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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 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Feb 2022 to Feb 2025
TIDMAIRE
RNS Number : 7738D
Alternative Income REIT PLC
07 March 2022
THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN THE UNITED STATES OF AMERICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH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.
7 March 2022
Alternative Income REIT plc
(the "Company" or the "Group")
Interim Report and Financial Statements for the half year ended 31 December 2021
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 2021.
Financial Highlights
At 31 December
Hot Features
Premium
2021 2020 Change
Net Asset Value (unaudited) GBP72.75 million GBP68.17 million +6.7%
----------------- ----------------- -------
Net Asset Value per share
(unaudited) 90.38 p 84.68 p +6.7%
----------------- ----------------- -------
Share price 72.2 p 60.0 p +20.3%
----------------- ----------------- -------
Loan to GAV (3 A) 35.22% 36.62%
----------------- ----------------- -------
For the half year ended 31 December
2021 2020 Change
EPRA EPS (A) 3.28 p 2.90 p (1) +13.1%
---------------------------- ---------------- --------
Adjusted EPS (A) 2.79 p 2.66 p (1) +4.9%
---------------------------- ---------------- --------
Dividend cover (A) 107.31% 118.22% -10.9%
---------------------------- ---------------- --------
Total dividends 2.60 p 2.25 p +15.6%
---------------------------- ---------------- --------
GBP3.45 million (including
gain on sale of investment
property but excluding
Operating profit fair value changes) GBP3.48 million -0.9%
---------------------------- ---------------- --------
Profit before tax GBP6.23 million GBP3.03 million +105.3%
---------------------------- ---------------- --------
Earnings per share 7.74 p 3.77 p +105.3%
---------------------------- ---------------- --------
Share price total return
(A) 5.84% 17.15%
---------------------------- ---------------- --------
NAV total return (A) 9.65% 5.02%
---------------------------- ---------------- --------
Ongoing charges (A) 1.44% 1.45% -1 bps
---------------------------- ---------------- --------
(A) Considered to be an Alternative Performance Measure. Further details can be found at the end of this section and full calculations are set out following the financial statements.
(1) Originally reported 31 December 2020 EPRA EPS was 3.43p and Adjusted EPS was 3.19p. This included gain on investment disposal of GBP425,000 equivalent to 0.53p which should have been excluded from the EPRA EPS calculation. See Note 7.
(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) The loan facility at 31 December 2021 of GBP41.0 million (31 December 2020: same) is with Canada Life Investments, matures on 20 October 2025 and has a weighted average interest cost of 3.19%.
-- The Net Asset Value increased by 6.7% or GBP4.58 million to GBP72.75 million, equivalent to 90.38 pence per share ('pps') as at 31 December 2021 (31 December 2020: GBP68.17 million and 84.68 pps). The majority of this increase is due to the GBP3.9 million valuation uplift in investment properties primarily due to improved market conditions, with previous year valuations impacted by poorer market conditions due to Covid-19.
-- Total dividends of 2.60p have been declared for the half year (half year ended 31 December 2020: 2.25 p). This is an increase of 15.6% and reflects the Board's view that the Company remains on track to deliver its target annual dividend(2) of 5.5 pps, with full dividend cover expected, all else being equal, by September 2022.
-- Profit before tax increased 105.3% to GBP6.23 million and earnings per share to 7.74p for the half year (half year ended 31 December 2020: profit of GBP3.03 million and earnings per share of 3.77p). The majority of this increase is due to the GBP3.9 million valuation uplift in investment properties.
-- At 31 December 2021, the Group had a GBP41.00 million loan facility with Canada Life Investments, which represented a loan to Gross Asset Value ('GAV')(A) of 35.22% (31 December 2020: 36.62%), with the weighted average interest cost of 3.19% (31 December 2020: same).
Property Highlights
-- At 31 December 2021, the Group's property portfolio had a fair value of GBP107.73 million across 18 properties (31 December 2020: GBP108.53 million across 19 properties). During the year, the Group disposed of the investment property known as Trident Business Park, Huddersfield (refer to Financial Results section within the Chairman's Statement below). On a like-for-like basis the remaining 18 properties were valued at GBP107.73 million at 31 December 2021 (31 December 2020: GBP103.03 million), a valuation increase of GBP4.70 million or 4.6%.
-- EPRA Net Initial Yield (A) ('NIY') improved to 5.72% at 31 December 2021 (31 December 2020: 5.49%).
-- Rent recognised during the half year was GBP3.73 million (half year to 31 December 2020: GBP3.49 million), of which, GBP0.25 million was accrued debtors for the combination of minimum uplifts and rent-free period (31 December 2020: accrued debtors of GBP0.24 million). The number of tenants at 31 December 2021 was 20 (31 December 2020: 22).
-- At 31 December 2021, the portfolio had Annualised Gross Passing Rental Income (A) of GBP6.62 million across 18 properties (31 December 2020: GBP6.94 million across 19 properties).
-- 92.6% of the Group's income is inflation linked to Retail Price Index ('RPI') or Consumer Price Index ('CPI').
-- The assets were 99.4% let at 31 December 2021 (31 December 2020: fully let).
-- The weighted average unexpired lease term ('WAULT') at 31 December 2021 was 18.1 years to the earlier of break and expiry (31 December 2020: 18.3 years) and 20.2 years to expiry (31 December 2020: 20.3 years).
-- On 1 December 2021, the Group completed the disposal of the freehold interest in the Audi car showroom in Huddersfield to the occupier for GBP5.5 million, representing a 3.8% premium on the book value at June 2021 and a net initial yield of 6.75%.
Post balance sheet highlights
-- On 3 February 2022, the Board declared an interim dividend of 1.3 p in respect of the period from 1 October 2021 to 31 December 2021. This was paid on 28 February 2022 to shareholders on the register as at 11 February 2022. The ex-dividend date was 10 February 2022.
-- By 2 March 2022, in respect of the March, June, September and December 2021 rent quarters, the Group has collected 100% of rent. All current tenants have repaid outstanding arrears/deferrals, including Pure Gym who accelerated repayment of all arrears from July 2022 to December 2021.
-- The portfolio is fully let following a further letting to Bgen Ltd at St Helens.
-- As announced on 31 January 2022, the Company completed the acquisition of the Volvo car showroom in a prime location on the A4 Bath Road, Slough for GBP5.0 million (net of acquisition costs to the Company) with a materially longer WAULT of 15 years. This acquisition redeployed the net proceeds from the Group's disposal, announced on 30 November 2021, of its Audi car showroom in Huddersfield for GBP5.5 million.
Alan Sippetts, Non-Executive Chairman of Alternative Income REIT plc, comments:
Our results clearly underline the strength of our resilient portfolio which is delivering strong increases in our like-for-like property valuation and unaudited NAV, with continuing income growth and very strong rent collection. We expect to provide our shareholders with further enhanced income and capital growth from our robust portfolio, which benefits from long leases, 92.6% of which have inflation linked uplifts, as well as from asset management activities, opportunistic transactions and further improvements in the market. When combined with our strong balance sheet and modest overhead, the Group has a strong foundation from which to deliver attractive total returns, including a potentially progressive dividend, and we are continuing to focus on identifying opportunities which can deliver further potential income, valuation enhancement and scale to the Company.
The Board remains confident that the Company is on track to deliver on its target annual dividend of 5.5 pence per share (2) , with full dividend cover expected, all else being equal, by September 2022."
ENQUIRIES
Alternative Income REIT plc Alan Sippetts - 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, 220 employees in 15 countries across Europe. The team manages over 570 properties with a value of circa EUR4.3 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.
Alternative Performance Measures ("APM")
In assessing the performance of the Group, the Board and the Investment Adviser use APMs including the European Public Real Estate ("EPRA") Best Practice Recommendations to supplement IFRS. EPRA measures are widely recognised and used by public real estate companies and investors and seek to improve transparency, comparability and relevance of published results in the sector.
Reconciliations between EPRA measures, other APMs and IFRS disclosures can be found in Note 7 and immediately after the Notes the Consolidated Condensed Financial Statements in this report.
Definitions of APMs are given in the Key Performance Indicators, EPRA Performance Measures Calculations and APM Calculations sections or otherwise included in the Glossary section of this report.
Chairman's Statement
Overview
I am pleased to present the unaudited interim report and financial statements of Alternative Income REIT plc (the "Company") together with its subsidiaries (the "Group") for the half year ended 31 December 2021.
During the period and up to the date of this report, the portfolio has continued to prove its resilience. In spite of the resurgence of Covid-19 through the new Omicron variant and additional Government measures implemented, our rent collection from the Group's portfolio has remained very strong. Yields in our portfolio have remained robust, even in those sectors most impacted by the pandemic, and there is further potential for yield compression as trading and the market generally improves supported by the removal by the Government of Plan B restrictions. Together with our robust balance sheet, modest overhead, 92.6% of our portfolio's leases with inflation linked upwards only rent reviews and the potential for further enhancement through asset management initiatives and transactions initiated on an opportunistic basis only, the Board believes the Company is positioned well to deliver very attractive income and capital growth.
