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Share Name Share Symbol Market Type Share ISIN Share Description
Mckay Securities Plc LSE:MCKS London Ordinary Share GB0005522007 ORD 20P
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  -2.00 -0.88% 225.00 225.00 228.00 225.00 225.00 225.00 2,001 08:58:41
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Real Estate Investment Trusts 28.6 -16.6 -17.5 - 211

McKay Securities Plc Full Year results for the year ended 31 March 2021

18/05/2021 7:00am

UK Regulatory (RNS & others)


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McKay Securities Plc

18 May 2021

SOUTH EAST REGIONAL FOCUS, UNDERPINNED BY ROBUST TRADING AND ACHIEVEMENT OF KEY MILESTONES, LEAVES McKAY WELL PLACED FOR THE FUTURE

McKay Securities Plc, the only Real Estate Investment Trust (REIT) specialising exclusively in the South East and London office, industrial and logistics markets today announces its Full Year results for the year ended 31 March 2021.

Financial Highlights

   --      Adjusted profit before tax up 2.4% to GBP9.96 million (31 March 2020: GBP9.73 million) 
   --      Adjusted earnings per share increased by 2.3% to 10.56 pence (31 March 2020: 10.32 pence) 

-- IFRS loss before tax of GBP16.58 million (31 March 2020: GBP9.49 million profit) due to a valuation deficit compared with a surplus in the comparable period

   --      EPRA EPS: 10.21 pence (31 March 2020: 10.60 pence) 

-- Gross rental income down 2.1% to GBP24.62 million (31 March 2020: GBP25.16 million) following disposals in the current and prior period

-- Portfolio ERV GBP31.45 million (31 March 2020 GBP34.91 million) down 2.0% on a like for like basis

   --      IFRS NAV per share down 5.8% to 309 pence (31 March 2020: 328 pence) 

-- Portfolio valuation of GBP437.90 million (31 March 2020: GBP510.00 million), resulting in a 4.7% valuation deficit of GBP21.58 million

   --      EPRA NTA down 6.1% to 309 pence per share (31 March 2020: 329 pence) 

-- LTV reduced to 32.4% (31 March 2020: 37.6%) following the disposal of 30 Lombard Street, EC3 for GBP70.06 million (net)

   --      Cash and undrawn facilities of GBP103.25 million, well placed for new opportunities 

-- Share buy-back programme of up to GBP10.00 million (announced in March 2021) underway, accretive to both NAV and EPS

   --      538,542 shares acquired by the year-end at a cost of GBP1.15 million 

-- Final dividend up 25.0% to 5.5 pence per share (31 March 2020: 4.4 pps), making a total dividend for the year of 8.3 pence per share (31 March 2020: 7.2 pps)

Portfolio and Operational Highlights

   --      ESG - Defined pathway towards reducing carbon across portfolio 

o Company entering the next stage of its ESG journey through the announcement today of its 2021 Net Zero Carbon Pathway which provides details of its target to reduce the use of carbon across the portfolio

o ESG ambitions build on established track record, recognised through achieving a GRESB (Global Real Estate Sustainability Benchmark) Green-Star award for the fifth year running, and BREEAM Excellent rating at 135 Theale Logistics Park

   --      Strong rent collection and robust leasing activity 

o Strong rent collection throughout the period, with 98.0% of contracted rent received or agreed

o 18 open market lettings completed at a combined contracted rent of GBP2.56 million pa, marginally ahead of ERV

o 10 year lease completed with Amazon at 135 Theale Logistics Park (135,095 sq ft)

o 34 lease renewals at a contracted annual rent of GBP3.87 million pa, securing a 10.4% uplift, including 37,400 sq ft at Swan Court, Wimbledon to D&G on a new 10 year lease

o Circa 75% of occupiers choosing to remain with McKay at lease break or expiry over the period despite the challenging backdrop

o Portfolio occupancy decreased slightly from 88.7% to 85.3%, providing scope to grow income through planned asset management initiatives

   --      Acquisitions and active asset management driving future rental growth: 

o Acquisition of Willoughby Logistics Park, Bracknell, comprising two fully let modern, self-contained units totalling 54,157 sq ft for GBP10.00 million (5.6% yield)

o McKay+ refurbishments continue to attract new occupiers to the portfolio, including Maersk Line UK Limited who signed a five year lease on the 6(th) floor of Portsoken House, EC3 at a contracted rent of GBP0.98 million pa

o Refurbishment of two floors at Corinthian House, Croydon completed with terms agreed on 51.0% of the new accommodation above ERV, reflecting McKay's ability to grow income through active asset management

o Lease expiries at Sopwith Drive, Weybridge (logistics: 63,140 sq ft) in March 2021 and at Great Brighams Mead, Reading (office: 84,840 sq ft) in April 2022 provide pipeline scope for future refurbishment, redevelopment or sale

o 28.0% of portfolio now weighted towards the industrial and logistics sector (31 March 2020: 18.0%), which continues to benefit from the accelerated rise in e-commerce

Simon Perkins, Chief Executive of McKay, said:

"McKay has delivered another positive set of results against a market backdrop that continues to be dominated by Covid-19, reflecting the portfolio's resilience during these challenging market conditions. As a result of our active asset management efforts, we exit the third lock down with a reduced LTV compared with twelve months ago, having completed a meaningful level of lettings and lease renewals at or above ERV, as well as achieving a number of substantial milestones. These included the sale of 30 Lombard Street, EC3; the letting of Theale Logistics Park to Amazon within six months of completion; and the acquisition of Willoughby Logistics Park, Bracknell, which has increased our portfolio weighting in the industrial and logistics sector to 28.0%.

"The successes we have achieved in office leasing this year reinforces our conviction that the office will continue to play an essential role within corporate life, while our assets, due to both their location and specification, remain well placed to support hybrid working practices as these evolve. We remain active in recycling our capital to drive income potential both in terms of refurbishment of vacant floorspace and acquisitions. The pace of recovery and market sentiment will influence the speed at which we are able to recycle capital from recent disposals. However with our South East focus, portfolio strength and substantial cash and undrawn facilities, we believe we are well positioned to benefit from this recovery and to respond quickly as opportunities present themselves."

Webcast Conference

There will be an audio webcast presentation for analysts at 11.00am today, hosted by Simon Perkins, Chief Executive Officer of McKay Securities, together with Giles Salmon, Chief Financial Officer, and Tom Elliott, Property Director and Head of Sustainability.

If you would like to join the webcast please use the registration link below:

https://webcasting.brrmedia.co.uk/broadcast/608adfff0386285386ccc59c

Date: 18 May 2021

-S -

NOTE:

For reconciliation of adjusted profit before tax see note 4 below

For reconciliation of adjusted basic earnings per share see note 8 below

For reconciliation of NAV (EPRA) see note 21 below

LTV - Loan to value, being net debt as percentage of portfolio value

 
 For further information please 
  contact: 
 
 McKay Securities Plc             FTI Consulting 
 Simon Perkins, CEO               Dido Laurimore, Talia Jessener 
 Giles Salmon, CFO                020 3727 1000 
  01189 502333                     McKay@fticonsulting.com 
 
 

About McKay

McKay Securities Plc is a commercial property investment company with Real Estate Investment Trust (REIT) status, listed on the main market of the London Stock Exchange. It specialises in the development and refurbishment of office, industrial and logistics buildings within proven markets of South East England and London. The portfolio at 31 March 2021 comprised 33 properties, valued at GBP437.90 million, located in established areas, predominantly along the M4 corridor, where McKay has deep expertise, with a focus on growing satellite towns benefitting from strong connectivity to London and robust demand amongst leading occupiers.

Forward looking statements

This announcement is for information purposes only and contains certain forward-looking statements which, by their nature, involve risk and uncertainty because they relate to or depend upon future events and circumstances.

There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward looking statements, including a number of factors outside McKay Securities Plc's control. All forward-looking statements are based upon information known to McKay Securities Plc on the date of this announcement and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. McKay Securities Plc gives no undertaking to update forward-looking statements whether as a result of new information, future events or otherwise. Information contained in this announcement relating to the Company should not be relied upon as an indicator of future performance.

Details of the programme for the payment of the final dividend of the Ordinary Shares is as follows:

 
 Ex dividend date                                             27 May 2021 
 Record Date for the final dividend                           28 May 2021 
 Report and Financial Statements dispatched to Shareholders   2 June 2021 
  with Notice of AGM 
 Annual General Meeting to be held at The Royal Thames        1 July 2021 
  Yacht Club, 60 Knightsbridge, London SW1X 7LF 
 Final dividend paid                                          22 July 2021 
 

A final dividend of 5.5 pence per share is recommended by the Board making a total dividend for the year of 8.3 pence per share (31 March 2020: 7.2 pps). The final dividend will be paid as an Ordinary Dividend.

Chair's Statement

Overview

What an extraordinary year we have lived through! McKay has navigated this challenging environment well and so I am pleased to be able to report on a positive set of results which reflect a strong operational performance and the achievement of significant milestones following the sale of 30 Lombard Street, EC3 and the letting of 135 Theale Logistics Park, both on excellent terms.

Our strategic focus on the office, industrial and logistics sectors of the South East and London, the most economically resilient regions in the country, and a lack of exposure to the retail and hospitality sectors, has insulated us from the worst impact of the Covid-19 pandemic. Our industrial and logistics assets have performed well, benefitting from both our in-house management initiatives and the increase in on-line retail activity, with higher occupational demand driving rental and capital growth. The office market has been more challenging, and many of our buildings have not been occupied by their tenants for over a year due to the Government's 'work from home' policy. This has contributed to a reduction in office values, and held back our ability to maintain business growth.

The increase in working from home during the pandemic has generated much debate over future demand for the office, which is clearly of key importance to us with a 66.6% portfolio weighting to the sector. Working practices will continue to evolve, and whilst there will inevitably be change, we remain confident that the office market will recover as the country is released from lockdown. Our South East office assets are well placed to meet this evolving demand, strategically positioned to offer high quality, flexible business space with good environmental credentials in well established regional centres.

During the year under review, the three strategic priorities that we have been focused on in view of the Covid-19 trading environment were:

-- Continued operational efficiency

-- Positioning for growth post Covid-19

-- Continued delivery of our ESG commitments

Continued operational efficiency

With the country in lockdown and at a standstill at the beginning of the financial year, our team responded quickly and effectively to maintain operational efficiency and to protect the profitability of the business. This was achieved without government aid and without the need to furlough any of our employees. The relationships built up over many years with our occupiers as a result of our in-house management model helped during this challenging period, enabling us to collect 96.0% of contracted rent for the financial year (with a further 2.0% due under agreed payment plans), and to maintain a high 74.3% occupier retention rate at lease break and expiry, which compares to 80.0% retention in 2020.

This activity, combined with the benefit of income from recent acquisitions and developments, contributed to stable net rental income for the year of GBP21.63 million (31 March 2020: GBP21.98 million) and a 2.4% increase in adjusted profit before tax to GBP9.96 million (31 March 2020: GBP9.73 million).

The independent valuation of the portfolio at the end of the period totalled GBP437.90 million (31 March 2020: GBP510.00 million). After taking into account capital expenditure, disposals and acquisitions, this reflects a 4.7% valuation deficit for the year of GBP21.58 million (31 March 2020: GBP0.11 million surplus), with the pace of decline slowing in H2 following a 3.4% deficit recorded in the first half. The deficit for the year, which is covered in more detail in the Property and Finance Review, was mainly due to the reduction in the valuation of our office assets. This was partially offset by a positive performance from our industrial and logistics assets, which now account for GBP122.4 million (28.0%) of the portfolio (31 March 2020: 18.1%).

Our weighting to the industrial and logistics sector has increased following the acquisition of Willoughby Logistics Park, Bracknell and a strong performance on completion of development and the letting at 135 Theale Logistics Park, Reading. The timing of this scheme has proved excellent, and we secured a letting of the whole asset to Amazon on a ten year term shortly after practical completion, at a rent of GBP1.51 million pa. The quality of the scheme and the letting terms achieved resulted in a 42.7% (GBP10.88 million) valuation surplus for the period, and a 49.5% profit on cost for the scheme.

Inclusion of the unrealised valuation movement is primarily responsible for the IFRS loss before tax of GBP16.58 million (31 March 2020: GBP9.49 million profit), and the 6.1% reduction in EPRA net tangible asset value per share ('EPRA NTA') to 309 pence (31 March 2020: 329 pence). IFRS NAV per share reduced by 5.8% to 309 pence (31 March 2020: 328 pence).

Growth prospects post pandemic

We began the year with cash and undrawn facilities of GBP53.25 million providing us with the headroom for acquisitions, or other value enhancing opportunities. The sale of 30 Lombard Street, EC3 which completed in September 2020, achieved an excellent headline price of GBP76.50 million, reflecting an initial yield of 4.2%. This sale significantly strengthened the balance sheet at the end of the year with reduced loan to value ('LTV') of 32.4% (31 March 2020: 37.6%) and increased cash and undrawn facilities for opportunities to GBP103.25 million.

