We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ediston Property Investment Company Plc | LSE:EPIC | London | Ordinary Share | GB00BNGMZB68 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 68.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2022 to Apr 2024
TIDMEPIC
RNS Number : 6047J
Ediston Property Inv Comp PLC
14 December 2022
Ediston Property Investment Company plc
(the 'Company')
(LEI: 213800JRL87EGX9TUI28)
FULL YEAR RESULTS AND NOTICE OF AGM
Ediston Property Investment Company plc (LSE: EPIC), a UK-listed Real Estate Investment Trust (REIT) investing in commercial property throughout the UK, announces its full year results for the year ended 30 September 2022.
The Company also announces that its 2022 Annual General Meeting will be held on Friday, 24 February 2023 at 2.00 p.m. at the offices of Ediston Investment Services Limited at 1 St Andrew Square, Edinburgh, EH2 2BD.
The Company's Annual Report and Financial Statements for the year ended 30 September 2022 and the formal Notice of the Annual General Meeting will be posted to shareholders and in accordance with Listing Rule 9.6.1 copies of the documents have been submitted to the UK Listing Authority and will shortly be available to view on the Company's corporate website at https://www.epic-reit.com/literature/ and have also been submitted to the UK Listing Authority and will be shortly available for inspection from the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Year to 30 September 2022:
Operational
- Sold four office assets and two leisure assets for GBP69.5m. - 15 lease transactions completed with a contracted rent of GBP2.5m per annum. - 98.2% of rent due was collected.
- Portfolio is now 100% in retail warehousing, in line with the new investment strategy, with cash available for further investment at the appropriate time.
Key Performance Indicators and Financial
Hot Features
Premium
2022 2021
---------------------------------- --------- ---------
NAV total return 11.5% 9.6%
Annualised dividend per shares 5.00p 4.42p
Average premium/discount of share
price to NAV -17.9% -22.1%
Share price total return -2.3% 54.6%
EPRA vacancy rate 6.5% 8.6%
Ongoing charges 1.4% 1.4%
Total assets GBP313.7m GBP303.0m
Weighted average unexpired lease 4.5 years 5.0 years
term
EPRA NAV per share 94.9p 89.6p
Rent collected in the year 98.2% 95.7%
Dividend Cover 81.2% 119.0%
Anticipated Financial Calendar 2023
January 2023 Announcement of Net Asset Value as at 31
December 2022
24 February Annual General Meeting
2023
------------------------------------------
April 2023 Announcement of Net Asset Value as at 31
March 2023
------------------------------------------
May 2023 Publication of Half Yearly Report for the
six months to 31 March 2023
------------------------------------------
July 2023 Announcement of Net Asset Value as at 30
June 2023
------------------------------------------
October 2023 Announcement of Net Asset Value as at 30
September 2023
------------------------------------------
December 2023 Publication of Annual Report for the year
to 30 September 2023
------------------------------------------
It is the intention of the Board that dividends will continue to be announced and paid monthly.
Enquiries
Will Barnett Investec Bank plc 0207 597 5873
Ediston Properties
Calum Bruce Limited 0131 225 5599
Ruth Wright JTC 0203 893 1011
Ben Robinson Kaso Legg Communications 0203 995 6672
Stephanie Ross Kaso Legg Communications 0203 995 6676
Chairman's Statement
OVERVIEW
The sale of the office and leisure properties has increased the retail warehouse exposure in the property portfolio from 74.1% to 100% of our invested assets. At the year end, the Company held GBP31.0m in the debt disposal account earmarked specifically for reinvestment, as well as GBP50.2m in its operational account.
In my interim statement in May, I commented that, whilst the retail warehouse market had flourished in the first part of the year, the macro-economic position was becoming more challenging due to world events and rising inflation. Behind this caution was the expectation of higher interest rates and a squeeze on business investment and consumer spending to bring inflation under control. This has happened against a background of political chaos in the UK.
The consequent spike in gilt rates has created a wave of fear in real estate markets as investors grapple with the pricing implications of needing higher returns on equity to compensate, and much higher borrowing costs than anticipated. This is reflected in the widened discounts across the closed-ended sector.
For the Company, the most obvious and immediate impact has been the deterioration in the share price, which has moved down from 78.8 pence per share at the half year to 67.6 pence at the year end. Due to a reduction in property values, the Company has seen a fall in Net Asset Value at 30 September, following five quarters of increases.
There are no doubt more real estate bumps in the road to navigate over coming months, with a slowing economy and rising interest rates. A sizeable one in the short term will be the impact of the expected mark down in market valuations at the end of December, based on transactional evidence over the quarter. External geopolitical factors will also remain a significant factor in determining the direction of the economy. The Board will continue to manage risk proactively and where possible ensure the Company is as resilient as it can be to whatever lies ahead. Despite the economic and political difficulties that emerged in 2022, the Company, with its new investment focus and cash to invest, should emerge from this period of disruption in a strong position.
INVESTMENT AND SHARE PRICE PERFORMANCE
The Company's Net Asset Value (NAV) per share increased by 5.9% with an annualised NAV total return as at 30 September 2022 of 11.5%. Like-for-like property values increased by 10.3% over the period.
Despite the increase in NAV, the share price has declined 8.4% over the year from 73.8 pence to 67.6 pence. Allowing for the payment of the dividend, the share price total return was -2.3%.
The increase in NAV for the year was driven by the improvement in valuations in the retail warehouse portfolio due to a combination of yield shift and the gains from asset management initiatives. Some of this value was lost in the last quarter due to markets falling back on economic concerns, the general rise in borrowing costs and the political turmoil. The sale of the office portfolio was completed below the September 2021 valuation, and was a drag on performance for the year. However, the sale was prescient as it is highly likely that, if these assets had not been sold, the current valuation of the offices would be below the sale value, creating a larger offset to the retail warehouse gains.
INVESTMENT STRATEGY
Asset Allocation
The completion of the office sales and the disposal of the two leisure assets during the year has shifted the asset mix from 74.1% to 100% invested in the retail warehouse sector. Uninvested cash resources will be invested into the sector, maintaining a 100% exposure for the foreseeable future and in line with the revised strategy. The Investment Manager had intended for the Company to be fully invested by the half year. However, due to the uncertainty and re-pricing of the market, it was decided that it was prudent to hold cash until the right opportunities were available, and the extent of the correction was more visible.
In considering retail warehouse investments, it is important to note that the sector is not one homogenous group of assets. Investment performance can be influenced by many factors, including planning restrictions on users, tenant focus, tenant mix, size and layout of units, the size of the overall scheme, availability of car parking, accessibility, the nature of the catchment, supply of competing space, property management, sustainability factors, the affordability of the prevailing rent, opportunities to add space and alternative use values. The dispersion of returns can be significant across the sector, accentuating the importance of stock selection and an experienced Investment Manager.
Given the focus on the sector, the Investment Manager has provided more information in its review later on in this report. What does come through from the analysis is the strength of the Company's income stream. The credit rating of 85.0% of the tenant line-up is rated by Dun & Bradstreet as having a lower than average risk of business failure. The average rent passing (including the smaller coffee and kiosk units, which command higher rents but ignoring vacant units) is GBP14.72 per sq. ft. The Company is aware that many of its retailers are making money from this rental base and, with void levels low, it augurs well for rental growth.
What makes the sector especially interesting is that the investment story is much more than the attractive levels of rent and capital value as:
1) click-and-collect continues to grow, with out-of-town parks well placed to provide this function;
2) retailers remain attracted to the better configured space on retail parks;
3) new revenue opportunities exist from creating new spaces such as drive-thru units and electrical vehicle (EV) charging points; and
4) densities can be increased with the potential for introducing other uses.
Sustainability
I am delighted that the Company is embracing its sustainability responsibilities and has made further progress during the year in charting its way to net zero. The Sustainability Working Group, comprising the team from the Investment Manager, Savills, Imogen Moss and myself, is proving effective in maintaining the required momentum. It is satisfying that the Investment Manager has secured another green star to last year's rating following the Company's participation in the 2022 GRESB survey.
The ESG activities are more fully described within the report. This is more detailed disclosure than the previous year and hopefully informative for shareholders.
PORTFOLIO ACTIVITY
It has been an exceptionally busy year, with the Investment Manager's report providing full information. The key highlights are:
1) Sales
The four office assets in Bath, Birmingham, Newcastle and Edinburgh, and the leisure assets at Hartlepool and Telford, were sold. The total capital raised from the six transactions was GBP69.5m. The sales achieved one of the key strategic objectives set last year.
2) Asset Management
The strategic priorities of protecting rent and enhancing NAV were achieved. Fifteen lease transactions involving GBP2.5m of rent were completed during the year, with one further deal concluding post the year end. The void management target was also achieved with the reduction in the EPRA Vacancy Rate from 8.6% to 6.5%. This all contributed to the value of the retail warehouse assets improving during the year.
RENT COLLECTION
In total, 98.2% of rent due was collected at the year end. Contracted rent had fallen at the year end from 12 months ago due to the loss of income from the office and leisure property sales and the deferral of the reinvestment of the sale proceeds. The objective is to replace as much of this income as possible through reinvestment in suitable retail warehouse assets.
GEARING AND CASH RESOURCES
The Company's total debt is unchanged at GBP111.1m, at a blended 'all-in' fixed rate of 2.9%. The loans do not mature until 2025 and 2027. Gearing on 30 September 2022 was 35.41% of total assets, a slight decrease from last year end. Gearing is within investment policy limits and covenants.
As at 30 September 2022, the Company held GBP81.2m of cash. Of this sum, GBP31.0m is contained within the security pool and consent from the lender is required where Loan-to-Value (LTV) levels at the time the funds are utilised is above 35%.
DIVIDS
In my report last year, I stated the Board's commitment to a covered dividend and the prospect of further dividend progress as contracted rental income continued to improve. I also highlighted that the likely mismatch between sales and reinvestment could lead to a period of uncovered dividends and that,if prudent to do so, the shortfall would be made up from reserves.
Delaying the reinvestment of capital from the sales has meant the period of uncovered dividend has become longer than was anticipated. The Board believes the way the Company has responded to the changed market conditions is both responsible and appropriate. The Company is well funded to continue to pay the current monthly dividend. It is the intention of the Board to maintain the dividend at 5.0 pence per share. The expectation remains that when the available capital is invested the dividend will be covered.
LONG-TERM GROWTH STRATEGY
The Board's immediate focus is on NAV per share with the active management of the current assets and ensuring that capital is invested on an accretive basis for the medium term. Longer term, the Board would like to grow the equity base of the Company to improve liquidity, lower the cost base per share and enlarge the investment opportunity set, but this will depend in no small part on the recovery of the Company's share price rating.
Although the issue of new equity is unlikely in the short term, due to the share price being at a discount to NAV, the Board is asking shareholders to renew our non-pre-emptive authority of 10%, so that we are in a better position to use 'tap issuance' if we were able to do so. We will consider other means of raising capital if there are substantial acquisitions to be financed. In any fund raising, the interests of existing shareholders will be of paramount importance in how we price and structure any new issuance or take on any new gearing.
BOARD MATTERS
I would like to thank the Board, Investment Manager and all the agents that provide services to the Company for their hard work.
We have made some Board changes during the year as part of our succession plan. I would like to welcome Karyn Lamont, who joined the Board on 1 September, as our new Audit and Risk Committee Chair. She will stand for election at the AGM in February 2023. Karyn is a chartered accountant, a former audit partner at PwC and an experienced non-executive director on other collective funds, including as audit chair. Imogen Moss became the Senior Independent Director on 1 June this year. These changes result from Robin Archibald stepping down from both these positions to enable a well-managed handover and transition to take place before he retires from the Board at the AGM in 2023.
Robin has been on the Board since the Company floated in October 2014. During his time of service he has made an immense contribution to the management oversight of the Company, and I would like to thank him not only for that but also for all the wise counsel and support he has given me personally. I know Robin will remain active in the Investment Trust sector with his other board appointments and we wish him well with these roles.
The end of my tenure is also in sight, having joined the Board at the same time as Robin. The Board has asked me to continue as Chairman in the coming year and I will, therefore, stand for election at the forthcoming AGM. It is my intention to stand down no later than the AGM in 2024 and between now and then will work with my fellow directors on identifying a new Chair.
The Board has not revised its base remuneration levels in five years. The only modifications to Board remuneration in that period related to changes in roles and the introduction of the arrangements relating to Robin Archibald's remuneration. The Remuneration Committee has concluded that a modest increase is now justified based on its assessment of market rates following the recruitment process undertaken this year. The proposed increases are significantly below the rate of inflation over the last five years. Shareholders are being asked to approve an increase in the remuneration cap to GBP275,000, giving the Board the flexibility it might need over its composition in future years and to manage succession.
ANNUAL GENERAL MEETING (AGM)
Shareholders are invited to attend the Company's AGM to be held at 1 St Andrew Square, Edinburgh EH2 2BD on 24 February 2023.
Those shareholders who are unable to attend the AGM in person are encouraged to raise any questions in advance with the Administrator at epic.reit@jtcgroup.com (please include 'EPIC AGM' in the subject heading). Questions must be received by 5.00 p.m. on 10 February 2023. Any questions received will be replied to by either the Investment Manager or Board, via the Administrator, before the AGM. A shareholder presentation will be made available on the Company website following the AGM, updating shareholders on the activities of the Company.
OUTLOOK
The decision to delay the reinvestment of the sales proceeds from the office and leisure disposals has undoubtedly put the Company in a better position to take advantage of the current market uncertainty and setback in asset valuations. We can expect some interesting and attractive opportunities to arise over the coming months, given the expected further falls in market valuations. Real estate markets are now much quicker to adjust than in the past so these opportunities could come quickly. However, the Investment Manager has no specific timetable in mind for the reinvestment and will be led by opportunity and to the extent that the market has re-priced. The timing will also be driven by the need to ensure the Company remains financially resilient to the effects of any sustained market downturn.
However, it will mean the payment of an uncovered dividend in the meantime.
The immediate focus is on managing the existing assets to protect the NAV per share and ensure the income is maximised to reduce the extent of the uncovered dividend. The Investment Manager did an excellent job in this regard during the COVID-19 Crisis and is well-positioned to do so during a period of economic difficulty.
The attractiveness of large parts of the retail warehouse sector was recognised by investors in the early part of the year and the consequent increase in buying activity started to drive yields down and prices up. The general correction in the last quarter has brought this to an end for the moment. However, the fundamentals remain attractive with many of the tenants in the sector making money from the rebased rents, void levels are low and the click-and-collect model continues to grow in popularity.