On 1 December 2021, we completed the disposal of the freehold interest in the Audi car showroom in Huddersfield to the occupier for GBP5.5 million, representing a 3.8% premium on the book value as at June 2021 and a net exit yield of 6.75%. As announced on 31 January 2022, we were delighted to have subsequently swiftly redeployed these proceeds through the acquisition of a state-of-the-art car showroom let to Volvo for GBP5.0 million (net of acquisition costs to the Company) with a materially longer WAULT of 15 years. The Board believes that the asset has the potential to deliver excellent long term returns to shareholders, particularly with the strength of the tenant covenant on a long lease with index-linked rent reviews. This transaction was the second investment introduced by M7 Real Estate Limited ("M7"), the Company's Investment Adviser. M7 continues to consider asset management initiatives and transactions initiated on an opportunistic basis to further enhance income and capital growth; further information can be found in the Investment Adviser's Report below.
By 2 March 2022, in respect of the March, June, September and December 2021 rent quarters, the Group has collected 100% of rent. All current tenants have repaid outstanding arrears/deferrals, including Pure Gym who accelerated repayment of all arrears from July 2022 to December 2021. The portfolio is fully let following a further letting to Bgen Ltd at St Helens. A total of four rent reviews took place during the period with a combined uplift of GBP70,361 representing a 3.54% increase in contracted rent on those properties. A further five are expected to take place in the year ending 30 June 2022, with an expected increase of c.3.7% in contracted rent across the portfolio.
Financial Results Half year Half year Year
ended ended ended
31 December 31 December 30 June
2021 (unaudited) 2020 (unaudited) 2021 (audited)
IFRS performance measures:
Operating profit before fair value changes
[GBP'000] 3,445 3,475 6,311
Operating profit [GBP'000] 6,939 3,745 6,993
Profit before tax [GBP'000] 6,228 3,033 5,572
Profit per share - basic and diluted 7.74 p 3.77 p 6.92 p
Dividend per share 2.60 p 2.25 p 5.14 p
Net Asset Value per share 90.38 p 84.68 p 85.58 p
Alternative performance measures:
EPRA EPS - basic and diluted 3.28 p 2.90 p 5.55 p
Adjusted EPS - basic and diluted 2.79 p 2.66 p 5.07 p
Financing
As at 31 December 2021, the Group had fully utilised its GBP41.0 million loan facility with Canada Life Investments (31 December 2020: fully utilised). The weighted average interest cost of the Group's facility is 3.19% and the loan is repayable on 20 October 2025. If repayment is made prior to this date, and the corresponding Gilt rate is lower than the contracted rate of interest, then the loan terms provide for a significant early redemption fee, which as at 31 December 2021 would have been GBP2,551,803.
Dividends & Earnings
The Company declared interim dividends of 2.6 p in respect of the half year ended 31 December 2021, an increase of 15.6% on the dividends declared for the half year ended 31 December 2020 of 2.25 p.
As set out in Note 7 to the Consolidated Condensed Financial Statements, these dividends were covered by both EPRA Earnings (A) of 3.28 p (31 December 2020: 2.90 p), and the Group's Adjusted EPS (representing cash) were 2.79 p (31 December 2020: 2.66 p).
Future Growth and Outlook
Our results clearly underline the strength of our resilient portfolio which is delivering strong increases in our like-for-like property valuation and unaudited NAV, with continuing income growth and very strong rent collection. We expect to provide our shareholders with further enhanced income and capital growth from our robust portfolio, which benefits from long leases, 92.6% of which have inflation linked uplifts, as well as from asset management activities, opportunistic transactions and further improvements in the market. When combined with our strong balance sheet and modest overhead, the Group has a strong foundation from which to deliver attractive total returns, including a potentially progressive dividend, and we are continuing to focus on identifying opportunities which can deliver further potential income, valuation enhancement and scale to the Company.
The Board remains confident that the Company is on track to deliver on its target annual dividend of 5.5 pence, with full dividend cover expected, all else being equal, by September 2022(5) .
I would like to thank my fellow shareholders, Directors, the Investment Adviser and our other advisers and service providers who have provided professional support and services to the Group during the period.
Alan Sippetts
Chairman
4 March 2022
(A) Considered to be an Alternative Performance Measure. Further details can be found at the end of this section and full calculations are set out following the financial statements.
(5) 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.
Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE
----------------------------------- -------------------------------- ----------------------------
1. Net Initial Yield 5.71 %
('NIY') The NIY is an indicator at 31 December 2021
Annualised rental income of the ability of the (30 June 2021: 5.93%;
based on the cash rents Company to meet its target 31 December 2020: 5.53%)
passing at the balance dividend after adjusting
sheet date, less non-recoverable for the impacts of leverage
property operating expenses, and deducting operating
divided by the market costs.
value of the property,
increased with purchasers'
costs estimated by the
Group's External Valuers.
2. Weighted Average Unexpired 18.1 years to break
Lease Term ('WAULT') and 20.2 years to expiry
to break and expiry
The average lease term The WAULT is a key measure at 31 December 2021
remaining to expiry across of the quality of the (30 June 2021: 17.8 years
the portfolio, weighted portfolio. Long leases to break and 19.8 years
by contracted rent. underpin the security to expiry; 31 December
of our future income. 2020: 18.3 years to break
and 20.3 years to expiry)
3. Net Asset Value ('NAV') GBP 72.75 million/ 90.38
per share Provides stakeholders p
NAV is the value of an with the most relevant at 31 December 2021
entity's assets minus information on the fair (30 June 2021: GBP68.89
the value of its liabilities. value of the assets and million, 85.58 p and
liabilities of the Group. 31 December 2020: GBP68.17
million, 84.68 p)
4. Dividend per share 2.60 p
Dividends declared in The Company seeks to deliver for the half year ended
relation to the period a sustainable income stream 31 December 2021
are in line with the from its portfolio, which (year ended 30 June 2021:
stated dividend target it distributes as dividends. 5.14 p; half year ended
as set out in the Prospectus 31 December 2020: 2.25
at IPO. The Company targets p)
a dividend of 5.50 pence
per Ordinary Share per
annum once fully invested
and leveraged(2) .
5. Adjusted EPS 2.79 p
Adjusted EPS from core This reflects the Company's for the half year ended
operational activities, ability to generate earnings 31 December 2021
as adjusted for non-cash from the portfolio which (year ended 30 June 2021:
items. A key measure underpins dividends. 5.07 p; half year to
of a company's underlying 31 December 2020: 2.66
operating results from p)
its property rental business
and an indication of
the extent to which current
dividend payments are
supported by earnings.
See Note 7 to the Consolidated
Condensed Financial Statements.
6. Leverage (Loan-to-GAV) 35.22 %
The proportion of the The Group utilises borrowings at 31 December 2021
Group's assets that is to enhance returns over (30 June 2021: 36.30%
funded by borrowings. the medium term. Borrowings and 31 December 2020:
will not exceed 40% of 36.62%)
GAV (measured at drawdown).
EPRA Performance Measures
The table below shows EPRA performance measures (which are all alternative performance measures) of the Group.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
----------------------------------- ---------------------------------- -----------------------------
EPRA NIY (6) 5.72 %
Annualised rental income A comparable measure for at 31 December 2021
based on the cash rents portfolio valuations. (30 June 2021: 5.94%
passing at the balance This measure should make and 31 December 2020:
sheet date, less non-recoverable it easier for investors 5.49%)
property operating expenses, to judge themselves, how
divided by the market the valuation of two portfolios
value of the property, compare.
increased with (estimated)
purchasers' costs.
EPRA 'Topped-Up' NIY 6.68 %
(6) A comparable measure for at 31 December 2021
This measure incorporates portfolio valuations. (30 June 2021: 6.95%
an adjustment to the This measure should make and 31 December 2020:
EPRA NIY in respect of it easier for investors 7.04 %)
the expiration of rent-free to judge themselves, how
periods (or other unexpired the valuation of two portfolios
lease incentives such compare.
as discounted rent periods
and step rents).
EPRA NAV (7) GBP72.75 million / 90.38
Net asset value adjusted Makes adjustments to IFRS p
to include properties NAV to provide stakeholders at 31 December 2021
and other investment with the most relevant (30 June 2021: GBP68.89
interests at fair value information on the fair million, 85.58 p and
and to exclude certain value of the assets and 31 December 2020: 68.17
items not expected to liabilities within a real million, 84.68 p)
crystallise in a long-term estate investment company
investment property business. with a long-term investment
strategy.