Despite the negative impact on the economy of Covid-19, there have been few forced sellers in the market so far. Acquisition opportunities in the office sector have been limited as vendors wait for buildings to be reoccupied, whereas the high investor demand for warehouse and logistics assets has pushed pricing to record levels. Over the period we adopted a patient and selective approach, looking for accretive opportunities in our core South East and London markets to offset the GBP1.35 million of rental income that 30 Lombard Street contributed to the year, whilst maintaining a prudent balance sheet.

This approach led to the off-market acquisition of Willoughby Logistics Park, Bracknell (54,157 sq ft) in August 2020 for GBP10.00 million at a 5.6% yield. The two units are let until 2024 and provide scope for rental growth at expiry and medium term redevelopment potential.

Within the existing portfolio, we invested GBP6.71 million across a range of refurbishment projects to upgrade both the quality and environmental credentials of our assets. These targeted works have improved the rental values and letting prospects of these assets and have contributed to the 22.8% (GBP5.84 million pa) reversionary income potential remaining in the portfolio at the end of the period, being the difference between contracted rent of GBP25.61 million pa and the GBP31.45 million pa full rental value ('ERV') of the portfolio. This portfolio potential includes our logistics asset at Sopwith Drive, Weybridge (63,140 sq ft) which was vacated by a parcel distributor at the end of the period, and two floors at our office asset Swan Court, Wimbledon (16,400 sq ft) that we took back as part of the successful lease re-gear in January 2021. Refurbishment works and possible redevelopment in the case of Weybridge are planned to secure a combined ERV of GBP1.63 million pa.

Looking further ahead, it has now been confirmed that our tenant at Great Brighams Mead in central Reading (84,840 sq ft), which has been in occupation since the Company developed this office building in 2000, will vacate at lease expiry in March 2022. We are looking at a range of possible alternatives including a comprehensive office refurbishment, conversion to residential and other alternative uses which will determine whether we retain or sell the asset.

We have been frustrated by the share price discount resulting first from Brexit and then Covid-19 which triggered a significant decrease in share prices across the sector, which subsequently recovered to varying degrees dependent on market exposure. As one of a number of possible initiatives to help close the discount, we reviewed the possibility of a share buy-back throughout the year whilst waiting to establish a better feel for how Covid-19 was likely to impact on market conditions and business progress. In March 2021, with improved clarity on these issues in particular, we announced a share buy-back up to the value of GBP10.00 million, which equates to circa. 5.0% of the issued share capital.

By the year end, the buy-back programme had acquired 538,542 shares at an average price of 213 pence per share, which has proved accretive to both net asset value and earnings per share. We will keep the programme under review, ensuring that it continues as an efficient and effective means of generating value for shareholders.

Continued focus on our ESG commitments

ESG considerations have been a part of our decision making since we adopted our first sustainability strategy in 2013 in response to the shift in market demand to more environmentally friendly buildings. We reviewed our approach in 2019 and introduced a new ESG framework: "The Right Choice for a Sustainable Business", with three key priorities:

-- Low carbon, resource efficient and healthy buildings

-- A customer-focused and flexible landlord

-- A progressive and transparent business

These priorities are integral to our strategy, supporting our commercial objectives and targeting the highest standards of corporate governance. Our positive performance against these priorities and externally set independent targets is set out in detail in our 2021 Sustainability Review in our Annual Report and Financial Statements, and on our website. Of particular note is the achievement of the high 4-star rating in our 2020 GRESB score, the BREEAM excellent rating achieved at 135 Theale Logistics Park, and the target to reduce the use of carbon across our business, which we plan to deliver with our 2021 Carbon Net Zero Policy announced today.

Board and employees

I am very pleased to welcome Helen Sachdev to the Board as an independent Non-Executive Director with effect from April 2021. Helen has considerable experience gained from a range of sectors, including real estate, and her knowledge and experience will be very helpful as we all emerge from the current pandemic. After a period of stability, the appointment marks the first stage in succession planning to maintain an independent board.

I would like to thank my Board colleagues for their support, particularly through the early stages of the pandemic when we held weekly meetings to discuss the impact on the business.

The pandemic created substantial challenges for our employees, and I would also like to thank them for their dedication and the impressive results that their efforts have delivered.

Dividend

The Board is recommending a final dividend of 5.5 pence per share. This represents a 25.0%% increase compared with the final dividend paid last year (31 March 2020: 4.4 pence), and takes the full year dividend to 8.3 pence per share, an increase of 15.3% over last year (31 March 2020: 7.2 pence).

Although we remain in a period of economic uncertainty, and the full impact of the pandemic remains to be seen, the Board considers this increase is justified based on the strong operational performance over the period, and the improved visibility of market conditions.

Outlook

As we work our way out of the third lockdown, there are clear signs that the speed of the national vaccine roll out is having a positive effect on the economy and corporate confidence. Current Government policy allows a full return to the workplace from mid June, and as this gathers pace, we expect activity across our markets to increase.

We believe that this activity will confirm the essential role of the office in corporate life, benefitting our office assets which are well placed in terms of specification and geography to support the hybrid working practices that will continue to evolve.

The pace of recovery and future market sentiment will influence our ability to replace earnings from recent disposals with new lettings and acquisitions. With our well positioned portfolio and substantial cash and undrawn facilities, we have maintained the ability to benefit from this recovery and to respond as opportunities present themselves.

Richard Grainger

Chair

Chief Executive's Review

Overview

Our initial challenge this year was to make the necessary operational adjustments in response to Covid-19 to maintain the safety of our team and occupiers, whilst ensuring the efficient running of the business.

The operating system that we put in place worked effectively from the outset, with recent investment in our IT systems enabling all staff to access Company networks remotely without difficulty. In between lockdowns, all but the most vulnerable of our team were working from the office, facilitated by being able to drive to work to our self-contained and secure low rise headquarters in Reading.

Faced with so much uncertainly, it was reassuring that the business was well capitalised and that our portfolio was focused in well established centres of the South East and London, with occupier diversity across the office, industrial and logistics sectors.

Moreover, we were pleased to complete the sale of 30 Lombard Street, EC3 and to let 135 Theale Logistics Park on such good terms.

The benefits of our in-house, internal management model were particularly apparent during the crisis. The close work with our occupiers secured high levels of rent collection and occupier retention, and resulted in many positive endorsements in our Occupier Survey carried out in mid 2020. In addition we continued to invest in the portfolio to benefit from likely trends in office occupier demand, particularly with our McKay+ offer and sustainable, flexible, business space.

Continued focus on the South East and London

We remain confident in our strategic focus in our core markets. We have extensive knowledge of these markets which are supported by a strong regional economy that contributes 39.0% of the national GVA, built on specialisation in high value and high technology sectors. The two regions support 9.4 million workers, 30% of the national total, and have a higher density of businesses than in the rest of the country and we believe this should support economic recovery and occupier demand as pandemic restrictions ease.

Market review

From the first lockdown at the beginning of the year, the office market stalled, whereas the industrial and logistics sector continued to operate benefitting from the boom in on-line shopping. This mix of fortunes contributed to a 2.6% reduction in our office portfolio ERV over the period and an 11.8% valuation deficit, whereas the ERV for our industrial and logistics assets held over the period (excluding developments) increased by 2.6% and their valuation by 9.0%. Overall, the portfolio valuation deficit was 4.7% (MSCI All Property Index: -2.9%) and the ERV for properties held over the period was down 2.0% (MSCI All Property Index: -2.0%).

The valuation deficit of our office portfolio was greater than the -6.1% MSCI All Property Index performance, which contributed to the relative under performance of the portfolio as a whole. This was due in part to the number of planned office refurbishment projects either completed or underway where we are carrying out upgrading works to improve rental prospects, and to deliver future value. However current values were particularly exposed to more cautious valuation assumptions to reflect the Covid-19 trading environment. This also applied to forthcoming lease expiries, as covered in more detail in the Property and Financial Review.

The fall in office values was partially offset by the valuation gains in our industrial and logistics assets, including a substantial 42.7% (GBP10.88 million) surplus following the letting success at 135 Theale Logistics Park. This took the valuation surplus for this segment of the portfolio to 18.1%.

Investor appetite reflected these sector variations, with demand from a wide range of investors outstripping the supply of industrial and logistics opportunities and pushing pricing to record levels. With the office market on pause, office transactions have been limited and values have fallen, with the exception of low risk assets with secure, long term income, where investor demand remains strong.

The largest segment of our portfolio is South East offices (53.8%), located predominantly along the M4 corridor. Named occupier demand at the end of the period, as monitored by BNP Paribas, totalled 2.25 million sq ft. This was an encouraging 24.9% increase over the previous quarter, but still 33.0% below the five year average of 3.37 million sq ft. Annual take up of 1.31 million sq ft for 2020 in our market area suffered as a result, being 36.4% below the five year average of 2.06 million sq ft and on a par with 2009, the lowest on record since 2000. Of this take up, 72.9% was for unit sizes below 60,000 sq ft, and 66.5% was for new or Grade A space. This continues the trend that we have reported on for a number of years of occupier demand for better quality floor space in smaller unit sizes.

With a lower level of letting activity over the year, supply in this market increased to 8.80 million sq ft, representing a vacancy rate of 9.4% (31 March 2020: 7.4%), but still well below the peak vacancy rate following the GFC of 14.2% in 2014. The low vacancy rate of 2.3% for new buildings (31 March 2020: 1.8%) continues to limit occupier choice and the speculative pipeline of new schemes is likely to remain restricted until the demand outlook is clearer.

Following the sale of 30 Lombard Street, the value of our remaining three central London buildings accounts for 12.8% of the portfolio (31 March 2020: 24.7%). Each asset continues to provide opportunities for income and capital growth, which we will monitor as the central London occupational market becomes clearer.

Office demand - all change?

As noted above, demand and letting activity in the South East office market has reduced this past year, and there has been much discussion regarding the impact of Covid-19, and the working from home experience in particular, on future occupier trends.

Around 30% of the workforce in the South East and London was already working from home some of the time prior to the pandemic, with the proportion rising to around 50% during the first lockdown. Hybrid working patterns will evolve from this, and although the number of employees in the office full time may reduce, this is likely to be offset by lower occupational densities to create safer working environments.

We believe that demand has been deferred rather than lost. To best position ourselves to benefit when it returns, the key considerations we are addressing are:

-- How will offices be used in the future? The use of the office will vary between business size and type, but remain essential as a strategic tool in the management of most businesses. It is likely to be more of a collaborative space to enforce business identity and to encourage team-work and the effective integration of new and younger employees.

-- What type of business space will be in demand? We expect the majority of demand to be for safe, sustainable and smart buildings of quality that help attract and retain employees. Ease and flexibility of occupation will be important considerations, as well as ease of access and local amenities. Letting activity is likely to remain predominantly for new and Grade A floor space within the sub 60,000 sq ft size range. A shift to shorter commuting could also result in decentralisation.

-- How do we meet occupier expectations? Occupiers will expect a high quality service from their landlord to support the concept of the office being a welcoming, central and integral part of their business. Track record and customer focus will be key.

Many of these requirements reflect trends that we were seeing before the pandemic, and responding to with the quality and specification of our buildings and the delivery of high levels of service set out in 'The McKay Way' by our in-house occupier services team.

With our office properties located mainly in outer London and the South East, we are also able to offer a cost effective alternative should occupiers decide to decentralise to reduce exposure to congested public transport and long travel to work times. Construction of the Elizabeth Line from central London to Reading, once opened, will enhance our offer with improved connectivity.

Sustainability and ESG will play a key role

The importance of ESG considerations, and the environmental credentials of business space, will continue to increase. These considerations are integral to our decision making with regard to portfolio properties and the way that we run the business more generally.

Our 2021 Sustainability Review, available on our website, provides full details of our ESG policy and progress during the year. This includes the publication of our 2021 Net Zero Carbon commitment announced today, which sets out a number of ambitious targets in relation to our existing portfolio and future projects to support the delivery of our core sustainability objective of creating low carbon, resource efficient buildings.

We will continue to work on these ESG and property initiatives, such as our McKay+ offer of ready to occupy floor space, short form leases and fully connected buildings.

The year ahead

Within the existing portfolio, we look forward to improved confidence from the road map out of lockdown and the continued roll out of the vaccination programme driving a pick up in leasing activity of current vacancies and future refurbishments. The lease break exercised at Sopwith Drive, Weybridge provides scope for a major refurbishment or redevelopment of this 1980s warehouse, and at Great Brighams Mead, Reading we are considering a range of options to evolve a strategy ahead of lease expiry in March 2022.

With substantial cash and undrawn facilities, we will continue to progress portfolio initiatives and look for earnings and value accretive acquisitions in our core markets to offset the planned reduction in earnings from the sale of 30 Lombard Street. Full use of this headroom will be governed by maintaining a level of gearing appropriate to the macroeconomic climate and evolving outlook. We will also continue to closely monitor occupier demand and the possibility of recycling capital through further disposals, and maintain the current share buy-back programme while it continues to be an effective and efficient means of generating shareholder value.