There is good prospect that investor interest will return when confidence improves and pressure on asset sales is reduced as open-ended property fund redemptions normalise. This will not only benefit the Company's NAV but should also flow through to an improved share price and a reduction in the discount. Whether this will be evident in the second half of the new financial year will remain to be seen. Nevertheless, the Board is confident that the Company will be able to emerge from the current turbulence in a strong position to reap the benefits of better times ahead.
William Hill
Chairman
Investment Manager's Review
It has been a busy year for the Company, which has seen improvement across several areas. The NAV has increased, the EPRA Vacancy Rate has fallen, rent collection has improved further and 15 asset management transactions have been completed.
The revised strategy to sell office and leisure assets to focus investment on the retail warehouse sector has been successfully completed. During the period, all six of the office and leisure assets were sold, meaning the Company now only holds retail warehouse assets and has cash available for reinvestment.
The first half of the financial year saw positive momentum build across the portfolio, driven by the continued recovery of the retail warehouse market. Yields hardened as investors recognised the attributes of the retail warehouse sector and tenants continued to lease space.
The Interim Report cautioned that headwinds were building, which they did, and they are now affecting the Company. Rising inflation, interest rates and energy costs, coupled with political instability, have reduced consumer confidence and put a squeeze on household incomes. Reductions in disposable income could affect the retail market, including retail warehousing. Discretionary spending and the purchasing of 'big-ticket' items will be particularly affected. The fact that the Company's portfolio is underpinned by convenience-led tenants, has low average rents and a reduced vacancy rate is important and should help make the portfolio more defensive to these reductions in consumer spending.
If retailers are impacted, there is an increased likelihood of them using Company Voluntary Arrangements (CVAs) and other insolvency processes to reduce costs. The Company is in a better position to deal with these challenges than it was during the COVID-19 Crisis, which it weathered well in terms of sustaining income.
However, the increase in gilt yields has put all property valuations under downward pressure. The Company's property portfolio reduced in value by 2.5%, on a like-for-like basis, at 30 September 2022. Further, larger declines are likely as the property market reprices due to the rise in gilt yields. The expectation is that the property portfolio will fall in value as at 31 December 2022, with the potential for further volatility thereafter.
Despite the more measured short-term outlook, the fundamentals of the retail warehouse sector remain robust. Supply of available space is low, tenant demand is holding up, occupiers are still doing deals and we continue to identify and complete asset management transactions that secure income.
We expect the retail warehouse sector to be the most resilient and flexible part of the retail market, which can adapt to the changing needs of tenants and the integration of their omnichannel strategies. Having sold assets and with cash in the bank, the Company is well placed to capitalise on any investment opportunities that are identified in a re-priced market, but only at the right time and price for the Company.
Property Valuation
The Company's property portfolio is valued by Knight Frank on a quarterly basis throughout the year. As at 30 September 2022 it was valued at GBP231.4m, a like-for-like increase of 10.3% over the reporting period. The increase was driven by falling yields in the retail warehouse portfolio, albeit there was a decrease in the property valuation in the final quarter as some of the yield improvement was reversed.
EPRA Vacancy Rate
During the period the EPRA Vacancy Rate decreased from 8.6% to 6.5%. This was due to the sale of the office at St. Philips Point in Birmingham, which had vacant floors, and the letting of vacant units in the retail warehouse portfolio. Letting the remaining vacant units remains a key focus.
Rent
Over the year, the Company's contracted rent has reduced from GBP20.8m to GBP16.2m. This is principally because of the sale of the office and leisure properties, and the fact that the sales proceeds have not been reinvested. It is anticipated that the income will be replaced when suitable assets are acquired.
Rent collection for the year, as at 30 September 2022, was 98.2%, an improvement from 95.7% in the prior year.
Implementing the revised strategy
Last year the Company announced its strategy to sell its office and leisure assets to focus on the retail warehouse sector. During the period, the Company sold its four office assets in Bath, Birmingham, Edinburgh and Newcastle for a headline price of GBP61.9m. This was 3.3% below the property valuations at the time of the sales. Once deductions for topped up rents and rent-free periods were factored in, the net receipt to the Company was GBP60.0m.
The Company also disposed of its two leisure units, both of which were let to Mecca Bingo. The Lanyard, Hartlepool, was sold for GBP2.6m. This was 16.4% above the valuation. The second leisure property, Southwater Square, Telford, was sold to an owner occupier for GBP5.0m, which was 67% above the property valuation.
The next phase of investment activity will be focused on the retail warehouse sector. Whilst the Company recognises the benefits of being fully invested, the deterioration in the market, coupled with the economic and political challenges, means that it is carefully reviewing opportunities to ensure that the cash is deployed in appropriate assets, at the correct price, at the right time. Despite the recent challenges, we still believe the prospects are attractive for retail warehousing, both in absolute terms and relative to other sectors of the real estate market.
Portfolio activity
The Company has continued to deliver asset management transactions across the portfolio, which have helped reduce the EPRA Vacancy Rate and secure the Company's income stream.
During the period the Company completed 15 transactions across the office, leisure and retail warehouse assets.
Thirteen of the 15 deals were completed in the retail warehouse assets, securing GBP1.8m of rent per annum, of which GBP0.6m was additional rent. These are summarised as follows:
- at Kingston Retail Park in Hull, The Range signed a 15-year lease on a 14,500 sq. ft. unit;
- also at Hull, Greggs signed a 10-year lease with a five-year tenant break option on a 2,000 sq. ft. unit;
- at Prestatyn Shopping Park, The Tech Edge leased a vacant unit of 1,300 sq. ft. on a five-year lease;
- at Clwyd Retail Park, Rhyl, Now to Bed leased 8,017 sq. ft. on a three-year lease;
- at Barnsley, Bensons downsized from a unit of 10,000 sq. ft. into one of 5,036 sq. ft. and signed a five-year lease;
- Jysk then signed a 10-year lease with a five-year break option on the unit vacated by Bensons;
- in one other deal at Barnsley, One Below, occupying a 4,996 sq. ft. unit on a short-term lease, committed to the park for five years;
- at Widnes Shopping Park, Card Factory signed a five-year lease, without break, on a 1,590 sq. ft. unit;
- at Stirling, Harry Corry signed a five-year lease extension on its 9,968 sq. ft. unit, meaning its lease will now expire in February 2027;
- also at Stirling, Pets at Home agreed to remove its break option, due in 2024, meaning the lease now expires in June 2029; and
- in a third deal at Stirling, existing tenant Bensons signed an agreement for lease on a 9,977 sq. ft. unit. On completion of landlord works it will sign a 10-year lease.
At Prestatyn Shopping Park, JD Sports signed a 10-year lease with breaks at years four and seven on a 7,623 sq. ft. unit, which was previously occupied by New Look. New Look was occupying the unit on a turnover rent basis following the approval of its CVA. Under the terms of the CVA landlords were entitled to break the leases.
We considered that the terms of the CVA were below market, so we took the opportunity to exercise the break clause and identified JD Sports as a more suitable tenant for the space. The rent received from JD Sports is 44.0% higher than the rent being paid by New Look.
At Coatbridge, Glasgow, we completed an AFL with existing tenant B&Q, to secure them on the park for a further 10 years. B&Q had a lease expiry in December 2022. As part of the transaction, B&Q will downsize from 102,000 sq. ft. to 79,960 sq. ft. Aldi has signed an AFL for a 20,000 sq. ft. unit which will be created in the space vacated by B&Q. Planning permission has been obtained for the change to food use. On completion of the landlord works, Aldi will enter into a 20-year lease without break, subject to five-yearly rent reviews linked to RPI.
One asset management transaction completed in each of the office and leisure portfolio. Both properties were then sold during the period.
At the office in Newcastle, Citygate II, UNW LLP signed an extension to its leases, to expire in March 2032, with a tenant break option in March 2027.
At Hartlepool, Mecca Bingo signed a 10-year reversionary lease with a seven-year tenant break option on its 31,284 sq. ft unit. The lease expiry date was extended to September 2032, with a break option in September 2029.
Post period end activity
Post period end, at Wombwell Lane Retail Park, Barnsley, B&M agreed to extend its occupation at the park by 10 years.
The lease now expires in September 2037 and the passing rent increased by 6.0%. To facilitate the deal, B&M was granted a 15-month rent-free period. This underscores B&M's commitment to the location.
Outlook
Despite the growing economic and property market headwinds, there is still occupational demand for the Company's properties. There is interest in not only the Company's vacant units, but also in let units where we are trying to accommodate the demand by right sizing tenants to secure their ongoing occupation. The fact that we can modify units to match tenant requirements demonstrates the flexibility offered by retail warehouse parks.
Protecting income and growing it where possible remains a key focus. There will be challenges to contend with, but with a reshaped portfolio (with no office or leisure exposure), a good tenant line up, a low vacancy rate (6.5%) an attractive WAULT (4.5 years) and ongoing asset management opportunities, the Company has a robust platform on which to build. Further, the Company has cash available for investment into a re-priced market, at the appropriate time.
Calum Bruce
Investment Manager
Property Portfolio as at 30 September 2022
Market
value
range
Location Name Sub-sector (GBPm) Tenure
========== ================== ================ ======= =========
Widnes Widnes Shopping Retail Warehouse 35-40 Leasehold
Park
========== ================== ================ ======= =========
Prestatyn Prestatyn Shopping Retail Warehouse 25-30 Freehold
Park
========== ================== ================ ======= =========
Stirling Springkerse Retail Warehouse 25-30 Heritable
Retail Park
========== ================== ================ ======= =========
Hull Kingston Retail Retail Warehouse 20-25 Freehold
Park
========== ================== ================ ======= =========
Rhyl Clwyd Retail Retail Warehouse 15-20 Freehold
Park
========== ================== ================ ======= =========
Sunderland Pallion Retail Retail Warehouse 15-20 Freehold
Park
========== ================== ================ ======= =========
Wrexham Plas Coch Retail Retail Warehouse 15-20 Freehold
Park
========== ================== ================ ======= =========
Coatbridge B&Q Retail Warehouse 15-20 Heritable
========== ================== ================ ======= =========
Haddington Haddington Retail Retail Warehouse 15-20 Heritable
Park
========== ================== ================ ======= =========
Daventry Abbey Retail Retail Warehouse 10-15 Leasehold
Park
========== ================== ================ ======= =========
Barnsley Wombwell Lane Retail Warehouse 10-15 Freehold
Retail Park
========== ================== ================ ======= =========
Finance Report
The positive net asset value performance this year has been driven by general yield improvement in the retail warehouse portfolio, combined with the effect of the 15 asset management transactions completed. The strategic decision to sell the remaining office and leisure properties has provided significant cash reserves. This gives the Company funds to deploy at the right time and at the right level, as well as retaining sufficient cash to manage operationally through current economic uncertainty.
Rental Income
During the year, 98.2% of contracted income was collected (2021: 95.7%), of which 86.9% was collected within seven days. The remaining 1.8% is expected to be collected. This is an improvement on prior years and is also better than the collection rates pre-pandemic. The focus on rent collection continues to contribute to the improvement in payment rates.
The Company's contracted rent at the year end was GBP16.2m (2021: GBP20.8m).
The decrease in the year can be largely explained by the sale of the office and leisure properties which contributed GBP5.1m to the contracted rent, offset by the asset management initiatives completed in the year.
Rent free periods as a percentage of contracted rent at the year end was 3.1% (2021: 9.3%) which equates to GBP0.5m (2021: GBP1.9m). This has fallen due to tenants coming out of their rent-free periods and the effect of the office disposals where there were a number of rent-free periods in place.
The portfolio continues to provide long-term stability to the Company's income. This is demonstrated by 85.0% of our tenants having a lower than average risk of business failure, according to Dun & Bradstreet. The EPRA Vacancy Rate has fallen from 8.6% to 6.5% due to the letting of vacant units in the period and the sale of the office in Birmingham which had some vacant space. The WAULT at year end was 4.5 years (2021: 5.0 years). The decrease was due to the passing of another year offset by the 15 asset management transactions completed in the year. The disposals also impacted on the ability to show a like-for-like comparison.
Income Statement
Rental income for the year was GBP16.4m (2021: GBP17.4m). This decrease of GBP1.0m was due to the disposal of several assets in the year, which have yet to be replaced, offset partially by asset management transactions.
Revenue expenditure in the year was GBP4.8m (2021: GBP3.0m), including GBP2.1m property specific expenditure and GBP1.7m relating to the Investment Manager's fee. Net financing costs were GBP3.0m (2021: GBP3.1m), a decrease on the prior year due to the sale proceeds earning some interest in the year. Revenue profit decreased to GBP8.6m (2021: GBP11.3m). This decrease of 23.9% is largely due to the fall in rental income following the sale of all the office and leisure assets, plus the increase in property expenditure which relates to GBP1.1m of voids paid in the year and for costs relating to transactions which have not concluded. Administration expenses are GBP0.6m higher due to the increases in investment manager fees and other operational costs in the year, such as auditors' fees.
The positive movement in the value of our investment properties of GBP15.9m, combined with a loss of GBP3.0m on the properties sold, has enabled the Company to report a total profit of GBP21.5m. The sale proceeds received for the office and leisure assets sold during the year was GBP3.1m higher than their acquisition costs.
2022 (GBPm) 2021 (GBPm)
============================================= =========== ===========
Rental and other income 16.4 17.4
Property expenditure (2.1) (1.0)
============================================= =========== ===========
Net rental income 14.3 16.4
Administration expenses (2.7) (2.0)
Net financing costs (3.0) (3.1)
============================================= =========== ===========
Revenue profit 8.6 11.3
Gain on revaluation of investment properties 15.9 4.6
Loss on sale of investment properties (3.0) 1.2
============================================= =========== ===========
Accounting profit after tax 21.5 17.1
============================================= =========== ===========
EPRA and diluted EPRA earnings per share 4.06p 5.34p
Dividend per share 5.00p 4.42p
Basic and diluted earnings per share 10.17p 8.10p
============================================= =========== ===========
EPRA performance measures
As a member of EPRA, we support EPRA's drive to bring consistency to the comparability and quality of information provided to investors and other key stakeholders of property company reports. We therefore continue to include performance measures, which are based on EPRA methodology.
It should be noted that there is no difference between the Company's IFRS and EPRA NAV in this year's accounts, or in any of our accounts to date.