EPRA Earnings/EPS (7) GBP2.64 million/3.28
Earnings from operational A key measure of a company's p
activities. underlying operating results EPRA earnings for the
and an indication of the half year ended 31 December
extent to which current 2021
dividend payments are (30 June 2021: GBP 4.47
supported by earnings. million/5.55 p and 31
December 2020: GBP2.34
million/2.9 p)
EPRA Vacancy (6) 0.6 %
Estimated Rental Value A 'pure' percentage measure EPRA vacancy as at 31
('ERV') of vacant space of investment property December 2021
divided by ERV of the space that is vacant, (30 June 2021: 0% and
whole portfolio. based on ERV. 31 December 2020: 0%)
EPRA Cost Ratio (6) 10.3 %
Administrative and operating A key measure to enable EPRA Cost Ratio as at
costs (including and meaningful measurement 31 December 2021. 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 2021: 18.4%
and 31 December 2020:
12.6%)
EPRA Net Reinstatement GBP77.20 million/95.91
Value (7) A measure that highlights p
The EPRA NRV adds back the value of net assets EPRA NRV for the half
the purchasers' costs on a long-term basis. year ended 31 December
deducted from the EPRA 2021
NAV and deducts the break (30 June 2021: GBP72.53
cost of bank borrowings. million/90.09p and 31
December 2020: GBP71.04
million/88.25p)
EPRA Net Tangible Assets GBP70.20 million/87.21
(7) A measure that assumes p
The EPRA NTA deducts entities buy and sell EPRA NTA for the half
the break cost of bank assets, thereby crystallising year ended 31 December
borrowings from the EPRA certain levels of deferred 2021
NAV. tax liability. The Group (30 June 2021: GBP65.43
has UK REIT status and million/81.27 p and 31
as such no deferred tax December 2020: GBP62.90
is required to be recognised million/78.14 p)
in the accounts.
EPRA Net Disposal Value GBP70.20 million/87.21
(7) A measure that shows the p
The EPRA NDV deducts shareholder value if assets EPRA NDV for the half
the break cost of bank and liabilities are not year ended 31 December
borrowings from the EPRA held until maturity. 2021
NAV. (30 June 2021: GBP65.43
million/81.27 p and 31
December 2020: GBP62.90
million/78.14 p)
EPRA NNNAV is equal to EPRA NAV as there are no adjusting items. As such, this measure has not been presented.
(6) The reconciliation of this APM is set out in the EPRA Performance Measures Calculations section following the Notes to the Consolidated Condensed Financial Statements.
(7) The reconciliation of this APM is set out in Note 7 of the Notes to the Consolidated Condensed Financial Statements.
Investment Adviser's Report
Market Outlook
UK Economic Outlook
Headline GDP growth in 2022 could be between 4.5% and 5.1% but this is largely driven by base effects. The annual growth figures in the first half of 2022 are expected to be skewed as the economy comes off its low base due to the national lockdown in early 2021. Core underlying growth will continue to be relatively modest, continuing the low-growth trend we have seen this year driven by the normalisation of economic activity.
PricewaterhouseCoopers (PwC) anticipate GDP growth to slow down in 2022 as the economy returns to its pre-pandemic trend with the UK economy anticipated by the end of 2022 to be roughly 1% to 2% above the pre-COVID levels. From 2023 onwards, the pace of growth is projected to slow down further as base effects fall out of the annual figures. Under PwC's two scenarios, growth is expected to range between 1.3% and 1.8% in 2023.
Research produced by PwC in December 2021(8) suggested that the end of the furlough scheme has not set back the labour market recovery. Various indicators and surveys suggest that a significant majority of the 1.1 million workers still on furlough at the end of September remain in employment. However, it will take some months to understand the full impact of the end of furlough. This is because furloughed employees that have been made redundant will still be included in the payroll data while they serve out their notice periods. This means the short-term outlook for the labour market is cautiously optimistic.
Inflation is likely to reach its highest level for three decades in Q2 2022, before returning gradually back to target. Ofgem's price cap review, combined with the scheduled reversal of the VAT cuts for hospitality and tourism, is expected to create a perfect storm that creates upward pressure on inflation rates in the first half of 2022. This increase in inflation is expected to positively impact the income profile of the Alternative Income REIT plc with several tenants having index linked rent reviews. Inflation is expected to gradually fall back to target over the next 1-2 years, as the impact of these two factors fade, supply bottlenecks ease, and base effects dissipate.
(8) UK Economic Outlook, December 2021, PricewaterhouseCoopers
UK Real Estate Outlook
Although the UK isn't in the clear with regards to the Covid-19 pandemic, progress has been made and people are moving forward with a renewed sense of optimism. An improving economy and the labour market holding stable following the removal of the furlough scheme provide a generally positive backdrop for real estate in 2022.
Whilst there is a general positivity around real estate in 2022, following the easing of Covid-19 related lockdown measures, sectors such as industrial are assumed to continue to thrive, which will benefit the Group's industrial exposure. It is expected that the rental growth experienced in recent years will continue into 2022, with speculative development at an all-time high, but insufficient to meet the current demand, causing vacancy rates to remain low and created upward pressure on rents. Additionally, retail is expected to recover during 2022, driven by a pick-up in spend in 2022 leading to increased occupier demand. Retail warehousing and parks are expected to continue to be the strongest performers during 2022.
The Group's hotel assets struggled throughout the pandemic, however, hotel revenues are expected to recover during 2022, driven by increases in international travel and the removal of national lockdown restrictions. Increased investor appetite will support recovery in asset values and liquidity. Healthcare was another sector that struggled during 2022, however, CBRE expect the market to recover to pre pandemic levels, boosting investor confidence and leading to prime yields of 4.5%. Furthermore, they are anticipating record M&A activity in the leisure industry during 2022, because of investors looking to capitalise on operational risk with the market.
Student housing is another sector in which the Group has a large exposure. At the end of 2021, it was reported that 2021 saw significant confidence return to the UK's purpose build student accommodation sector with over GBP2.5 billion invested and companies, such as Unite, reporting occupancy figures of 94%.
2021 saw an emphasis placed on the importance of ESG related credentials. Normally associated with sustainability, and gaining in prominence, ESG is a growing and has quickly become an ethical priority for businesses, both large and small. It is becoming a central aspect of how businesses define themselves. This is having significant impacts on the occupational market with perspective tenants taking ESG values into account when considering their next office, making ESG related credentials a key selling point.
Portfolio Activity During the Period
The following asset management initiatives were undertaken during the half year:
-- Rent Reviews: A total of four rent reviews took place during the period with a combined uplift of GBP70,361 representing an average of 3.54% growth in contracted rent across those properties affected and 1.07% across the portfolio.
-- Covid-19 rent arrangements: All Covid-19 related arrears have now been repaid.
o Premier Inn - the tenant did not utilise the option to defer the payment of 50% of rent due at the end of September & December 2021, having paid all rents in accordance with their obligations.
o Pets at Home - continue to pay monthly although contracted to pay quarterly.
o Pure Gym - 10 month's rent, deferred by agreement due to Covid closures, was repaid in full 7 months early in December 2021.
o Snap Fitness - rent deposit is being repaid by instalments through to March 2022.
-- Grazebrook Industrial Estate, Dudley: major new machinery and steel installation works by Meridian Steel in their Dudley operation is due to complete in Spring 2022.
-- Pocket Nook Estate, St Helens: A 5 year lease extension of Unit 2 by Bgen Limited, on expiry of their lease in April 2022, completed on 21 February 2022 at a 5.6% increased rent.
-- Travelodge, Swindon: Travelodge Hotels Limited, who entered CVA in June 2020 have performed in accordance with their agreement. Following a rent review in June 2021, 100% of the reviewed rent (GBP403,147 per annum) became due from 1 January 2022. As previously reported, work was completed in December 2020 to replace the combustible elements uncovered on the external walls of the top floors and rear lift core of the Travelodge Hotel, with non-combustible replacements and to remediate the fire/smoke stopping, at a cost (including professional fees) of c.GBP1.2 million. The property was extended in 2007 and both the architect and cladding sub-contractor involved are being pursued for reimbursement of the costs. Particulars of Claim were lodged with the Court on 12 November 2021, Defences were lodged on 7 February 2022.
-- Huddersfield, Audi car showroom was sold for GBP5.5 million on 1 December 2021 to the occupier. The lease has a WAULT of 3.86 years and rent reflecting GBP13.49 per sq ft, significantly in excess of industrial rents in the vicinity.
The following asset management initiatives were undertaken between the half year and the date of this report:
-- Acquisition of a state-of-the-art car showroom let to Volvo for GBP5.0 million (net of acquisition costs to the Company) with a materially longer WAULT (15 years compared with Huddersfield of 3.86 years) on 28 January 2022. The rent reflects GBP18.05 per sq ft, a level underpinned by alternative use (industrial and retail warehouse) rental values in the vicinity.
-- Bgen Limited has taken a 3 year lease of an adjacent yard so that the only unlet property at the period end is now let, returning the Group's portfolio to 100% occupancy.
Financial Results
Net rental income earned from the portfolio for the half year ended 31 December 2021 was GBP3.73 million excluding service and direct recharges (half year to 31 December 2020: GBP3.49 million; year to 30 June 2021: GBP7.21 million), contributing to an operating profit before fair value changes of GBP3.35 million (half year to 2020: GBP3.05 million; year to 30 June 2021: GBP5.89 million).
The portfolio has seen a gain of GBP3.49 (9) million in fair value of investment property over the half year (half year to 31 December 2020: gain of GBP0.27 million; year to 30 June 2021: gain of GBP0.68 million). This is primarily due to improved market conditions, with previous year valuations impacted by poorer market conditions due to Covid-19.