Simon Perkins

Chief Executive Officer

Property and Financial Review

Introduction

As at 31 March 2021 our portfolio consisted of 33 assets with an independent valuation of GBP437.90 million. The majority of the portfolio falls within the office sector, but through a combination of development and valuation gains as well as the recycling of capital, we have increased our weighting over the year to the industrial and logistics sector. By value the breakdown is now 66.6% offices, 28.0% industrial and logistics and 5.4% other with no retail exposure (31 March 2020: 77.1%, 18.1% and 4.8% respectively). See Table 1.

Together with selling our largest asset and letting our most recent development project, Covid-19 and its repercussions have dominated this year. Operationally our business model of managing all our assets internally, rather than using third party managing agents, allowed us to respond with agility and resilience. With this business model, we know our tenants well and as a result we knew very quickly where to help, how to help and where to remain firm. In a crisis more economically damaging than the GFC, we maintained a strong tenant retention rate with 74.3% of our occupiers choosing to remain with McKay at lease break or expiry; collected or agreed plans for 98% of our annual rent; renewed 34 leases; secured 18 open market lettings; and achieved a positive customer survey with 90% of our occupiers happy with their direct McKay relationship.

Our total occupancy has fallen to 85.3% (31 March 2020: 88.7%) and there are two clear reasons for this. Firstly in February 2021 Hermes operated their break clause at Sopwith Drive in Weybridge (63,140 sq ft / GBP0.65 million pa contracted rent) which they had occupied for many years, in order to relocate to a larger unit. The industrial and logistics sector is currently very strong from both an occupational and investment perspective and this lease break frees up a prime development / refurbishment opportunity for us.

Secondly, while we successfully negotiated with our largest occupier, Domestic & General, to renew their occupation for a further five years at Swan Court in Wimbledon, they did hand back 30% of the building (ground and first floors totalling 16,400 sq ft) which they had not been using for some years. These floors will be refurbished and delivered into this popular under-supplied Greater London sub-market in the autumn.

These two new vacancies represent 5.2% of the overall portfolio ERV as at 31 March 2021.

We believe the office remains critical to business continuation and that the best and most engaging office space will remain in demand from businesses keen to attract and retain staff. As a result, we shall continue to upgrade and invest in our assets when vacancies occur to meet that demand.

Table 1: Properties

 
                                  Properties  % of Portfolio 
=================  =============  ==========  ============== 
Office              London                 3           12.8% 
Office              South East            17           53.8% 
=================  =============  ==========  ============== 
Total Office                              20           66.6% 
Industrial          South East             9           28.0% 
=================  =============  ==========  ============== 
Total Industrial                           9           28.0% 
Other               Health                 1            1.3% 
Other               Leisure                1            3.1% 
Other               Residential            2             1.% 
=================  =============  ==========  ============== 
Total Other                                4            5.4% 
================================  ==========  ============== 
Overall Total                             33          100.0% 
================================  ==========  ============== 
 

Sustainability and ESG

We continue to recognise how important sustainability is to potential and existing occupiers, our investors, our employees and indeed all our stakeholders.

We are particularly proud this year to have achieved a 4* GRESB (Global Real Estate Sustainability Benchmark) rating, placing us in the top 40% of those who choose to be measured by this renowned benchmark.

Our 2021 Sustainability Review, included within our Annual Report and Financial Statements and available on our website, provides extensive detail of our ambitions and achievements under the three pillars for a sustainable business, the Environment, Social awareness and Governance (ESG).

Development

We completed 135 Theale Logistics Park (135,095 sq ft) in April 2020 and, with Covid-19 limiting mobility, we immediately stepped up our digital marketing campaign and successfully secured a letting of the whole scheme to Amazon. This lease completed in September 2020 for a ten year term with an option to extend for a further ten years to this strong covenant at GBP1.51 million pa, marginally ahead of 31 March 2020 ERV ("ERV") with a fixed uplift at the fifth year review. This resulted in a year end valuation surplus of GBP10.88 million which delivered a profit on cost for the development of 49.5%.

Asset management

Portfolio

We have always had a very active, hands-on approach to asset management which has benefited us in a year when occupiers need flexibility, potential reorganisations and above all a regular constructive dialogue with their landlord. Given the difficulty many occupiers have faced, during the year we negotiated many more lease renewals than a typical year (34 compared to the average of the previous two years of 17) at a contracted annual rent of GBP3.87 million pa (an uplift of 10.4% over the previous passing rent). The Covid-19 related agreements, in particular, had the win-win benefit for both us and our occupiers by introducing a rent free period now in return for a longer lease. Added to this, we achieved 18 open market lettings at a combined contractual rent of GBP2.56 million pa, marginally ahead of ERV, providing a total contracted rent (excluding acquisitions and disposals) of GBP25.02 million pa (31 March 2020: GBP24.93 million pa).

Offices

Within our office portfolio, the most significant lease renewal was at Swan Court, Wimbledon (57,500 sq ft) which has been the headquarters of Domestic & General (D&G) since we built the office building in 2006. Their lease expiry was February 2021 and in recent years they had sub-let the ground and first floors (16,400 sq ft). In January 2021 we exchanged an agreement to lease floors 2-5 (37,400 sq ft) on a ten year lease with a fifth year tenant break at a contracted rent of GBP1.76 million pa which will commence on completion of planned landlord upgrade works to the common parts at the end of the summer. The works will significantly enhance the look and feel of the building improving the lettability of the remaining ground and first floors which we will refurbish simultaneously.

Across selected parts of our office portfolio we continue to attract occupiers with the McKay+ specification. This provides the middle ground between conventional accommodation and serviced offices enabling speed and flexibility of occupation with no middle man or hidden costs and is managed directly by us, while at the same time giving the occupiers their own identity and privacy. At the Mille in Brentford (96,700 sq ft) this model attracted a tenant out of serviced accommodation into the entire 6th floor (8,174 sq ft) at a contracted rent of GBP0.18 million pa on a ten year lease with a tenant break at the end of the third year.

Further McKay + refurbishments attracted two new significant occupier names to the portfolio. Maersk Line UK Limited signed a five year lease on the 6th floor (1,870 sq ft) at Portsoken House, EC3 at a contracted rent of GBP0.98 million pa and Sedgewick International UK committed to the final vacant suite (4,112 sq ft) at Prospero in Redhill on a ten year lease at a contracted rent of GBP0.13 million pa.

Table 2: Capital Value Movement

 
                                  March 2021  March 2020   12 month 
                                   portfolio   portfolio          1     MSCI 2 
12 months to 31 March 2021              GBPm        GBPm   Movement   Movement 
================================  ==========  ==========  =========  ========= 
London offices                         56.00       58.55     (5.9)%     (2.6)% 
South East offices                    235.60      267.30    (13.0)%     (6.1)% 
================================  ==========  ==========  =========  ========= 
Total offices                         291.60      325.85    (11.8)%     (5.6)% 
South East industrial/logistics        75.25       68.35       9.0%      10.3% 
Other                                  23.90       23.80       0.3%          - 
================================  ==========  ==========  =========  ========= 
                                                                        (2.9)% 
Total (excl. dev)                     390.75      418.00     (7.7)%          3 
Developments4                          36.35       24.00      42.7% 
================================  ==========  ==========  =========  ========= 
Total portfolio (like for 
 like)                                427.10      442.00     (4.8)%     (2.9)% 
Disposals                                  -       68.00 
Acquisitions                           10.80           - 
================================  ==========  ==========  =========  ========= 
Total (overall)                       437.90      510.00     (4.7%)     (2.9%) 
================================  ==========  ==========  =========  ========= 
 
Valuation yields 
================================  ==========  ==========  =========  ========= 
Initial                                 4.8%        4.0% 
Initial (topped up)                     5.5%        5.2% 
Reversion                               6.7%        6.4% 
Equivalent                              6.1%        5.7% 
================================  ==========  ==========  =========  ========= 
 
   1      Valuation movements (%) after allowing for cap-ex incurred during the period 
   2      MSCI Monthly Index by relevant sector. London = MSCI City sector 
   3      MSCI Monthly Index (All property) 
   4      Theale Logistics Park 

Table 3: Rental Value Movement

 
                                    March 2021    March 2020 
                                     portfolio     portfolio   12 month     MSCI 1 
12 months to 31 March 2021         ERV GBPm pa   ERV GBPm pa   Movement   Movement 
================================  ============  ============  =========  ========= 
London offices                            3.66          3.75     (2.5)%     (0.8)% 
South East offices                       20.60         21.15     (2.6)%     (0.6)% 
================================  ============  ============  =========  ========= 
Total offices                            24.26         24.90     (2.6)%     (0.6)% 
South East industrial/logistics           4.07          3.96       2.6%       3.4% 
Other                                     1.00          1.14    (11.9)%          - 
================================  ============  ============  =========  ========= 
                                                                            (2.0)% 
Total (excl. dev)                        29.33         30.00     (2.2)%          2 
Developments3                             1.51          1.48       2.3% 
================================  ============  ============  =========  ========= 
Total portfolio (like for 
 like)                                   30.84         31.48     (2.0)%     (2.0)% 
Disposals                                    -          3.43 
Acquisitions                              0.61             - 
================================  ============  ============  =========  ========= 
Total (overall)                          31.45         34.91 
================================  ============  ============  =========  ========= 
 
   1      MSCI Monthly Index by relevant sector. London = MSCI City sector 
   2      MSCI Monthly Index (All property) 
   3      Theale Logistics Park 

At Corinthian House, Croydon (44,590 sq ft), having upgraded the reception and common parts last year, we are now underway with floor by floor refurbishments as they become available on expiry of older legacy lettings, enabling us to achieve substantially higher rental values. Having just reached completion at year end of the 2nd and 5th floors (8,660 sq ft) we had already agreed terms on over 50% of the new accommodation above ERV reflecting the quality and prime location of this Croydon landmark office. We aim to refurbish a further four floors (18,550 sq ft) this year which have already attracted positive enquiries.

Industrial and logistics

28.0% of the portfolio by value is in the industrial and logistics sector which has performed very well over the year, driven by management initiatives, lettings at or above ERV and the development success referred to earlier.

At Five Acre in Folkestone, we pre-let our last upgraded unit (17,333 sq ft) to an existing expanding occupier on a ten year lease at a contracted rent of GBP0.09 million pa and at the McKay Trading Estate at Poyle we renewed four leases with our largest occupier (32,251 sq ft) for a further six years at a contracted rent of GBP0.34 million pa.

Well located trade parks continue to attract demand as evidenced by our latest refurbishment at Oakwood Trade Park in Crawley (52,400 sq ft). Prior to completion of a refurbishment of Unit 1 (2,717 sq ft) we signed a ten year lease at a new record rent equating to GBP18.00 psf which helped drive ERV growth and a subsequent capital surplus across the Park of 23.5%.

As mentioned above, the exercise of a lease break at Sopwith Drive, Weybridge (63,140 sq ft) has provided the potential to add to the value of the building through refurbishment or redevelopment in this excellent outer London location. A number of schemes are under review at present.

Table 4: Portfolio yields and reversions

 
                                                 31st March 2021                  31st March 2020 
                                       ====================================  ========================= 
                                       GBPm pa  Yield             Occupancy  GBPm pa  Yield  Occupancy 
                                                  (2)                                   (2)        (3) 
=====================================  =======  =====  ====================  =======  =====  ========= 
Current rental income(1)                 22.20   4.8%                          21.90   4.0% 
=====================================  =======  =====  ====================  =======  =====  ========= 
 
Contracted rental income(1)              25.61   5.5%                 85.3%    28.33   5.2%      88.7% 
=====================================  =======  =====  ====================  =======  =====  ========= 
Uplifts at rent review/lease 
 expiry                                   1.21                                  2.62 
=====================================  =======  =====  ====================  =======  =====  ========= 
Void properties (exc developments(3) 
 )                                        4.63                        15.5%     2.48              7.4% 
=====================================  =======  =====  ====================  =======  =====  ========= 
Void (developments)                          -                                  1.48              3.9% 
=====================================  =======  =====  ====================  =======  =====  ========= 
Portfolio reversion                       5.84                                  6.58 
=====================================  =======  =====  ====================  =======  =====  ========= 
Total portfolio ERV                      31.45   6.7%                          34.91   6.4% 
=====================================  =======  =====  ====================  =======  =====  ========= 
Equivalent yield                                 6.1%                                  5.7% 
=====================================  =======  =====  ====================  =======  =====  ========= 
 
   1      Net of ground rents 
   2      Yield on portfolio valuation with notional purchaser's costs (6.75%) added 
   3      By ERV 

Valuations

As at 31 March 2021 Knight Frank's independent valuation of the portfolio was GBP437.90 million (31 March 2020: GBP510.00 million).

The entire year has been characterised by Covid-19 and the economic uncertainty that it carried which is only now beginning to clear with the successful vaccine rollout. The total portfolio suffered to a greater degree in H1 with a valuation deficit of -3.4% followed by -1.3% in H2, delivering a total 12 month deficit of 4.7% set against the MSCI All Property Index of -2.9%. See Tables 2 and 3.

