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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Aew Uk Long Lease Reit Plc | LSE:AEWL | London | Ordinary Share | GB00BDVK7088 | ORD GBP0.01 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 72.50 | 72.00 | 73.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMAIRE
RNS Number : 8095P
Alternative Income REIT PLC
22 February 2021
THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN THE UNITED STATES OF AMERICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.
22 February 2021
Alternative Income REIT plc
(the "Company" or the "Group")
Interim Report and Financial Statements for the half year ended 31 December 2020
The Board of Directors of Alternative Income REIT plc (ticker: AIRE), the owner of a diversified portfolio of UK commercial property assets predominantly let on long leases, is pleased to announce its interim report and financial statements for the half year ended 31 December 2020.
Financial Highlights
-- Unaudited Net Asset Value of GBP68.17 million and of 84.68 pence per share ('pps') as at 31 December 2020 (31 December 2019: GBP76.17 million and 94.63 pps) - further details in the NAV section of the Chairman's Statement below.
-- Operating profit of GBP3.48 million (including gain on sale of investment property but excluding fair value changes) for the half year (half year ended 31 December 2019: GBP3.03 million) - further details in the Financial Results section of the Chairman's Statement below.
-- Unadjusted profit before tax of GBP3.03 million and 3.77 pps for the half year (half year ended 31 December 2019: profit of GBP2.07 million and 2.57 pps).
-- EPRA Earnings per Share (1) for the half year of 3.43 pence (half year ended 31 December 2019: 2.87 pps).
o The EPRA EPS includes accruals to reflect the minimum contracted uplifts, the spreading of rent free periods, the amortisation of loan arrangement fees and the movement in the provision for impairment of trade receivables. Excluding these items from the Group's EPRA EPS, the unaudited adjusted cash earnings were 3.19 pence per share, reflecting 141.6% cash dividend cover for the half year (half year ended 31 December 2019: 2.22 pence per share; 80.7% cash dividend cover).
-- Total dividends of 2.25 pps have been declared for the half year (half year ended
31 December 2019: 2.75 pps ).
o As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been particularly adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.
o The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share (2) , all else being equal, by September 2022.
-- The price of the Company's Ordinary Shares on the Main Market of the London Stock Exchange was 60.00 pps as at 31 December 2020 (31 December 2019: 74.68 pps).
-- As at 31 December 2020, the Group had a GBP41.00 million loan facility with Canada Life Investments and was geared to 36.6% of the Gross Asset Value ('GAV') (31 December 2019: 34.5%).
-- EPRA Cost Ratio (3) of 12.6% as at 31 December 2020 (31 December 2019: 16.3%).
(1) see Note 7 of the Consolidated Financial Statements, Glossary for definitions and abbreviations, and Key Performance Indicators section below for their definitions.
2 This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.
3 A definition of EPRA measures is set out in the EPRA Unaudited Performance Measures section further below.
Property Highlights
-- As at 31 December 2020, the Group's property portfolio had a fair value of GBP108.53 million, including GBP4.75m for the newly acquired property, Droitwich Spa Retail Park (31 December 2019: GBP112.99 million) - see Financial Results section within the Chairman's Statement below.
-- The weighted average unexpired lease term ('WAULT') as at 31 December 2020 was 18.3 years to the earlier of break and expiry (31 December 2019: 20.0 years) and 20.3 years to expiry (31 December 2019: 22.1 years).
-- The assets were fully let as at 31 December 2020 (31 December 2019: fully let).
-- Rent and other income recognised during the half year was GBP3.53 million (half year to 31 December 2019: GBP3.63 million). The number of tenants as at 31 December 2020 was 22 (31 December 2019: 21).
-- The portfolio had annualised gross passing rental income of GBP6.94 million as at 31 December 2020 (31 December 2019: GBP6.78 million).
-- EPRA Net Initial Yield (3) ('NIY') of 5.49% as at 31 December 2020 (31 December 2019: 5.04%).
-- EPRA topped-up NIY (3) of 7.04% as at 31 December 2020 (31 December 2019: 6.30%).
Post balance sheet highlights
-- By week commencing 15 February 2021, in respect of the March, June and September 2020 rent quarters, the Group had collected 91.5% of rents due and payment plans are in place in respect of the remaining 8.5%. By the same date, the Group had collected 86.6% of its December 2020 quarter's rent and agreed, or is the process of agreeing, rent concessions with the remaining 13.4%.
-- As previously announced, and in line with its commitment set out in the results of the Annual General Meeting announcement on 26 November 2020, the Board is continuing to engage in an open and transparent dialogue with shareholders and expects to provide an update shortly.
-- On 4 February 2021, the Board declared an interim dividend of 1.00 pps in respect of the period from 1 October 2020 to 31 December 2020. This will be paid on 26 February 2021 to shareholders on the register as at 12 February 2021. The ex-dividend date was 11 February 2021.
ENQUIRIES
Alternative Income REIT PLC Steve Smith - Chairman via Maitland/AMO below M7 Real Estate Ltd Richard Croft +44 (0)20 3657 5500 Panmure Gordon (UK) Limited +44 (0)20 7886 2500 Alex Collins Tom Scrivens Chloe Ponsonby Maitland/AMO (Communications Adviser) +44(0) 7747 113 930 James Benjamin james.benjamin@maitland.co.uk
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on Alternative Income REIT plc is available at www.alternativeincomereit.com (4)
NOTES
Alternative Income REIT PLC aims to generate a sustainable, secure and attractive income return for shareholders from a diversified portfolio of UK property investments, predominately in alternative and specialist sectors. The majority of the assets in the Group's portfolio are let on long leases which contain inflation linked rent review provisions.
The Company's investment adviser is M7 Real Estate Limited ("M7"). M7 is a leading specialist in the pan-European, regional, multi-tenanted real estate market. Majority owned by its senior managers, it has over 200 employees in 14 countries across Europe. The team manages over 835 properties with a value of circa EUR5.1 billion.
(4) Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.
Chairman's Statement
Overview
I am pleased to present the unaudited interim report and financial statements for the Group for the half year ended 31 December 2020.
The past year has seen unprecedented challenges as the COVID-19 pandemic continues to create global uncertainty. However, I am pleased to reflect that, at the start of the new year, the vaccination programme may be turning the tide and that we have cause to look forward with cautious optimism.
Whilst the full impact of the pandemic on the economy and, in particular, the property sector is still to be understood, in spite of considerable uncertainty, the Group has continued to make progress. We were particularly pleased to have completed the disposal of the Wet 'n' Wild Water Park, North Shields ("Wet 'n' Wild") at a significant premium to cost and book value, and subsequently to redeploy the proceeds through the acquisition of the Droitwich Spa Retail Park, at a yield which was materially higher than both the 6.0% exit yield on Wet 'n' Wild and the Group's 5.76% portfolio valuation yield at the time. This transaction was the first investment for the Company identified by its Investment Adviser, M7 Real Estate Limited, and the Board believes it to be an asset with good defensive qualities and the potential to deliver excellent long term returns for shareholders.
Over the period, the Board's focus has been the health, safety and wellbeing of its stakeholders, coupled with proportionate support for its tenants, to ensure that as far as possible the financial position of both landlord and its lessees remains healthy and sustainable, cognisant of the duty to act in the best interests of the Company's shareholders as a whole. By week commencing 15 February 2021, in respect of the March, June and September 2020 rent quarters, the Group had collected 91.5% of rents due and payment plans are in place in respect of the remaining 8.5%. By the same date, the Group had collected 86.6% of its December 2020 quarter's rent and agreed, or is the process of agreeing, rent concessions with the remaining 13.4%.
The Board believes that the Group is well positioned given its diversified, 100% let portfolio, generally strong rent collection, a robust balance sheet and modest overhead. The focus remains on generating a progressive cash covered dividend from the Group's now fully invested portfolio.