Administrative and property operating expenses, which include the Investment Manager's fee and other costs attributable to the running of the Group, were GBP0.38 million for the half year excluding service and direct recharges (half year to 31 December 2020: GBP0.44 million; year to 30 June 2021: GBP1.32 million). Ongoing charges for the half year were 1.44% (half year to 31 December 2020: 1.45%; year to 30 June 2021: 1.27%). The increase compared with the year to 30 June 2021 is caused by the Investment Adviser's fee holiday which the Company benefited from during 2020.
The Group incurred finance costs of GBP0.71 million during the half year (half year to 31 December 2020: GBP0.71 million; year to 30 June 2021: GBP1.42 million).
The profit before tax for the half year of GBP6.23 million (half year to 31 December 2020: profit before tax of GBP3.03 million; year to 30 June 2021: profit before tax of GBP5.57 million) equates to a basic earnings per share of 7.74 p (half year to 31 December 2020: basic earnings per share of 3.77 p; year to 30 June 2021: basic earnings per share of 6.92 p).
EPRA EPS for the half year was 3.28 p which, based on dividends declared of 2.6 p, reflects a dividend cover of 126.15% (half year to 31 December 2020: EPRA EPS of 2.90 p, dividends declared of 2.25 p and dividend cover of 128.89%; year to 30 June 2021: EPRA EPS of 5.55 p, dividends declared of 5.14 p and dividend cover of 107.98%).
Adjusted EPS for the period which equates to cash generated from operations (and therefore excludes movements in accrued minimum contracted uplifts, the amortisation of loan arrangement fees and movements in the provision for impairment of trade receivables) were 2.79 p which, based on dividends declared of 2.6p, reflect a dividend cover of 107.31% (half year to 31 December 2020: Adjusted EPS of 2.66 p, dividends declared of 2.25 p and dividend cover of 118.22%; year to 30 June 2021: Adjusted EPS of 5.07 p, dividends declared of 5.14 p and dividend cover of 98.64%).
The Group's NAV as at 31 December 2021 was GBP72.75 million or 90.38 p (31 December 2020: GBP68.17 million or 84.68 p; 30 June 2021: GBP68.89 million or 85.58 p). This is an increase of 4.8 pps or 5.61% over the half year ended 31 December 2021, and an increase of 5.7 p or +6.73% over the year to 31 December 2021, with the underlying movement in NAV set out in the table below:
Half year ended Half year ended Year ended
31 December 2021 31 December 2020 30 June 2021
Pence per Pence per Pence per
share GBP million share GBP million share GBP million
---------- ------------ ---------- ------------ ---------- ------------
NAV as at beginning
of period/ year 85.58 68.89 83.58 67.27 83.58 67.29
Change in fair value
of investment property 4.34 3.49 0.34 0.27 0.85 0.68
Income earned for the
year 4.75 3.83 4.38 3.53 9.20 7.41
Gain on sale of property 0.12 0.10 0.53 0.43 0.53 0.42
Finance costs for the
year (0.88) (0.71) (0.88) (0.71) (1.77) (1.42)
Other expenses for the
year (0.59) (0.48) (0.59) (0.47) (1.89) (1.52)
Dividends paid during
the year (2.94) (2.37) (2.68) (2.15) (4.92) (3.97)
NAV as at the end of
the year 90.38 72.75 84.68 68.17 85.58 68.89
(9) the fair value increase includes accounting adjustments relating to rent smoothing of (GBP0.30m) and movement in finance lease obligation of (GBP0.05m).
Valuation
At the period end (31 December 2021) the Group owned 18 assets, following the sale of Trident Business Park, Huddersfield. The fair value of these 18 assets had increased from GBP103.03 million at 31 December 2020 to GBP107.73 million at the period end, an increase of GBP4.70 million or 4.6%.
The Group has experienced valuation increases across its retail warehousing, industrial and student housing assets. Additionally, following the easing of Covid-19 related lockdown restrictions, the Group has experienced valuation increases during 2021 across is leisure and hotel assets, two asset classes that were hit hardest by the pandemic.
Financing
As at 31 December 2021, the Group had fully utilised its GBP41 million loan facility with Canada Life Investments (31 December 2020 and 30 June 2021: GBP41 million facility utilised). This term facility, which is repayable on 20 October 2025, allows up to 40% loan to property value at drawdown, is provided on a portfolio basis and has a loan to value covenant of 60%.
As at 31 December 2021, the weighted average interest cost of the Group's GBP41 million facility is 3.19% (31 December 2021 and 30 June 2021: same).
Summary by Sector at 31 December 2021
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 24.0 22.3 97.3 23.7 1.49 1.51 22.8
Hotel 3 21.4 19.9 100.0 14.0 1.40 1.43 21.6
Healthcare 3 18.4 17.1 100.0 27.0 1.13 1.10 16.6
Automotive & Petroleum 2 11.8 11.0 100.0 14.2 0.73 0.72 10.8
Student Accommodation 1 13.2 12.3 100.0 19.6 0.67 0.67 10.2
Leisure 2 5.7 5.2 100.0 7.8 0.37 0.38 5.9
Power Station 1 5.2 4.8 100.0 10.2 0.30 0.30 4.5
Retail 1 5.9 5.5 100.0 5.5 0.40 0.37 5.6
Education 1 2.1 1.9 100.0 22.1 0.13 0.13 2.0
----------- ---------- ------- ---------- --------- -------- ------- -------
Total/Average 18 107.7 100.0 99.4 18.1 6.62 6.61 100.0
----------- ---------- ------- ---------- --------- -------- ------- -------
Summary by Geographical Area at 31 December 2021
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 28.0 26.0 100.0 12.8 1.87 1.80 27.3
The North West &
Merseyside 2 23.4 21.7 96.8 35.5 1.22 1.23 18.7
Rest of South East 4 19.2 17.8 100.0 11.1 1.07 1.07 16.2
South West 2 13.0 12.1 100.0 23.8 0.69 0.81 12.3
Yorkshire and the
Humber 2 6.4 6.0 100.0 20.3 0.42 0.42 6.2
Scotland 1 7.0 6.5 100.0 14.7 0.68 0.59 8.9
London 2 5.6 5.2 100.0 7.8 0.37 0.39 5.9
Eastern 1 5.1 4.8 100.0 10.2 0.30 0.30 4.5
----------- ---------- ------- ---------- --------- -------- ------- -------
Total/Average 18 107.7 100.0 99.4 18.1 6.62 6.61 100.0
----------- ---------- ------- ---------- --------- -------- ------- -------
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: 69.2%; CPI inflation linked: 23.4% and Open Market Value Reviews: 7.4%.
Top Ten Tenants Annual % of
Passing Portfolio
Tenant Property Rental Total
Income Passing
(GBP'000) Rental
Income
--------------------- -------------------------------------- ---------- ----------
Lyndon Croft Care Centre, Solihull
Prime Life Ltd and Westerlands Care Village, Brough 704 10.6
Grazebrook Industrial Estate, Dudley
Meridian Steel Ltd and Provincial Park, Sheffield 688 10.4
Jupiter Hotels Ltd Mercure City Hotel, Glasgow 680 10.3
Mears Group Plc Bramall Court, Salford 671 10.1
Motorpoint Ltd Motorpoint, Birmingham 500 7.6
Premier Inn Hotels
Ltd Premier Inn, Camberley 449 6.8
Handsale Ltd Silver Trees, Bristol 421 6.4
Hoddesdon Energy
Ltd Hoddesdon Energy, Hoddesdon 300 4.5
B&M Bargains Droitwich Spa Retail Park, Droitwich 272 4.1
Biffa Waste Services Pocket Nook Industrial Estate,
Ltd St Helens 267 4.0
The Group's top ten tenants, listed above, represent 7.8% of the total passing rental income of the portfolio.
Lease Expiry Portfolio - To the earlier of break of expiry
Year Expiring passing Cumulative (GBP'000)
rent pa (GBP'000)
2022 123 123
------------------- ---------------------
2023 286 409
------------------- ---------------------
2024 - 409
------------------- ---------------------
2025 - 409
------------------- ---------------------
2026 - 409
------------------- ---------------------
2027 924 1,333
------------------- ---------------------
2028 262 1,594
------------------- ---------------------
2029 272 1,867
------------------- ---------------------
2030 - 1,867
------------------- ---------------------
2031 - 1,867
------------------- ---------------------
2032 771 2,637
------------------- ---------------------
2033 364 3,002
------------------- ---------------------
2034 - 3,002
------------------- ---------------------
2035 - 3,002
------------------- ---------------------
2036 680 3,682
------------------- ---------------------
2037 500 4,182
------------------- ---------------------
2038 - 4,182
------------------- ---------------------
2039+ 2,438 6,620
------------------- ---------------------
M7 Real Estate Limited
4 March 2022
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 ('Annual Report') for the year ended 30 June 2021 as set out in that report on pages 20 to 24 and in Note 19 to the Financial Statements on pages 79 to 81.
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, failure of service providers, dependence on the Investment Adviser, ability to meet objectives, Group REIT status, political/economic risks and introduction of, or amendment to, laws and regulations (especially in relation to climate change).