The valuers reflected uncertainty in the office sector by increasing void periods and rent free incentives while also pushing yields out to varying degrees depending on tenant covenant strength and lease length. These adjustments were more severe in H1 when there was still significant uncertainty at the September valuation date, resulting in a capital deficit in our office portfolio for H1 of -6.7%. Although the H2 valuation date of 31 March 2021 had the benefit of an improving outlook, there still remained uncertainty about the speed and quantum of a return to work. This resulted in further valuation risk adjustments and an H2 office portfolio deficit of -5.0%, delivering a total office portfolio deficit for the year of -11.8%. Rental value declines were less apparent and our office portfolio ERV fell by -2.6%. See Table 4.

There were two office assets which impacted our office portfolio performance which are worth highlighting. At the start of the year at Great Brighams Mead in central Reading (84,840 sq ft) discussions had been ongoing about the possibility of a lease extension with the sole tenant (expiry March 2022). However, towards Christmas the tenant confirmed that it would vacate at lease expiry, and at the valuation date the valuers had to assume vacancy at expiry, full refurbishment expenditure as well as estimated voids and rent free incentives.

Secondly at Corinthian House in Croydon, the valuation reduced due to the timing in the refurbishment cycle of the building, and the current vacancy and capex required for the launch of this re-positioned asset. Although strong pre-let interest is being pursued, at the date of valuation it had not crystallised.

Our industrial and logistics portfolio (28.0% by value) performed well, delivering a capital surplus of 16.4%. As referred to above, the letting at 135 Theale Logistics Park and the strength of investor demand generated a substantial 42.7% surplus of GBP10.88 million.

As at 31 March 2021 the portfolio net initial yield was 4.75% (31 March 2020: 4.02%) rising to 5.48% on the expiry of rent free periods (31 March 2020: 5.20%). This yield increase reflects the fall in values due to the Covid uncertainty coupled with the fact that we sold our largest asset at a low yield of 4.16%. The reversionary yield, adopting the full net ERV and current book value was 6.73% (31 March 2020: 6.41%).

Cash collection

The table below highlights the quarterly experience for the Group regarding cash collection. The overall result for the year shows 96.0% of contracted rents were collected in cash and a further 2.0% (GBP0.45 million) to be collected under agreements put in place during the year. Of the total contracted rent of GBP22.38 million demanded for the year to 31 March 2021, only GBP0.39 million has been impaired.

 
Table 5: Cash collection     Mar 20 Quarter    Jun 20 Quarter    Sep 20 Quarter    Dec 20 Quarter    Total 4 Quarters 
                           ================  ================  ================  ================  ================== 
                                GBP       %       GBP       %       GBP       %       GBP       %         GBP       % 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Paid within 7 days            3,342     62%     4,075     71%     3,872     69%     5,043     88%      16,333     73% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Paid after 7 days             1,714     31%     1,528     26%     1,477     26%       480      8%       5,200     23% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Cash received                 5,056     94%     5,604     98%     5,348     96%     5,524     96%      21,532     96% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
 
Paying monthly 
 - O/S                            0      0%         0      0%         0      0%         6      0%           6      0% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Not monthly - O/S               246      5%        19      1%       143      3%        34      1%         442      2% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Agreed but O/S                  246      5%        19      1%       143      3%        40      1%         448      2% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Total received 
 or agreed                    5,302     99%     5,623     98%     5,491     98%     5,564     98%      21,980     98% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
 
Impaired                         78      1%        92      2%        92      2%       133      2%         395      2% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
Total received 
 or agreed                    5,380    100%     5,715    100%     5,583    100%     5,697    100%      22,375    100% 
=========================  ========  ======  ========  ======  ========  ======  ========  ======  ==========  ====== 
 

Key: O/S - outstanding

Income statement

Adjusted profit before tax, our measure of recurring profit, increased by GBP0.23 million (2.4%) to GBP9.96 million (31 March 2020: GBP9.73 million). Gross rental income was 2.1% lower as a result of significant disposals in the current and prior period, offset by reduced interest costs on lower borrowings. Adjusted basic earnings per share increased by 2.3% to 10.56 pps (31 March 2020: 10.32 pps).

At headline level, the loss before tax (IFRS) of GBP16.58 million (31 March 2020: GBP9.49 million profit), was mainly as a result of the valuation deficit of GBP23.36 million (after the IFRS 16 adjustment) being bigger than the prior year (31 March 2020: deficit GBP2.20 million).

The 2.1% (GBP0.54 million) reduction in gross rental income to GBP24.62 million (31 March 2020: GBP25.16 million) was a result of the significant disposals of 30 Lombard St, EC3 and Station Plaza, Theale, offset by new rental income from the acquisitions at Willoughby Road, Bracknell and Rivergate, Newbury, the latter contributing a full year of rental income, and further increased by new lettings such as 135 Theale Logistics Park.

Property costs for the year of GBP3.15 million were GBP0.10 million less than the previous year (31 March 2020: GBP3.25 million) mainly due to the successful reclaiming of previously paid council rates received in the year which offset higher void costs.

Administration costs before IFRS 2 charges reduced to GBP5.17 million (31 March 2020: GBP5.39 million), primarily due to the 2018 Performance Share Plan outturn of zero which reduced the National Insurance charge compared to the prior year, and Covid-19 related savings. The IFRS 2 charge increased during the year (GBP0.49 million) compared to the GBP0.22 million credit in the previous year. The credit in the previous year resulted from an accounting change in the calculation methodology of IFRS 2.

Whilst cash collection was strong during the Covid-19 affected period, as noted above, GBP0.39 million of the rents receivable have been impaired (31 March 2020: Nil). These relate to tenants that have gone into administration or amounts assessed as irrecoverable. The two tenants that account for half of this amount are a professional services firm and a hospitality tenant.

The interest cost for the year reduced to GBP6.35 million (31 March 2020: GBP7.36 million), due to lower drawings after the sale of 30 Lombard St, EC3, which reduced drawn debt to GBP144.00 million at 31 March 2021 (31 March 2020: GBP194.00 million). The weighted average cost of debt prior to amortisation and finance lease interest reduced slightly to 3.1% (31 March 2020: 3.4%).

Balance sheet

Shareholders' funds decreased from GBP309.17 million to GBP289.90 million over the period, primarily due to the revaluation deficit for the year of GBP23.36 million as detailed above. In addition, the sale of 30 Lombard Street, EC3 resulted in a GBP2.82 million loss of disposal after adjustment for IFRS16 (letting incentives).

EPRA NTA per share reduced by 6.1% over the period to 309 pence (31 March 2020: 329 pence) and IFRS NAV per share reduced by 5.8% to 309 pence (31 March 2020: 328 pence). The revaluation movement was the main driver for these changes.

Debt facilities at the year end remained at GBP245.00 million (31 March 2020: GBP245.00 million), providing GBP101.00 million of headroom over our current drawings to support operational flexibility, deliver further portfolio initiatives and provide increased scope for new investments. The reduction in drawings was driven by the receipt from the sale of 30 Lombard St, EC3 (GBP70.06 million), offset by the purchase of Willoughby Rd, Bracknell (GBP10.66 million), capex on the portfolio of GBP6.71 million and paid dividends of GBP6.79 million.

The ratio of net debt to portfolio value (LTV) at the year end was 32.4% (31 March 2020: 37.6%).

Net cash inflow from operating activities was GBP7.43 million (31 March 2020: inflow GBP6.81 million) and interest cover based on adjusted profit plus finance costs as a ratio to finance costs was 2.49x (31 March 2020: 2.28x).

As a REIT, the Company is tax exempt in respect of qualifying capital gains and qualifying rental income, which covers the majority of the Company's activities. However the sale of 30 Lombard St, EC3, was within three years of practical completion and therefore triggered a capital gains tax charge of GBP1.26 million under REIT regulations. This was estimated in the prior year at GBP1.39 million, and finalised this year.

Defined benefit pension scheme

Under the application of accounting standard IAS19, the Company's pension deficit slightly increased over the period from GBP2.10 million to GBP2.18 million.

A triennial valuation was completed for the period to 31 March 2020, which shows a funding level of 77.8% on a SFO (Statutory Funding Objective) valuation basis. The previous triennial valuation showed a funding level of 87.5% on a SFO valuation basis. As a result of this valuation, the company will continue the annual cash contribution to the scheme of GBP0.24 million. The scheme was closed to new entrants in the 1980's, and now consists of six pensioners and no active members.

Share buy-back programme

The buy-back programme commenced on 8 March 2021. The Board set the total size of the programme at up to GBP10.00 million, or approximately 5% of the Company's issued ordinary share capital. As at 31 March 2021, 538,542 shares had been purchased by the company at a cost of GBP1.15 million. The reported IFRS Basic NAV is 309 pps, however this equates to 307 pps prior to the buyback and can therefore be considered NAV accretive.

Dividends

The final dividend of 5.5 pence per share (31 March 2020: 4.4 pps) will be paid on 22 July 2021 to those on the register as at 28 May 2021. With the interim dividend of 2.8 pence per share, this takes the total dividend for the year to 8.3 pence per share (31 March 2020: 7.2 pps), an increase of 15.3% on the previous year.

As a REIT, the Company is required to distribute at least 90.0% of rental income profits arising each financial year by way of a Property Income Distribution ("PID"). After taking into account allowable costs the final dividend will be paid as an ordinary dividend rather than a PID.

Financial risks

The financial risks are documented in the principal risks and uncertainty section of the Strategic Report.

Signed on behalf of the Board of Directors

T. Elliott

Property Director and Head of Sustainability

G. Salmon

Chief Financial Officer

Consolidated Profit and Loss and Other Comprehensive Income

For the year ended 31 March 2021

 
                                                                            2021      2020 
                                                     Notes               GBP'000   GBP'000 
===================================================  =====  ====================  ======== 
Gross rents and service charges receivable               2                28,589    29,296 
===================================================  =====  ====================  ======== 
Other property income                                                        157        69 
===================================================  =====  ====================  ======== 
Direct property outgoings                                                (7,112)   (7,384) 
===================================================  =====  ====================  ======== 
Net rental income from investment properties             2                21,634    21,981 
===================================================  =====  ====================  ======== 
Administration costs                                                     (5,175)   (5,385) 
===================================================  =====  ====================  ======== 
IFRS 2 charge                                                              (489)       222 
===================================================  =====  ====================  ======== 
Total administration costs                               3               (5,664)   (5,163) 
===================================================  =====  ====================  ======== 
Operating profit before gains on investment 
 properties                                                               15,970    16,818 
===================================================  =====  ====================  ======== 
(Loss)/profit on disposal of investment properties                       (2,854)     1,668 
===================================================  =====  ====================  ======== 
Revaluation of investment properties                    10              (23,356)   (2,199) 
===================================================  =====  ====================  ======== 
Operating (loss)/profit                                                 (10,240)    16,287 
===================================================  =====  ====================  ======== 
Finance costs                                            5               (6,351)   (6,805) 
===================================================  =====  ====================  ======== 
Finance income                                           5                     8         5 
===================================================  =====  ====================  ======== 
 
(Loss)/profit before taxation                            4              (16,583)     9,487 
===================================================  =====  ====================  ======== 
Taxation                                                 6                   133   (1,392) 
===================================================  =====  ====================  ======== 
(Loss)/profit for the year                                              (16,450)     8,095 
===================================================  =====  ====================  ======== 
Other comprehensive income: 
===================================================  =====  ====================  ======== 
Items that will not be reclassified subsequently 
 to profit or loss 
===================================================  =====  ====================  ======== 
  Remeasurement on defined benefit pension scheme                          (278)     (185) 
===================================================  =====  ====================  ======== 
Total comprehensive (expense)/income for the 
 year                                                                   (16,728)     7,910 
===================================================  =====  ====================  ======== 
 
(Loss)/earnings per share                                8 
===================================================  =====  ====================  ======== 
Basic                                                                   (17.45)p     8.59p 
===================================================  =====  ====================  ======== 
Diluted                                                                 (17.45)p     8.57p 
===================================================  =====  ====================  ======== 
 
Adjusted earnings per share figures are shown 
 in note 9 
===================================================  =====  ====================  ======== 
 
Dividends                                                9 
===================================================  =====  ====================  ======== 
31 March 2020 final dividend of 4.4 pence (31 
 March 2019: 7.4 pence) paid during the year                               4,148     6,965 
===================================================  =====  ====================  ======== 
 
30 September 2020 interim dividend of 2.8 pence 
 (30 September 2019: 2.8 pence) paid during 
 the year                                                                  2,642     2,639 
===================================================  =====  ====================  ======== 
 
Proposed final dividend of 5.5 pence (31 March 
 2020: 4.4 pence)                                                          5,116     4,148 
===================================================  =====  ====================  ======== 
 

The total comprehensive income for the year is all attributable to the equity holders of the Parent Company.

The accompanying notes form an integral part of these financial statements.