2022 2021
================================================= ======= ========
EPRA earnings GBP8.6m GBP11.3m
EPRA earnings per share 4.06p 5.34p
Diluted EPRA earnings per share 4.06p 5.34p
EPRA NAV per share 94.86p 89.69p
EPRA cost ratio (including direct vacancy costs) 29.6% 18.4%
EPRA cost ratio (excluding direct vacancy costs) 23.6% 18.0%
EPRA net initial yield 5.9% 6.2%
EPRA topped up net initial yield 6.1% 6.9%
EPRA Vacancy Rate 6.5% 8.6%
================================================= ======= ========
Net Asset Value (NAV)
At 30 September 2022 our net assets were GBP200.5m, equating to net assets per share of 94.86 pence (2021: 89.69 pence). This is summarised in the table below:
Pence per
GBP million share
=========================================================== =========== =========
NAV at 30 September 2021 189.6 89.69
Increase in value of investment properties (net of capital
expenditure plus gain on sale and transaction costs) 12.9 6.11
Net earnings in the year 8.6 4.06
Less: dividends paid in the year (10.6) (5.00)
NAV at 30 September 2022 200.5 94.86
=========================================================== =========== =========
The NAV is predominantly represented by our investment properties, which have a fair value of GBP231.4m at the year end. This is included in the financial statements as Investment Properties at GBP227.5m with the difference relating to lease incentives. The remaining GBP27.0m of net liabilities is made up of: i) (GBP110.4m) of debt; ii) GBP50.2m of cash and cash equivalents; and iii) GBP33.2m of net current assets.
Debt
The Company has two debt facilities with Aviva Commercial Finance Limited, totalling GBP111.1m, less amortised costs of GBP0.7m. One facility, of GBP56.9m, will mature in 2025 and the other, of GBP54.2m, will mature in 2027. The facilities have an all-in blended, fixed interest rate of 2.86%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset cover breach covenants. Property values covering the two facilities would need to drop by more than 23% and 35% respectively, from the 30 September 2022 valuations, for the LTV covenant to be breached.
Gearing (debt to total assets) was 35.4% at the year end (2021: 36.7%). Whilst this is higher than the Board's target range of 30-35%, it is in conformity with the Company's Investment Policy as it lay within these boundaries when drawn down.
Further details are included in Note 13 of the financial statements.
Cash
As at 30 September 2022, the Company had cash and cash equivalents of GBP50.2m with a further GBP31.0m drawn and held in a disposals account under the debt facility. Cash held is significantly higher than usual due to the sales proceeds collected in the year, from the sale of the office and leisure assets, which will be used to assist with future asset management and investment opportunities.
Dividends
The Company has paid monthly dividends at an annual rate of 5.00p per share. Historically, the Company has had covered dividends but at year ended 30 September 2022, dividend cover was 81.2% (2021: 119.0%). Using the annual dividend of 5.00p per share and the share price of 67.15p as at 30 September 2022, the Company's dividend yield is 7.4%.
The Board declared a dividend of 0.4167 pence per share for the month of September which was paid in October 2022 and expects to continue with this consistent monthly rate in the near term.
The Company continues to monitor the aggregate distributions made to ensure compliance with REIT regulations, which, with some flexibility on timing, require a REIT to distribute 90% of tax-exempt rental income as Property Income Distributions (PIDs): a condition that the Company has met since inception.
Tax
As a REIT, income and capital gains from the property rental business are exempt from corporation tax and the tax charge for the year is, therefore, nil. The Company recovers all of its VAT cost.
The Company continues to meet all the REIT requirements, ensuring that REIT status is maintained.
Neelum Yousaf
Director of Finance, Ediston Investment Services Limited
Principal and Emerging Risks
The principal risks and emerging risks have all been reviewed in detail, including the significant economic risks that might impact the Company and the attainment of its investment objectives. The Board recognises that there are risks and uncertainties that could have a material effect on the Company's financial results. Under the 2019 AIC Code of Corporate Governance (the 'AIC Code'), directors of listed companies are required to confirm in the annual report that they have performed a robust assessment of the Company's emerging and principal risks, including those that would threaten its business model, future income and asset value performance, solvency or liquidity and pricing of the Company's shares.
The Group's risk register is the core element of the risk management process. The register is prepared, in conjunction with the Board, by the Investment Manager and Administrator, is updated regularly and is the assessment of all the detailed operational, performance and other risks that might impact on the Company, and how these risks are potentially mitigated by Board or third-party service provider controls.
The Directors review and challenge the risk register on a regular basis, assessing the likelihood of each risk, including identifying emerging risks and significant changes to recognised risks, the potential impact on the Group and the strength of controls operating over each risk.
The Board tries to identify emerging risks, defined as potential trends, sudden events or changing risks, which are characterised by a high degree of uncertainty in terms of probability of occurrence and possible effects on the Company - the COVID-19 pandemic, ESG and events in Ukraine, with their economic impact being examples. Once emerging risks become sufficiently clear, they may be treated as specific risks and added to the Company's matrix of significant risks.
The Board works closely with the Investment Manager and advisers to the Company to try and manage the risks, including emerging risks, as best as it can. The central aims remain to preserve net income for the Company, maintain resilience in the Company's day-to-day operations (including the Company meeting its regulatory obligations and obligations to its stakeholders), preservation of capital values and the price at which shares are traded where it can, whilst looking to the longer term to try and find strategic direction for positive rather than simply protective returns.
The impact of exposure to a particular sector, for example retail, the impact of share price volatility on shareholder returns, the effects of gearing (when returns are negative) and the continuing risks of an uncertain economic and political environment in the UK have all resulted in challenges, and emerging opportunities, during the financial year. In particular, the change in strategic direction has resulted in the disposal of the office and leisure parts of the portfolio, meaning that the Company is now focused on retail warehousing which proved more resilient during the COVID-19 Crisis than other UK commercial property categories.
Recent events in Ukraine and their impact on European economies, coinciding with inflation and cost of living issues in most developed economies, are presenting new challenges post the pandemic lock downs, as is the prospect of increasing interest rates to how returns might be earned.
For the purposes of reporting, the concentration is on the medium to longer term for the significant changes that are impacting on the UK commercial property sector. The eventual outcomes are difficult to assess or predict with any accuracy but are as challenging as most commercial property companies in UK will have faced in recent decades and are likely to transform the way in which office, retail and industrial property is used.
The Board, identifies risk under the following categories:
- investment strategy (including sustainability considerations) and performance; - premium/discount level and share price volatility; - financial, which includes the impact of gearing; - regulatory; - operational; and - economic, governmental and exogenous risks outside the Company's control.
These categories of risk are broken into individual key risks with an assessment of potential impact, controls and mitigation in place and changes in that environment since the previous year end and any other comments on the risk. The risks include those that may be more remote but, should they arise, would have an impact, given the nature of a property investment company with tangible assets compared to a widely diversified listed equity portfolio, health and safety being an example.
Details of the principal and emerging risks facing the Company are set out in the following table .
Investment strategy and performance
Risk
Strategic direction of the Company and how and where it invests.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Deployment of the Company's The Board formally reviews Increased
capital in areas of the the Company's investment Following a strategic
market that are poorer objectives, policy and review, the Company has
in their return prospects strategies for achieving changed the focus of
or more affected by structural them on an annual basis, its investment to retail
changes and exogenous or more regularly, if warehouse assets, which
risks than other investment appropriate. This includes included the disposal
areas, with an adverse an examination of the of office and other assets
impact on income and Company's current situation, and re-deployment of
capital values, as well strengths and weaknesses, resultant cash.
as opportunity cost. and how this compares Exogenous risk has increased
Sustainability is a key with a wider UK commercial with inflation at highest
part of the investment property peer group. level for decades, rising
review process in making During its strategy sessions interest rates and the
and retaining investments the Board considers how geopolitical events in
and how they are developed. the assets are positioned Eastern Europe impacting
and might be better positioned on supply, including
for the longer term. energy and political
There has been increased security.
focus on sustainability
as evidenced by the reports
on this subject and the
establishment of a specific
working group as part
of the investment committee.
Each quarterly Board
meeting includes a detailed
discussion on asset and
income performance and
changes in the portfolio
as well as an assessment
of property market trends,
which is reported on
by the Investment Manager,
the Company's broker
and with input from the
valuer.
=================================== ================================== =================================
Risk
Significant exposure to a specific property sector, tenant, and geographic
location or to lease expiries.
Poor asset allocation.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Downturn in an area to The investment policy
which the Company has and its restrictions/limits Increased (by focusing
significant exposure are set by the Board on particular property
resulting in a reduction and are reviewed quarterly. sub-sector)
inthe capital value of The limits are monitored Heightened by recent
investment properties by the Investment Manager. exogenous events that
and a reduction in NAV. The Board and Investment have accelerated the
Significant tenant failure Manager also review, impact on certain property
causing a material reduction at least quarterly, other sectors - some more than
in revenue profits, impacting key metrics, such as others - but with an
on cash flow and dividends. principal property sector impact on all UK commercial
weightings, to ensure property.
these remain appropriate The Company's portfolio
even where there may has moved to a position
be no formal limits on where it is now 100%
exposure. invested in retail warehouse
Board approval memorandums assets. The retail warehouse
state whether there are assets are in good locations,
any concentration issues, with strong covenants,
which links in with overall at affordable rent levels
strategic imperatives. and have low voids. The
The AIFM and Depositary portfolio WAULT (30 September
monitor compliance with 2022) is 4.5 years.
the investment policy In adopting changes in
and will highlight any strategic direction,
breaches of concentration there is exposure to
limits. more retail tenants than
The Investment Manager was previously the case,
is proactive in monitoring as the office and leisure
developments in the retail assets have been sold.
industry, anticipating The Company is now focused,
issues, and where appropriate for the foreseeable future,
replacing struggling in a specific property
tenants with those with sector, whilst retaining
stronger covenants. Retail some capacity to apply
warehousing proved to more generalist exposure
be the most resilient at a future date.
of the retail sub-sectors,
and has seen increased
investment demand, which
has led to an increase
in property valuations
during the year.
=================================== ================================== =================================
Risk
Lack of investment opportunities reducing the ability to acquire properties
at the required return.
Poor investment decisions, incomplete due diligence and mistimed investment
of capital.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Inappropriate use of Regular review of property
capital that hinders performance against acquisition Increased (by focusing
investors' long-term and disposal plans. on single sector)
returns. Experienced Investment Following changes in
Reduction in revenue Manager who sources assets strategic direction,
profits, impacting on that meet agreed investment the Investment Manager
cash flow and dividends. criteria. Linkage with is tasked with investing
Cash drag from uninvested overall strategic objectives the available cash from
cash and interest cost for the Company. asset sales to achieve
on drawn down debt. The Investment Committee the Company's investment
scrutinises and approves objective. Re-deployment
all proposed acquisitions. of capital is made more
The Board reviews the difficult by the significant
portfolio performance economic risks affecting
at each quarterly meeting property and markets
and, through the Management generally.
Engagement Committee,
conducts a formal annual
review of the performance
of the Investment Manager.
Comprehensive profit
and cash flow forecasting
is undertaken, which
models the impact of
property transactions
at Group level and over
the medium to longer
term.
The Investment Manager
has recognised expertise
in the retail warehouse
sector and good connections
to assist investment
in that sub-sector.
There is a reduced fee
paid to the Investment
Manager for cash held
available for investment.
=================================== ================================== =================================
Risk
Sustainability of dividend payments.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
The Company should, as Dividend level (and any Increased
far as practical, maintain prospective adjustments) The holding of cash post
dividend payments at is reviewed regularly asset sales has created
a sustainable level, by the Board. an uncovered dividend.
with adjustments upwards The Board aims to have There are sufficient
when it is financially a sustainable dividend reserves and cash to
appropriate to do so. and tries to only make maintain the dividend
Dividend cuts have a changes if they can be until the cash is reinvested.
dramatic impact on the sustained for the long There is a risk that
Company where sustainable term. this position could change
dividend is a substantial In times of market volatility, if there was a long delay
proportion of the total dividend level is reviewed or replacement assets
return package to shareholders. at least monthly, as provided insufficient
was the case during the income. Consistent monthly
COVID-19 Crisis when dividend at 5.00p annualised
income receipts appeared (increased in the previous
under pressure for the year from 4.00p annualised
commercial property sector but still down from a
as a whole. peak of 5.75p annualised
in 2019).
=================================== ================================== =================================
Premium/Discount level and share price volatility
Risk
Secondary market share price volatility and insufficient secondary
market liquidity to cope with secondary market selling.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
The Company's share price The Board monitors closely Increased
could be impacted by the market in the Company's The Board and Investment
a range of factors, causing shares, including significant Manager continue to communicate
it to be higher than purchases and sales. with shareholders to
(at a premium) or lower Through the Investment reinforce the value approach
than (at a discount) Manager and the Company's taken to investing in
the underlying net asset broker, institutional UK commercial properties
value per share. Fluctuations investors are kept in and not least the resilience
in the share price may regular touch directly of the income from the
not be reflective of with developments in portfolio.
the underlying investment the Company, positive Having recovered following
portfolio and depend and negative. The broker the COVID-19 pandemic,
on supply and demand and Investment Manager recent market uncertainty
for the shares, market are in regular contact has caused the discount
conditions, general investor with existing shareholders to widen materially,
sentiment and other factors, and prospective shareholders in common with many other
including political and to try and maintain an closed-ended property
economic uncertainties. active market in the investment funds.
The Company does not Company's shares.
have a significant free The Company announces
float of shares and as portfolio and any other
has been apparent in significant activity
the past, relatively between its quarterly
small sales or purchases net asset value announcements
of shares can produce and publication of its
volatile pricing. In interim and final accounts.
common with many generalist The Company can allot
UK property vehicles, shares, and has done
the rating of the Company's so, where there has been
shares has been dramatically demand in the secondary
impacted since the advent market and issuance has
of the COVID-19 Crisis not been dilutive to
in the second quarter existing shareholders'
of 2020 and more recently interests.
by the geopolitical and The Company also takes
economic crisis. the annual authority
to buy back shares. However,
the Company's intention
is to be fully invested
and geared, so the use
of share buybacks would
require a change in the
strategic direction of
the Company, not least
in having liquidity in
the portfolio that could
only be found through
realising longer-term
assets.
The Board reviews the
strategic direction of
the Company regularly
to ensure that application
of the investment policy,
the returns generated
from it and the objectives
of the shareholders are
being met. The Company
has a Marketing Committee
that focuses on trade
in the Company's shares
and how the corporate
message is being communicated
to existing and prospective
new investors.
The Marketing Committee,
in consultation with
the PR consultant, undertakes
advertising (if appropriate)
and engages media (print
and online) where it
can, to try and raise
awareness of the Company
to retail investors who
could buy the Company's
shares via the platforms.