Financial Results Half year Half year . ended 31 December ended 31 2020 (unaudited) December Year ended 2019 (unaudited) 30 June 2020 (audited) Operating profit before fair value changes and gain [GBP'000] 3,050 3,027 5,803 Increase / (decrease) in fair values [GBP'000] 270 (245) (9,411) Capital gain on sale of Wet 'n' Wild Water Park [GBP'000] 425 - - Operating profit/(loss) [GBP'000] 3,745 2,782 (3,608) Profit/(loss) before tax [GBP'000] 3,033 2,067 (5,050) Profit/(loss) per share - basic and diluted [pence] 3.77 2.57 (6.27) EPRA Earnings per Share (EPS) - basic and diluted [pence] 3.43 2.87 5.42 Adjusted EPS* - basic and diluted [pence] 3.19 2.22 4.25 Net Asset Value (NAV) & EPRA NAV per share [pence] 84.68 94.63 83.58 EPRA Cost Ratio [%] 12.6 16.3 21.1 Annualised charges [%] 1.14 1.60 2.22 Gearing ratio [%] 36.6 34.5 37.0
* The EPRA EPS includes accruals to reflect the minimum contracted uplifts, the spreading of rent-free periods, the amortisation of loan arrangement fees and the movement in the provision for impairment of trade receivables. Excluding these items from the Group's EPRA EPS, the unaudited adjusted cash earnings were 3.19 pence per share, reflecting 141.6% cash dividend cover for the half year (half year ended 31 December 2019: 2.22 pence per share; 80.7% cash dividend cover). As shown in the above table, the gain on the disposal of Wet 'n' Wild was GBP425,202 which after taking account of the corresponding reversal of rent smoothing for minimum uplifts of GBP115,568 was equivalent to 0.39 pence per share.
NAV
At 31 December 2020, the independent fair valuation undertaken by Knight Frank of the Company's property portfolio was GBP108.53 million, including GBP4.75 million for the property at Droitwich Spa Retail Park acquired in early December 2020 (31 December 2019: GBP112.99 million).
As described in the latest Annual Report, the fair value of the Group's property portfolio (including the Wet 'n' Wild held for sale) declined from GBP112.99 million (31 December 2019) to GBP104.76 million (30 June 2020). GBP6.15 million (74%) of this movement was driven by the leisure, gym and hotel properties, and a further GBP1.30 million (16%) was due to the automotive dealerships. These property sectors, both occupational and investment markets, were amongst the most adversely affected by the COVID-19 related lockdown in effect from 23 March 2020.
During the half year ended 31 December 2020, property values within the portfolio have stabilised. The exception is an uplift (GBP1.70 million) during Q4 for the hotel property in Swindon where the 31 December 2020 valuation reflects the completion of remedial work and agreement reached with Travelodge.
Dividends & Earnings
The Company declared interim dividends of 2.25 pps in respect of the half year ended 31 December 2020 (half year ended 31 December 2019: 2.75 pps). As set out in Note 8 to the Consolidated Financial Statements, these dividends were covered by EPRA earnings of 3.43 pps (31 December 2019: 2.87 pps), and the Group's adjusted earnings (representing cash) were 3.19 pps (31 December 2019: 2.22 pps).
As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been particularly adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.
The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share (2) , all else being equal, by September 2022.
Shareholder Engagement
Whilst the Board was disappointed by the rejection of the revised Investment Policy at the Annual General Meeting on 26 November 2020 ("AGM"), it recognises that in the current febrile atmosphere our major investors voted for a cautious approach, at least in the short term, and the Board understands and is fully supportive of their decision. The Board felt confident that the proposed amendments would have enabled the Company to take advantage of current market opportunities and deliver significant added value for shareholders, but given the lack of appetite amongst investors, the Board recognises the need for caution. One disappointing aspect of the AGM was the level of voting participation, particularly amongst smaller investors.
Following discussions with Glenstone Property PLC ("Glenstone"), which holds 14.73% of the Company's issued share capital following its Tender Offer, the Board and its adviser have been in regular communication with Glenstone in relation to its request for representation on the Board.
As announced on 4 February 2021, the Board is engaging in an open and transparent dialogue with shareholders and will provide an update shortly.
Future Growth and Outlook
Despite the potential impact of Brexit and, latterly, the major disruption caused by the COVID-19 pandemic, the appetite for well let UK commercial property with secure income remains relatively strong. We therefore remain confident that the Group's diversified robust portfolio is well positioned to absorb potential market dislocation.
The Board believes that it has taken a disciplined and timely approach, particularly in relation to cost management and the appointment of a talented, proficient team of service providers and advisers. The Group has a strong foundation from which to deliver attractive total returns including a potentially progressive dividend and believes the portfolio to be well positioned for the better times that we expect to lie ahead.
Finally, I would like to thank our service providers, our advisers and my fellow Directors for their input, effort and support during very challenging times. Thank you also to our shareholders for their continued patience and support during what have been trying circumstances.
Steve Smith
Chairman
22 February 2021
Unaudited Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE ----------------------------------- -------------------------------- ---------------------------- 1. Net Initial Yield 5.53 % ('NIY') The NIY is an indicator at 31 December 2020 Annualised rental income of the ability of the (30 June 2020: 5.77%; based on the cash rents Company to meet its target 31 December 2019: 5.04%) passing at the balance dividend . sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased by purchasers' costs estimated by the Group's External Valuers. 18.3 years to break and 2. WAULT to break and 20.3 years to expiry expiry The WAULT is a key measure at 31 December 2020 The average lease term of the quality of the (30 June 2020: 19.5 years remaining to expiry across portfolio. Long leases to break and 21.6 years the portfolio, weighted underpin the security to expiry; 31 December by contracted rent. of the Group's future 2019: 20.0 years to break income. and 22.1 years to expiry) 3. Net Asset Value ('NAV') GBP 68.17 million/ 84.68 NAV is the value of an Provides stakeholders pps entity's assets minus with the most relevant at 31 December 2020 the value of its liabilities. information on the fair (30 June 2020: GBP67.29 value of the assets and million, 83.58 pps and liabilities of the Group. 31 December 2019: GBP76.17 million, 94.63 pps)
4. Dividend 2.25 pps Dividends declared in The Company seeks to deliver for the half year ended relation to the period. a sustainable income stream 31 December 2020 from its portfolio, which (year ended 30 June 2020: it distributes as dividends. 5.00pps; half year ended 31 December 2019: 2.75pps) 5. Adjusted EPS 3.19 pps Adjusted EPS from core This reflects the Company's for the half year ended operational activities, generation of cash earnings 31 December 2020 as adjusted for non-cash from the portfolio which (year ended 30 June 2020: items. A key measure underpins dividends. 4.25 pps; half year to of a company's underlying 31 December 2019: 2.22 operating results from pps) its property rental business and an indication of the extent to which current dividend payments are supported by cash earnings. See note 7 to the Consolidated Financial Statements. 6. Leverage (Loan-to-GAV) 36.6 % The proportion of the The Group utilises borrowings at 31 December 2020 Group's property that to enhance returns over (30 June 2020: 37.0% is funded by borrowings. the medium term. Borrowings and 31 December 2019: will not exceed 40% of 34.5%) GAV (measured at drawdown).
EPRA Unaudited Performance Measures
Detailed below is a summary table showing the EPRA performance measures of the Group (5)
MEASURE AND DEFINITION PURPOSE PERFORMANCE ----------------------------------- -------------------------------- ----------------------------- EPRA NIY 5.49 % Annualised rental income A comparable measure for at 31 December 2020 based on the cash rents portfolio valuations. (30 June 2020: 5.72 % passing at the balance This measure should make and 31 December 2019: sheet date, less non-recoverable it easier for investors 5.04%) property operating expenses, to judge how the valuation divided by the market of two portfolios compare. value of the property, increased by (estimated) purchasers' costs. EPRA 'Topped-Up' NIY 7.04 % This measure incorporates A comparable measure for at 31 December 2020 an adjustment to the portfolio valuations. (30 June 2020: 6.97% EPRA NIY in respect of This measure should make and 31 December 2019: the expiration of rent it easier for investors 6.30%) free periods (or other to judge how the valuation unexpired lease incentives of two portfolios compare. such as discounted rent periods and stepped rents). EPRA NAV GBP68.17 million / 84.68 NAV adjusted to include Makes adjustments to IFRS pps properties and other NAV to provide stakeholders at 31 December 2020 investment interests with the most relevant (30 June 2020: GBP67.29 at fair value and to information on the fair million, 83.58 pps and exclude certain items value of the assets and 31 December 2019: GBP76.17 not expected to crystallise liabilities within a real million, 94.63 pps) in a long term investment estate investment company property business. with a long term investment strategy. EPRA Earnings/EPS GBP2.76 million/3.43 Earnings from operational A key measure of a company's pps activities. underlying operating results EPRA earnings for the and an indication of the half year ended 31 December extent to which current 2020 dividend payments are (30 June 2020: GBP 4.36 supported by earnings. million/5.42 pps and 31 December 2019: GBP2.31 million/2.87 pps) EPRA Vacancy 0 % Estimated Market Rental A "pure" percentage measure EPRA vacancy as at 31 Value ('ERV') of vacant of investment property December 2020 space divided by ERV space that is vacant, (30 June 2020: 0% and of the whole portfolio. based on ERV. 31 December 2019: 0%) EPRA Cost Ratio 12.6 % Administrative and operating A key measure to enable EPRA Cost Ratio as at costs (including and meaningful measurement 31 December 2020. The excluding costs of direct of the changes in a company's ratio is the same both vacancy) divided by gross operating costs. including and excluding rental income. the vacancy costs. (30 June 2020: 21.1% and 31 December 2019: 16.3%)
EPRA NNNAV is equal to EPRA NAV as there are no adjusting items. As such, this measure has not been presented.