Consolidated Statement of Financial Position

As at 31 March 2021

 
                               2021      2020 
                    Notes   GBP'000   GBP'000 
==================  =====  ========  ======== 
Non-current assets 
==================  =====  ========  ======== 
 
 
 Investment properties - Valuation as reported 
  by the valuers                                                                             437,900    510,000 
=====================================================================================      =========  ========= 
 
                              *    Adjustment for tenant incentives recognised under 
                                   IFRS 16                                                   (7,403)   (10,637) 
=====================================================================================      =========  ========= 
 
                              *    Assets held for sale                                     (13,500)   (79,365) 
=====================================================================================      =========  ========= 
 
                              *    Adjustment for grossing up of headleases            14      3,683      4,403 
=====================================================================================      =========  ========= 
                                                                                       10    420,680    424,401 
=====================================================================================      =========  ========= 
Plant and equipment                                                                    11        125        148 
=====================================================================================      =========  ========= 
Other receivables                                                                      13      7,403      6,982 
=====================================================================================      =========  ========= 
Total non-current assets                                                                     428,208    431,531 
=====================================================================================      =========  ========= 
 
Current assets 
=====================================================================================      =========  ========= 
Trade and other receivables                                                            13      3,063      3,200 
=====================================================================================      =========  ========= 
Assets held for sale                                                                   10     13,500     83,020 
=====================================================================================      =========  ========= 
Cash                                                                                           2,249      2,245 
=====================================================================================      =========  ========= 
Total current assets                                                                          18,812     88,465 
=====================================================================================      =========  ========= 
 
Total assets                                                                                 447,020    519,996 
=====================================================================================      =========  ========= 
 
Current liabilities 
=====================================================================================      =========  ========= 
Trade and other payables                                                               14    (9,233)   (12,433) 
=====================================================================================      =========  ========= 
Lease liabilities                                                                      15      (229)      (180) 
=====================================================================================      =========  ========= 
Current tax liability                                                                          (654)          - 
=====================================================================================      =========  ========= 
Liabilities directly associated with assets 
 classified as held for sale                                                           15          -    (1,520) 
=====================================================================================      =========  ========= 
Total current liabilities                                                                   (10,116)   (14,133) 
=====================================================================================      =========  ========= 
 
Non-current liabilities 
=====================================================================================      =========  ========= 
Loans and other borrowings                                                             14  (141,369)  (190,505) 
=====================================================================================      =========  ========= 
Pension fund deficit                                                                   23    (2,180)    (2,097) 
=====================================================================================      =========  ========= 
Deferred tax liability                                                                  6          -    (1,392) 
=====================================================================================      =========  ========= 
Lease liabilities                                                                      15    (3,453)    (2,703) 
=====================================================================================      =========  ========= 
Total non-current liabilities                                                              (147,002)  (196,697) 
=====================================================================================      =========  ========= 
 
Total liabilities                                                                          (157,118)  (210,830) 
=====================================================================================      =========  ========= 
 
Net assets                                                                                   289,902    309,166 
=====================================================================================      =========  ========= 
Equity 
=====================================================================================      =========  ========= 
Called up share capital                                                                18     18,760     18,853 
=====================================================================================      =========  ========= 
Capital redemption reserve                                                                       108          - 
=====================================================================================      =========  ========= 
Share premium account                                                                         75,541     75,541 
=====================================================================================      =========  ========= 
Retained earnings                                                                             80,598     81,531 
=====================================================================================      =========  ========= 
Revaluation reserve                                                                          114,895    133,241 
=====================================================================================      =========  ========= 
Total equity                                                                                 289,902    309,166 
=====================================================================================      =========  ========= 
 
IFRS net asset value per share                                                         21       309p       328p 
=====================================================================================      =========  ========= 
EPRA NTA/NRV value per share                                                           21       309p       329p 
=====================================================================================      =========  ========= 
 

The accompanying notes form an integral part of these financial statements.

These financial statements were approved by the Board of Directors on 17 May 2021 and were signed on its behalf by R Grainger and S Perkins.

Company Statement of Financial Position

As at 31 March 2021

Registration number 421479

 
                                                                                         2021       2020 
                                                                             Notes    GBP'000    GBP'000 
===========================================================================  =====  =========  ========= 
Non-current assets 
===========================================================================  =====  =========  ========= 
     Investment properties - Valuation as reported 
      by the valuers                                                                  433,400    437,500 
===========================================================================  =====  =========  ========= 
                          - Adjustment for tenant incentives recognised 
                           under IFRS 16                                              (7,403)    (6,982) 
===========================================================================  =====  =========  ========= 
                          - Assets held for sale                                     (13,500)   (13,500) 
===========================================================================  =====  =========  ========= 
 
                            *    Adjustment for grossing up of head leases              3,682      2,883 
===========================================================================  =====  =========  ========= 
                                                                                10    416,179    419,901 
===========================================================================  =====  =========  ========= 
Plant and equipment                                                             11         77         84 
===========================================================================  =====  =========  ========= 
Investments in subsidiary                                                                   -          - 
===========================================================================  =====  =========  ========= 
Other receivables                                                               13      7,404      6,982 
===========================================================================  =====  =========  ========= 
Total non-current assets                                                              423,660    426,967 
===========================================================================  =====  =========  ========= 
 
Current assets 
===========================================================================  =====  =========  ========= 
Trade and other receivables                                                     13      3,062     46,933 
===========================================================================  =====  =========  ========= 
Assets held for sale                                                            10     13,500     13,500 
===========================================================================  =====  =========  ========= 
Cash                                                                                    2,249      2,245 
===========================================================================  =====  =========  ========= 
Total current assets                                                                   18,811     62,678 
===========================================================================  =====  =========  ========= 
 
Total assets                                                                          442,471    489,645 
===========================================================================  =====  =========  ========= 
 
Current liabilities 
===========================================================================  =====  =========  ========= 
Trade and other payables                                                        14   (34,750)   (12,423) 
===========================================================================  =====  =========  ========= 
Lease liabilities                                                                       (229)      (180) 
===========================================================================  =====  =========  ========= 
Total current liabilities                                                            (34,979)   (12,603) 
===========================================================================  =====  =========  ========= 
 
Non-current liabilities 
===========================================================================  =====  =========  ========= 
Loans and other borrowings                                                      14  (141,369)  (190,505) 
===========================================================================  =====  =========  ========= 
Pension fund deficit                                                            23    (2,180)    (2,097) 
===========================================================================  =====  =========  ========= 
Lease liabilities                                                                     (3,453)    (2,703) 
===========================================================================  =====  =========  ========= 
Total non-current liabilities                                                       (147,002)  (195,305) 
===========================================================================  =====  =========  ========= 
 
Total liabilities                                                                   (181,981)  (207,908) 
===========================================================================  =====  =========  ========= 
 
Net assets                                                                            260,490    281,737 
===========================================================================  =====  =========  ========= 
 
Equity 
===========================================================================  =====  =========  ========= 
Called up share capital                                                         18     18,760     18,853 
===========================================================================  =====  =========  ========= 
Capital redemption reserve                                                                108          - 
===========================================================================  =====  =========  ========= 
Share premium account                                                                  75,541     75,541 
===========================================================================  =====  =========  ========= 
Retained earnings                                                                      65,914     65,181 
===========================================================================  =====  =========  ========= 
Revaluation reserve                                                                   100,167    122,162 
===========================================================================  =====  =========  ========= 
Total equity                                                                          260,490    281,737 
===========================================================================  =====  =========  ========= 
 

The accompanying notes form an integral part of these financial statements.

The loss for the financial year ended 31 March 2021 was GBP13,422,039 (2020 profit of: GBP8,340,645).

These financial statements were approved by the Board of Directors on 17 May 2021 and were signed on its behalf by R Grainger and S Perkins.

Consolidated Cashflow Statement

For the year ended 31 March 2021

 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
=====================================================  ========  ======== 
Operating activities 
=====================================================  ========  ======== 
(Loss)/profit before tax                               (16,583)     9,487 
=====================================================  ========  ======== 
Adjustments for: 
=====================================================  ========  ======== 
Depreciation                                                 47        50 
=====================================================  ========  ======== 
Amortisation of leasehold properties                          1         1 
=====================================================  ========  ======== 
Deferred bonus write-off                                     94        68 
=====================================================  ========  ======== 
Fair value of share options                                 396     (290) 
=====================================================  ========  ======== 
Letting fees amortisation                                   652       668 
=====================================================  ========  ======== 
Defined benefit pension scheme adjustments                   45        44 
=====================================================  ========  ======== 
Taxation                                                    133   (1,392) 
=====================================================  ========  ======== 
Loss/(profit) on sale of investment properties            2,854   (1,668) 
=====================================================  ========  ======== 
Movement in revaluation of investment properties         23,356     2,199 
=====================================================  ========  ======== 
Net finance costs                                         6,342     6,800 
=====================================================  ========  ======== 
Cashflow from operations before changes in working 
 capital                                                 17,337    15,967 
=====================================================  ========  ======== 
Increase in debtors                                     (1,680)     (203) 
=====================================================  ========  ======== 
Decrease in creditors                                   (2,394)   (2,903) 
=====================================================  ========  ======== 
Cash generated from operations                           13,263    12,861 
=====================================================  ========  ======== 
Interest paid                                           (5,237)   (6,061) 
=====================================================  ========  ======== 
Interest received                                             8         5 
=====================================================  ========  ======== 
Corporation tax paid                                      (605)         - 
=====================================================  ========  ======== 
Cashflows from operating activities                       7,429     6,805 
=====================================================  ========  ======== 
 
Investing activities 
=====================================================  ========  ======== 
Proceeds from sale of investment properties              70,777     8,056 
=====================================================  ========  ======== 
Purchase and development of investment properties      (19,925)  (33,395) 
=====================================================  ========  ======== 
Purchase of other fixed assets                             (24)     (126) 
=====================================================  ========  ======== 
Cashflows from investing activities                      50,828  (25,465) 
=====================================================  ========  ======== 
 
Financing activities 
=====================================================  ========  ======== 
Gross debt drawdowns                                     20,000    34,000 
=====================================================  ========  ======== 
Gross debt repayments                                  (70,000)   (5,000) 
=====================================================  ========  ======== 
Bank facility fees paid                                    (34)   (2,569) 
=====================================================  ========  ======== 
Equity dividends paid                                   (6,790)   (9,604) 
=====================================================  ========  ======== 
Share buybacks                                          (1,147)         - 
=====================================================  ========  ======== 
Headlease interest and capital paid                       (282)     (285) 
=====================================================  ========  ======== 
Cashflows from financing activities                    (58,253)    16,542 
=====================================================  ========  ======== 
 
Net increase/(decrease) in cash and cash equivalents          4   (2,118) 
=====================================================  ========  ======== 
Cash and cash equivalents at the beginning of the 
 year                                                     2,245     4,363 
=====================================================  ========  ======== 
Cash and cash equivalents at the end of the year          2,249     2,245 
=====================================================  ========  ======== 
 

The accompanying notes form an integral part of these financial statements.

Company Cashflow Statement

For the year ended 31 March 2021

 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
=====================================================  ========  ======== 
Operating activities 
=====================================================  ========  ======== 
(Loss)/profit before tax                               (13,422)     8,341 
=====================================================  ========  ======== 
Adjustments for: 
=====================================================  ========  ======== 
Depreciation                                                 31        34 
=====================================================  ========  ======== 
Amortisation of leasehold properties                          1         1 
=====================================================  ========  ======== 
Deferred bonus write-off                                     94        68 
=====================================================  ========  ======== 
Fair value of share options                                 396     (290) 
=====================================================  ========  ======== 
Letting fees amortisation                                   649       617 
=====================================================  ========  ======== 
Defined benefit pension scheme adjustments                   45        44 
=====================================================  ========  ======== 
Profit on sale of investment properties                       -   (1,668) 
=====================================================  ========  ======== 
Movement in revaluation of investment properties         21,995     2,205 
=====================================================  ========  ======== 
Net finance costs                                         6,205     5,374 
=====================================================  ========  ======== 
Cashflow from operations before changes in working 
 capital                                                 15,994    14,726 
=====================================================  ========  ======== 
Decrease/(increase) in debtors                           43,403   (3,893) 
=====================================================  ========  ======== 
Increase/(decrease) in creditors                         24,677      (27) 
=====================================================  ========  ======== 
Cash generated from operations                           84,074    10,806 
=====================================================  ========  ======== 
Interest paid                                           (5,125)   (6,061) 
=====================================================  ========  ======== 
Interest received                                            92     1,327 
=====================================================  ========  ======== 
Cashflows from operating activities                      79,041     6,072 
=====================================================  ========  ======== 
 
Investing activities 
=====================================================  ========  ======== 
Proceeds from sale of investment properties                   -     8,056 
=====================================================  ========  ======== 
Purchase and development of investment properties      (20,813)  (32,847) 
=====================================================  ========  ======== 
Purchase of other fixed assets                             (24)      (46) 
=====================================================  ========  ======== 
Cashflows from investing activities                    (20,837)  (24,837) 
=====================================================  ========  ======== 
 