=================================== ================================== =================================
Financial
Risk
Gearing and non-compliance with debt facility terms.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Gearing will accentuate The Board reviews the Increased
returns if the cost of level of gearing on a Higher levels of cash
debt is less than the regular basis. reduce the impact of
equity returns or have The borrowing facilities falling values. However,
the reverse effect if have prescribed covenants it weakens the income
equity returns are less and the Board signs off cover until investment
than the cost of debt. quarterly returns to is made in income returning
A substantial fall in the debt provider on assets.
the property asset values asset and income cover. The Board will continue
or rental income levels The Investment Manager to monitor the level
could lead to a breach presents for Board review of gearing closely.
of financial covenants quarterly cash flow forecasts The Board is closely
within the Group's debt prepared from the level appraised of the level
funding arrangements. of detail of individual of cover over debt covenants
This could lead to a properties, tenants and on net income and asset
modification in the costs future rental projections. levels.
of funding or in extremis The Company has its portfolio There is no immediate
cancellation of debt reviewed and reported need to re-finance debt,
funding, if the Company on by an external valuer with the first tranche
is unable to service each quarter. not repayable until 2025.
the debt. The Board intends to However, the Board is
maintain gearing at 30% monitoring the debt market
of Company gross assets closely as it will need
at drawdown but will to plan appropriately
not exceed 35%, at the if re-financing terms
time of drawdown. are likely to be materially
In the current circumstances, adverse to those in place.
the level of gearing
has exceeded 35% but
the covenants, which
are based on Loan-to-Value
and income cover, remain
well covered.
Covenants are reviewed
on a regular basis. Compliance
certificates and reports
for the lender are prepared
on a quarterly basis
by the Investment Manager
then reviewed and signed
by a Director.
=================================== ================================== =================================
Regulatory
Risk
Non-compliance with laws, regulations and governance codes.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
The Company is required The Company uses an experienced No change
to comply with REIT rules, tax adviser, auditor, Changes in the regulatory
the Listing Rules, Disclosure investment manager, broker, environment over the
Guidance and Transparency property managing agent, year have not had a significant
Rules, the UK and AIC property valuation agent, impact on the risk profile
Corporate Governance depositary, administrator of the Company.
Code, IFRS accounting and firm of solicitors
standards and UK legislation to provide advice and
(including the UK Bribery support throughout the
Act, Modern Slavery Act, year.
The Criminal Finances The Company and its agents
Act 2017, Market Abuse have a strong compliance
Regulations, GDPR and culture, with regular
Health & Safety regulations). risk reviews undertaken
by the Audit and Risk
Committee.
The resilience of the
key Company agents was
reviewed during the year.
No failings have arisen,
despite the more difficult
operating conditions
for many businesses.
=================================== ================================== =================================
Risk
REIT status and structure of the Company.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
The Company and its two A REIT compliance schedule No change
operating subsidiaries is produced quarterly
must be managed in the by the Administrator
context of both REIT to ensure compliance.
regulations in relation REIT compliance is covered
to the property assets by external tax advisers,
held and income distributed including when major
and the structure of acquisitions are being
the Group, with income considered.
and costs allocated between
the subsidiaries and
the Company.
=================================== ================================== =================================
Operational
Risk
The Company is reliant on third-party service providers, including
Ediston as Investment Manager and AIFM and JTC (UK) Ltd as Administrator,
and key teams and individuals at these service providers. Failure
of the operational activities or internal controls at these service
providers, or exposure to cyber risk through them, could result in
adverse consequences for the Company.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Risk of failure in third-party The Board is ultimately No change
providers of services responsible for any actions
resulting in a material taken by the Company
adverse effect to the but relies on external
Company's financial position, agents to perform their
through operational inefficiency, duties competently. The
compliance breach or Audit and Risk Committee
reporting inadequacies, reviews the services
with reputational or provided for purposes
governance impacts as of accurate and timely
potential consequences financial and risk reporting;
to the Company as well. the Board for any compliance
or operational breaches;
and there is an annual
review by the Management
Engagement Committee
of all service providers.
Any significant failings
or breaches are brought
to the attention of the
Board when they occur
and are followed up for
rectification accordingly,
rather than having to
wait for the periodic
Board meeting cycle.
=================================== ================================== =================================
Economic, governmental & exogenous
Risk
Weak economic and/or political environment, including the impacts
of geo-political events, rising inflation and interest rates.
Controls and mitigation
Impact in place Change in the year
=================================== ================================== =================================
Lower occupational demand Out of the Company's Increased
impacting on income, control to a large extent. Whilst the impacts of
cash flow, rental growth, Executing asset management the COVID-19 Crisis and
property valuations and initiatives remains a economic consequences
capital performance. high priority, and cash of it are better understood,
Reduced consumer spending, control continues to there are new headwinds
particularly on discretionary be a strong focus. This that means the economic
items and/ or 'big-ticket' ensures that the income and political environment
items, could impact tenants is maximised, and voids in the UK and beyond
and their ability to are minimised across remains uncertain.
pay rent. the property portfolio. War in Ukraine, rising
Rising inflation is causing Sensitivity analysis inflation, increasing
the price of goods and of the portfolio is undertaken interest rates, and the
materials used in construction regularly via a comprehensive cost of living crisis
to increase. Costs to cash flow model, which are all risks that have
refurbish or develop includes stress testing emerged during the period,
are increasing and many of cash flows and capital and which could have
contractors will only values against loan covenants a negative effect on
hold tender prices for and the operational requirements the property portfolio.
two weeks, as opposed of the business, including This may result in lower
to the usual four. the payment of monthly occupational demand and
The economic landscape dividends. lower rent collection
in most developed markets The Company carefully levels. It could also
is looking increasingly considers the budgets affect the terms on which
challenged despite relaxation and timing of developments/ debt is obtained. Although
of many of the COVID-19 refurbishment projects partially mitigated by
restrictions, causing to ensure that there the Company's good-quality
heightened uncertainty is enough contingency assets, low vacancy rate,
in listed and unlisted to allow for unexpected long WAULT and strong
markets and for UK commercial cost increases and/or covenants, the continuing
property. delays. uncertainty increases
The Board and Investment the risk to returns from
Manager regularly review the UK commercial property
the economic backdrop market as a whole.
and strategic implications
on the portfolio as regards
investment and disinvestment,
holding of cash, gearing
levels and operational
costs to try and protect
the Company, its net
income and its asset
value against external
challenges.
=================================== ================================== =================================
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report, including the Director's Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the Group Financial Statements in accordance with UK-adopted international accounting standards and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 'Reduced Disclosure Framework' (UK Accounting Standards and applicable law).
Under company law the Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group and the Company for that period. In preparing these Financial Statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent;
- state whether applicable UK-adopted international accounting standards have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company financial statements,, subject to any material departures disclosed and explained in the Financial Statements; and
- prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the Financial Statements and the Directors' Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider the Annual Report and the Financial Statements, taken as a whole, provide the information necessary to assess the Group and Company's performance, business model and strategy and are fair, balanced and understandable.
DIRECTORS' RESPONSIBILITY STATEMENT UNDER THE DISCLOSURE GUIDANCE AND TRANSPARENCY RULES
To the best of our knowledge:
- the Group Financial Statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole;
- the Company Financial Statements, prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities and financial position of the Company; and
- the Annual Report, including the Strategic Report and the Directors' Report, includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors confirm that:
- so far as each Director is aware, there is no relevant audit information of which the Group and Company's auditor is unaware; and
- the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group and Company's Auditor is aware of that information.
William Hill
Chairman
13 December 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2022
Year ended 30 September Year ended 30 September
2022 2021
============================ ============================
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ===== ======== ======== ======== ======== ======== ========
Revenue
Rental income 16,426 - 16,426 17,371 - 17,371
=========================== ===== ======== ======== ======== ======== ======== ========
Total revenue 16,426 - 16,426 17,371 - 17,371
Unrealised gain on
revaluation of investment
properties 9 - 15,920 15,920 - 4,655 4,655
(Loss)/gain on sale
of investment properties
realised during the
year 9 - (3,014) (3,014) - 1,179 1,179
=========================== ===== ======== ======== ======== ======== ======== ========
Total income 16,426 12,906 29,332 17,371 5,834 23,205
=========================== ===== ======== ======== ======== ======== ======== ========
Expenditure
Investment management
fee 2 (1,703) - (1,703) (1,687) - (1,687)
Other expenses 3 (3,212) - (3,212) (1,914) - (1,914)
=========================== ===== ======== ======== ======== ======== ======== ========
Total expenditure (4,915) - (4,915) (3,601) - (3,601)
=========================== ===== ======== ======== ======== ======== ======== ========
Movement in expected
credit losses 11 51 - 51 615 - 615
=========================== ===== ======== ======== ======== ======== ======== ========
Profit before finance
costs and taxation 11,562 12,906 24,468 14,385 5,834 20,219
Net finance costs
Interest receivable 4 22 - 22 - - -
Interest payable 5 (3,003) - (3,003) (3,109) - (3,109)
=========================== ===== ======== ======== ======== ======== ======== ========
Profit before taxation 8,581 12,906 21,487 11,276 5,834 17,110
Taxation 6 - - - - - -
=========================== ===== ======== ======== ======== ======== ======== ========
Profit and total
comprehensive income
for the year 8,581 12,906 21,487 11,276 5,834 17,110
=========================== ===== ======== ======== ======== ======== ======== ========
Basic and diluted
earnings per share 8 4.06p 6.11p 10.17p 5.34p 2.76p 8.10p
=========================== ===== ======== ======== ======== ======== ======== ========
The total column of this statement represents the Group's Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS.
The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement are derived from continuing operations.
No operations were acquired or discontinued in the year.
The accompanying notes are an integral part of these Financial Statements.
Consolidated Statement of Financial Position
As at 30 September 2022
As at As at 30
30 September September
2022 2021
Notes GBP'000 GBP'000
=================================== ===== ============= ==========
Non-current assets
Investment properties 9 227,465 277,984
=================================== ===== ============= ==========
227,465 277,984
=================================== ===== ============= ==========
Current assets
Trade and other receivables 11 35,978 13,390
Cash and cash equivalents 12 50,235 11,642
=================================== ===== ============= ==========
86,213 25,032
=================================== ===== ============= ==========
Total assets 313,678 303,016
=================================== ===== ============= ==========
Non-current liabilities
Loans 13 (110,443) (110,277)
=================================== ===== ============= ==========
(110,443) (110,277)
=================================== ===== ============= ==========
Current liabilities
Trade and other payables 14 (2,767) (3,190)
=================================== ===== ============= ==========
Total liabilities (113,210) (113,467)
=================================== ===== ============= ==========
Net assets 200,468 189,549
=================================== ===== ============= ==========
Equity and reserves
Called-up equity share capital 16 2,113 2,113
Share premium 125,559 125,559
Capital reserve - investments held (32,957) (42,710)
Capital reserve - investments sold 6,714 3,561
Special distributable reserve 82,075 82,711
Revenue reserve 16,964 18,315
=================================== ===== ============= ==========
Equity shareholders' funds 200,468 189,549
=================================== ===== ============= ==========
Net asset value per Ordinary Share 15 94.86p 89.69p
=================================== ===== ============= ==========
The accompanying notes are an integral part of these Financial Statements.
Company number: 09090446.
The Financial Statements were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:
William Hill
Chairman
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Capital Capital
reserve reserve
- - Special
Share capital investments investments distributable Revenue
account Share premium held sold reserve reserve Total equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2021 2,113 125,559 (42,710) 3,561 82,711 18,315 189,549
Profit and
total
comprehensive
income for
the year - - 15,920 (3,014) - 8,581 21,487
Transfer
between
unrealised
and realised
reserves - - (6,167) 6,167 - - -
Transactions
with owners
recognised
in equity:
Dividends paid 7 - - - - - (10,568) (10,568)
Transfer from
special
reserve - - - - (636) 636 -
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2022 2,113 125,559 (32,957) 6,714 82,075 16,964 200,468
============== ===== ============= ============= ============ ============ ============= ======== ============
For the year ended 30 September 2021
Capital Capital
reserve reserve
- - Special
Share capital investments investments distributable Revenue
account Share premium held sold reserve reserve Total equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2020 2,113 125,559 (47,365) 2,382 83,162 15,922 181,773
Loss and total
comprehensive
income for
the year - - 4,655 1,179 - 11,276 17,110
Transactions
with owners
recognised
in equity:
Dividends paid 7 - - - - - (9,334) (9,334)
Transfer from
special
reserve - - - - (451) 451 -
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2021 2,113 125,559 (42,710) 3,561 82,711 18,315 189,549
============== ===== ============= ============= ============ ============ ============= ======== ============
The accompanying notes are an integral part of these Financial Statements.
Consolidated Statement of Cash Flow
For the year ended 30 September 2022
Year ended Year ended
30 September 30 September
2022 2021
Notes GBP'000 GBP'000
===================================================== ===== ============= =============
Cash flows from operating activities
Profit before tax 21,487 17,110
Adjustments for:
Interest payable 3,003 3,109
Unrealised revaluation gain on property portfolio (15,920) (4,655)
Loss/(gain) on sale of investment property realised 3,014 (1,179)
===================================================== ===== ============= =============
Operating cash flows before working capital
changes 11,584 14,385
Decrease in trade and other receivables 547 1,823
Decrease in trade and other payables (420) (492)
===================================================== ===== ============= =============
Net cash inflow from operating activities 11,711 15,716
===================================================== ===== ============= =============
Cash flows from investing activities
Capital expenditure (3,207) (10,345)
Acquisition of investment properties - (21,640)
Sale of investment properties 67,704 27,953
Deposits with Aviva (24,210) -
===================================================== ===== ============= =============
Net cash inflow/(outflow) from investing activities 40,287 (4,032)
===================================================== ===== ============= =============
Cash flows from financing activities
Dividends paid (10,568) (9,334)
Interest paid (2,837) (3,016)
===================================================== ===== ============= =============
Net cash outflow from financing activities (13,405) (12,350)
===================================================== ===== ============= =============
Net increase/(decrease) in cash and cash equivalents 38,593 (666)
Opening cash and cash equivalents 11,642 12,308
===================================================== ===== ============= =============
Closing cash and cash equivalents 12 50,235 11,642
===================================================== ===== ============= =============
The accompanying notes are an integral part of these Financial Statements.
Notes to the Consolidated Financial Statements
1. ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
BASIS OF ACCOUNTING
These Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with IFRS adopted pursuant to UK adopted international accounting standards. The accounts have been prepared on a historical cost basis, except for investment property valuations that have been measured at fair value.
The Notes and Financial Statements are presented in pounds sterling (being the functional currency and presentational currency for the Company) and are rounded to the nearest thousand except where otherwise indicated.
GOING CONCERN
Under the AIC Code, the Board needs to report whether the business is a going concern. In considering this requirement, the Directors have taken the following into account:
- the Group's projections for the next three years, in particular the cash flows, borrowings and occupancy rate;
- the ongoing ability to comply comfortably with the Group's financial covenants (details of the loan covenants are included in Note 13);
- the risks included on the Group's risk register that could impact on the Group's liquidity and solvency over the next 12 months (details of risks are included in the Strategic Report); and
- the risks on the Group's risk register that could be a potential threat to the Group's business model (details of risks are included in the Strategic Report).