(5) The full calculations of these measures are set out in the EPRA Unaudited Performance Measures Calculations section following the financial statements
Investment Adviser's Report
Market Outlook
UK Economic Outlook
Lockdown measures introduced in early 2020 had a significant impact on the UK economy, with GDP falling over 20% between Q4 2019 and Q2 2020(6) . However, the gradual easing of these restrictions resulted in a stronger recovery than expected and GDP rose 15% between April and September, to be just 8% below pre pandemic levels(6) . The economic impact of lockdown measures implemented at the end of 2020 is likely to be less severe than the first lockdown. Now, more sectors have continued to operate and firms have generally been more prepared, having adapted their business models during the first lockdown. The extension of the Job Retention Scheme should also mitigate the upward pressure on unemployment whilst recently reported Government grants may help to protect some small to medium sized businesses.
Despite the impact of the pandemic, inflation is expected to rise close to the Bank of England's 2% target by the end of 2021, but to remain below target thereafter. Rising unemployment and weak inflationary pressure suggest that the Bank of England will not raise short term rates for the foreseeable future. The Bank of England announced a further expansion of its asset purchase programme (QE) that will ensure the government can increase gilt issuance without facing any substantial rise in borrowing costs.
Forecasts suggest that it is likely to be several years before the UK economy fully recovers to pre-pandemic levels. Whilst a steady recovery can be expected throughout 2021, the risk of sustained damage to some economic sectors (including retail, hotels, hospitality, aviation and tourism) means that there is a high level of uncertainty in the outlook, however, greater clarity over the timing of COVID-19 vaccine distribution will undoubtedly help the mapping of the route to recovery.
(6) UK Real Estate Market Outlook, December 2020, CBRE.
UK Real Estate Outlook
Despite economic uncertainty, the UK property market continues to deliver healthy spreads over government bond yields, both in absolute terms and relative to other markets. A global pandemic, Brexit transition and ongoing economic slowdown, has seen central banks keep interest rates low, with the chance of negative rates in the UK now becoming a possibility. As a result, we expect to see yield stability for many property sectors as investors seek a safe haven offering attractive risk adjusted returns. Coupled with the weight of frustrated capital which has been unable to invest over the past year due to lockdown measures preventing in-person inspections, investment demand is likely to be bolstered as the UK enters its recovery phase with the potential to compress yields further in certain markets.
Sectoral change stimulated by the COVID-19 pandemic had a significant impact on specific markets during 2020, with high street retail, shopping centres and leisure assets being impacted most heavily by lockdown restrictions, whilst the extent of the impact to offices is yet to be fully understood. Conversely, the industrial and logistics sectors thrived during the year with the ongoing trend to e-retailing only being accelerated.
The property industry continues to benefit from strong competition amongst investors seeking long, inflation linked income. Those markets that offer bond like income streams or are linked to social infrastructure, such as distribution, last mile logistics, supermarkets and certain alternative income will continue to attract significant demand.
Financial Results
Rent and other income earned from the portfolio for the half year ended 31 December 2020 was GBP3.53 million (half year to 31 December 2019: GBP3.63 million; year to 30 June 2020: GBP7.81 million), contributing to an operating profit before fair value changes of GBP3.48 million (including the gain on sale of Wet 'n' Wild) (half year to 2019: GBP3.03 million; year to 30 June 2020: GBP5.80 million).
The portfolio has seen a gain of GBP0.27(7) million in fair value of investment property over the period (half year to 31 December 2019: loss of GBP0.24 million; year to 30 June 2020: loss of GBP9.41 million).
Administrative and property operations expenses, which include the Investment Adviser's fee from 1 October 2020 and other costs attributable to the running of the Group, were GBP0.44 million for the period excluding service and direct recharges (half year to 31 December 2019: GBP0.61 million; year to 30 June 2020: GBP1.55 million). Annualised ongoing charges as a percentage of net asset value for the period were 1.14% (half year to 31 December 2019: 1.60%; year to 30 June 2020: 2.22%).
The Group incurred finance costs of GBP0.71 million during the period (half year to 31 December 2019: GBP0.72 million; year to 30 June 2020: GBP1.44 million).
The total profit before tax for the half year of GBP3.03 million (half year to 31 December 2019: profit before tax of GBP2.07 million; year to 30 June 2020: loss before tax of GBP5.05 million) equates to a basic earnings per share of 3.77 pence (half year to 31 December 2019: earnings of 2.57 pps; year to 30 June 2020: loss of 6.27 pps).
EPRA EPS for the half year was 3.43 pence which, based on dividends declared of 2.25 pence, reflects a dividend cover of 152.6 % (half year to 31 December 2019: EPRA earnings of 2.87 pence, dividends declared of 2.75 pence and dividend cover of 104.4%; year to 30 June 2020: EPRA earnings of 5.42 pence, dividends declared of 5.00 pence and dividend cover of 108.4%).
Adjusted EPRA EPS for the period which equates to cash generated from operations (and therefore excludes movements in accrued rent debtors, reversal/impairment of trade receivables and the amortisation of loan arrangement fees) were 3.19 pence which, based on dividends declared of 2.25 pence, reflect a dividend cover of 141.6% (half year to 31 December 2019: Adjusted earnings per share of 2.22 pence, dividends declared of 2.75 pence and dividend cover of 80.7%; year to 30 June 2020: Adjusted earnings per share of 4.25 pence, dividends declared of 5.00 pence and dividend cover of 85.0%).
The Group's NAV as at 31 December 2020 was GBP68.17 million or 84.68 pps (31 December 2019: GBP76.17 million or 94.63 pps; 30 June 2020: GBP67.29 million or 83.58 pps). This is an increase of 1.09 pps or 1.31% over the half year ended 31 December 2020, and a decrease of 9.95 pps of 11.75% over the year to 31 December 2020, with the underlying movement in NAV set out in the table below:
Half year ended Half year ended Year ended 30 June 31 December 2020 31 December 2019 2020 Pence per Pence per Pence per share GBP million share GBP million share GBP million ---------- ------------ ---------- ------------ ---------- ------------ NAV as at beginning of year/period 83.586 67.27 94.810 76.32 94.810 76.32 Portfolio acquisition costs - - (0.027) (0.02) - - Change in fair value of investment property 0.336 0.27 (0.277) (0.22) (11.691) (9.41) Income earned for the year 4.380 3.53 4.514 3.63 9.702 7.81 Gain on sale of property(8) 0.528 0.43 - - - - Finance costs for the year (0.884) (0.71) (0.755) (0.71) (1.791) (1.44) Other expenses for the year (0.591) (0.47) (0.888) (0.61) (2.494) (2.01) Dividends paid during the year (2.675) (2.15) (2.750) (2.22) (4.950) (3.98) NAV as at the end of the year 84.680 68.17 94.627 76.17 83.586 67.29
(7) the fair value increase includes accounting adjustments relating to rent smoothing of (GBP0.36m) and movement in finance lease obligation of (GBP0.02m).
(8) the gain on the disposal of Wet 'n' Wild was GBP425,202 which after taking account of the corresponding reversal of rent smoothing for minimum uplifts of GBP115,568 is equivalent to 0.39 pence per share.
Valuation
The fair value of the Group's property portfolio (including the Wet 'n' Wild Water Park held for sale) reduced from GBP112.99 million (31 December 2019) to GBP104.76 million (30 June 2020). GBP6.15 million (74%) of this movement was driven by the leisure, gym and hotel properties, and a further GBP1.30 million (16%) was due to the automotive dealerships. These property sectors, both occupational and investment markets, were amongst the most adversely affected by the COVID-19 related lockdown in effect from 23 March 2020.