Financing activities 
=====================================================  ========  ======== 
Gross debt drawdowns                                     20,000    34,000 
=====================================================  ========  ======== 
Gross debt repayments                                  (70,000)   (5,000) 
=====================================================  ========  ======== 
Bank facility fees paid                                    (34)   (2,569) 
=====================================================  ========  ======== 
Headlease interest and capital paid                       (229)     (180) 
=====================================================  ========  ======== 
Repurchase of shares                                    (1,147)         - 
=====================================================  ========  ======== 
Equity dividends paid                                   (6,790)   (9,604) 
=====================================================  ========  ======== 
Cashflows from financing activities                    (58,200)    16,647 
=====================================================  ========  ======== 
 
Net increase/(decrease) in cash and cash equivalents          4   (2,118) 
=====================================================  ========  ======== 
Cash and cash equivalents at the beginning of the 
 year                                                     2,245     4,363 
=====================================================  ========  ======== 
Cash and cash equivalents at the end of the year          2,249     2,245 
=====================================================  ========  ======== 
 

The accompanying notes form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 March 2021

 
                                                    Attributable to equity holders 
                                                         of the Parent Company 
                                        ======================================================= 
                                                      Capital  Restated                Restated 
                                           Share   redemption     Share  Revaluation   Retained     Total 
                                         capital      revenue   premium      reserve   earnings    equity 
                                         GBP'000      GBP'000   GBP'000      GBP'000    GBP'000   GBP'000 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2019                          18,825            -    75,541      132,625     84,092   311,083 
======================================  ========  ===========  ========  ===========  =========  ======== 
Profit for the year                            -            -         -            -      8,095     8,095 
======================================  ========  ===========  ========  ===========  =========  ======== 
Other comprehensive income: 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer deficit on revaluation 
 of properties                                 -            -         -      (2,200)      2,200         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer on disposal of investment 
 properties                                    -            -         -        2,816    (2,816)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Remeasurement on defined benefit 
 pension scheme                                -            -         -            -      (185)     (185) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Total comprehensive income for 
 the year                                      -            -         -          616      7,294     7,910 
======================================  ========  ===========  ========  ===========  =========  ======== 
Issue of new shares net of costs              28            -         -            -       (28)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Dividends paid in year                         -            -         -            -    (9,605)   (9,605) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Deferred bonus                                 -            -         -            -         68        68 
======================================  ========  ===========  ========  ===========  =========  ======== 
Costs of share-based payments                  -            -         -            -      (290)     (290) 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2020                          18,853            -    75,541      133,241     81,531   309,166 
======================================  ========  ===========  ========  ===========  =========  ======== 
Loss for the year                              -            -         -            -   (16,450)  (16,450) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Other comprehensive (expense)/income: 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer deficit on revaluation 
 of properties                                 -            -         -     (23,356)     23,356         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer on disposal of investment 
 property                                      -            -         -        5,010          -     5,010 
======================================  ========  ===========  ========  ===========  =========  ======== 
Remeasurement on defined benefit 
 pension scheme                                -            -         -            -      (278)     (278) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Total comprehensive (expense)/income 
 for the year                                  -            -         -     (18,346)      6,628  (11,718) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Issue of new shares net of costs              15            -         -            -       (15)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Repurchase of shares                       (108)          108         -            -    (1,247)   (1,247) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Dividends paid in year                         -            -         -            -    (6,789)   (6,789) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Deferred bonus                                 -            -         -            -         94        94 
======================================  ========  ===========  ========  ===========  =========  ======== 
Costs of share-based payments                  -            -         -            -        396       396 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2021                          18,760          108    75,541      114,895     80,598   289,902 
======================================  ========  ===========  ========  ===========  =========  ======== 
 

The accompanying notes form an integral part of these financial statements.

Company Statement of Changes in Equity

For the year ended 31 March 2021

 
                                                      Capital  Restated                Restated 
                                           Share   redemption     Share  Revaluation   Retained     Total 
                                         capital      revenue   premium      reserve   earnings    equity 
                                         GBP'000      GBP'000   GBP'000      GBP'000    GBP'000   GBP'000 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2019                          18,825            -    75,541      121,551     67,491   283,408 
======================================  ========  ===========  ========  ===========  =========  ======== 
Profit for the year                            -            -         -            -      8,341     8,341 
======================================  ========  ===========  ========  ===========  =========  ======== 
Other comprehensive income: 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer deficit on revaluation 
 of properties                                 -            -         -      (2,205)      2,205         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer on disposal of investment 
 properties                                    -            -         -        2,816    (2,816)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Remeasurement on defined benefit 
 pension scheme                                -            -         -            -      (185)     (185) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Total comprehensive income for 
 the year                                      -            -         -          611      7,545     8,156 
======================================  ========  ===========  ========  ===========  =========  ======== 
Issue of new shares net of costs              28            -         -            -       (28)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Dividends paid in year                         -            -         -            -    (9,605)   (9,605) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Deferred bonus                                 -            -         -            -         68        68 
======================================  ========  ===========  ========  ===========  =========  ======== 
Costs of share-based payments                  -            -         -            -      (290)     (290) 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2020                          18,853            -    75,541      122,162     65,181   281,737 
======================================  ========  ===========  ========  ===========  =========  ======== 
Loss for the year                              -            -         -            -   (13,422)  (13,422) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Other comprehensive (expense)/income: 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer deficit on revaluation 
 of properties                                 -            -         -     (21,995)     21,995         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Transfer on disposal of investment 
 properties                                    -            -         -            -          -         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Remeasurement on defined benefit 
 pension scheme                                -            -         -            -      (278)     (278) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Total comprehensive (expense)/income 
 for the year                                  -            -         -     (21,995)      8,295  (13,700) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Issue of new shares net of costs              15            -         -            -       (15)         - 
======================================  ========  ===========  ========  ===========  =========  ======== 
Repurchase of shares                       (108)          108         -            -    (1,247)   (1,247) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Dividends paid in year                         -            -         -            -    (6,789)   (6,789) 
======================================  ========  ===========  ========  ===========  =========  ======== 
Deferred bonus                                 -            -         -            -         93        93 
======================================  ========  ===========  ========  ===========  =========  ======== 
Costs of share-based payments                  -            -         -            -        396       396 
======================================  ========  ===========  ========  ===========  =========  ======== 
At 31 March 2021                          18,760          108    75,541      100,167     65,914   260,490 
======================================  ========  ===========  ========  ===========  =========  ======== 
 

The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements

For the year ended 31 March 2021

1 Accounting policies

Basis of preparation

McKay Securities Plc ('the Company') is a public company limited by shares incorporated in the United Kingdom under the Companies Act and is registered in England and Wales. The address of the Company's registered office is 20 Greyfriars Road, Reading, Berkshire RG1 1NL.

The principal activities of the Company and its subsidiaries ('the Group') and the nature of the Group's operations are set out in the Strategic Report.

These financial statements are presented in GBP sterling, which is the currency of the primary economic environment in which the Group operates and are rounded to the nearest thousand.

The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS Standards) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial statements are prepared on a going concern basis as explained in the Principal Risks and Uncertainties and going concern statement.

In accordance with Section 408 Companies Act 2006 a separate Profit and Loss and Other Comprehensive Income for the Company is not presented. The loss for the year after tax of the Company is GBP13,422,039 (2020: profit of GBP8,340,645).

The consolidated financial statements of the Company and its subsidiary ('the Group') have been prepared on a historical cost basis, except for investment property which is measured at fair value through the Profit and Loss and Other Comprehensive Income.

Fair value is 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 and leasing transactions that are within the scope of IFRS 16.

New and revised IFRS Standards in issue but not yet effective

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective:

   IFRS 17                                                 Insurance Contracts 

IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to IAS 1 Classification of Liabilities as Current or Non-current

   Amendments to IFRS 3                         Reference to the Conceptual Framework 

Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use

   Amendments to IAS 37                         Onerous Contracts - Cost of Fulfilling a Contract 

Annual Improvements to IFRS Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards,

Standards 2018-2020 Cycle IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.

IFRS 16 was adopted for the first time for the year ended 31 March 2020.

For the year ended 31 March 2021 the following subsidiaries of the Company were entitled to exemption from audit under s479A of the Companies Act 2006 relating to subsidiary companies:

 
                        Companies House Registration 
Subsidiary Name          Number 
======================  ============================ 
Baldwin House Limited   00692181 
======================  ============================ 
 

Basis of consolidation

The subsidiary company is under the control of the Company. Control means being exposed or have rights to variable returns from its involvement and has the ability to affect those returns through its power over the subsidiary.

Control is achieved when the Company: has the power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affects its returns.

All intra-Group assets and liabilities, equity, income, expenses and cashflows relating to transactions between the members of the Group are eliminated on consolidation.

Critical accounting judgements and key sources of estimation uncertainty

In the process of preparing the Group's financial statements management is required to make judgements, estimates and assumptions when applying accounting policies that may affect the reported amounts of revenues, expenses, assets and liabilities. Any judgements, estimates and associated assumptions used in the preparation of the financial statements are based on management's best information at the time, however actual outcomes may differ from estimates used. Management does not consider there to be any critical accounting judgements in the preparation of the Group's financial statements. Management considers that the valuation of investment property represents a key source of estimation uncertainty, for which qualified external advisers are used. As a result of Covid-19, the level of estimation increased, as reflected by the inclusion of a material uncertainty clause within the valuation report, as at 31 March 2020. However no material uncertainty clause has been included for the year ended 31 March 2021. See further detail below and in note 10.

Investment properties

The Group's properties are held as investments to earn rental income and for capital appreciation and are stated at fair value at the balance sheet date. The value, reflecting market conditions, is determined at each reporting date by independent external valuers and any gain or loss arising from a change in value is recognised in the Profit and Loss and Other Comprehensive Income and transferred to the revaluation reserve in the Group Statement of Financial Position. Tenant incentives are recognised as a separate asset in accordance with the Group's accounting policy on lease incentives and are deducted from the external valuation.

Properties purchased are recognised on legal completion in the accounting period and measured initially at cost including transaction costs. Sales of properties are recognised on legal completion. Gains and losses arising on the disposal of investment properties are recognised in the Profit and Loss and Other Comprehensive Income, being the difference between net sale proceeds and the carrying value of the property.

Subsequent expenditure on investment properties is capitalised only when it increases the future economic benefits associated with the property. All other expenditure is charged to the Profit and Loss and Other Comprehensive Income.

Interest and other outgoings less rental income relating to investment properties in the course of development are capitalised, and added to the cost of the property. Interest capitalised is calculated on development outgoings, including material refurbishments to investment property, using the weighted average cost of general Group borrowings for the year. A property ceases to be treated as being in the course of development when substantially all the activities that are necessary to prepare the property for use are completed.

The Group owns a number of properties under long leaseholds. These are leased out to tenants under operating leases and included in the balance sheet at fair value (disclosed as head leases). The obligation to the freeholder for the buildings element of the leasehold is included in the balance sheet at the present value of the minimum lease payments at inception. The minimum lease payments are apportioned between finance charges in the Profit and Loss and Other Comprehensive Income and the reduction of the Group Statement of Financial Position liability. Contingent rents are charged as an expense in the Profit and Loss and Other Comprehensive Income in the period incurred.

Assets held for sale

Properties held for sale are classified as non-current assets if their carrying amount will be recovered principally through sale rather than through continuing use, they are available for immediate sale and sale is highly probable within one year.

Investment properties held for sale are carried at fair value in the Statement of Financial Position. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated.

Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis at rates calculated to write off the cost less estimated residual value over their useful lives, which are estimated to be between three and five years.

Cash

Cash comprises cash at bank and short-term deposits held on call.

Financial assets

Financial assets do not carry any interest and are stated initially at fair value and subsequently at amortised cost as reduced by appropriate credit loss allowances. The Group always recognises lifetime expected credit losses ('ECL') on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The Group derecognises a financial asset when the contractual right to the cashflows of the asset expire or on transfer of the asset and the associated risks and rewards to another party.

Trade and other payables

Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently at amortised cost. The Group derecognises trade and other payables liabilities when they are extinguished, which occurs when the obligation associated with the liability is discharged, cancelled or expires.

Interest bearing loans and borrowings

All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. Subsequent to initial recognition, loans and borrowings are measured at amortised cost using the effective interest rate method.

Reserves

The revaluation reserve represents the unrealised surpluses and deficits arising on fair value measurement of the Group's properties and is not available for distribution until realised through sale. This forms part of retained earnings.

Segmental analysis

All of the Group's revenue is derived from the ownership of investment properties located in the South East and London. The management team works within a single structure which includes the Executive Directors acting as chief operating decision maker. Responsibilities are not defined by type or location, each property being managed individually and reported on for the Group as a whole directly to the Board of Directors. Properties under development generate no revenue and are treated as investment properties in the portfolio. The Directors therefore consider there to be only one reporting segment.

Revenue

The Group has entered into commercial property leases on its investment property portfolio. The Directors consider, based on the terms and conditions, the significant risks and rewards of ownership of the properties are retained and therefore account for the leases as operating leases. Rental income receivable under operating leases less initial direct costs on arranging the leases is recognised on a straight line basis over the non-cancellable term of the lease.