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The Strategic Report also includes the Group's risks and risk management processes.
The Directors made an assessment of going concern, under the guidelines of the AIC. Details of this assessment is included in the Directors' Report.
Furthermore, the Company and Investment Manager have assessed that values would need to drop by 23% in EPIC No.1 and 35% in EPIC No.2 respectively, based on the 30 September 2022 valuations, for the Loan-to-Value covenant to be breached. This would be a dramatic decline and considered to be remote. Beyond these drops, cure rights are available under the facility agreement to rectify any breach.
With this information and bearing in mind the nature of the Group's business and assets, the Directors consider that the Group has adequate resources to continue in operational existence over the medium term and believe that the Company has the ability to meet its financial commitments for a period of at least twelve months from the date of approval of the accounts. For these reasons, the Directors continue to adopt the going concern basis in preparing the accounts.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of Financial Statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the year-end date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.
KEY ESTIMATES
The only significant source of estimation uncertainty relates to the investment property valuations. The fair value of investment properties is determined by independent real estate valuation experts using recognised valuation techniques. The properties have been valued on the basis of 'Fair Value' in accordance with the current editions of Royal Institution of Chartered Surveyors (RICS) Valuation - Global Standards, which incorporate the International Valuation Standards, and the RICS UK National Supplement. Investment property under construction is subject to a higher estimation uncertainty than that of investment property due to the estimation required for future expenditure, which is factored into the valuation models for any such properties. In line with the recommendation of the European Public Real Estate Association, all properties have been deemed to be Level 3 under the fair value hierarchy classification set out below. This is described in more detail in Note 9. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.
The fair value measurement for the assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: unobservable inputs for the asset or liability. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or a similar instrument. As explained in more detail in Note 9, all investment properties are included in Level 3.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred.
KEY JUDGEMENTS
Key judgements relate to property acquisitions where different accounting policies could be applied and operating lease contracts. These are described in more detail below, or in the relevant notes to the Financial Statements.
PROPERTY ACQUISITIONS AND BUSINESS COMBINATIONS
The Group acquires real estate either as individual properties or as the acquisition of a portfolio of properties either directly or through the acquisition of a corporate entity.
OPERATING LEASE CONTRACTS - THE GROUP AS LESSOR
The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases. Management has applied judgement by considering key new leases this year and have assessed that no lease exceeds a term of 40 years and as such determined that the terms and conditions of the arrangements do not result in a transfer of significant risks and rewards of ownership of these properties and that these should therefore be accounted for as operating leases.
The leases, when signed, are for between 5 and 35 years. At the inception of the lease, management do not consider any extension of the leases to be reasonably certain and, as such do not factor any lease extensions into their considerations of lease incentives and the treatment of rental income.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements comprise the Financial Statements of the Company and its two subsidiaries drawn up to 30 September 2022. Subsidiaries are those entities, including special purpose entities, controlled by the Company and are detailed in Note 10. Control exists when the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases.
In preparing the Consolidated Financial Statements, intra-Group balances, transactions and unrealised gains or losses have been eliminated in full. Uniform accounting policies are adopted for all companies within the Group.
(B) REVENUE RECOGNITION
RENTAL INCOME
Rental income, excluding VAT, arising on investment properties is accounted for in the Statement of Comprehensive Income on a straight-line basis over the terms of the individual leases.
Lease incentives, including rent-free periods and payments to tenants, are allocated to the Statement of Comprehensive Income on a straight-line basis over the lease term or on another systematic basis, if applicable. Where income is recognised in advance of the related cash flows, an adjustment is made to ensure that the carrying value of the relevant property, including accrued rent disclosed separately within 'trade and other receivables', does not exceed the external valuation.
The Group may from time to time receive surrender premiums from tenants who break their leases early. To the extent they are deemed capital receipts to compensate the Group for loss in value of property to which they relate, they are credited through the capital column of the Statement of Comprehensive Income to capital reserves. All other surrender premiums are recognised within rental income in the Statement of Comprehensive Income.
INTEREST INCOME
Interest income is accounted for on an accruals basis.
SERVICE CHARGES AND EXPENSES RECOVERABLE FROM TENANTS
Where service charges and other expenses are recharged to tenants, the expense and the income received in reimbursement are offset within the Statement of Comprehensive Income and are not separately disclosed, as the Directors consider that the Group acts as agent in this respect. Service charges and other property-related expenses that are not recoverable from tenants are recognised in expenses on an accruals' basis.
(C) OTHER EXPENSES
Expenses are accounted for on an accruals' basis. The Group's investment management and administration fees, finance costs and all other expenses are charged to revenue through the Statement of Comprehensive Income.
(D) DIVIDS PAYABLE
Dividends are accounted for in the period in which they are paid. All the dividends are paid as interim dividends and the dividend policy is put to shareholders for approval.
(E) TAXATION
The Group is a UK REIT and is thereby exempt from corporation tax on both net rental profits and chargeable gains arising on properties using within its exempt property business. In order to retain UK REIT status, certain ongoing criteria must be maintained. The main criteria are as follows:
- at the start of each accounting period, the assets of the Tax-exempt Business must be at least 75% of the total value of the Group's assets;
- at least 75% of the Group's total profits must arise from the Tax-exempt Business;
- at least 90% of the tax-exempt rental business profits must be distributed in the form of a Property Income Distribution within 12 months of the end of the period; and
- the Group must hold a minimum of three properties with no single property exceeding 40% of the total values of the properties used within the Tax-exempt Business.
The Directors intend that the Group should continue as a UK REIT for the foreseeable future, with the result that deferred tax is not recognised on temporary differences relating to the property rental business which is within the UK REIT structure.
Taxation on any profit or loss for the period not exempt under UK-REIT regulations comprises current and deferred tax. Taxation is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movements in equity, in which case it is also recognised as a direct movement in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates and laws enacted or substantively enacted at the year-end date.
Deferred tax is provided using the liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes calculated using rates and laws enacted or substantively enacted by the end of the period expected to apply. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward tax credits or tax losses can be utilised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. In determining the expected manner of realisation of an asset, the Directors consider that the Group will recover the value of investment property through sale. Deferred tax relating to items recognised directly in equity is recognised in equity and not in profit or loss.
(F) INVESTMENT PROPERTIES
Investment properties are properties held to earn rentals or for capital appreciation, or both, and are accounted for using the fair value model.
Investment properties are revalued quarterly with resulting gains and losses recognised in profit or loss. These are included in the Consolidated Statement of Financial Position at their fair values.
Investment properties consist of land and buildings that are not occupied for use by or in the operations of the Group or for sale in the ordinary course of business but are held to earn rental income together with the potential for capital and income growth.
Investment properties are initially recognised at the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property.
After initial recognition, investment properties are measured at fair value, with gains and losses recognised in the Statement of Comprehensive Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date using recognised valuation techniques appropriately adjusted for unamortised lease incentives, lease surrender premiums and rental adjustments.
The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (including lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.
In terms of IAS 40, investment property under construction is measured at fair value, with gains and losses recognised in the Statement of Comprehensive Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date. The determination of the fair value of investment property under construction requires the use of estimates such as future cash flows from assets (including lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.
Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. On derecognition, gains and losses on disposals of investment properties are recognised in the Statement of Comprehensive Income and transferred to the capital reserve - investments sold. Recognition and derecognition occurs on the completion of a sale.
(G) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and short-term deposits in banks with an original maturity of three months or less.
(H) TRADE AND OTHER RECEIVABLES
Rents receivable, which are generally due for settlement at the relevant quarter end, are recognised and carried at the original invoice amount less an allowance for any uncollectable amounts. An expected credit loss methodology is applied to applicable trade and other receivables. Expected credit losses are recognised in the Statement of Comprehensive Income as part of the ongoing assessment. Any incurred losses are written off when identified.
The Group applies the IFRS 9 simplified approach to measuring the expected credit losses (ECLs) for trade receivables whereby the allowance or provision for all trade receivables are based on the lifetime ECLs. The Group considers historical defaults over the expected life of the trade receivables and any information related to the debtors available at year end to determine forward-looking estimates of possible defaulting. This is consistent with the approach followed in prior periods.
(I) INTEREST-BEARING LOANS AND BORROWINGS
All loans and borrowings are initially recognised at the fair value of the consideration received net of arrangement costs associated with the borrowing. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost; any difference is recognised in the Statement of Comprehensive Income over the period of the borrowing using the effective interest method. Amortised cost is calculated by taking into account any loan arrangement costs and any discount or premium on settlement.
The Company discloses the bases and impact of early repayment of debt and also the fair value of the loans but includes the creditor amounts on the accounting policy above.
(J) PROPERTY ACQUISITIONS
Where property is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business or the acquisition of an asset.
Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred taxation arises. Otherwise, acquisitions are accounted for as business combinations.
(K) RESERVES
SHARE PREMIUM
The surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. The reserve is non-distributable. The initial share premium account, on the launch of the Company in 2014, was transferred to the special distributable reserve, following shareholder approval and successful application to court.
CAPITAL RESERVES
The following are accounted for in the capital reserve - investments sold:
- realised gains and losses arising on the disposal of investment properties.
The following are accounted for in the capital reserve - investments held:
- increases and decreases in the fair value of investment properties held at the period end.
REVENUE RESERVE
The net profit arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve which is available for paying dividends. Where the Company's revenue reserve is insufficient to fund the dividends paid, a transfer can be made to this reserve from the special distributable reserve.
SPECIAL DISTRIBUTABLE RESERVE
Shortly after the launch of the Company, an application to Court was successfully made for the cancellation of the initial share premium account, which allowed the balance of the share premium account at that date to be transferred to the special distributable reserve. This reserve is available for paying dividends and buying back the Company's shares.
CAPITAL MANAGEMENT
The Group's capital is represented by the Ordinary Shares, share premium, capital reserves, revenue reserve and special distributable reserve. The Group is not subject to any externally imposed capital requirements.
The capital of the Group is managed in accordance with its investment policy, in pursuit of its investment objective. Capital management activities may include the allotment of new shares, the buy back or re-issuance of shares from treasury, the management of the Group's discount to net asset value and consideration of the Group's net gearing level.
There have been no changes in the capital management objectives and policies or the nature of the capital managed during the year.
(L) CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial year.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
The following standards have been issued but is not effective for this accounting period and has not been adopted early:
- IAS 1 (amended) - Amendments regarding classifications of liabilities, and disclosure of accounting policies - effective from 1 January 2023
- IAS 8 (amended) - Amendments regarding the definition of accounting estimates - effective from 1 January 2023.
- IAS 12 (amended) - Amendments regarding deferred tax on leases and decommissioning obligations - effective from 1 January 2023.
- IFRS 17 - Amendments to IFRS 17 'Insurance Contracts' (Amendments to IFRS 17 and IFRS 4) - effective from 1 January 2023.
Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the financial statements of the Group.
The Group does not consider the adoption of any new standards or amendments, other than those noted above, to be applicable to the Group.
2. INVESTMENT MANAGEMENT FEE
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
========================== ============= =============
Investment management fee 1,703 1,687
========================== ============= =============
Total 1,703 1,687
========================== ============= =============
Ediston Investment Services Limited has been appointed as the Company's Alternative Investment Fund Manager (AIFM) and Investment Manager, with the property management services of the Group being delegated to Ediston Properties Limited. Ediston Investment Services Limited is entitled to a fee calculated as 0.95% per annum of the net assets of the Group up to GBP250m, 0.75% per annum of the net assets of the Group over GBP250m and up to GBP500m and 0.65% per annum of the net assets of the Group over GBP500m. The management fee on any cash available for investment (being all cash held by the Group except cash required for working capital and capital expenditure) is reduced to 0.475% per annum while such cash remains uninvested. The Management fee is reduced by GBP40,000 per annum pursuant to the side letter agreement entered into in December 2020.
Ediston Investment Services Limited has committed to investing 20.0% of the quarterly management fee in the Company's shares each quarter commencing from 1 October 2020 to 21 December 2023. Refer to Note 17 for further information.
3. OTHER EXPENSES
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
============================================================ ============= =============
Direct operating expenses for investment properties:
* from which income is received 2,077* 1,016
* from which income is not received - -
Administration fee 190 179
Valuation and other professional fees 174 157
Directors' fees 216 212
Public relations and marketing 83 73
Auditor's remuneration for:
Audit services:
* fees payable for the audit of the consolidation and
the parent company accounts 80 42
* fees payable for the audit of subsidiaries, pursuant
to legislation 45 36
Listing and registrar fees 73 46
Other 274 153
============================================================ ============= =============
Total 3,212 1,914
============================================================ ============= =============
* Direct property expenses includes transaction costs for potential acquisitions not concluded.
The movement in expected credited losses, which was previously grouped with other expenses, has been reconsidered and whilst this is immaterial, it has been presented separately on the face of the Consolidated Statement of Comprehensive Income, in line with the requirements of IAS 1.
4. INTEREST RECEIVABLE
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
================= ============= =============
Deposit interest 22 -
================= ============= =============
Total 22 -
================= ============= =============
5. INTEREST PAYABLE
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
================================== ============= =============
Loan interest 2,837 2,938
Amortisation of loan set-up costs 166 165
Bank interest - 6
================================== ============= =============
Total 3,003 3,109
================================== ============= =============
6. TAXATION
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
================ ============= =============
Total tax charge - -
================ ============= =============
A reconciliation of the corporation tax charge applicable to the results at the statutory corporation tax rate to the charge for the year is as follows:
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
================================================ ============= =============
Profit/(loss) before taxation 21,487 17,110
================================================ ============= =============
UK tax at a rate of 19.0% (2021: 19.0%) 4,082 3,251
Effects of:
REIT exempt profits (1,751) (2,228)
REIT exempt gains/losses (2,452) (1,109)
Excess management expenses of residual business 121 86
================================================ ============= =============
Total tax charge - -
================================================ ============= =============
The Company served notice to HM Revenue & Customs that the Company, and its subsidiaries, qualified as a REIT with effect from 31 October 2014. Subject to continuing relevant UK-REIT criteria being met, the profits from the Group's property rental business, arising from both income and capital gains, are exempt from corporation tax.
The Group has unutilised tax losses carried forward in its residual business of GBP3,202,000 at 30 September 2022 (2021: GBP2,566,000). No deferred tax asset has been recognised on this amount as the Group cannot be certain that there will be taxable revenue profits arising within its residual business from which the future reversal of the deferred tax asset could be deducted. Although the Group anticipates sufficient capital profits, these cannot be offset against losses which are revenue in nature.