The Board is of the opinion that these principal risks are equally applicable to the remaining six months of the Group's financial year, as they were to the six months being reported on.
Related Party Transactions
Detail of the Investment Adviser arrangements were provided in the Annual Report. There have been no changes to the related party transactions described in that report that could have a material effect on the financial position or performance of the Company or Group. Amounts payable to the Investment Adviser in the six months being reported are shown in the unaudited Consolidated Condensed Statement of Comprehensive Income.
Going Concern
This report has been prepared on a going concern basis. Note 2.4 sets out the Board's considerations in coming to this conclusion.
Responsibility Statement
The Directors confirm that to the best of our knowledge:
-- the consolidated condensed set of financial statements has been prepared in accordance with the UK-adopted IAS 34 Interim Financial Reporting;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the six months 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 six months 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
Alan Sippetts
Chairman
4 March 2022
Consolidated Condensed Statement of Comprehensive Income
For the half year ended 31 December 2021
Year
ended
30 June
Half year Half year
ended ended 2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Income
Rental and other
income 3 3,826 3,526 7,409
Property operating
income
/ (expense) 4 48 (85) (647)
Net rental and other
income 3,874 3,441 6,762
Other operating
expenses 4 (526) (391) (876)
Operating profit before fair
value change 3,348 3,050 5,886
Change in fair value of
investment
properties 9 3,494 270 682
Gain on disposal of investment
property 9 97 425 425
Operating profit 6,939 3,745 6,993
Finance expense 5 (711) (712) (1,421)
Profit before tax 6,228 3,033 5,572
Taxation 6 - - -
Profit and total
comprehensive
income attributable
to
shareholders 6,228 3,033 5,572
------------------------- ------------------- -------------
Earnings per share (pence)
(basic and diluted) 7 7.74 3.77 6.92
------------------------- ------------------- -------------
EPRA EPS (pence)
(basic and diluted) 7 3.28 2.90 5.55
------------------------- ------------------- -------------
Adjusted EPS (pence)
(basic and diluted) 7 2.79 2.66 5.07
------------------------- ------------------- -------------
All items in the above statement are derived from continuing operations.
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Consolidated Condensed Statement of Financial Position
As at 31 December 2021
As at
30 June
As at As at 2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current Assets
Investment properties 9 105,220 106,551 107,026
105,220 106,551 107,026
------------------- ------------------- -------------
Current Assets
Receivables and prepayments 10 8,962 3,740 3,682
Cash and cash equivalents 2,243 1,670 2,115
11,205 5,410 5,797
------------------- ------------------- -------------
Total Assets 116,425 111,961 112,823
------------------- ------------------- -------------
Non-current
Liabilities:
Interest bearing loans
and borrowings 12 (40,568) (40,464) (40,516)
Lease obligations 13 (317) (353) (335)
(40,885) (40,817) (40,851)
------------------- ------------------- -------------
Current Liabilities
Payables and accrued expenses 11 (2,749) (2,939) (3,041)
Lease obligations 13 (37) (39) (38)
(2,786) (2,978) (3,079)
------------------- ------------------- -------------
Total Liabilities (43,671) (43,795) (43,930)
------------------- ------------------- -------------
Net Assets 72,754 68,166 68,893
------------------- ------------------- -------------
Equity
Share capital 16 805 805 805
Capital reserve and retained
earnings 71,949 67,361 68,088
Total capital and reserves
attributable to equity holders
of the Group 72,754 68,166 68,893
------------------- ------------------- -------------
Net Asset Value per share
(pence) 7 90.38 84.68 85.58
------------------- ------------------- -------------
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
The financial statements were approved by the Board of Directors on 4
March 2022 and were signed on its behalf by:
Alan Sippetts
Chairman
Company number: 10727886
Consolidated Condensed Statement of Changes in Equity
For the half year ended 31 December 2021
Total
capital
Capital and reserves
reserve attributable
and to equity
Share retained holders of
capital earnings the Group
Notes GBP'000 GBP'000 GBP'000
For the half year ended 31
December 2021 (unaudited)
Balance as at 1 July 2021 16 805 68,088 68,893
Total comprehensive income - 6,228 6,228
Dividends paid 8 - (2,367) (2,367)
Balance as at 31 December
2021 805 71,949 72,754
---- ------------------- ------------------- -------------
For the half year ended 31
December 2020 (unaudited)
Balance as at 1 July 2020 16 805 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 year ended 30 June
2021 (audited)
Balance as at 1 July 2020 16 805 66,481 67,286
Total comprehensive income - 5,572 5,572
Dividends paid 8 - (3,965) (3,965)
Balance as at 30 June 2021 805 68,088 68,893
---- ------------------- ------------------- -------------
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Consolidated Condensed Statement of Cash Flows
For the half year ended 31 December 2021
Half year Year
ended ended
31 December 30 June
Half year
ended 2020 2021
31 December
2021 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 6,228 3,033 5,572
Adjustment for:
Finance expenses 711 712 1,421
Gain on sale of investment property (97) (425) (425)
Change in fair value of investment
properties (3,494) (270) (682)
--------------------- -------------- ------------
Operating results before working
capital changes 3,348 3,050 5,886
Change in working capital
(Increase)/ decrease in other
receivables
and prepayments (5,280) 1,677 1,735
(Decrease)/ increase in other
payables
and accrued expenses (297) 342 429
Net cash (used in)/ generated
from operating activities (2,229) 5,069 8,050
--------------------- -------------- ------------
Cash flows from investing activities
Purchase of investment property - (4,907) (6,070)
Additions to investment property - (1,101) -
Disposal of investment property 5,397 3,159 3,159
Net cash generated from/ (used
in) investing activities 5,397 (2,849) (2,911)
--------------------- -------------- ------------
Cash flows from financing activities
Finance costs paid (659) (709) (1,322)
Dividends paid (2,362) (2,129) (3,949)
Payment of lease obligation (19) - (41)
Net cash used in financing activities (3,040) (2,838) (5,312)
--------------------- -------------- ------------
Net increase/ (decrease) in cash
and cash equivalents 128 (618) (173)
Cash and cash equivalents at start
of period/year 2,115 2,288 2,288
Cash and cash equivalents at end
of period/ year 2,243 1,670 2,115
--------------------- -------------- ------------
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Notes to the Consolidated Condensed Financial Statements
for the half year ended 31 December 2021
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
is registered in England and Wales. The registered office of the Company
is located at 1 King William Street, London, United Kingdom, EC4N 7AF.
The consolidated condensed financial statements for the period ended 31
December 2021 do not constitute statutory accounts as defined in section
434 of the Companies Act 2006 and have not been audited nor reviewed by
the Company's auditor. A copy of the statutory accounts for the year ended
30 June 2021 has been delivered to the Registrar of Companies. The auditor's
report on those accounts was unqualified and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
2.1 Basis of preparation
These consolidated condensed financial statements have been prepared
in accordance with International Accounting Standard ('IAS') 34
Interim Financial Reporting and should be read in conjunction
with the Group's last annual consolidated financial statements
for the year ended 30 June 2021 ('Audited Financial Statements').
These unaudited consolidated condensed financial statements do
not include all information required for a complete set of financial
statements prepared in accordance with international accounting
standard in conformity with the requirements of the Companies
Act 2006 and in accordance with international financial reporting
standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union ('EU') and Article 4 of the
IAS Regulations. 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.
Although not required by IAS 34, the comparative figures as at
31 December 2020 for the Consolidated Condensed Statement of Financial
Position and for the year ended 30 June 2021 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 financial statements have been prepared
under the historical cost convention, except for investment properties
that have been measured at fair value. These consolidated condensed
financial statements are presented in Sterling, which is the Group's
presentational and functional currency, and all values are rounded
to the nearest thousand pounds, except where otherwise shown.
Basis of consolidation
These consolidated condensed financial statements for the half-year
ended 31 December 2021 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.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation . Accounting policies of the subsidiaries
are consistent with the policies adopted by the Company.
New standards, amendments and interpretations
The following new accounting amendments have been applied in preparing
these consolidated condensed financial statements:
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). The amendments
provide relief to the Group in respect of certain loans whose
contractual terms are affected by interest benchmark reform (effective
from 1 January 2021). Applying the practical expedient introduced
by the amendments, when the benchmarks are replaced the adjustments
to the contractual cash flows will be reflected as an adjustment
to the effective interest rate. Therefore, the replacement of
the benchmark interest rate does not result in an immediate gain
or loss recorded in profit or loss.
The following are new standards, interpretations and amendments,
which are not yet effective, and have not been early adopted in
this financial information, that will or may have an effect on
the Group's future financial statements:
-- Amendments to IAS 1 which clarifies the criteria used to determine
whether liabilities are classified as current or non-current (effective
1 January 2023). These amendments clarify that current or non-current
classification is based on whether an entity has a right at the
end of the reporting period to defer settlement of the liability
for at least twelve months after the reporting period. The amendment
is not expected to have an impact on the presentation or classification
of the liabilities in the Group based on rights that are in existence
at the end of the reporting period.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IFRS
requires the Directors 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
The estimates and associated assumptions that have a significant
effect on the amounts recognised in the consolidated financial
information outlined below.