The property portfolio has seen a 3.60% increase in fair value to GBP108.53 million since the 30 June 2020 valuation. When account is taken for the disposal of Wet 'n' Wild and the acquisition of Droitwich Spa Retail Park the core portfolio has seen an increase of 1.83% in the half year ended 31 December 2020. The property portfolio outperformed the MSCI All Property index, which showed a 1.25% decrease in capital value growth for half year ended 31 December 2020.
Dividends
Total dividends of 2.25 pps have been declared for the half year (half year ended 31 December 2019: 2.75 pps). As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.
The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share (2) , all else being equal, by September 2022.
Refer to Note 8 of the Consolidated Financial Statements for details.
Financing
As at 31 December 2020, the Group had fully utilised its GBP41 million loan facility with Canada Life Investments (31 December 2019 and 30 June 2020: GBP41 million facility utilised). This term facility, which is repayable on 20 October 2025, allows up to 40% loan to property value at drawdown and is provided on a portfolio basis and has a loan to value covenant of 60%.
The weighted average interest cost of the Group's GBP41 million facility is 3.19% (31 December and 30 June 2020: 3.19%).
Summary by Sector as at 31 December 2020
Gross Passing Market Occupancy WAULT to Rental Number Valuation Value by ERV break Income ERV ERV of Sector Properties (GBPm) (%) (%) (years) (GBPm) (GBPm) (%) ------------------------ ----------- ---------- ------- ---------- --------- -------- ------- ------ Industrial 4 21.55 19.9 100 24.8 1.49 1.44 20.8 Hotel 3 20.85 19.2 100 15.0 1.36 1.43 20.6 Healthcare 3 18.28 16.8 100 28.0 1.10 1.09 15.7 Automotive & Petroleum 3 17.80 16.4 100 11.5 1.13 1.11 16.0 Student Accommodation 1 12.30 11.3 100 20.6 0.66 0.65 9.4 Leisure 2 5.75 5.3 100 8.8 0.37 0.40 5.8 Power Station 1 5.15 4.8 100 11.2 0.30 0.30 4.3 Retail 1 4.75 4.4 100 6.5 0.40 0.38 5.5 Education 1 2.10 1.9 100 23.1 0.13 0.13 1.9 Total/Average 19 108.53 100.0 100 18.3 6.94 6.93 100.0 ----------- ---------- ------- ---------- --------- -------- ------- ------
Summary by Geographical Area as at 31 December 2020
Gross Passing Market Occupancy WAULT to Rental Geographical Number Valuation Value by ERV break Income ERV ERV of Area Properties (GBPm) (%) (%) (years) (GBPm) (GBPm) (%) -------------------- ----------- ---------- ------- ---------- --------- -------- ------- ------ West Midlands 4 26.50 24.4 100 13.8 1.84 1.80 25.9 The North West & Merseyside 2 21.65 19.9 100 36.3 1.22 1.18 17.0 Rest of South East 4 18.25 16.8 100 12.1 1.07 1.05 15.3 South West 2 12.60 11.6 100 24.8 0.68 0.81 11.7 Yorkshire and the Humber 2 11.68 10.8 100 13.0 0.81 0.80 11.5 Scotland 1 6.95 6.4 100 15.7 0.65 0.59 8.5 London 1 5.75 5.3 100 8.8 0.37 0.40 5.8 Eastern 3 5.15 4.8 100 11.2 0.30 0.30 4.3 Total/Average 19 108.53 100.0 100 18.3 6.94 6.93 100 ----------- ---------- ------- ---------- --------- -------- ------- ------
The weighting of the Group's contracted rental income, based on the type of rent review associated with each lease is as follows: RPI inflation linked: 64.9%; CPI inflation linked: 22.1% and Open Market Value Reviews: 13.0%.
Top Ten Tenants Annual % of Passing Portfolio Tenant Property Rental Total Income Passing (GBP'000) Rental Income ----------------------- --------------------------------------- ---------- ---------- Lyndon Croft Care Centre, Solihull Prime Life Limited and Westerlands Care Village, Brough 680 9.8 Meridian Metal Trading Grazebrook Industrial Estate, Dudley Limited and Provincial Park, Sheffield 669 9.6 Mears Group Plc Bramall Court, Salford 655 9.4 Jupiter Hotels Limited Mercure City Hotel, Glasgow 650 9.4 Motorpoint Limited Motorpoint, Birmingham 500 7.2 Premier Inn Hotels Limited Premier Inn, Camberley 449 6.5 Handsale Limited Silver Trees, Bristol 417 5.7 Volkswagen Group UK Limited Audi, Huddersfield 396 5.8 Hoddesdon Energy Limited Hoddesdon Energy, Hoddesdon 300 4.3 B&M Bargains Droitwich Spa Retail Park, Droitwich 272 3.9
The Group's top ten tenants, listed above, represent 71.9% of the total passing rental income of the portfolio.
Lease Expiry Portfolio
Year Expiring passing Cumulative (GBP'000) rent pa (GBP'000) 2021 - - ------------------- --------------------- 2022 123 123 ------------------- --------------------- 2023 286 409 ------------------- --------------------- 2024 - 409 ------------------- --------------------- 2025 396 805 ------------------- --------------------- 2026 - 805 ------------------- --------------------- 2027 905 1,709 ------------------- --------------------- 2028 282 1,991 ------------------- --------------------- 2029 272 2,263 ------------------- --------------------- 2030 - 2,263 ------------------- --------------------- 2031 - 2,263 ------------------- --------------------- 2032 771 3,034 ------------------- --------------------- 2033 364 3,398 ------------------- --------------------- 2034 - 3,398 ------------------- --------------------- 2035 - 3,398 ------------------- --------------------- 2036+ 3,544 6,942 ------------------- ---------------------
M7 Real Estate Limited
22 February 2021
Interim Management Report and Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining half year of the financial year are set out in the Chairman's Statement and the Investment Adviser's Report above.
The principal risks facing the Company are unchanged since the date of the Annual Report and Financial Statements for the year ended 30 June 2020 as set out in that report on pages 21 to 25 and in Note 19 to the Financial Statements on pages 78 & 79.
Risks faced by the Company include, but are not limited to, tenant default, portfolio concentration, property defects, rate of inflation, property market, property valuation, illiquid investments, breach of borrowing covenants, use of service providers, dependence on the Investment Adviser, ability to meet objectives, Group REIT status, political/economic risks and Brexit.