7. DIVIDS
Twelve monthly dividends of 0.4167 pence per share, at a total cost of GBP10,568,000 (2021: Seven monthly dividends of 0.3333 pence per share and five monthly dividends of 0.4167 pence per share, at a total cost of GBP9,334,000) were paid during the year. This equates to an annualised dividend of 5.00 pence (2021: 4.42 pence) per share.
Since the year end, interim dividends, each of 0.4167 pence per share, have been paid on 31 October 2022 and 30 November 2022. A further
interim dividend, of 0.4167 pence per share, will be paid on 30 December 2022. This monthly dividend of 0.4167 pence per share equates to an annualised dividend level of 5.00 pence per share. All of the distributions made by the Company have been Property Income Distributions (PIDs).
8. EARNINGS PER SHARE
Basic and diluted earnings per share.*
Year ended 30 Year ended 30 September
September 2022 2021
==================== =========================
Pence Pence per
GBP'000 per share GBP'000 share
================================== ======= =========== ========= ==============
Revenue earnings 8,581 4.06 11,276 5.34
Capital earnings 12,906 6.11 5,834 2.76
Total earnings 21,487 10.17 17,110 8.10
================================== ======= =========== ========= ==============
Average number of shares in issue 211,333,737 211,333,737
================================== ======= =========== ========= ==============
* There is no difference between basic and diluted earnings per share (2021: no difference).
9. INVESTMENT PROPERTIES
As at As at 30
30 September September
2022 2021
Freehold and leasehold properties GBP'000 GBP'000
====================================================== ============= ==========
Opening book cost 320,694 315,611
Opening unrealised depreciation (42,710) (47,365)
====================================================== ============= ==========
Opening fair value 277,984 268,246
====================================================== ============= ==========
Movements for the period
Acquisitions - 21,850
Sales - proceeds (67,704) (27,953)
- (Loss)/gain on sales (3,014) 1,179
Transfer to unrealised reserves on properties sold 6,167 -
Capital expenditure 4,279 10,007
====================================================== ============= ==========
Movement in book cost (60,272) 5,083
====================================================== ============= ==========
Unrealised gains on investment properties 29,772 10,798
Unrealised losses on investment properties (13,852) (6,143)
====================================================== ============= ==========
Unrealised movement during the year 15,920 4,655
Transfer between unrealised and realised reserves for
properties sold (6,167) -
====================================================== ============= ==========
Movement in fair value 9,753 4,655
====================================================== ============= ==========
Closing book cost 260,422 320,694
Closing unrealised depreciation (32,957) (42,710)
====================================================== ============= ==========
Closing fair value 227,465 277,984
====================================================== ============= ==========
During the year ended 30 September 2022, the Group sold the properties at Bath, Newcastle, Edinburgh, Birmingham, Hartlepool and Telford. The Group received a net amount of GBP67,704,000 (2021: GBP27,953,000) from investments sold during the year. The total book cost of the investments when it was purchased was GBP64,551,000 (2021: GBP26,774,000). These investments have been revalued over time and, until it was sold, any unrealised gains/losses were included in the fair value of the investments.
During the year, expenditure totalling GBP4,279,000 (2021: GBP10,007,000), including capitalised lease incentives, incurred in improving investment properties, has been capitalised to the book cost of the property.
The fair value of the investment properties reconciled to the appraised value as follows:
As at As at
30 September 30 September
2022 2021
GBP'000 GBP'000
=================================================== ============= =============
Closing fair value 227,465 277,984
Lease incentives held as debtors (Note 11) 3,970 5,361
=================================================== ============= =============
Appraised market value per Knight Frank 231,435 283,345
=================================================== ============= =============
Changes in the valuation of investment properties:
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
=================================================== ============= =============
(Loss)/gain on sale of investment properties (3,014) 1,179
Unrealised profit realised during the year 6,167 -
=================================================== ============= =============
Gain on sale of investment properties realised* 3,153 1,179
Unrealised gains on investment properties 9,753 4,655
=================================================== ============= =============
Total gain on revaluation of investment properties 12,906 5,834
=================================================== ============= =============
* Represents the difference between the sales proceeds, net of costs, and the property valuation at the time of sale.
The gain/loss on revaluation of investment properties reconciles to the movement in appraised market value as follows:
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
======================================================== ============= =============
Total gain on revaluation of investment properties held
at year end 9,753 4,655
Purchases - 21,850
Capital expenditure 4,279 10,007
Sales - net proceeds (64,551) (26,774)
======================================================== ============= =============
Movement in fair value (50,519) 9,738
======================================================== ============= =============
Movement in lease incentives held as debtors (1,391) 632
======================================================== ============= =============
Movement in appraised market value (51,910) 10,370
======================================================== ============= =============
At 30 September 2022, the investment properties were valued at GBP231,435,000 (2021: GBP283,345,000) by Knight Frank LLP (Knight Frank), in their capacity as external valuers. This includes no investment property under construction (2021: GBPNil). The valuation was undertaken in accordance with the current editions of RICS Valuation - Global Standards, which incorporate the International Valuation Standards, and the RICS UK National Supplement. Fair value is based on an open market valuation (the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date), provided by Knight Frank on a quarterly basis, using recognised valuation techniques as set out in the Group's accounting policies.
The Group is required to classify fair value measurements of its investment properties using a fair value hierarchy, in accordance with IFRS 13 'Fair Value Measurement'. In determining what level of the fair value hierarchy to classify the Group's investments within, the Directors have considered the content and conclusion of the position paper on IFRS 13 prepared by the European Public Real Estate Association (EPRA), the representative body of the publicly listed real estate industry in Europe. This paper concludes that, even in the most transparent and liquid markets, it is likely that valuers of investment property will use one or more significant unobservable inputs or make at least one significant adjustment to an observable input, resulting in the vast majority of investment properties being classified as Level 3.
Observable market data is considered to be that which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market. In arriving at the valuation Knight Frank will have to make adjustments to observable data of similar properties and transactions to determine the fair value of a property and this will involve the use of considerable judgement.
Considering the Group's specific valuation process, industry guidance, and the level of judgement required in the valuation process, the Directors believe it appropriate to classify the Group's assets within Level 3 of the fair value hierarchy.
All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are applied to leasehold and freehold properties. All leasehold properties have more than 100 years remaining on the lease term.
The Group's investment properties, which are all commercial properties, are considered to be a single class of assets. There have been no changes to the valuation technique used through the period, nor have there been any transfers between levels.
The key unobservable inputs made in determining the fair values are:
- estimated rental value (ERV): the rent at which space could be let in the market conditions prevailing at the date of valuation; and
- net equivalent yield: the equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review, but with no further rental growth.
Information on these inputs is disclosed below:
30 September 2022 30 September 2021
==================== ===================
Weighted Weighted
Range average Range average
======================================= ========== ======== ======== =========
Estimated rental value per sq. ft. per GBP5 - GBP5 -
annum GBP42.82 GBP12.90 GBP43 GBP13.80
5.5% - 6.0% -
Net equivalent yield 8.0% 6.96% 9.8% 7.0%
======================================= ========== ======== ======== =========
The ERV for the total portfolio is not materially different from the contracted rent.
A decrease in the net equivalent yield applied to the portfolio by 0.25% will increase the fair value of the portfolio by GBP11,087,000 (2021: GBP10,500,000), and consequently increase the Group's reported income from unrealised gains on investments. An increase in yield by 0.25% will decrease the fair value of the portfolio by GBP9,243,699 (2021: GBP9,800,000) and reduce the Group's income.
The management of market price risk is part of the investment management process and is typical of a property investment company. The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is minimised through the appointment of external property valuers. The basis of valuation of the property portfolio is set out in detail in the accounting policies.
Any changes in market conditions will directly affect the profit and loss reported through the Statement of Comprehensive Income. Details of the Group's investment property portfolio held at the balance sheet date are disclosed in Note 9. A 10% increase in the value of the investment properties held as at 30 September 2022 would have increased net assets available to shareholders and increased the net income for the year by GBP23,000,000 (2021: GBP28,000,000); an equal and opposite movement would have decreased net assets and decreased the net income by an equivalent amount.
The calculations are based on the investment property valuations at the respective balance sheet date and are not representative of the year as a whole, nor reflective of future market conditions.
10. INVESTMENT IN SUBSIDIARIES
EPIC (No.1) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company number: 09106328) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.1) Limited was incorporated on 27 June 2014 and began trading on 5 May 2015. On 5 May 2015, the ownership of the property portfolio held by the Company at that date was transferred to EPIC (No.1) Limited. The net asset value of EPIC (No.1) Limited as at 30 September 2022 was GBP96,727,000 (2021: GBP102,605,000). The loss of EPIC (No.1) Limited for the year to 30 September 2022 was GBP1,026,000 (2021: GBP4,716,000 profit).
EPIC (No.2) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company number: 10978359) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.2) Limited was incorporated on 23 September 2017, having been established to hold the five properties acquired by the Group and to enter into the Group's additional loan facility. The net asset value of EPIC (No.2) Limited as at 30 September 2022 was GBP99,011,000 (2021: GBP81,412,000). The profit of EPIC (No.2) Limited for the period to 30 September 2022 was GBP23,149,000 (2021: GBP12,680,000).
11. TRADE AND OTHER RECEIVABLES
As at As at
30 September 30 September
2022 2021
GBP'000 GBP'000
====================================================== ============= =============
Secured balance held with loan provider 31,047 6,837
Capital and rental lease incentives 3,970 5,361
Rent receivable (net of allowance for expected credit
losses) 865 1,175
Other debtors and prepayments 96 17
====================================================== ============= =============
Total 35,978 13,390
====================================================== ============= =============
The secured balance held with the loan provider represents monies that have been drawn under the Group's loan facilities, which are not currently invested in properties and which have been placed in a secured account with Aviva until required. The balance includes interest receivable of GBP90,000 (2021: GBP186,000). These monies are available for reinvestment in the Group's investment property portfolio or, if necessary, could be used to partially repay the Group's borrowings. During the year ended 30 September 2022, the Company deposited an additional sum of GBP24,209,000 to the secured account (2021: utilised GBP1,646,000 from the secured amount).
Capital and rental lease incentives consist of GBP3,435,000 (2021: GBP3,717,000) being the prepayments for rent-free periods recognised over the life of the lease, GBP570,000 (2021: GBP1,644,000) relating to capital incentives paid to tenants, and GBP33,000 (2021: GBPNil) of lease premium being the premium paid by the tenant. As set out in the accounting policy for rental income, an adjustment is made for these amounts to the fair value of the investment properties (see Note 9) to prevent double counting.
Rent receivable is shown net of an allowance for expected credit losses balance of GBP34,000 (2021: GBP85,000). The movement in the allowance is shown below and reflected in the Statement of Comprehensive Income.
As at As at
30 September 30 September
2022 2021
Allowance for expected credit losses GBP'000 GBP'000
================================================= ============= =============
Opening balance as at 30 September 85 700
Reversal of allowance for expected credit losses (51) (615)
================================================= ============= =============
Closing balance as at 30 September 34 85
================================================= ============= =============
12. CASH AND CASH EQUIVALENTS
All cash balances at the year end were held in cash, current accounts or deposit accounts.
As at As at 30
30 September September
2022 2021
GBP'000 GBP'000
========================== ============= ==========
Cash and cash equivalents 50,235 11,642
========================== ============= ==========
Total 50,235 11,642
========================== ============= ==========
13. LOANS
As at As at 30
30 September September
2022 2021
GBP'000 GBP'000
================================== ============= ==========
Principal amount outstanding 111,076 111,076
Set-up costs (1,612) (1,612)
Amortisation of loan set-up costs 979 813
================================== ============= ==========
Total 110,443 110,277
================================== ============= ==========
The Group's loan arrangements are with Aviva Commercial Finance Limited.
The Group has loans totalling GBP56,920,000, which carry a blended fixed interest rate of 2.99% and mature in May 2025. This rate is fixed for the period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the Loan-to-Value is 40% or higher. These loans are secured over EPIC (No.1) Limited's property portfolio.
The Group also has a loan totalling GBP54,156,000, which carries a fixed interest rate of 2.73% and matures in December 2027. This rate is fixed for the period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the LTV is 40% or higher. This loan is secured over EPIC (No.2) Limited's property portfolio. At year end, the covenants were both below 40 per cent LTV.
The Group's weighted average cost of borrowings remained 2.86% at 30 September 2022.
Under the financial covenants relating to the loans, the Group has to ensure that for each of EPIC (No.1) Limited and EPIC (No.2) Limited:
- the Historic Interest Cover and Projected Interest Cover, each being the passing rental income as a percentage of finance costs and generally calculated over a period of 12 months to/from the calculation date, is at least 300%; and
- the LTV ratio, being the adjusted value of the loan as a percentage of the aggregate market value of the relevant properties, must not exceed 50%.
Breach of the financial covenants, subject to various cure rights, may lead to the loans falling due for repayment earlier than the final maturity dates stated above. The Group has complied with all the loan covenants during the year. Under the terms of early repayment relating to the loans, the cost of repaying the loans on 30 September 2022, based on the yield on the treasury 5% 2025 and treasury 4.25% 2027 plus a margin of 0.5%, would have been approximately GBP111,520,000 (2021: GBP120,268,000), including repayment of the principal of GBP111,076,000 (2021: GBP111,076,000).
The fair value of the loans based on a marked-to-market basis, being the yield on the relevant treasury plus the appropriate margin, was GBP98,682,000 as at 30 September 2022 (2021: GBP114,918,000). This includes the principal amount borrowed. Analysis of net debt:
Cash and Cash and
cash equivalents Borrowing Net Debt cash equivalents Borrowing Net debt
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ================= ========= ======== ================= ========= ========
Opening balance 11,642 (110,277) (98,635) 12,308 (110,112) (97,804)
Cash flows 38,593 2,837 41,430 (666) - (666)
Non-cash flows - (3,003) (3,003) - (165) (165)
================ ================= ========= ======== ================= ========= ========
Closing balance 50,235 (110,443) (60,208) 11,642 (110,277) (98,635)
================ ================= ========= ======== ================= ========= ========
14. TRADE AND OTHER PAYABLES
As at As at
30 September 30 September
2022 2021
GBP'000 GBP'000
================================== ============= =============
Rental income received in advance 406 1,320
VAT payable to HMRC 471 549
Investment management fee payable 438 437
Loan interest payable 444 444
Capital expenditure payable - 2
Other payables 1,008 438
================================== ============= =============
Total 2,767 3,190
================================== ============= =============
The Group's payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
15. NET ASSET VALUE
The Group's net asset value per Ordinary Share of 94.86 pence (2021: 89.69 pence) is based on equity shareholders' funds of GBP200,468,000 (2021: GBP189,549,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.