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. Factors
include current market conditions, annual rentals, the contractual
terms of the leases and their lengths and location. The significant
methods and assumptions used by valuers in estimating the fair
value of investment properties are set out in note 9.
Provision for expected credit losses ('ECL') of trade receivables
Rent collection rates pre-Covid is in the region of 100%. As a
result, the Group does not have the data to establish historical
loss rates for the expected credit loss analysis.
In determining the provision on a tenant-by-tenant basis, the
Group considers both recent payment history and future expectations
of the tenant's ability to pay or possible default in order to
recognise an expected credit loss allowance. The Group also considers
the risk factors associated by sector in which the tenant operates
and the nature of the debt. Based on sector and rent receivable
type a provision is provided in addition to full provision for
maximum risk tenants or known issues.
Judgment
Principal versus agent considerations - services to tenants
The Group arranges for certain services to be provided to tenants.
These arrangements are included in the contract the Group enters
into as a lessor. The Group has determined that it controls the
services before they are transferred to tenants, because it has
the ability to direct the use of these services and obtain the
benefits from them. The Group has determined that it is primarily
responsible for fulfilling these services as it directly deals
with tenants' complaints and is primarily responsible for the
quality or sustainability of the services. In addition, the Group
has discretion in establishing the price that it charges to the
tenants for the specified services.
Therefore, the Group has concluded that it is the principal in
these contracts. In addition, the Group has concluded that it
transfers control of these services over time, as services are
rendered by the third-party service providers, because this is
when tenants receive and, at the same time, consume the benefits
from these services.
REIT status
The Group is a Real Estate Investment Trust (REIT) and does not
pay tax on its property income or gains on property sales, provided
that at least 90% of the Group's property income is distributed
as a dividend to shareholders, which becomes taxable in their
hands. In addition, the Group has to meet certain conditions such
as ensuring the property rental business represents more than
75% of total profits and assets. Any potential or proposed changes
to the REIT legislation are monitored and discussed with HMRC.
It is management's intention that the Group will continue as a
REIT for the foreseeable future.
Classification of lease arrangements - the Group as lessor
The Group has acquired investment properties that are leased to
tenants. In considering the classification of lease arrangements,
at inception of each lease the Group considers the economic life
of the asset compared with the lease term and the present value
of the minimum lease payments and any residual value compared
with the fair value and associated costs of acquiring the asset
as well as qualitative factors as indicators that may assert to
the risks and rewards of ownership having been substantially retained
or transferred. The Group has determined that it retains all the
significant risks and rewards of ownership of its investment property
and accounts for the lease arrangements as operating leases.
2.3 Segmental information
Each property held by the Group is reported to the chief operating
decision maker. In the case of the Group, the chief operating
decision maker is considered to be the Board of Directors. The
review process for segmental information includes the monitoring
of key performance indicators applicable across all properties.
These key performance indicators include Net Asset Value, Earnings
per Share 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 considered the ongoing 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 2023, 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 GBP41.0
million 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 2022 and Q2 2022, decreasing to 70% in Q3 2022
and recovering back to 80% in 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 12 months from Q1
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
(being 12 months following the signing of the Statement of Financial
Position).
Accordingly, the Directors continue to adopt the going concern
basis of accounting in preparing the consolidated 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
Year
ended
Half year
ended 30 June
Half year 31 December
ended 2020 2021
31 December
2021 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross rental income 3,484 3,245 6,724
Spreading of minimum contracted
future - rent indexation 291 284 571
Spreading of tenant incentives -
rent free periods (44) (41) (85)
-------------------- ---------------------- -------------
Total 3,731 3,488 7,210
Service charges and direct recharges
(see note 4) 95 38 199
-------------------- ---------------------- -------------
Total rental and other
income 3,826 3,526 7,409
-------------------- ---------------------- -------------
All rental, service charges and direct recharges and other income are
derived from the United Kingdom.
4. Expenses
Year
ended
30 June
Half year Half year
ended ended 2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Property operating
expenses 54 53 448
Service charges and direct recharges
(see note 3) 95 35 199
Reversal of provision for impairment
of trade receivables (197) (3) -
Property operating (income) / expenses (48) 85 647
------------------------ ------------------------ -----------------------
Investment management
fee 180 89 269
Auditor remuneration 33 58 77
Operating costs 274 221 442
Directors' remuneration 39 38 88
Reversal of write off of unreconciled - (15) -
difference
------------------------ ------------------------ -----------------------
Other operating
expenses 526 391 876
------------------------ ------------------------ -----------------------
Total operating expenses 478 476 1,523
------------------------ ------------------------ -----------------------
Total operating expenses (excluding
service
charges and direct recharges) 383 441 1,324
------------------------ ------------------------ -----------------------
5. Finance
expenses
Year
ended
30 June
Half year Half year
ended ended 2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on
loan 653 656 1,307
Amortisation of loan arrangement fee
(note 12) 52 47 99
------------------------ ------------------------ -----------------------
Other finance costs 6 9 15
------------------------ ------------------------ -----------------------
Total 711 712 1,421
------------------------ ------------------------ -----------------------
6. Taxation
Year
ended
30 June
Half year Half year
ended ended 2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Tax charge
comprises:
Analysis of tax charge
in the
period
Profit before
tax 6,228 3,033 5,572
------------------------ ------------------------ -----------------------
Theoretical tax at UK corporation tax
standard rate of 19.00 (2020:
19.00%) 1,183 576 1,059
Effects of tax-exempt items under
REIT
regime (1,183) (576) (1,059)
------------------------ ------------------------ -----------------------
Total - - -
------------------------ ------------------------ -----------------------
The Group maintained its REIT status and 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 or
losses arising on the revaluation or disposal of investments.
7. Earnings per share and NAV per share
Half year Year
ended ended
31 December 30 June
Half year
2021 ended 2021
31 December
(unaudited) 2020 (unaudited) (audited)
Earnings per
share:
Total
comprehensive
income
(GBP'000) 6,228 3,033 5,572
----------------------------- ------------------- --------------------------
Weighted average number of
shares (number) 80,500,000 80,500,000 80,500,000
Earnings per share (basic and diluted)
(pence) 7.74 3.77 6.92
----------------------------- ------------------- --------------------------
EPRA EPS:
Total
comprehensive
income
(GBP'000) 6,228 3,033 5,572
Adjustment to total
comprehensive
income:
Change in fair value of
investment
properties (GBP'000) (3,494) (270) (682)
Gain on disposal of
investment
property (GBP'000) (97) (425) (425)
----------------------------- ------------------- --------------------------
EPRA earnings (basic and
diluted)
(GBP'000) 2,637 2,338 4,465
----------------------------- ------------------- --------------------------
EPRA EPS (basic and diluted)
(pence) 3.28 2.90 * 5.55
----------------------------- ------------------- --------------------------
Adjusted EPS:
EPRA earnings (basic and
diluted)
(GBP'000) - as above 2,637 2,338 4,465
Adjustments:
Rental income recognised in respect of
guaranteed fixed rental uplifts (GBP'000) (291) (284) (571)
Rental income recognised in respect of
rent free periods (GBP'000) 44 41 85
Amortisation of loan
arrangement
fee (GBP'000) 52 47 99
Reversal of provision for
impairment
of trade receivables (197) (3) -
----------------------------- ------------------- --------------------------
Adjusted earnings (basic and diluted)
(GBP'000) 2,245 2,139 4,078
----------------------------- ------------------- --------------------------
Adjusted EPS (basic and diluted) (pence)** 2.79 2.66 * 5.07
----------------------------- ------------------- --------------------------
* Following the review of the EPRA guidelines, it was noted that the gain
on disposal of investment property should be excluded from the calculation
of the EPRA EPS. Accordingly, the figure for the half year to 31 December
2020 has been amended for basic EPS from 3.43p to 2.90p and for adjusted
EPS from 3.19p to 2.66p.
** Adjusted EPS is a measure used by the Board 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 profit/(loss) for the year
attributable to ordinary equity holders of the Company by the weighted average
number of Ordinary Shares in issue during the year.
Half year Half year Year
ended ended ended
31 December 31 December 30 June
2020
2021 (unaudited) 2021
(unaudited) (audited)
GBP'000 GBP'000 GBP'000
NAV per share:
Net assets
(GBP'000) 72,754 68,166 68,893
------------------- -------------- ------------
Ordinary Shares
(Number) 80,500,000 80,500,000 80,500,000
------------------- -------------- ------------
NAV per share
(pence) 90.38 84.68 85.58
------------------- -------------- ------------
EPRA NAV and EPRA NNNAV (refer to Glossary) are equal to the NAV presented
in the Consolidated Condensed Statement of Financial Position under IFRS
and there are no adjusting items. Accordingly, a reconciliation between
these measures does not need to be provided.