Responsibility Statement
We confirm that to the best of our knowledge:
-- the consolidated condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first half of the financial year and their impact on the consolidated condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining half of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first half of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
A list of the Directors is maintained on the Company's website at www.alternativeincomereit.com
Steve Smith
Chairman
22 February 2021
Consolidated Condensed Statement of Comprehensive Income For the half year ended 31 December 2020 Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) Notes GBP'000 GBP'000 GBP'000 Income Rental and other income 3 3,526 3,634 7,810 Property operating expense 4 (88) (68) (515) Net rental and other income 3,438 3,566 7,295 Other operating expenses 4 (388) (539) (1,492) Operating profit before fair value changes 3,050 3,027 5,803 Gain on sale of investment property 15 425 - - Change in fair value of investment properties 9 270 (245) (9,411) Operating profit/ (loss) 3,745 2,782 (3,608) Finance expense 5 (712) (715) (1,442) Profit/ (loss) before tax 3,033 2,067 (5,050) Taxation 6 - - - Profit/ (loss) after tax 3,033 2,067 (5,050) Other comprehensive income - - - Total comprehensive profit/
(loss) for the year 3,033 2,067 (5,050) ----------------------- --------------------- --------------------- Earnings/ (loss) per share (pence per share) (basic and diluted) 7 3.77 2.57 (6.27) ======================= ===================== ===================== The notes further below form an integral part of these Consolidated Financial Statements. Consolidated Condensed Statement of Financial Position As at 31 December 2020 As at As at As at 31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) Notes GBP'000 GBP'000 GBP'000 Assets Non-current Assets Investment property 9 106,551 111,966 100,273 106,551 111,966 100,273 Current Assets Receivables and prepayments 10 3,740 1,980 5,417 Cash and cash equivalents 1,670 4,758 2,288 5,410 6,738 7,705 Non-current assets held for sale 15 - - 2,734 ----------------------- --------------------- --------------------- Total Assets 111,961 118,704 110,712 ----------------------- --------------------- --------------------- Non-current Liabilities: Interest bearing loans and borrowings 12 (40,464) (40,349) (40,417) Lease obligations 13 (353) (450) (373) (40,817) (40,799) (40,790) ----------------------- --------------------- --------------------- Current Liabilities Payables and accrued expenses 11 (2,939) (1,683) (2,595) Lease obligations 13 (39) (48) (41) (2,978) 1,731 (2,636) ----------------------- --------------------- --------------------- Total Liabilities (43,795) (42,530) (43,426) ----------------------- --------------------- --------------------- Net Assets 68,166 76,174 67,286 ----------------------- --------------------- --------------------- Equity Share capital 17 805 805 805 Capital reserve and retained earnings 67,361 75,369 66,481 Total capital and reserves attributable to equity holders of the Group 68,166 76,174 67,286 ----------------------- --------------------- --------------------- Net Asset Value per share (pence per share) 7 84.68 94.63 83.58 ======================= ===================== ===================== The notes further below form an integral part of these Consolidated Financial Statements. The financial statements were approved by the Board of Directors on 22 February 2021 and were signed on its behalf by: Steve Smith Chairman Company number: 10727886 Consolidated Condensed Statement of Changes in Equity For the half year ended 31 December 2020 Total capital Capital and reserves reserve attributable Share and to equity holders Share premium retained of capital account earnings the Group Notes GBP'000 GBP'000 GBP'000 GBP'000 For the half year ended 31 December 2020 (unaudited) Balance as at 1 July 2020 805 - 66,481 67,286 Total comprehensive income - - 3,033 3,033 Dividends paid 8 - - (2,153) (2,153) Balance as at 31 December 2020 805 - 67,361 68,166 ------------------ ------------------ ----------------- ------------------- For the half year ended 31 December 2019 (unaudited) Balance as at 1 July 2019 805 - 75,516 76,321 Total comprehensive income - - 2,067 2,067 Share issue costs - - - - Dividends paid 8 - - (2,214) (2,214) Balance as at 31 December 2019 805 - 75,369 76,174 ------------------ ------------------ ----------------- ------------------- For the year ended 30 June 2020 (audited) Balance as at 1 July 2019 805 - 75,516 76,321 Total comprehensive loss - - (5,050) (5,050) Dividends paid 8 - - (3,985) (3,985) Balance as at 30 June 2020 805 - 66,481 67,286 ------------------ ------------------ ----------------- ------------------- The notes further below form an integral part of these Consolidated Financial Statements. Consolidated Condensed Statement of Cash Flows For the half year ended 31 December 2020 Half year Half year Year ended 31 ended 31 ended December December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP '000 GBP '000 GBP '000 Cash flows from operating activities Profit/ (loss) after tax 3,033 2,067 (5,050) Adjustment for Finance expenses 712 715 1,442 Gain on sale of investment property (425) - - Change in fair value of investment property (270) 245 9,411 Increase in other receivables and prepayments 1,677 (828) (4,262) Increase/(decrease) in other payables and accrued expenses 342 (39) 694 Net cash flow generated from operating activities 5,069 2,160 2,235 -------------------- --------------------- ------------------ Cash flows from investing activities Purchase of investment property (5,007) (27) - Additions to investment property (1,101) Disposal of investment properties 3,159 - - Net cash used in investing activities (2,849) (27) -
-------------------- --------------------- ------------------ Cash flows from financing activities Finance costs paid (709) (673) (1,435) Dividends paid (2,129) (2,221) (4,031) Net cash used in from financing activities (2,838) (2,894) (5,466) -------------------- --------------------- ------------------ Net decrease in cash and cash equivalents (618) (761) (3,231) Cash and cash equivalents at start of period 2,288 5,519 5,519 Cash and cash equivalents at end of period 1,670 4,758 2,288 ==================== ===================== ================== The notes further below form an integral part of these Consolidated Financial Statements.
Notes to the Consolidated Condensed Financial Statements
for the half year ended 31 December 2020
1. Corporate information
The Company is a public limited company and a closed-ended Real Estate Investment Trust ('REIT') incorporated on 18 April 2017 and domiciled in the UK and registered in England and Wales. The registered office of the Company is located at 1 King William Street, London, EC4N 7AF.
The consolidated financial statements for the period ended 31 December 2020 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 30 June 2020 has been delivered to the Registrar of Companies. The auditor reported on those accounts. Its report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The financial statements for the period ended 31 December 2020 have not been audited or reviewed by the Company's Auditors.
2. Accounting policies 2.1 Basis of preparation
These interim consolidated condensed unaudited financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and should be read in conjunction with the Group's last financial statements for the year ended 30 June 2020. These consolidated condensed unaudited financial statements do not include all information required for a complete set of financial statements proposed in accordance with IFRS as adopted by the EU ('EU IFRS'). However, selected explanatory notes have been included to explain events and transactions that are significant in understanding changes in the Group's financial position and performance since the last financial statements.
The comparative figures disclosed in the consolidated condensed unaudited financial statements and related notes have been presented for both the six-month period ended 31 December 2019 and year ended 30 June 2020.
Although not required by IAS 34, the comparative figures as at 31 December 2019 for the Consolidated Condensed Statement of Financial Position and for the year ended 30 June 2020 for the Consolidated Condensed Statement of Comprehensive Income, Consolidated Condensed Statement of Changes in Equity and Consolidated Condensed Statement of Cash Flows and related notes have been included on a voluntary basis.
These consolidated condensed unaudited financial statements have been prepared under the historical- cost convention, except for investment property that has been measured at fair value. The consolidated condensed unaudited financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (GBP'000), except when otherwise indicated.
Basis of consolidation
The consolidated condensed unaudited financial statements for the half year ended 31 December 2020 incorporate the financial statements of the Company and its subsidiaries (the 'Group'). Subsidiaries are entities controlled by the Company, being Alternative Income Limited and Alternative Income REIT Holdco Limited. IFRS 10 outlines the requirements for the preparation of consolidated financial statements, requiring an entity to consolidate the results of all investees it is considered to control. Control exists where an entity is exposed to variable returns and has the ability to affect those returns through its power over the investee.
New standards, amendments and interpretations
There are a number of new standards or amendments which are effective for the Group for the first time for the financial year beginning 1 January 2020.
Standards issued but not yet effective
A number of new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted however the Group has not early adopted the new or amended standards in preparing these financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group's financial statements:
-- Amendments to References to Conceptual Framework in IFRS Standards. -- Definition of a Business (Amendments to IFRS 3). -- Definition of Material (Amendments to IAS 1 and IAS 8). -- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). -- IFRS 17: Insurance Contracts. -- Classification of Liabilities as Current or Non-current (Amendment to IAS 1)
-- Sale or Contribution of Assets between an Investor and its Associated or Joint Venture (Amendments to IFRS 10 and IAS 28)
New/Revised International Financial Reporting Standards
Effectivity Sale or contribution of assets between an investor Deferred and its associate or joint venture (Amendments indefinitely to IFRS 10 and IAS 28) IFRS 17: Insurance Contracts 1 January 2021
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with EU 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.
There are not considered to be any judgements which have a significant effect on the amounts recognised in the consolidated financial information.
Estimates
In the process of applying the Group's accounting policies, management has made the following estimates, which have a significant effect on the amounts recognised in the consolidated financial information:
Valuation of investment property
The fair value of investment property is determined, by external property valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques, applying the principles of both IAS 40 and IFRS13.
The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors ('RICS') Valuation - Global Standard January 2020. Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in note 9.
2.3 Segmental information
Each property held by the group is reported to the chief operating decision maker individually. In the case of the group, the chief operating decision maker is considered to be the three Directors. The review process for segmental information includes the monitoring of key performance indicators applicable across all properties. These key performance indicators include Gross Passing Rental Income, WAULT to break in years and valuation of properties. All asset cost and rental allocations are reported by property too. The internal financial reports received by the Directors cover the group and all its properties and do not differ from amounts reported in the financial statements. The Directors have considered that each property has similar economic characteristics and have therefore aggregated the portfolio into one reportable segment under the provisions of IFRS 8.
2.4 Going concern
In assessing the Group's going concern assumptions, the Directors have particularly considered the impact of the COVID-19 pandemic on the performance of the business.
The Directors have therefore projected the Group's cash flows for the period up to 31 December 2021, challenging and sensitising inputs and assumptions to ensure that the cash forecast reflects a realistic outcome given the uncertainties associated with the current economic environment.
The Directors note that the Group's main financing of GBP41m does not mature until 2025 and the Group has reported full compliance with its loan covenants to date. Based on the current cash flow projections, the directors expect to continue to remain compliant with the covenants.
The Directors also note that the headroom of the loan to value covenant is significant and any fall in property values that caused a breach would be significantly more than any currently envisaged.