The net asset value calculated under IFRS above is the same as the EPRA net asset value at 30 September 2022 and 30 September 2021.
16. CALLED-UP EQUITY SHARE CAPITAL
Allotted, called-up and fully paid Ordinary Shares of Number 1 pence par value of shares GBP'000 ====================================================== =========== ======= Opening balance as at 30 September 2021 211,333,737 2,113 Issue of Ordinary Shares - - ====================================================== =========== ======= Closing balance as at 30 September 2022 211,333,737 2,113 ====================================================== =========== =======
The Company did not issue any Ordinary Shares in the last two financial years. The Company did not hold any shares in treasury during the previous two years. Under the Company's Articles of Association, the Company may issue an unlimited number of Ordinary Shares but issuance is subject to shareholder approval.
Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.
17. RELATED PARTIES
There have been no material transactions between the Company and its Directors during the year other than amounts paid to them in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end.
Ediston Investment Services Limited has received investment management fees of GBP1,703,000 in relation to the year ended 30 September 2022 (2021: GBP1,687,000), of which GBP438,000 (2021: GBP437,000) remained payable at the year end. Ediston Investment Services Limited received no development management fees in relation to the year ended 30 September 2022 (2021: GBP257,000).
Ediston Investment Services Limited acquired 541,000 shares in the Company during the year ended 30 September 2022 (2021: 374,215) as part of its commitment to reinvest 20% of its quarterly management fee.
The aggregate shareholding of the Manager and its senior personnel as at 30 September 2022 is 2,618,148 (2021: 1,984,667) shares, 1.2% (2021:
0.9%) of the issued share capital as at that date.
18. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Group is engaged in a single unified business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has no segments. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Group. The key measure of performance used by the Board to assess the Group's performance is the total return on the Group's net asset value. As the total return on the Group's net asset value is calculated based on the net asset value per share calculated under IFRSs as shown at the foot of the Consolidated Statement of Financial Position, the key performance measure is that prepared under IFRSs. Therefore, no reconciliation is required between the measure of profit or loss used by the Board and that contained in the Financial Statements.
The view that the Group is engaged in a single unified business is based on the following considerations:
- one of the key financial indicators received and reviewed by the Board is the total return from the property portfolio taken as a whole;
- there is no active allocation of resources to particular types or groups of properties in order to try to match the asset allocation of an index or benchmark; and
- the management of the portfolio is ultimately delegated to a single property manager, Ediston Properties Limited.
19. FINANCIAL INSTRUMENTS
Consistent with its objective, the Group holds UK commercial property investments. In addition, the Group's financial instruments comprise cash and receivables and payables that arise directly from its operations. The Group does not have exposure to any derivative instruments.
The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk and interest rate risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling. The Group has insignificant exposure to market price risk related to financial instruments.
The Board reviews and agrees policies for managing the Group's risk exposure. These policies are summarised below and have remained unchanged for the period under review. These disclosures include, where appropriate, consideration of the Group's investment properties which, whilst not constituting financial instruments as de ned by IFRSs, are considered by the Board to be integral to the Group's overall risk exposure.
SECURITIES FINANCING TRANSACTIONS (SFT)
The Company has not, during the year to 30 September 2022 (2021: same), participated in any: repurchase transactions; securities lending or borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no disclosure to make in satisfaction of the EU regulations on transparency of SFT.
The following table summarises the Group's financial assets and liabilities into the categories required by IFRS 7 'Financial Instruments: Disclosures':
As at 30 September As at 30 September
2022 2021
============================== =============================
Held at Financial Held at
fair value assets fair value Financialassets
through and liabilities through and liabilities
profit at amortised profit at amortised
or loss cost or loss cost
GBP'000 GBP'000 GBP'000 GBP'000
============================ ============ ================ =========== ================
Financial assets
Trade and other receivables - 31,912 - 8,012
Cash and cash equivalents - 50,235 - 11,642
============================ ============ ================ =========== ================
- 82,147 - 19,654
========================================= ================ =========== ================
Financial liabilities
Loan - (110,443) - (110,277)
Trade and other payables - (1,890) - (1,321)
============================ ============ ================ =========== ================
- (112,333) - (111,598)
========================================= ================ =========== ================
Apart from the Aviva loans, as disclosed in Note 13, the fair value of financial assets and liabilities is not materially different from their carrying value in the financial statements.
CREDIT RISK
Credit risk is the risk that a counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group. At the reporting date, the Group's financial assets exposed to credit risk amounted to GBP82,147,000 (2021: GBP19,654,000), consisting of cash of GBP50,235,000 (2021: GBP11,642,000), the secured balance held with the loan provider of GBP31,047,000 (2021: GBP6,837,000) and rent receivable of GBP865,000 (2021: GBP1,175,000).
In the event of default by a tenant, if it is in financial difficulty or otherwise unable to meet its obligations under the lease, the Group will suffer a rental shortfall and incur additional expenses until the property is re-let. These expenses could include legal and surveyor's costs in re-letting, maintenance costs, insurances, rates and marketing costs, and may have an adverse impact on the financial condition and performance of the Group. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Investment Manager monitors such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants. In assessing the probability of default of the individual debtor. The Directors have considered a number of factors including history of default, past experience, future expectations as well as the support the debtor receives from its parent company and the ability to settle the amount receivable when due.
Where there are concerns over the recoverability of rental income, the Group monitors creditworthiness of the tenants and makes provision for potential bad debts based on the ECL model. The Group considers historical defaults over the expected life of the trade receivables and any information related to the debtors available at year end to determine forward-looking estimates of possible defaulting. This is consistent with the approach followed in prior periods. Given an improved rent profile of tenants and having considered their ability to pay, the wider expected credit losses considered by the Group has reduced to GBP34,000 at 30 September 2022 from GBP85,000 at 30 September 2021. Having given consideration to these criteria, the Group has determined that there are no additional expected credit losses other than those already recognised. As at 30 September 2022, collection plans are in place to recover any outstanding amounts. There were no other financial assets that were either past due or considered impaired at 30 September 2022 or at 30 September 2021.
At 30 September 2022, the Group held GBP47,382,000 (2021: GBP8,789,000) with RBS and GBP2,853,000 (2021: GBP2,853,000) with Bank of Scotland plc. Bankruptcy or insolvency of the bank holding cash balances may cause the Group's ability to access cash placed with them to be delayed, limited or lost. Both RBS and Bank of Scotland plc are rated by all the main rating agencies. Should the credit quality or the financial position of the banks currently employed significantly deteriorate, cash holdings would be moved to another bank. As at 30 September 2022, 'S&P Global Ratings' credit rating for RBS was A-1 and Moody's was P-1. The equivalent credit ratings for Bank of Scotland plc were A-1 and P-1, respectively. There has been no change in the fair values of cash or receivables as a result of changes in credit risk in the current or prior periods.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments. The Group's investments comprise commercial properties.
Property and property-related assets in which the Group invests are not traded in an organised public market and are relatively illiquid assets, requiring individual attention to sell in an orderly way. As a result, the Group may not be able to liquidate quickly its investments in these properties at an amount close to their fair value in order to meet its liquidity requirements.
The Group's liquidity risk is managed on an ongoing basis by the Investment Manager and monitored on a quarterly basis by the Board. In order to mitigate liquidity risk the Group has a comprehensive nine-year cash flow forecast that aims to have sufficient cash balances, taking into account projected receipts for rental income and property sales, to meet its obligations for a period of at least 12 months. At the reporting date, the maturity of the financial assets was:
FINANCIAL ASSETS AS AT 30 SEPTEMBER 2022
More than
three More than
months one year
Three but less but less More than
months than one than three three
or less year years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ======== ========= =========== ========= ========
Cash and cash equivalents 50,235 - - - 50,235
Secured balance held with loan
provider 31,047 - - - 31,047
Rent receivable 865 - - - 865
=============================== ======== ========= =========== ========= ========
Total 82,147 - - - 82,147
=============================== ======== ========= =========== ========= ========
FINANCIAL ASSETS AS AT 30 SEPTEMBER 2021
More than More than
three months one year
but less but less
Three months than one than three More than
or less year years three years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ============ ============= =========== ============ ========
Cash and cash equivalents 11,642 - - - 11,642
Secured balance held with loan
provider 6,837 - - - 6,837
Rent receivable 1,175 - - - 1,175
=============================== ============ ============= =========== ============ ========
Total 19,654 - - - 19,654
=============================== ============ ============= =========== ============ ========
At the reporting date, the financial liabilities on a contractual maturity basis were:
FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2022
More than
three More than
months one year
Three but less but less More than
months than one than three three
or less year years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================= ======== ========= =========== ========= ========
Loan - - 56,920 54,156 111,076
Interest payable on loan 802 2,378 5,927 3,439 12,546
Other payables 1,446 - - - 1,446
========================= ======== ========= =========== ========= ========
Total 2,248 2,378 62,847 57,595 125,068
========================= ======== ========= =========== ========= ========
FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2021
More than More than
three months one year
but less but less
Three months than one than three More than
or less year years three years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================= ============ ============= =========== ============ ========
Loan - - - 111,076 111,076
Interest payable on loan 802 2,378 6,389 6,162 15,731
Other payables 877 - - - 877
========================= ============ ============= =========== ============ ========
Total 1,679 2,378 6,389 117,238 127,684
========================= ============ ============= =========== ============ ========
Included in the tables above are payments due to Aviva, including interest payable, in connection with the loans as detailed in Note 13.
As at 30 September 2022, the Group remain in compliance with the loan covenants.
As at 30 September 2022, EPIC 1 reported a LTV of 38.10% (LTV of less than 50% required), the historical interest cover was reported at 349.74% (historical interest cover of at least 300% required) and the projected interest cover was reported at 493.81% (projected interest cover of at least 300% required).
As at 30 September 2022, EPIC 2 reported a LTV of 32.78% (LTV of less than 50% required), the historical interest cover was reported at 627.54% (historical interest cover of at least 300% required) and the projected interest cover was reported at 557.03% (projected interest cover of at least 300% required).
INTEREST RATE RISK
Some of the Group's financial instruments will be interest-bearing. They are a mix of both fixed and variable rate instruments with differing maturities. As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate. The Group's exposure to floating interest rates gives cash flow interest rate risk and its exposure to fixed interest rates gives fair value interest rate risk.
The following table sets out the carrying amount of the Group's financial instruments that are exposed to interest rate risk:
As at 30 September As at 30 September
2022 2021
======================== =========================
Fixed
rate Variable Fixed rate Variable
GBP'000 rate GBP'000 GBP'000 rate GBP'000
======================================== ========= ============= ========== =============
Cash and cash equivalents - 50,235 - 11,642
Secured balance held with loan provider - 31,047 - 6,837
Loan (110,443) - (110,277) -
======================================== ========= ============= ========== =============
VARIABLE RATE
An increase of 1% in interest rates would have increased the reported profit for the year and increased the net assets at 30 September 2022 by GBP813,000 (2021: 0.5% GBP92,000), a decrease of 1% in interest rates would have had an equal and opposite effect. These calculations are based on the variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual future conditions.
FIXED RATE
Considering the effect on the loan balance, it is estimated that an increase of 1% in interest rates as at the balance sheet date would have decreased its fair value by approximately GBP3,373,000 (2021: 0.50% GBP2,500,000) and a decrease of 1% would have increased its fair value by approximately GBP3,390,000 (2021: 0.50% GBP2,600,000). As the loan balance is recognised in the Consolidated Financial Statements at amortised cost, this change in fair value would not have resulted in a change in the reported loss for the year, nor the net assets of the Group at the year end.
20. CAPITAL COMMITMENTS
The Group had contractual commitments totalling GBP62,100 in relation to new frontages and roofs overclad of units 1A-1C, Stirling, as at 30 September 2022 (30 September 2021: GBP4,666,000).
21. OPERATING LEASES
The Group leases out its investment properties under operating leases. These properties are measured under the fair value model as the properties are held to earn rentals. All leases are non-cancellable with a weighted average unexpired lease term of 4.5 years (2021: 5.0 years).
The Group's investment properties are leased to tenants under the terms of property leases that include rent reviews as determined at the inception of the lease. These reviews can be linked to RPI, fixed rate or stepped rent increases.
The following table sets out the maturity analysis of leases receivables, showing the undiscounted lease payments under non-cancellable operating leases receivable by the Group:
As at As at 30
30 September September
2022 2021
GBP'000 GBP'000
=================== ============= ==========
Year 1 12,795 19,448
Year 2 11,510 16,136
Year 3 10,182 14,267
Year 4 7,857 12,887
Year 5 6,680 10,643
Year 6 and onwards 16,026 27,507
=================== ============= ==========
Total 65,050 100,888
=================== ============= ==========
The largest single tenant at the year end accounted for 9% (2021: 6.4%) of the contracted rent.
22. ALTERNATIVE INVESTMENT FUND MANAGERS (AIFM) DIRECTIVE
Ediston Investment Services Limited has been authorised as an AIFM by the Financial Conduct Authority under the AIFMD regulations and
became the Group's AIFM with effect from 24 February 2016. In accordance with the AIFMD, information in relation to the Group's leverage and the
remuneration of the Company's AIFM is required to be made available to investors. Ediston Investment Services Limited has provided disclosures
on its website, https://www.ediston.com/about-us-ediston-investment-services-limited/, incorporating the requirements of the AIFMD regulations
regarding remuneration.
The Group's maximum and actual leverage levels at 30 September 2022 are shown below:
Leverage ratio
========================
Commitment
Leverage exposure Gross method method
================== ============ ==========
Maximum limit 3.00 3.00
================== ============ ==========
Actual 1.3 1.3
================== ============ ==========
For the purposes of the AIFMD, leverage is any method which increases the Group's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a percentage of the Group's exposure to its net asset value and is calculated on both a gross and commitment method.
Under the gross method, exposure represents the sum of the Group's positions after deduction of cash balances, without taking account of any
hedging or netting arrangements. Under the commitment method, exposure is calculated in a similar manner as the Company doesn't have any hedging or netting arrangements.
The leverage limits are set by the AIFM and approved by the Board, and are in line with the maximum leverage levels permitted in the Company's
Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.
Detailed regulatory disclosures to investors in accordance with the AIFMD are contained on the Company's website.
23. SUBSEQUENT EVENTS
No significant events have occurred between the statement of financial position date and the date when the financial statements have been approved, which would require adjustments to, or disclosure in the financial statements.