EPRA Net Reinvestment Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA
Net Disposal Value (NDV)
EPRA NRV EPRA NTA and EPRA NDV
At 31 December
2021
Net assets
value
(GBP'000) 72,754 72,754
Purchasers' 7,002 -
cost (GBP'000)
Break cost on
bank
borrowings
(GBP'000) (2,552) (2,552)
------------------------------ -------------------------------------------
77,204 70,202
------------------------------ -------------------------------------------
Ordinary
Shares
(Number) 80,500,000 80,500,000
------------------------------ -------------------------------------------
Per share
measure 95.91 87.21
------------------------------ -------------------------------------------
EPRA NRV EPRA NTA and EPRA NDV
At 31 December
2020
Net assets
value
(GBP'000) 68,166 68,166
Purchasers' 8,140 -
cost (GBP'000)
Break cost on
bank
borrowings
(GBP'000) (5,262) (5,262)
------------------------------ -------------------------------------------
71,044 62,904
------------------------------ -------------------------------------------
Ordinary
Shares
(Number) 80,500,000 80,500,000
------------------------------ -------------------------------------------
Per share
measure 88.25 78.14
------------------------------ -------------------------------------------
EPRA NRV EPRA NTA and EPRA NDV
At 30 June 2021
Net assets
value
(GBP'000) 68,893 68,893
Purchasers' 7,100 -
cost (GBP'000)
Break cost on
bank
borrowings
(GBP'000) (3,467) (3,467)
------------------------------ -------------------------------------------
72,526 65,426
------------------------------ -------------------------------------------
Ordinary
Shares
(Number) 80,500,000 80,500,000
------------------------------ -------------------------------------------
Per share
measure 90.09 81.27
------------------------------ -------------------------------------------
8. Dividends paid
All dividends are
interim dividends
Half year Half year Year
ended ended
31 December 31 December ended
2021 2020
(unaudited) (unaudited) 30 June
2021
(audited)
Dividend GBP'000 GBP'000 GBP'000
Rate
Dividends in respect of year ended 30
June 2020
4th dividend for
quarter ended 30 Jun 2020 1.425p - 1,147 1,147
Dividends in respect of year ended 30
June 2021
1st dividend for
quarter ended 30 Sep 2020 1.250p - 1,006 1,006
2nd dividend for
quarter ended 31 Dec 2020 1.000p - - 805
3rd dividend for
quarter ended 31 Mar 2021 1.250p - - 1,007
4th dividend for
quarter ended 30 Jun 2021 1.640p 1,320 - -
Dividends in respect of year ending 30
June 2022
1st dividend for
quarter ended 30 Sep 2021 1.300p 1,047 - -
Total dividends
paid 2,367 2,153 3,965
4th dividend for
quarter ended 30 Jun 2020 1.425p - ( 1,147) ( 1,147)
2nd dividend for
quarter ended 31 Dec 2020 1.000p - 805 -
4th dividend for
quarter ended 30 Jun 2021 1.640p ( 1,320) - 1,320
2nd dividend for
quarter ended 31 Dec 2021 1.300p 1,047 - -
-------------- ------------- ----------------
Total dividends payable in respect of
the period/year 2,094 1,811 4,138
Total dividends payable in respect of
the period/year 2.60p 2.25p 5.14p
-------------- ------------- ----------------
Dividends declared after the period/year end are not included in the Consolidated
Condensed Financial Statements as a liability.
Dividends paid per cash flow statement amount to GBP2,362,000 (31 December
2020: GBP2,129,000) include the amount of withholding tax paid.
9. Investment properties
Year
ended
30 June
Half year
Half year ended ended 2021
31 December
31 December 2021 (unaudited) 2020 (unaudited) (audited)
Investment Investment
properties properties
freehold leasehold Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Investment
properties
At the beginning of
the
period/year 75,772 33,458 109,230 101,910 101,910
Acquisition during
the
period - - - 4,907 6,070
Additions to - - - 1,101 -
investment
property
Disposal during the
period (5,300) - (5,300) - -
Change in value of
investment
properties 2,400 1,400 3,800 612 1,250
----------------------- --------------------------------- ---------------------- ------------------- ----------------------
Valuation provided by
Knight Frank LLP 72,872 34,858 107,730 108,530 109,230
----------------------- --------------------------------- ---------------------- ------------------- ----------------------
Adjustment to fair value for minimum
rent indexation of lease income
(note 10) (2,956) (2,466) (2,709)
Adjustment for lease obligation 446 487 505
Total investment
properties 105,220 106,551 107,026
---------------------- ------------------- ----------------------
Change in fair value of investment properties
Change in fair value before adjustments for
lease incentives and lease obligations 3,800 612 1,250
Movement in lease obligations (59) 16 34
Adjustment to spreading of contracted future
rent indexation and tenant incentives (247) (358) (602)
3,494 270 682
---------------------- ------------------- ----------------------
Disposal of investment property
During the year, the Group disposed of the investment property known as
Trident Business Park, Huddersfield. In July 2020, the Group disposed of
the investment property known as Wet n Wild, Royal Quays, North Shields.
The table below shows a reconciliation of the gain recognised on disposal
through the Consolidated Condensed Statement of Comprehensive Income and
the realised gain on disposal in the year which includes changes in fair
value of the investment property and minimum rent indexation spreading recognised
in previous periods.
Year
ended
Half year
ended 30 June
Half year 31 December
ended 2020 2021
31 December
2021 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross proceeds on
disposal 5,500 3,204 3,204
Selling costs (103) (45) (45)
Net proceeds on
disposal 5,397 3,159 3,159
Carrying value (5,300) (2,734) (2,734)
Gain on disposal of investment property 97 425 425
Valuation of investment properties
Valuation of investment property is performed by Knight Frank LLP, an accredited
external valuer 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 yield applicable to those cash
flows.
Fair value measurement hierarchy
IFRS13 'Fair Value Measurement' specifies the fair value hierarchy and,
as explained in Note 10. of the Company's 2021 Audited Financial Statements,
the Directors have classified the Company's property portfolio as Level
3. This reflects the fact that inputs to the valuation are not based on
observable market data.
10. Receivables and prepayments
30 June
2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Receivables
Rent debtor 279 1,342 602
Less: Provision for impairment of trade
receivables (16) (210) (213)
Other debtors* 5,591* - 307
Sub total 5,854 1,132 696
Spreading of minimum contracted future
rent indexation 2,414 1,881 2,167
Spreading of tenant incentives - rent
free periods 542 585 542
Tenant deposit asset (note 11) 79 123 -
Other prepayments 73 19 277
Total 8,962 3,740 3,682
* Other debtors represent net proceeds from the sale of Trident Business Park,
Huddersfield being held by the external lender, Canada Life Investments.
The aged debtor analysis of receivables which are past due but not impaired is
as follows:
30 June
2021
31 December 31 December
2021 (unaudited) 2020 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Less than three months due 5,816 618 667
Between three and six months due 38 514 29
Between six and twelve months due - - -
Total 5,854 1,132 696
11. Payables and accrued expenses
31 December 30 June
2020 2021
31 December
2021 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Deferred income 1,406 1,443 1,445
Trade creditors 30 62 59
Accruals 523 618 603
Tenant deposit liability (note 10) 79 123 -
Other creditors 711 693 934
2,749 2,939 3,041
12. Interest bearing loans and borrowings
31 December
2020 30 June
31 December
2021 (unaudited) (unaudited) 2021 (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 (484) (583) (583)
Plus: amortised loan issue costs 52 47 99
At end of period/ year 40,568 40,464 40,516
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years 41,000 - 41,000
Repayable in over 5 years - 41,000 -
Total 41,000 41,000 41,000
As at 31 December 2021, 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 35.22%. The weighted average
interest cost of the Group's facility is 3.19% and the facility is repayable
on 20 October 2025.
31 December
2020 30 June
31 December
2021 (unaudited) (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Reconciliation to cash flows from financing
activities
At the beginning of the period/ year 40,516 40,417 40,417
Interest paid (659) (709) (1,322)
Total changes from financing cash flows 39,857 39,708 39,095
Other changes
Movement in interest payable presented
under other creditors (52) (3) (99)
Interest expense 711 712 1,421
Adjustment on loan issue costs - - -
Amortisation of loan issue costs 52 47 99
Total other changes 711 756 1,421
At the end of the period/ year 40,568 40,464 40,516
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 30 June
31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Within one year 50 50 50
After one year but less than five years 150 200 150
More than five years 538 538 563
Total undiscounted lease liabilities
: 738 788 763
Less: Future finance charge on lease
obligations (384) (396) (390)
Present value of lease liabilities: 354 392 373
Lease liabilities included in the statement
of financial position:
Current 37 39 38
Non-current 317 353 335
Total: 354 392 373
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 31 December 2021 are as follows:
31 30
31 December December June
2021 (unaudited) 2020 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Less than one year 7,039 6,880 6,957
One to two years 7,723 6,947 7,135
Two to three years 7,341 7,101 7,094
Three to four years 7,279 7,187 7,191
Four to five years 7,307 6,966 7,002
Five to ten years 32,323 30,470 29,898
Ten to fifteen years 26,872 27,615 27,201
Over fifteen years 56,370 61,807 58,889
Total 152,254 154,973 151,367
During the half year ended 31 December 2021 (2020: GBPnil) there were no
material contingent rents recognised as income.