A 'severe, but plausible, downside' scenario has also been projected. While rent collections have been strong, this scenario anticipates further rent deferrals and write-offs where tenants would have difficulty paying rents.
-- The Directors have assumed a rent collection of 80% for Q1 2021 and Q2 2021, decreasing to 70% in Q3 2021 and 60% in Q4 2021, and recovering to 70% in Q1 2022 and then to 80% in Q2 2022 and 90% in Q3 2022 and back to 100% by Q4 2022.
-- In such a scenario, the assumption is that 50% of these rent deferrals would be written off, with the remainder repaid over the course of 5 years from Q2 2023. This is in addition to any existing agreements already made with tenants.
In this scenario the Group still has adequate headroom against the interest cover covenant and positive cash balances.
Having assessed the heightened risks as well as mitigating factors and management strategies available to reduce such risks, the Directors have determined that the Group has adequate resources to continue in operational existence for the foreseeable future.
Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
2.5 Summary of significant accounting policies
The accounting policies and methods of computation and presentation adopted in the preparation of the interim financial statements are consistent with those applied in the Audited Financial Statements.
The Audited Financial Statements are available at www.alternativeincomereit.com .
3. Rental and other income Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 2020 (unaudited) 2019 (unaudited) (audited) GBP'000 GBP'000 GBP'000 Gross rental income 3,245 3,056 6,073 Service charges and direct recharges* (see note 4) 38 - 459 Spreading of rent indexation 284 286 720 Spreading of tenant incentives - rent free periods (41) 292 558 Other property income - - - --------------------- --------------------- --------------------- Total rental and other income 3,526 3,634 7,810 --------------------- --------------------- ---------------------
All rental, service charges and direct recharges and other income are derived from the United Kingdom.
*During the audit of the annual accounts of the Group, the directors have reviewed the underlying agreements and determined that the Company is a principal under IFRS 15. As a result, the relevant income and expenses generated/incurred relating to service charges and direct recharges have been recognised and presented as gross in the financial statements. Please refer to note 4 for the relevant expense incurred during the period ended 31 December 2020 and year ended 30 June 2020. For the half year ended 31 December 2019, service charges and direct recharges were presented net, however these figures have not been restated as they were not material.
4. Expenses Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 2020 (unaudited) 2019 (unaudited) (audited) GBP'000 GBP'000 GBP'000 Property operating expenses 53 68 56 Service charges and direct recharges (see note 3) 35 - 459 ---------------------- ---------------------- ---------------------- 88 68 515 ---------------------- ---------------------- ---------------------- Other operating expenses Investment management fee 89 270 408 Auditor remuneration 58 42 120 (Reversal)/ provision for impairment of trade receivables (3) - 213 Operating costs 221 189 550 Directors' remuneration 38 38 94 (Reversal of write off)/ write off of unreconciled difference (15) - 107 ---------------------- ---------------------- ---------------------- Total other operating expenses 388 539 1,492 ---------------------- ---------------------- ---------------------- Total operating expenses 476 607 2,007 ---------------------- ---------------------- ---------------------- 5. Finance expenses Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 2020 (unaudited) 2019 (unaudited) (audited) GBP'000 GBP'000 GBP'000 Interest payable on loan 656 658 1,315 Amortisation of loan arrangement fee (note 12) 47 56 124 Other finance costs 9 1 3 Total 712 715 1,442 --------------------- ----------------------- ----------------------- 6. Taxation Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Tax charge comprises: Analysis of tax charge in the period Profit/ (loss) before tax 3,033 2,067 (5,050) --------------------- ----------------------- --------------------- Theoretical (tax credit)/tax at UK corporation tax standard rate of 19.00% (2019: 19.00%) 576 393 (960) Adjusted for tax exempt items under the REIT regime: Change in fair value of investment properties (51) - 1,788 Exempt REIT net profit (525) (393) (828) Total - - - ===================== ======================= =====================
The Group obtained REIT status on 13 October 2017, at which point any gains or losses arising from property business have been extinguished. As such, no deferred tax asset or liability has been
recognised in the current period.
Factors that may affect future tax charges
Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
7. Earnings/ (loss) per share and NAV per share Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) Earnings/ (loss) per share: Total comprehensive profit/ (loss) (GBP'000) 3,033 2,067 (5,050) Weighted average number of shares (million) 80.5 80.5 80.5 Earnings/ (loss) per share (basic
and diluted) (pence) 3.77 2.57 (6.27) ------------------- ----------------------- ----------------- EPRA EPS: Total comprehensive profit/ (loss) (GBP'000) 3,033 2,067 (5,050) Adjustment to total comprehensive profit/ (loss): Change in fair value of investment properties (GBP'000) (270) 245 9,411 ------------------- ----------------------- ----------------- EPRA earnings (basic and diluted) (GBP'000) 2,763 2,312 4,361 ------------------- ----------------------- ----------------- EPRA EPS (basic and diluted) (pence) 3.43 2.87 5.42 ------------------- ----------------------- ----------------- Adjusted EPS: EPRA earnings (basic and diluted) (GBP'000) 2,763 2,312 4,361 Adjustments: Rental income recognised in respect of guaranteed fixed rental uplifts (GBP'000) (284) (286) (720) Rental income recognised in respect of rent-free periods (GBP'000) 41 (292) (558) Amortisation of loan arrangement fee (GBP'000) 47 56 124 (Reversal)/ provision for impairment of trade receivables (GBP'000) (3) - 213 ------------------- ----------------------- ----------------- Adjusted earnings (basic and diluted) (GBP'000) 2,564 1,790 3,420 ------------------- ----------------------- ----------------- Adjusted EPS (basic and diluted) (pence)* 3.19 2.22 4.25 ------------------- ----------------------- ----------------- NAV per share: Net assets (GBP'000) 68,166 76,174 67,286 ------------------- ----------------------- ----------------- Ordinary Shares (million) 80.5 80.5 80.5 NAV per share (pence) 84.68 94.63 83.58 ------------------- ----------------------- -----------------
*Adjusted EPS is a measure used to assess the level of the Group's dividend payments. This metric adjusts EPRA earnings for non-cash items in arriving at an adjusted EPS as supported by cash flows.
Earnings per share are calculated by dividing (loss)/profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. EPRA NAV and EPRA NNNAV (refer to Glossary) are equal to the NAV presented in the Consolidated Statement of Financial Position under IFRS and there are no adjusting items. Accordingly, a reconciliation between these measures has not been presented.
8. Dividends paid Half year Half year ended 31 ended 31 Year ended December December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Fourth interim dividend declared and paid in respect of the quarter ended 30 June 2020 at 1.425p per Ordinary Share (2019: quarter ended 30 June 2019 at 1.375p per Ordinary Shares) 1,147 1,107 1,107 First interim dividend declared and paid in respect of the quarter ended 30 September 2020 at 1.25p per Ordinary Share (2019: quarter ended 30 September 2019 at 1.375p per Ordinary Share) 1,006 1,107 1,107 Second interim dividend declared and paid in respect of the quarter ended 31 December 2019 at 1.375p per Ordinary Share - - 1,107 Third interim dividend declared and paid in respect of the quarter ended 31 March 2020 at 0.825p per Ordinary Share - - 664 Total dividends declared and paid during the period/year** 2,153 2,214 3,985 ----------------------- ----------------------- ----------------------- Fourth interim dividend declared in respect of the quarter ended 30 June 2019 at 1.375p per Ordinary Shares - (1,107) (1,107) Second interim dividend declared and paid in respect of the quarter ended 31 December 2020 at 1.00p per Ordinary Share* (2019: quarter ended 31 December 2019 at 1.375p per Ordinary Share 805 1,107 - Fourth interim dividend declared in respect of the quarter ended 30 June 2020 at 1.425p per Ordinary Share* (1,147) - 1,147 Total dividends in respect of the period/year 1,811 2,214 4,025 ----------------------- ----------------------- -----------------------
* Dividends declared after the period/year end are not included in the Consolidated Financial Statements as a liability.