The aggregate value of incentives for lessees to enter into lease agreements, usually in the form of rent free periods or capital contributions, is recognised over the lease term or to tenant option to break as an adjustment to rental income.

The revenue recognition policy for the following revenue streams are in line with IFRS 15, as revenue is recognised when it transfers control over a product or service to a customer.

Premiums received from tenants to terminate leases are recognised as income from investment properties when they arise.

Service charges and other such receipts arising from expenses recharged to tenants, with the Group acting as principal, are recognised in the period that the expense can be contractually recovered and included gross in income from investment properties.

Interest received on short-term deposits is recognised in finance income as it accrues.

Operating profit

Operating profit is identified in the income statement and represents the profit on activities before finance costs and taxation.

Borrowing costs

Interest on borrowings, including interest on finance leases, is recognised in the Profit and Loss and Other Comprehensive Income in the period during which it is incurred, except for interest capitalised in accordance with the Group's policy on properties under development (see investment properties above). Costs incurred on putting in place borrowing facilities are recognised in finance costs over the term of the facility.

Share-based payments

The Group operates an equity-settled share-based performance plan outlined in the Directors' Remuneration Report under which Directors and employees are able to acquire shares in the Company. Equity-settled share-based payments to employees' services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 17.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.

Post employment benefits

The Group operates two pension schemes. The defined benefit scheme is based on final pensionable pay and has been closed to new entrants since 1989. The assets of the scheme are held separately from those of the Group and are measured at fair value, the scheme obligations being calculated at discounted present value, with any net surplus or deficit recognised in the Group Statement of Financial Position. Current service cost and net interest on scheme liabilities and scheme assets are recognised as an expense in the Profit and Loss and Other Comprehensive Income. Actuarial gains and losses on scheme assets and liabilities are recognised in equity through the Profit and Loss and Other Comprehensive Income. The assumptions used by a qualified actuary are outlined in note 23.

The Group contributes to eligible employees' defined contribution personal pension plans and does not accept any responsibility for the benefits gained from these plans. The contributions are recognised as an expense in the Profit and Loss and Other Comprehensive Income as incurred but the Group does not recognise any gains or losses arising from movements in the value of the personal pension plans.

Taxation

Any tax charge recognised in the Pro t and Loss and Other Comprehensive Income comprises current and deferred tax except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity.

Current tax is the expected tax liability on the results for the year adjusted for items that are not taxable or deductible, or taxable and deductible in other periods, together with any adjustment in respect of previous years calculated using tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be paid or recovered on temporary differences arising between the carrying amounts of assets and liabilities for nancial reporting purposes and their tax base. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Tax liabilities are recognised for all taxable temporary differences and tax assets to the extent that future taxable pro ts will be available against which the asset can be utilised.

The Group converted to REIT status on 1 April 2007 and as a consequence substantially all the Group's activities as a property rental business are exempt from tax, including rental pro ts and gains on rental property disposals that are compliant with the REIT rules.

2 Net rental income from investment properties

 
                                                          2021      2020 
                                                       GBP'000   GBP'000 
====================================================  ========  ======== 
Gross rents receivable                                  22,854    22,873 
====================================================  ========  ======== 
IFRS 16 adjustment (spreading of rental incentives)      1,771     2,291 
====================================================  ========  ======== 
Gross rental income                                     24,625    25,164 
====================================================  ========  ======== 
Service charges receivable                               3,964     4,132 
====================================================  ========  ======== 
Gross rents and service charges receivable              28,589    29,296 
====================================================  ========  ======== 
Other property income                                      157        69 
====================================================  ========  ======== 
Direct property outgoings                              (7,112)   (7,384) 
====================================================  ========  ======== 
Net rental income from investment properties            21,634    21,981 
====================================================  ========  ======== 
 

Rent receivable under the terms of the leases is adjusted, in accordance with IFRS 16, for the effect of any incentives given.

3 Administration costs

 
                                                     2021      2020 
                                                  GBP'000   GBP'000 
===============================================  ========  ======== 
Group 
===============================================  ========  ======== 
Directors' - remuneration                           1,204     1,203 
===============================================  ========  ======== 
                - bonus                               449       523 
===============================================  ========  ======== 
Staff - costs                                       1,061     1,167 
===============================================  ========  ======== 
                - bonus                               252       239 
===============================================  ========  ======== 
Management fee service charge                       (361)     (293) 
===============================================  ========  ======== 
National Insurance                                    227       507 
===============================================  ========  ======== 
Pension costs - defined benefit scheme                 45        44 
===============================================  ========  ======== 
                      - defined contributions         308       275 
===============================================  ========  ======== 
Other staff costs                                      51        37 
===============================================  ========  ======== 
Share-based payment accounting charge (IFRS 2)        489     (222) 
===============================================  ========  ======== 
Staff related costs                                 3,725     3,480 
===============================================  ========  ======== 
Depreciation (note 12)                                 47        50 
===============================================  ========  ======== 
Office costs                                          676       575 
===============================================  ========  ======== 
Legal and professional fees                         1,123     1,007 
===============================================  ========  ======== 
General expenses                                       93        51 
===============================================  ========  ======== 
Total administrations costs                         5,664     5,163 
===============================================  ========  ======== 
 

The average number of persons employed by the Group and Company during the year was 18 (2020: 19).

Details of Directors' remuneration can be found in the Directors' Annual Remuneration Report.

In advance of each audit, the Committee obtains confirmation from the external auditor that it remains independent and that the level and nature of non-audit fees are not an independence threat. The table below details the total fees paid to the auditor. The Committee considers the current auditor Deloitte to be independent of the Group and Company.

 
                                   2021      2020 
                                GBP'000   GBP'000 
=============================  ========  ======== 
Fees paid to auditor 
=============================  ========  ======== 
Statutory audit services 
=============================  ========  ======== 
  McKay Securities Plc audit        137       130 
=============================  ========  ======== 
  Subsidiary audit                   10        10 
=============================  ========  ======== 
 
Assurance services 
=============================  ========  ======== 
   Interim review                    31        30 
=============================  ========  ======== 
   Service charge review             16        15 
=============================  ========  ======== 
                                    194       185 
=============================  ========  ======== 
 

4 Alternative performance measures

 
APM                                              IFRS               Note reference 
===============================================  =================  ============== 
Adjusted profit before tax                       Profit before tax  Note 4 
 The Group adjusts to present recurring           IFRS 
 profits by removing items not under management 
 control 
-----------------------------------------------  -----------------  -------------- 
 
Total property return ('TPR')                                       Note 4 
-----------------------------------------------  -----------------  -------------- 
Management's indicator of return on portfolio 
 during the period. 
-----------------------------------------------  -----------------  -------------- 
 
Debt to portfolio value ('LTV')                                     Note 4 
-----------------------------------------------  -----------------  -------------- 
Management guide to gearing levels. 
-----------------------------------------------  -----------------  -------------- 
 
EPRA net tangible asset value per share          Net asset value    Note 21 
 ('NTA')                                          per share 
-----------------------------------------------  -----------------  -------------- 
Assumes that entities buy and sell assets, 
 crystalising unavoidable deferred tax. 
-----------------------------------------------  -----------------  -------------- 
 
EPRA net reinstatement asset value per           Net asset value    Note 21 
 share ('NRV')                                    per share 
-----------------------------------------------  -----------------  -------------- 
Assumes that entities never sell assets, 
 therefore the value required to rebuild 
 the entity. 
-----------------------------------------------  -----------------  -------------- 
 
EPRA net disposal asset value per share          Net asset value    Note 21 
 ('NDV')                                          per share 
-----------------------------------------------  -----------------  -------------- 
Represents a disposal scenario where 
 deferred tax and other adjustments are 
 calculated. 
-----------------------------------------------  -----------------  -------------- 
 
EPRA net asset value per share                   Net asset value    Note 21 
 A future looking matrix by adding in             per share 
 share options that may vest 
-----------------------------------------------  -----------------  -------------- 
 
EPRA ('NNNAV')                                   Net asset value    Note 21 
 EPRA NNNAV in the EPRA NAV adjusted to           per share 
 reflect the fair value of debt and derivatives 
 and to include deferred taxation. 
-----------------------------------------------  -----------------  -------------- 
 
Adjusted earnings per share                      Basic earnings     Note 8 
 Adjusted earnings as above by using recurring    per share 
 profits 
-----------------------------------------------  -----------------  -------------- 
 
EPRA earnings per share                          Basic earnings     Note 8 
 Adjusted earnings per share except for           per share 
 surrender premiums (included in other 
 property income) and share based payments 
 are added back. 
-----------------------------------------------  -----------------  -------------- 
 
Portfolio valuation 
 Valuation of total property portfolio 
 at period end as per Knight Frank valuation 
===============================================  =================  ============== 
 

The Group uses a number of Alternative Performance Measures ('APMs') which are not defined or specified within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and allow greater comparability between periods but do not consider them to be a substitute for, or superior to, IFRS measures. The Directors consider adjusted profit before tax to be an additional informative measure of the ongoing profits from core rental activities before taxation, adjusted as set out. See further detail in the glossary.

These alternative performance measures are commonly used within the property sector.

 
                                                         2021      2020 
                                                      GBP'000   GBP'000 
===================================================  ========  ======== 
(Loss)/profit before tax                             (16,583)     9,487 
===================================================  ========  ======== 
Movement in revaluation of investment properties 
 (see note 11)                                         23,356     2,199 
===================================================  ========  ======== 
Other property income (see note 2)                      (157)      (69) 
===================================================  ========  ======== 
Loss/(profit) on disposal of investment properties      2,854   (1,668) 
===================================================  ========  ======== 
IFRS 2 adjustment to share-based payments                 489     (222) 
===================================================  ========  ======== 
Adjusted profit before tax                              9,959     9,727 
===================================================  ========  ======== 
 

Total property return (TPR)

 
                                                     2021      2020 
                                                  GBP'000   GBP'000 
===============================================  ========  ======== 
Valuation (deficit) / surplus                    (21,579)       111 
===============================================  ========  ======== 
Profit realised on disposal (excluding IFRS 16 
 write off)                                         2,155     1,668 
===============================================  ========  ======== 
Income from investment properties                  21,663    21,981 
===============================================  ========  ======== 
                                                    2,209    23,760 
===============================================  ========  ======== 
Book value                                        459,480   509,889 
===============================================  ========  ======== 
Total property return                                0.5%      4.7% 
===============================================  ========  ======== 
 

As there are no remaining developments as at 31 March 2021 we have updated the table above to show TPR including developments to provide a more appropriate comparison.

Debt to portfolio value ('LTV')

 
                                                2021      2020 
                                             GBP'000   GBP'000 
==========================================  ========  ======== 
Drawn debt                                   144,000   194,000 
==========================================  ========  ======== 
Cash balances                                (2,249)   (2,245) 
==========================================  ========  ======== 
Net debt - bank debt net of cash balances    141,751   191,755 
==========================================  ========  ======== 
Valuation as reported by external valuers    437,900   510,000 
==========================================  ========  ======== 
LTV                                            32.4%     37.6% 
==========================================  ========  ======== 
 

5 Net finance costs

 
                                                       2021      2020 
                                                    GBP'000   GBP'000 
=================================================  ========  ======== 
Interest on bank overdraft and loans                  4,606     5,602 
=================================================  ========  ======== 
Commitment fee                                          564       462 
=================================================  ========  ======== 
Lease interest on leasehold property obligations        282       397 
=================================================  ========  ======== 
Finance arrangement costs                               899       895 
=================================================  ========  ======== 
Capitalised interest (note 7)                             -     (551) 
=================================================  ========  ======== 
                                                      6,351     6,805 
=================================================  ========  ======== 
Interest receivable                                     (8)       (5) 
=================================================  ========  ======== 
Net finance costs                                     6,343     6,800 
=================================================  ========  ======== 
 

The capitalisation of interest has no effect on taxation.

6 Taxation

 
                                                        2021      2020 
                                                     GBP'000   GBP'000 
==================================================  ========  ======== 
Total tax in the Consolidated Profit and Loss and 
 Other Comprehensive Income                              133   (1,392) 
==================================================  ========  ======== 
Reconciliation to effective rate of tax: 
--------------------------------------------------  --------  -------- 
(Loss)/profit on ordinary activities before tax     (16,583)     9,487 
==================================================  ========  ======== 
Tax charge on profit at 19% (2020: 19%)              (3,151)     1,803 
==================================================  ========  ======== 
Effects of: 
==================================================  ========  ======== 
REIT tax exemption                                     3,151   (1,803) 
==================================================  ========  ======== 
Tax provision movement                                   133   (1,392) 
==================================================  ========  ======== 
Tax for period (as above)                                133   (1,392) 
==================================================  ========  ======== 
 

The taxation charge in the Consolidated Profit and Loss and Other Comprehensive Income relates to a movement in the taxation provision of GBP133,000 on the sale of 30 Lombard Street, EC3. As a REIT, the Group is tax exempt in respect of qualifying capital gains and qualifying rental income, which covers the majority of the Company's activities. The tax provision relating to the sale of 30 Lombard St arises as the completion of the sale was within three years of practical completion and therefore triggers a chargeable capital gain under REIT regulations.