15. Investments in subsidiaries
The Company has two wholly owned
subsidiaries
as disclosed below:
Country Ordinary
Name and company of registration Date of Principal Shares
number and incorporation incorporation activity held
Alternative Income
REIT
Holdco Limited England
(Company and 7 November Real Estate number 11052186) Wales 2017 Company 73,158,502* Alternative Income Limited England (Company number and Real Estate 10754641) Wales 4 May 2017 Company 73,158,501* * Ordinary shares of GBP1.00 each. Alternative Income REIT plc at 31 December 2021 owns 100% controlling stake of Alternative Income REIT Holdco Limited. Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited. 16. Issued share capital Ordinary Shares issued and fully paid of 80,500,000 shares at a nominal value of 1 penny per share. This remains unchanged for all period presented. 17. 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 at 31 December 2021 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 related parties. Directors' remuneration is disclosed in note 4. Investment Adviser M7 Real Estate Ltd M7 Real Estate Ltd was appointed as Investment Adviser on 14 May 2020. The Interim Investment Advisory agreement (amended 26 February 2021) specifies that there were 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) is due and payable quarterly in advance. During the period 1 July 2021 to 31 December 2021, the Group incurred GBP180,000 in respect of investment management fees and expenses of which GBP90,000 was outstanding at period end. 18. Events after reporting date Dividend On 3 February 2022, the Board declared an interim dividend of 1.30p in respect of the period from 1 October 2021 to 31 December 2021. This will be paid on 28 February 2022 to shareholders on the register at 11 February 2022. The ex-dividend date was 10 February 2022. Asset acquisition On 31 January 2022, the Group acquired a car showroom in Slough for GBP5.0m (net of acquisition costs to the Company), in an off-market transaction. Further details are available from the RNS published on 31 January 2022 and the Chairman's Statement and Investment Advisor's Report above.
EPRA Performance Measures Calculations
At At
31 December At 30 June
31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
EPRA Yield calculations GBP'000 GBP'000 GBP'000
Investment properties wholly owned:
* by Company 2,100 2,100 2,100
* by Alternative Income Limited 105,630 106,430 107,130
Total - note 9 107,730 108,530 109,230
Allowance for estimated purchasers'
costs 7,002 8,140 7,100
Gross up completed property portfolio
valuation b 114,732 116,670 116,330
Annualised cash passing rental income 6,620 6,460 6,965
Annualised property outgoings (55) (55) (55)
Annualised net rents a 6,565 6,405 6,910
Add: notional rent expiration of
rent-free periods or other lease
incentives 1,100 1,812 1,171
Topped-up net annualised rent c 7,665 8,217 8,081
EPRA NIY a/b 5.72% 5.49% 5.94%
EPRA "topped-up" NIY c/b 6.68% 7.04% 6.95%
Half year Year
ended ended
31 December 30 June
Half year
ended 2020 2021
31 December
2021 (unaudited) (unaudited) (audited)
EPRA Cost Ratios GBP'000 GBP'000 GBP'000
Include:
EPRA Costs (including direct vacancy
costs) - note 4 a 383 441 1,324
Direct vacancy costs - - -
EPRA Costs (excluding direct vacancy
costs) b 383 441 1,324
Gross rental income - note 3 c 3,731 3,526 7,210
EPRA Cost Ratio (including direct
vacancy costs) a/c 10.27% 12.51% 18.36%
EPRA Cost Ratio (excluding direct
vacancy costs) b/c 10.27% 12.51% 18.36%
Half year Year
Half year ended ended
ended 31 December 30 June
31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
EPRA Vacancy rate GBP'000 GBP'000 GBP'000
Annualised potential rental value
of vacant premises a 40 - -
Annualised potential rental value
for the completed property portfolio b 6,609 6,925 6,927
EPRA Vacancy rate a/b 0.6% 0.0% 0.0%
Alternative Performance Measure (APM) Calculations
APMs are numerical measures of the Group's current, historical or future
performance, financial position or cash flows, other than financial measures
defined or specified in the applicable financial framework. The Group's
applicable financial framework is IFRS. The Directors assess the Group's
performance against a range of criteria which are reviewed as particularly
relevant for a closed-end REIT.
Share Price and Net Asset Value (NAV) Total Return
Share price and NAV total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account
both capital returns and dividends paid to shareholders. Share price
and NAV total returns are monitored against FTSE EPRA Nareit UK and FTSE
Small Cap, respectively.
Share price NAV
Opening at 1 July 2021 a 71.00p 85.58p
Closing at 31 December
2021 b 72.20p 90.38p
Return c=(b/a)-1 1.69% 5.61%
Dividend reinvestment
* d 4.15% 4.04%
Total shareholder
return c+d 5.84% 9.65%
Opening at 1 July 2020 a 53.50p 83.58p
Closing at 31 December
2020 b 60.00p 84.68p
Return c=(b/a)-1 12.15% 1.32%
Dividend reinvestment* d 5.00% 3.71%
Total shareholder
return c+d 17.15% 5.02%
* Share price total return involves reinvesting the net dividend in the
share price of the Company on the date on which that dividend goes ex-dividend.
NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend.
Dividend Cover.
The ratio of Group's Adjusted EPS divided by the Group's dividends payable
for the relevant period/ year
31 December 2021 31 December 2020 30 June 2021
Adjusted
EPS a 2.79 2.66 5.07
Dividend per
share b 2.60 2.25 5.14
Dividend
cover a/b 107.31% 118.22% 98.64%
Loan to GAV
Loan to GAV measures 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 assets.
31 December 2021 31 December 2020 30 June 2021
Borrowings
(GBP'000) a 41,000 41,000 41,000
Total assets
(GBP'000) b 116,425 111,961 112,823
Loan to GAV (a/b) 35.22% 36.62% 36.34%
Ongoing Charges
The ongoing charges ratio is the total for all operating costs expected
to be regularly incurred expressed as a percentage of the average quarterly
NAVs of the Group for the financial period. Note that the ratio for 31
December is based on actual ongoing charges to 31 December and forecast
ongoing charges to the following June (shown as annualised in the below
calculation).
31 December 2021 31 December 2020 30 June 2021
Other operating
expenses for the
half year / year
(GBP'000) a 526 391 876
Ongoing charges-
annualised where
required (GBP'000) b 1,012 992 876
Average net assets
(GBP'000) c 70,214 68,459 68,893
Ongoing charges
ratio b/c 1.44% 1.45% 1.27%*
* The Company benefited from an investment adviser fee holiday during
2020. Adjusting for the impact of this fee holiday, the ongoing charges
ratio for the year to 30 June 2021 would have been 13 bps higher than
reported.
Non-recurring legal costs of GBP20,000 have been excluded in the annualised
amount for 31 December 2021 (31 December 2020: excluded non-recurring
write back of GBP15,000 and investment adviser fee holiday for three
months of GBP90,000).
Annualised Gross Passing Rental Income
The annualised gross passing rent is the rent roll at the reporting date,
taking account of any in-place rent free incentives or step rents annualised
on a straight-line basis over the following 12-month period.
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 Half-Yearly Reports are available from the Group's website.
Financial Calendar 2022
30 June 2022 Year end October 2022 Announcement of annual results November 2022 Annual General Meeting 31 December 2022 Half year end March 2023 Announcement of interim results
Glossary
Alternative Investment Langham Hall Fund Management LLP.
Fund Manager or AIFM
or Investment Manager
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.
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 Value The external valuer's opinion as to the
('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
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European
Union. On 31 December 2020 EU-adopted IFRS
was brought into UK law and became UK-adopted
international accounting standards, with
future changes to IFRS being subject to
endorsement by the UK Endorsement Board.
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 incentive is amortised
through the Consolidated Statement of Comprehensive
Income on a straight-line basis until the
lease expiry.
Net Asset Value ('NAV') Net Asset Value is the equity attributable
to shareholders calculated under IFRS.
Net Asset Value per Equity shareholders' funds divided by the
share number of Ordinary Shares in issue.
Net equivalent yield Calculated by the Group's 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.
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 in-place lease incentives.
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.
Weighted Average Unexpired The average lease term remaining for first
Lease Term ('WAULT') break, or expiry, across the portfolio
weighted by contracted rental income (including
rent-frees).
Shareholder Information
Directors
Alan Sippetts (Independent non-executive Chairman)
Stephanie Eastment (Independent non-executive Director)
Adam C Smith (Non-executive Director)
Company Website
https://www.alternativeincomereit.com/
Registered Office
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Investment Adviser and Administrator ('Investment Adviser')
M7 Real Estate Limited
3(rd) Floor
The Monument Building
11 Monument Street
London
EC3R 8AF
Property Manager
Mason Owen and Partners Limited
7(th) Floor
20 Chapel Street
Liverpool
L3 9AG
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
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
Moore Kingston Smith LLP
Devonshire House
60 Goswell Road
Barbican
London
EC1M 7AD
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
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
Communications Advisor
Maitland/AMO
3 Pancras Square
London
N1C 4AG
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(END) Dow Jones Newswires
March 07, 2022 02:00 ET (07:00 GMT)
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