** Dividends paid per cash flow statement amount to GBP2,129 (GBP'000) include the amount of withholding tax paid.
9. Investment property Half year ended 31 December 2020 Half year ended 31 Year ended December 30 June (unaudited) 2019 (unaudited) 2020 (audited) Investment Investment properties properties freehold leasehold Total Total Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 UK Investment property At the beginning of the period/year 87,130 14,780 101,910 112,990 112,990 Acquisition during the period/year 5,007 - 5,007 - - Addition to investment property 1,101 - 1,101 - - Reclassification between assets (12,089) 12,089 - - - Revaluation of investment property 542 70 612 333 (8,087) Non-current asset held for sale (note 15) - - - - (2,850) Adjustment to cost* - - - (333) (143) --------------- ----------- ----------------------- Valuation provided by Knight Frank LLP 81,591 26,939 108,530 112,990 101,910 --------------- ----------- ----------------------- ----------------------- ------------------- Adjustment to fair value for rent smoothing (note 10) (2,466) (1,522) (2,224) Reclassification to Non-current asset held for sale (note 15) - - 116 Adjustment for lease obligations 487 498 471 Total investment property 106,551 111,966 100,273
----------------------- ----------------------- ------------------- Change in fair value of Investment property Change in fair value before adjustments for lease incentives and lease obligations 612 333 (8,087) Movement in lease obligations 16 - (46) Adjustment to fair value for rent smoothing of lease income (including reversal as result of sale) (358) (578) (1,278) 270 (245) (9,411) ======================= ======================= ===================
*The adjustment on cost relates to the reversal of a provision raised in the prior period.
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, 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 valuation of the Group's investment property at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).
The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those flows.
10. Receivables and prepayments
31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Receivables Rent debtor 1,342 424 1,174 Less: Provision for impairment of trade receivables* (210) - (213) Other debtors - - 2,211 Total Receivables 1,132 424 3,172 --------------------- ----------------------- --------------------- Rent smoothing debtor - rent indexation 1,881 1,522 1,598 Rent smoothing debtor - rent free periods 585 - 626 Tenant deposit asset (note 11) 123 - - Other prepayments 19 34 21 Total 3,740 1,980 5,417 ===================== ======================= =====================
The aged debtor analysis of receivables which are past due but not impaired is as follows:
31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Less than three months due 618 424 3,089 Between three and six months due 514 - 83 Between six and twelve months due - - - 1,132 424 3,172 --------------------- --------------------- ----------------------
11. Payables and accrued expenses
31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Deferred income 1,443 1,018 1,265 Trade creditors 62 237 87 Accruals 618 - 395 Tenant deposit liability 123 - - (note 10) Other creditors 693 428 848 2,939 1,683 2,595 --------------------- --------------------- ----------------------
12. Interest bearing loans and borrowings
31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Facility drawn at the beginning of the period/year 41,000 41,000 41,000 ----------------------- ---------------------- --------------------- Less: unamortised loan issue costs incurred (583) (686) (686) Less: adjustment on loan issue cost - (21) (21) Plus: amortised loan issue costs 47 56 124 At end of period/ year 40,464 40,349 40,417 ----------------------- ---------------------- --------------------- Repayable between 1 and 2 years - - - Repayable between 2 and 5 years - - - Repayable in over 5 years 41,000 41,000 41,000 Total 41,000 41,000 41,000 ----------------------- ---------------------- ---------------------
As at 31 December 2020, the Group had utilised all of its GBP41 million fixed interest loan facility with Canada Life Investments and was geared at a loan to Gross Asset Value ('GAV') of 36.6%. The weighted average interest cost of the Group's facility is 3.19% and the facility is repayable on 20 October 2025.
31 December 31 December 30 June 2020 2020 (unaudited) 2019 (unaudited) (audited) GBP'000 GBP'000 GBP'000 Reconciliation to cash flows from financing activities At the beginning of the period/year 40,417 40,314 40,314 Interest paid (709) (673) (1,435) ---------------------- ---------------------- --------------------- Total changes from financing cash flows (709) (673) (1,435) Other changes Movement in interest payable presented under other creditors (3) (42) (7) Interest expense 712 715 1,442 Adjustment on loan issue costs - (21) (21) Amortisation of loan issue costs 47 56 124 Total other changes 756 708 1,538 At the end of the period/year 40,464 40,349 40,417 ---------------------- ---------------------- ---------------------
13. Lease obligations
At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid on that date.
The following table analyses the minimum lease payments under non-cancellable leases:
31 December 31 December 2019 (unaudited) 30 June 2020 (unaudited) - restated 2020 (audited) GBP'000 GBP'000 GBP'000 Within one year 50 48 50 After one year but less than five years 200 167 200 More than five years 538 283 563 Total undiscounted lease liabilities: 788 498 813 Less: Future finance charge on lease obligations (396) - (399) Present value of lease liabilities: 392 498 414 ---------------------- ---------------------- ---------------------- Lease liabilities included in the statement of financial position: Current 39 48 41 Non-current 353 450 373 Total: 392 498 413 ---------------------- ---------------------- ----------------------
14. Commitments
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 between 6 months and 90 years.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2020 are as follows:
31 December 31 December 2019 (unaudited) 30 June 2020 (unaudited) - restated 2020 (audited) GBP'000 GBP'000 GBP'000 Less than one year 6,880 6,332 6,449 One to two years 6,947 6,758 6,603 Two to three years 7,101 6,754 6,626 Three to four years 7,187 6,841 6,729 Four to five years 6,966 6,934 6,758 Five to ten years 30,470 31,681 30,429 Ten to fifteen years 27,615 29,520 28,231 Over fifteen years 61,807 67,931 64,735 Total 154,973 162,751 156,559 -------------------- -------------------- --------------------
During the half year ended 31 December 2020 (2019: GBPnil) there were no material contingent rents recognised as income.
15. Non-current assets held for sale
31 December 31 December 2019 (unaudited) 30 June 2020 (unaudited) - restated 2020 (audited) GBP'000 GBP'000 GBP'000 Assets held for sale Investment property - Wet 'n' Wild - - 2,734 Total - - 2,734 ----------------------- ------------------ --------------------
Details of the disposal of Wet 'n' Wild is as follows:
Half year from 1 July Half year from 2020 to 31 1 July 2019 Year ended Gain on sale of investment December 2020 to 31 December 30 June property (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Gross proceeds on 3,204 - - disposal Selling costs (45) - - Net proceeds on disposal 3,159 - - Carrying value (2,734) - - ---------------- ----------------------- ----------------------- Gain on disposal 425 - - ---------------- ----------------------- -----------------------
In addition to above gain on sale, an amount of GBP115,568 relating to the property were released in the statement of comprehensive income under "rental and other income".
16. Investments in subsidiaries
The Company has two wholly owned subsidiaries as disclosed below:
Country of Ordinary Name and company registration Date of Principal Shares number and incorporation incorporation activity held Alternative Income REIT Holdco Limited Real (Company England and 7 November Estate number 11052186) Wales 2017 Company 73,158,502* Alternative Income Real Limited (Company England and Estate number 10754641) Wales 4 May 2017 Company 73,158,501*
* Ordinary shares of GBP1.00 each.
Alternative Income REIT Plc as at 30 June 2020 owns 100% controlling stake of Alternative Income REIT Holdco Limited.
Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited.
17. Issued share capital
Half year ended 31 December 2020 For the year ended (unaudited) 30 June 2020 (audited) Number Number of of Ordinary Ordinary GBP'000 Shares GBP'000 Shares Ordinary Shares issued and fully paid At the beginning of the period/year 805 80,500,000 805 80,500,000 At the end of the period/year 805 80,500,000 805 80,500,000 -------- --------------- -------------------- ---------------
18. Transactions with related parties
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.
Subsidiaries
Alternative Income REIT Plc as at 31 December 2020 owns 100% controlling stake of Alternative Income REIT Holdco Limited and Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited.
Directors
Directors of the Group are considered to be the key management personnel. Directors' remuneration is disclosed in note 4.
Investment Manager
M7 Real Estate Ltd - from 14 May 2020 to date
M7 Real Estate Ltd was appointed as Investment Advisor on 14 May 2020. The Interim Investment Advisory agreement specifies that there are no fees payable up to 30 September 2020. From 1 October 2020, an annual management fee of 0.50% per annum of NAV (subject to a minimum fee of GBP90,000 per quarter) will be due and paid quarterly in advance. During the period 1 October 2020 to 31 December 2020, the Group incurred GBP90,000 in respect of investment management fees and expenses of which GBPnil was outstanding at period end.
AEW UK Investment Management LLP("AEW UK") - from 1 July 2019 to 9 April 2020
The Group was party to an Investment Management Agreement, with AEW UK, pursuant to which the Group appointed AEW UK to provide investment management 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 of the Board of Directors.