Company Statement of Financial Position
As at 30 September 2022
As at As at 30
30 September September
2022 2021
Notes GBP'000 GBP'000
====================================== ===== ============= ==========
Non-current assets
Investment in subsidiary undertakings 3 200,553 177,448
====================================== ===== ============= ==========
200,553 177,448
====================================== ===== ============= ==========
Current assets
Trade and other receivables 4 3,077 3,521
Cash and cash equivalents 5 2,958 2,989
====================================== ===== ============= ==========
6,035 6,510
====================================== ===== ============= ==========
Total assets 206,588 183,958
====================================== ===== ============= ==========
Current liabilities
Trade and other payables 6 (1,304) (1,143)
====================================== ===== ============= ==========
Total liabilities (1,304) (1,143)
====================================== ===== ============= ==========
Net assets 205,284 182,815
====================================== ===== ============= ==========
Equity and reserves
Called-up equity share capital 7 2,113 2,113
Share premium 125,559 125,559
Capital reserve - investments sold 4,649 4,649
Capital reserve - investments held (9,112) (32,217)
Special distributable reserve 82,075 82,711
Revenue reserve - -
====================================== ===== ============= ==========
Equity shareholders' funds 205,284 182,815
====================================== ===== ============= ==========
Net asset value per Ordinary Share 10 97.15p 86.51p
====================================== ===== ============= ==========
The accompanying notes are an integral part of these Financial Statements.
Company number: 09090446.
The Company made a profit for the year ended 30 September 2022 of GBP33,037,000 (2021: loss of GBP8,955,000).
The Company Financial Statements were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:
William Hill
Chairman
Company Statement of Changes in Equity
For the year ended 30 September 2022
Capital Capital
reserve reserve
- - Special
Share capital investments investments distributable Revenue
account Share premium held sold reserve reserve Total equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2021 2,113 125,559 (32,217) 4,649 82,711 - 182,815
Profit and
total
comprehensive
income for
the year - - 23,105 - - 9,932 33,037
Transactions
with owners
recognised
in equity:
Issue of
Ordinary
Shares 7 - - - - - - -
Dividends paid 2 - - - - - (10,568) (10,568)
Transfer from
special
reserve - - - - (636) 636 -
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2022 2,113 125,559 (9,112) 4,649 82,075 - 205,284
============== ===== ============= ============= ============ ============ ============= ======== ============
For the year ended 30 September 2021
Capital Capital
reserve reserve
- - Special
Share capital investments investments distributable Revenue
account Share premium held sold reserve reserve Total equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2020 2,113 125,559 (32,289) 4,649 83,162 - 183,194
Profit and
total
comprehensive
income for
the year - - 72 - - 8,883 8,955
Transactions
with owners
recognised
in equity:
Issue of
Ordinary
Shares 7 - - - - - - -
Dividends paid 2 - - - - - (9,334) (9,334)
Transfer from
special
reserve - - - - (451) 451 -
============== ===== ============= ============= ============ ============ ============= ======== ============
As at 30
September
2021 2,113 125,559 (32,217) 4,649 82,711 - 182,815
============== ===== ============= ============= ============ ============ ============= ======== ============
The accompanying notes are an integral part of these Financial Statements.
Notes to the Company Financial Statements
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company Financial Statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework and applicable legal and regulatory requirements of the Companies Act 2006.
The accounts have been prepared on a historical cost basis. The notes and financial statements are presented in pounds sterling (being the functional currency and presentational currency for the Company) and are rounded to the nearest thousand except where otherwise indicated.
The major accounting policies of the Company are set out below and have been applied consistently throughout the current and prior year.
The results of the Company have been included in the Group's Consolidated Financial Statements. The accounting policies adopted are consistent with those adopted by the Group as stated in Note 1 to the Consolidated Financial Statements. The only additional policy applied is in relation to investments in subsidiary undertakings and this is set out below.
The Company has taken advantage of the following exemptions permitted under FRS 101:
- an exemption from preparing the Company cash flow statement and related notes;
- an exemption from listing any new or revised standards that have not been adopted or providing information about their likely impact; and
- an exemption from disclosing transactions between the Company and its wholly-owned subsidiaries.
Shareholders were informed about the Company's intention to use the above disclosure exemptions in the Annual Report and Accounts 2017 and no objections have since been received. A shareholder holding, or shareholders holding in aggregate, 5% or more of the total allotted shares in Ediston Property Investment Company plc may serve objections to the future use of the disclosure exemptions on Ediston Property Investment Company plc, in writing, to its registered office (The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF) to be received not later than 90 days prior to the end of Company's relevant reporting period.
GOING CONCERN
The Financial Statements are prepared on the going concern basis as explained for the Consolidated Financial Statements.
INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
Investments in subsidiary undertakings are stated at cost less, where applicable, any provision for impairment under the provisions of IAS 36. A provision for impairment is recognised to reflect the recoverable amount (Note 3) of the subsidiaries. In accordance with IAS 36, provisions for impairment will be reduced or increased dependent on the assessment of the recoverable amount of the subsidiary in future. The value of investments can never exceed costs.
CAPITAL MANAGEMENT
The Company's capital is represented by the Ordinary Shares, Share Premium, Capital Reserves, Revenue Reserve and Special Distributable Reserve and is managed in line with the policies set out for the Group.
COMPANY PROFIT FOR THE FINANCIAL YEAR AFTER TAX
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account. The profit after tax for the year was GBP33,037,000 (2021: GBP8,955,000).
The Company does not have any employees (2021: nil). Details of the Directors' fees paid during the year are disclosed in the Group's Remuneration Report and in Note 3 to the Consolidated Financial Statements. All of the Directors' fees were paid by the parent company, although GBP217,000 (2021: GBP202,000) was subsequently re-allocated to the subsidiaries to reflect the work completed by the Directors in relation to the property assets held by those companies.
Audit fees in relation to the parent company only were GBP70,000 (2021: GBP42,000), excluding VAT. There were no non-audit fees paid to Grant Thornton UK LLP by the Company during the year (2021: nil).
2. DIVIDS
Details of dividends paid by the Company are included in Note 7 to the Consolidated Financial Statements.
3. INVESTMENTS IN SUBSIDIARIES
As at As at
30 September 30 September
2022 2021
GBP'000 GBP'000
==================================================== ============= =============
Opening balance - Investment in EPIC (No.1) Limited 99,527 104,160
Opening balance - Investment in EPIC (No.2) Limited 77,921 73,216
==================================================== ============= =============
Opening balance - Investments in subsidiaries 177,448 177,376
==================================================== ============= =============
Impairment loss - EPIC (No.1) Limited (509) (4,633)
Impairment loss reversal - EPIC (No.2) Limited 23,614 4,705
==================================================== ============= =============
Closing balance - Investment in EPIC (No.1) Limited 99,018 99,527
Closing balance - Investment in EPIC (No.2) Limited 101,535 77,921
==================================================== ============= =============
Closing balance - Investments in subsidiaries 200,553 177,448
==================================================== ============= =============
At 1 October 2017, the Company had a single equity investment in a wholly owned subsidiary, EPIC (No.1) Limited. During the year ended 30 September 2018, EPIC (No.1) Limited repurchased GBP19,520,000 of the equity previously issued to the Company.
During the year ended 30 September 2018, the Company subscribed for shares in a newly incorporated subsidiary, EPIC (No.2) Limited.
The Company's two property-owning subsidiaries above has seen an increase in investment property values over the course of the year to 30 September 2022. Details of the movement in the fair value of the investment properties of the Group are set out in Note 9 to the Consolidated Financial Statements. At 30 September 2022, an assessment of potential impairment of the equity investment in EPIC (No.1) Limited and EPIC (No.2) Limited was conducted, pursuant to the principles of IAS 36: Impairment of Assets. The net assets of EPIC (No.1) were lower than its carrying value which resulted in an impairment, and the net assets of EPIC (No. 2) Limited were higher than its carrying value which triggered an impairment write back. Following the principles of IAS 36 an impairment of GBP509,000 (2021: GBP4,633,000 impairment) was identified for EPIC (No.1) and a write back of GBP23,614,000 (2021: GBP4,705,000) in EPIC 2 was determined.
In terms of IAS 36, an asset should be carried at no more than their recoverable amount. The recoverable amount is determined as the higher of an asset's fair value less costs of disposal (FVLCOD) and its value in use. The cost of disposal used in determining the recoverable amount was 1.5% of the fair value of the asset. The value in use of an asset is the present value of the future cash flows expected to be derived from the asset.
In the assessment of this impairment, consideration was given to the nature of the assets and liabilities of the subsidiaries and a suitable determination of the recoverable amount of the investment in the subsidiaries. In line with the requirements of IAS 36, the value in use of each subsidiary was determined using projected cash flows over a five-year period using a discount rate of 7.7% (2021: 7%) and an expected growth rate of 2% for periods beyond the projected period of five years. The valuation technique is the sum of the fair value of the different components within the subsidiaries. Properties are carried at fair value, cash and working capital are held at amortised cost, which is considered its fair value. The fair value of debt was discounted based on a blended discount rate of 7.05% for EPIC (No.1) Limited and a discount rate of 6% for EPIC (No.2) Limited. The fair value hierarchy of the assets has been assessed as part of the fair value less costs of disposal, the assessment sits as a level 3 asset (refer to the accounting policies in the group accounts for the definition of a level 3 asset). The cost of disposal used in determining the recoverable amount was 3% of the fair value of the asset. The inputs to the calculations are subject to a high degree of estimation uncertainty.
EPIC (No.1) Limited has a FVLCOD of GBP99,018,000, which is considered an appropriate recoverable amount. The impairment thus reflects the amount by which the carrying value of GBP99,527,000 exceeds the recoverable amount of the investment in EPIC (No.1). A reasonably possible increase of 10% in the fair value of EPIC 1's property values would result in a recoverable amount of GBP104,160,000 this is limited to the original purchase price of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result in a decrease in the recoverable amount to GBP88,866,000.
EPIC (No.2) Limited has a FVLCOD of GBP101,535,000, which is considered an appropriate recoverable amount. A write back of previous impairment of GBP23,614,000 has therefore been raised, as the recoverable amount of the investment in EPIC (No.2) Limited exceeds its carrying amount of GBP77,921,000. A reasonably possible increase of 10% in the fair value of EPIC 2's property values would result in a recoverable amount of GBP105,505,000 this is limited to the original purchase price of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result in a decrease in the recoverable amount to GBP90,937,000.
See Note 10 to the Consolidated Financial Statements for further details on the Group structure.
4. TRADE AND OTHER RECEIVABLES
As at As at
30 September 30 September
2022 2021
GBP'000 GBP'000
======================================== ============= =============
Amount due from subsidiary undertakings 3,052 3,504
Other receivables and prepayments 25 17
======================================== ============= =============
Total 3,077 3,521
======================================== ============= =============
The amount due from subsidiary undertakings is a short-term balance, which arises from the re-allocation of the Group VAT payment and certain expenses between members of the Group on a quarterly basis and is settled in cash shortly after each quarter end.
Based on the assessment of impairment of the subsidiaries, there are no expected credit losses related to the amounts due from subsidiary undertakings.
5. CASH AND CASH EQUIVALENTS
All cash balances at the year end were held in cash, current accounts or deposit accounts.
6. TRADE AND OTHER PAYABLES
As at As at 30
30 September September
2022 2021
GBP'000 GBP'000
================================== ============= ==========
VAT payable to HMRC 471 549
Investment management fee payable 438 437
Other payables 395 157
================================== ============= ==========
Total 1,304 1,143
================================== ============= ==========
The Company's payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
7. SHARE CAPITAL
Allotted, called-up and fully paid Ordinary Shares of Number 1 pence par value of shares GBP'000 ====================================================== =========== ======= Opening balance as at 30 September 2021 211,333,737 2,113 Issue of Ordinary Shares - - ====================================================== =========== ======= Closing balance as at 30 September 2022 211,333,737 2,113 ====================================================== =========== =======
During the year to 30 September 2022, the Company did not issue any Ordinary Shares (year ended 30 September 2021: did not issue any Ordinary Shares). The Company did not buyback or resell from treasury any Ordinary Shares during the year (2021: nil). The Company did not hold any shares in treasury. Under the Company's Articles of Association, the Company may issue an unlimited number of Ordinary Shares.
Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.
8. FINANCIAL INSTRUMENTS
The Company's risks associated with financial instruments and the policies for managing its risk exposure are consistent with those detailed in Note 19 to the Consolidated Financial Statements.
With regards to the categorisation required by IFRS 7 'Financial Instruments: Disclosures' all of the Company financial assets and liabilities are categorised as 'financial assets and liabilities at amortised cost'. The Company's financial assets consist of trade and other receivables and cash and cash equivalents. The Company's financial liabilities consist of trade and other payables.
At the reporting date, the Company's financial assets exposed to credit risk amounted to GBP6,010,000 (2021: GBP6,493,000), consisting of the Company's cash balance of GBP2,958,000 (2021: GBP2,989,000) and current account balances due from its wholly-owned subsidiaries of GBP3,052,000 (2021: GBP3,504,000).
The maturity of the Company's financial liabilities (on a contractual maturity basis) at 30 September 2022 was as follows:
More than
three months
Three but less
months than three More than
or less years three years Total
GBP'000 GBP'000 GBP'000 GBP'000
=============== ======== ============= ============ ========
Other payables 833 - - 833
=============== ======== ============= ============ ========
The maturity of the Company's financial liabilities (on a contractual maturity basis) at 30 September 2021 was as follows:
More than
three months
Three months but less More than
or less than three three years Total
GBP'000 years GBP'000 GBP'000 GBP'000
=============== ============ ============== ============ ========
Other payables 594 - - 594
=============== ============ ============== ============ ========
The Company's only financial instrument exposed to interest rate risk at 30 September 2022 was its cash balance of GBP2,958,000 (2021: GBP2,989,000), which received a variable rate of interest. An increase of 1% in interest rates would have increased the reported profit for the year, and the net assets at year end, by GBP30,000 (2021: 0.50% GBP15,000). A decrease of 1% in interest rates would have had an equal and opposite effect. These calculations are based on the variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual future conditions.
9. RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE INVESTMENT MANAGER
Other than transactions between the Company and its wholly owned subsidiaries, in relation to which the Company has adopted the permitted exemption allowed by FRS 101, related party transactions are the same for the Company as for the Group. For details, refer to Note 17 to the Consolidated Financial Statements. The fees payable to the Directors and the Investment Manager are initially paid by the Company, but may be reallocated, in whole or in part, to the subsidiaries.
10. NET ASSET VALUE
The Company's NAV per Ordinary Share of 97.15 pence (2021: 86.51 pence) is based on equity shareholders' funds of GBP205,284,000 (2021: GBP182,815,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR UOAWRUKUUAAA
(END) Dow Jones Newswires
December 14, 2022 02:00 ET (07:00 GMT)
1 Year Ediston Property Investm... Chart |
1 Month Ediston Property Investm... Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