Under the Investment Management Agreement, AEW UK received a management fee which was calculated monthly at a rate equivalent to 0.75% per annum of NAV (excluding un-invested fund-raising proceeds) and paid quarterly in arrears. During the period 1 July 2019 to 9 April 2020, the Group incurred GBP407,708 (half year ended 31 December 2019: GBP269,584, 30 June 2020: GBPnil) in respect of investment management fees and expenses of which GBP137,445 (31 December 2019: 134,576, 30 June 2020: GBP137,445) was outstanding at 31 December 2020.
19. Events after reporting date
Dividend
On 4 February 2021, the Board declared an interim dividend of 1.00 pps in respect of the period from 1 October 2020 to 31 December 2020. This will be paid on 26 February 2021 to shareholders on the register as at 12 February 2021. The ex-dividend date was 11 February 2021.
EPRA Unaudited Performance Measures Calculations
31 December 31 December 30 June 2020 2020 (unaudited) 2019 (unaudited) (audited) GBP'000 GBP'000 GBP'000 Investment property - wholly owned 108,530 112,990 104,760 Allowance for estimated purchaser's costs 8,140 7,683 7,857 Gross up completed property portfolio valuation 116,670 120,673 112,617 Annualised cash passing rental income 6,460 6,117 6,496 Property outgoings (55) (40) (55) ------------------ Annualised net rents 6,405 6,077 6,441 Add: notional rent expiration of rent free periods and fixed uplifts 1,812 1,531 1,407 ------------------ EPRA 'topped-up' NIY 8,217 7,608 7,848 EPRA NIY 5.49% 5.04% 5.72% EPRA 'topped-up' NIY 7.04% 6.30% 6.97% ------------------- ------------------ ---------------------
EPRA NIY basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by the gross value of the completed property portfolio.
The valuation of grossed up completed property portfolio is determined by Knight Frank as at 31 December 2020, plus an allowance for estimated purchasers' costs. Estimated purchasers' costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent free periods and future contracted rental uplifts.
Calculation of EPRA Vacancy Rate 31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Annualised potential rental value of vacant premises - - - Annualised potential rental value for the completed property portfolio 6,925 6,698 6,729 EPRA Vacancy Rate 0.00% 0.00% 0.00% Calculation of EPRA Cost Ratios 31 December 31 December 30 June 2020 (unaudited) 2019 (unaudited) 2020 (audited) GBP'000 GBP'000 GBP'000 Administrative/operating expense per IFRS income statement 388 539 1,491 Property operating expenses 53 50 56 EPRA Costs (including and excluding direct vacancy costs) 441 589 1,547 Gross Rental Income 3,526 3,616 7,351 EPRA Cost Ratio (including direct vacancy costs) 12.51% 16.29% 21.05% EPRA Cost Ratio (excluding direct vacancy costs) 12.51% 16.29% 21.05%
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by Computershare Investor Services PLC. In the event of queries regarding your holding, please contact the Registrar on 0370 707 1874 or email: web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to the Registrar, at the address shown below. You can check your shareholding and find practical help on transferring shares or updating your details at www.investorcentre.co.uk. Shareholders eligible to receive dividend payments gross of tax may also download declaration forms from that website.
Share Information
Ordinary GBP0.01 shares 80,500,000
SEDOL Number BDVK708
ISIN Number GB00BDVK7088
Ticker/TIDM AIRE
Share Prices
The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.
Frequency of NAV publication
The Group's NAV is released to the London Stock Exchange on a quarterly basis and is published on the Company's website www.alternativeincomereit.com .
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Group's website.
Financial Calendar
February 2021 Announcement of interim results
30 June 2021 Year end
October 2021 Announcement of annual results
November 2021 Annual General Meeting
31 December 2021 Half year end
Directors
Steve Smith (Independent non-executive Chairman)
Jim Prower (Independent non-executive Director)
Alan Sippetts (Independent non-executive Director)
Registered Office
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Property Manager
Mason Owen and Partners Limited
7(th) Floor
20 Chapel Street
Liverpool
L3 9AG
Corporate Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Company Website
https://www.alternativeincomereit.com/
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Investment Adviser and Administrator
M7 Real Estate Limited
3(rd) Floor
The Monument Building
11 Monument Street
London
EC3R 8AF
Consultant Portfolio Manager
King Capital Consulting Limited
140a Tachbrook Street
London
SW1V 2NE
Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Communications Advisor
Maitland/AMO
3 Pancras Square
London
N1C 4AG
Glossary
Alternative Investment Langham Hall Fund Management LLP. Fund Manager or AIFM or Investment Manager Annualised charges A measure of the Group's annualised operating costs for the period as a percentage of NAV. Company Alternative Income REIT plc. Contracted rent The annualised rent adjusting for the inclusion of rent subject to rent free periods. Earnings Per Share Profit for the period attributable to equity ('EPS') shareholders divided by the weighted average number of Ordinary Shares in issue during the period. EPRA European Public Real Estate Association, the industry body representing listed companies in the real estate sector. EPRA cost ratio (including The ratio of net overheads and operating direct vacancy costs) expenses against gross rental income (with both amounts excluding ground rents payable). Net overheads and operating expenses relate to all administrative and operating expenses. EPRA cost ratio (excluding The ratio calculated above, but with direct direct vacancy costs) vacancy costs removed from net overheads and operating expenses balance. EPRA Earnings Per A key measure of a company's underlying Share operating results and an indication of the extent to which current dividend payments are supported by earnings. EPRA NAV NAV adjusted to include properties and
other investment interests at fair value and to exclude certain items not expected to crystallise in a long term investment property business. EPRA NNNAV EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations. EPRA Net Initial Annualised rental income based on the cash Yield ('NIY') 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. EPRA Topped-Up Net This measure incorporates an adjustment Initial Yield to the EPRA NIY in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent periods and step rents). EPRA Vacancy Rate Estimated Rental Value of vacant space as a percentage of the Estimated Rental Value of the whole portfolio. Equivalent Yield The internal rate of return of the cash flow from the property, assuming a rise to Estimated Rental Value at the next review or lease expiry. No future growth is allowed for. Estimated Rental The external valuer's opinion as to the Value ('ERV') open market rent which, on the date of the valuation, could reasonably be expected to be obtained on a new letting or rent review of a property. External Valuer An independent external valuer of a property. The Group's External Valuer is Knight Frank LLP. Fair value The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion. Fair value movement An accounting adjustment to change the book value of an asset or liability to its fair value. FCA The Financial Conduct Authority. Gross Asset Value The aggregate value of the total assets ('GAV') of the Group as determined in accordance with IFRS. IASB International Accounting Standards Board. IFRS International Financial Reporting Standards, as adopted by the European Union. Investment Adviser M7 Real Estate Limited. IPO The admission to trading on the London Stock Exchange's Main Market of the share capital of the Company and admission of Ordinary Shares to the premium listing segment of the Official List on 6 June 2017. Lease incentives Incentives offered to occupiers to enter into a lease. Typically this will be an initial rent free period, or a cash contribution to fit out. Under accounting rules the value of the lease incentives is amortised through the Consolidated Statement of Comprehensive Income on a straight line basis until the lease expiry. Loan to Value ('LTV') The value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the combined valuation of the property portfolio (as provided by the valuer) and the fair value of other investments. Net Asset Value Net Asset Value is the equity attributable ('NAV') to shareholders calculated under IFRS. Net Asset Value Equity shareholders' funds divided by the per share number of Ordinary Shares in issue. Net equivalent yield Calculated by the External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears. Net Initial Yield The initial net rental income from a property ('NIY') at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase. Net rental income Rental income receivable in the period after payment of ground rents and net property outgoings. Ongoing Charges The ratio of annualised total administration and property operating costs expressed as a percentage of average NAV throughout the period. Ordinary Shares The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both income, in the form of dividends paid by the Company, and any capital growth. Passing rent The gross rent, less any ground rent payable under head leases. pps Pence per share. REIT A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria being met, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax. Reversion Increase in rent estimated by the Company's External Valuers, where the passing rent is below the ERV. Share price The value of a share at a point in time as quoted on a stock exchange. The Company's Ordinary Shares are quoted on the Main Market of the London Stock Exchange. Total returns The returns to shareholders calculated on a per share basis by adding dividend paid in the period to the increase or decrease in the share price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets. Total Shareholder The percentage change in the share price Return assuming dividends are reinvested to purchase additional Ordinary Shares. Weighted Average The average lease term remaining before Unexpired Lease Term first break, or expiry, across the portfolio ('WAULT') weighted by contracted rental income (including rent frees).
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February 22, 2021 02:00 ET (07:00 GMT)
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