7 Capitalised interest

Interest relating to investment properties in the course of development is dealt with as explained in note 1.

Interest capitalised during the year amounted to nil (2020: GBP550,933 related to works to Theale Logistics Park).

Total development interest capitalised amounts to GBP14,737,480 (2020: GBP14,737,480).

Interest is capitalised using the Group's weighted average cost of borrowings and the effective rate applied in the year was 3.10% (2020: 3.35%).

8 Earnings per share

 
                                                          2021    2020 
Basic earnings per share                                 pence   pence 
=====================================================  =======  ====== 
Basic (loss)/earnings per share                        (17.45)    8.59 
=====================================================  =======  ====== 
  Movement in revaluation of investment properties       24.77    2.33 
=====================================================  =======  ====== 
  Other property income                                 (0.17)  (0.07) 
=====================================================  =======  ====== 
  Loss/(profit) on disposal of investment properties      3.03  (1.77) 
=====================================================  =======  ====== 
  Taxation                                              (0.14)    1.48 
=====================================================  =======  ====== 
  Share-based payments                                    0.52  (0.24) 
=====================================================  =======  ====== 
Adjusted earnings per share                              10.56   10.32 
=====================================================  =======  ====== 
  Share-based payments                                  (0.52)    0.24 
=====================================================  =======  ====== 
  Other property income                                   0.17    0.07 
=====================================================  =======  ====== 
EPRA earnings per share                                  10.21   10.63 
=====================================================  =======  ====== 
 

Basic (loss)/earnings per share on ordinary shares is calculated on the loss in the year of (GBP16,450,000) (2020: profit of GBP8,095,000) and 94,292,376 (2020: 94,234,253) shares, being the weighted average number of ordinary shares in issue during the year.

EPRA earnings per share is calculated on the same profit after tax and on the weighted average number of shares in issue during the year of 94,292,376 (2020: 94,234,253) shares.

 
                                                            2021        2020 
                                                          Number      Number 
                                                       of shares   of shares 
====================================================  ==========  ========== 
Weighted average number of ordinary shares in issue   94,292,376  94,234,253 
====================================================  ==========  ========== 
Number of shares under option                                  -     463,819 
====================================================  ==========  ========== 
Number of shares that would have been issued at 
 fair value                                                    -   (244,272) 
====================================================  ==========  ========== 
Diluted weighted average number of ordinary shares 
 in issue                                             94,292,376  94,453,800 
====================================================  ==========  ========== 
 

The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share.

 
                                      2021        2020 
                                    Number      Number 
                                 of shares   of shares 
==============================  ==========  ========== 
Number of shares under option      144,921           - 
==============================  ==========  ========== 
 
 
                                                          2021    2020 
Diluted earnings per share                               pence   pence 
=====================================================  =======  ====== 
Basic (loss)/earnings per share                        (17.45)    8.59 
=====================================================  =======  ====== 
  Effect of dilutive potential ordinary shares under 
   option                                                 0.00  (0.02) 
=====================================================  =======  ====== 
                                                       (17.45)    8.57 
=====================================================  =======  ====== 
  Movement in revaluation of investment properties       24.77    2.33 
=====================================================  =======  ====== 
  Other property income                                 (0.17)  (0.07) 
=====================================================  =======  ====== 
  Loss/(profit) on disposal of investment properties      3.03  (1.77) 
=====================================================  =======  ====== 
  Share-based payments                                    0.52  (0.24) 
=====================================================  =======  ====== 
  Taxation                                              (0.14)    1.47 
=====================================================  =======  ====== 
Adjusted diluted earnings per share                      10.56   10.29 
=====================================================  =======  ====== 
 

Adjusted earnings per share excludes the after tax effect of profit from the disposal of investment properties, share-based payments, deferred taxation, other property income, and the movement in revaluation of investment property.

The taxation charge in the Consolidated Profit and Loss and Other Comprehensive Income relates to a taxation provision movement of GBP133,000 on the sale of 30 Lombard Street, EC3.

9 Dividends

The final dividend is not included in the accounts as a liability as at 31 March 2021, as it is subject to shareholder approval at the Annual General Meeting. The final dividend for 2020 and interim for 2020 paid in the year are included in the Consolidated Statement of Changes in Equity above.

 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
=====================================================  ========  ======== 
Ordinary dividends 
=====================================================  ========  ======== 
31 March 2020 final dividend of 4.4 pence (31 March 
 2019: 7.4 pence) paid during the year                    4,148     6,965 
=====================================================  ========  ======== 
30 September 2020 interim dividend of 2.8 pence (30 
 September 2019: 2.8 pence) paid during the year          2,642     2,639 
=====================================================  ========  ======== 
Total recognised in financial statements                  6,790     9,604 
=====================================================  ========  ======== 
Proposed final dividend of 5.5 pence (31 March 2020: 
 4.4 pence)                                               5,116     4,148 
=====================================================  ========  ======== 
 

10 Investment properties

 
                                                   Group                          Company 
=====================================  ==============================  ============================== 
                                       Freehold        Long     Total  Freehold        Long     Total 
                                        GBP'000   leasehold   GBP'000   GBP'000   leasehold   GBP'000 
                                                    GBP'000                         GBP'000 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Valuation 
=====================================  ========  ==========  ========  ========  ==========  ======== 
At 1 April 2020                         401,998     101,768   503,766   401,998      31,402   433,400 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Additions - capital expenditure           6,337         484     6,821     6,337         478     6,815 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Additions - purchases                    10,658           -    10,658    10,658           -    10,658 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Revaluation deficit                    (18,445)     (3,134)  (21,579)  (18,445)     (3,128)  (21,573) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Adjustment for tenant incentives 
 recognised in advance under 
 IFRS 16                                  (449)     (1,327)   (1,776)     (449)          28     (421) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Disposals                                     -    (69,520)  (69,520)         -           -         - 
=====================================  ========  ==========  ========  ========  ==========  ======== 
IFRS write off on disposal                    -       5,009     5,009         -           -         - 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Headlease adjustment                          -         801       801         -         801       801 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Amortisation of grossed up headlease 
 liabilities                                  -         (1)       (1)         -         (1)       (1) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Book value as at 31 March 2021          400,099      34,080   434,179   400,099      29,580   429,679 
=====================================  ========  ==========  ========  ========  ==========  ======== 
 
Adjustment for grossing up of 
 headlease liabilities                        -     (3,682)   (3,682)         -     (3,682)   (3,682) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Adjustment for tenant incentives 
 recognised in advance under 
 IFRS 16                                  7,301         102     7,403     7,301         102     7,403 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Valuation as at 31 March 2021           407,400      30,500   437,900   407,400      26,000   433,400 
=====================================  ========  ==========  ========  ========  ==========  ======== 
 
 
                                                   Group                          Company 
=====================================  ==============================  ============================== 
                                       Freehold        Long     Total  Freehold        Long     Total 
                                        GBP'000   leasehold   GBP'000   GBP'000   leasehold   GBP'000 
                                                    GBP'000                         GBP'000 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Valuation 
=====================================  ========  ==========  ========  ========  ==========  ======== 
At 1 April 2019                         378,125     100,653   478,778   378,125      30,790   408,915 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Additions - development                  16,396         555    16,951    16,396          57    16,453 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Additions - purchases                    16,438           -    16,438    16,438           -    16,438 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Revaluation (deficit)/surplus           (3,235)       3,346       111   (3,235)         393   (2,842) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Adjustment for tenant incentives 
 recognised in advance under 
 IFRS 16                                    474     (2,785)   (2,311)       474         163       637 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Disposals                               (6,200)           -   (6,200)   (6,200)           -   (6,200) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Amortisation of grossed up headlease 
 liabilities                                  -         (1)       (1)         -         (1)       (1) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Book value as at 31 March 2020          401,998     101,768   503,766   401,988      31,402   433,400 
=====================================  ========  ==========  ========  ========  ==========  ======== 
 
Adjustment for grossing up of 
 headlease liabilities                        -     (4,403)   (4,403)         -     (2,882)   (2,882) 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Adjustment for tenant incentives 
 recognised in advance under 
 IFRS 16                                  6,852       3,785    10,637     6,852         130     6,982 
=====================================  ========  ==========  ========  ========  ==========  ======== 
Valuation as at 31 March 2020           408,850     101,150   510,000   408,850      28,650   437,500 
=====================================  ========  ==========  ========  ========  ==========  ======== 
 

In accordance with the Group's accounting policy on properties there was an external valuation at 31 March 2021. These valuations were carried out by Knight Frank LLP, Chartered Surveyors and Valuers. All valuations were carried out in accordance with the Appraisal and Valuation Standards of RICS, on an open market basis.

The historical cost of properties stated at valuation is approximately GBP322 million (2020: GBP377 million) for the Group and GBP321 million (2020: GBP315 million) for the Company.

The amount of interest capitalised during the year was nil (2020: GBP550,933). The Group is a REIT and therefore does not obtain relief from Corporation Tax.

Investment property valuation method and assumptions

The fair value of the property portfolio has been determined using income capitalisation techniques, whereby contracted and market rental values are capitalised with a market value for properties under development, the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion and a risk premium. The resulting valuations are cross-checked against the equivalent yields and the fair market values per square foot derived from comparable recent market transactions on arm's length terms.

These techniques are consistent with the principles in IFRS 13 Fair Value Measurement and use significant unobservable inputs such that the fair value measurement of each property within the portfolio has been classified as Level 3 in the fair value hierarchy. There were no transfers in or out of Level 3 for investment properties during the year.

Losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy amount to GBP23.4 million (2020: GBP2.2 million) and are presented in the Group income statement in the line item 'Revaluation of investment properties'.

Due to Covid-19 there was a material uncertainty clause attached to the Knight Frank valuation for the year ended 31 March 2020. Whilst Covid-19 continues to impact financial markets and restrictions remain in place in many countries including the UK the stabilising conditions have meant that no material uncertainty clause is included in the year ended 31 March 2021.

The asset held for sale is The Planets, Woking totalling GBP13.5 million, all of which has been reclassified from investment property. This property remains held for sale at 31 March 2021, with the original exchange of sale contracts in March 2019. This sale remains conditional on the receipt of planning consent being achieved by the purchaser. Whilst the submitted planning consent was not approved on initial submission, management is confident that a successful appeal will be undertaken with an adjusted plan such that the disposal will be able to be completed within 12 months of the balance sheet date.

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:

 
                                                                    South East             South East 
                                         London offices                offices             industrial 
================================  =====================  =====================  ===================== 
Valuation technique               Income capitalisation  Income capitalisation  Income capitalisation 
================================  =====================  =====================  ===================== 
Fair value                                GBP56,000,000         GBP235,600,000         GBP122,400,000 
================================  =====================  =====================  ===================== 
ERV (psf pa) - average                         GBP53.69               GBP23.62               GBP11.08 
================================  =====================  =====================  ===================== 
ERV (psf pa) - range                  GBP7.50-GBP100.00      GBP14.50-GBP48.00       GBP5.00-GBP17.00 
================================  =====================  =====================  ===================== 
True equivalent yield - average                   4.95%                  7.84%                  5.20% 
================================  =====================  =====================  ===================== 
True equivalent yield - range               4.36%-6.06%           5.95%-10.58%            4.25%-6.23% 
================================  =====================  =====================  ===================== 
Capital value psf                             GBP741.20              GBP321.87              GBP216.70 
================================  =====================  =====================  ===================== 
 

A further GBP23.90 million has been designated 'other' and not included in the analysis above.

Definitions for ERV and true equivalent yield are provided in the glossary.

 
                                            Change in ERV     Change in equivalent 
                                                                      yield 
=========================================  ================  ====================== 
                                               +5%      -5%      +0.25%      -0.25% 
=========================================  =======  =======  ==========  ========== 
Sensitivity analysis 
=========================================  =======  =======  ==========  ========== 
Change in value of investment properties   +GBP19m  -GBP19m     -GBP20m     +GBP22m 
=========================================  =======  =======  ==========  ========== 
 

11 Plant and equipment

 
                                2021                2020 
                     Group   Company     Group   Company 
                   GBP'000   GBP'000   GBP'000   GBP'000 
================  ========  ========  ========  ======== 
Cost 
================  ========  ========  ========  ======== 
Opening                231       151       133       133 
================  ========  ========  ========  ======== 
Additions               24        24       132        52 
================  ========  ========  ========  ======== 
Disposals             (20)      (20)      (34)      (34) 
================  ========  ========  ========  ======== 
Closing                235       155       231       151 
================  ========  ========  ========  ======== 
 
Depreciation 
================  ========  ========  ========  ======== 
Opening                 83        67        61        61 
================  ========  ========  ========  ======== 
Charge for year         47        31        50        34 
================  ========  ========  ========  ======== 
Disposals             (20)      (20)      (28)      (28) 
================  ========  ========  ========  ======== 
Closing                110        78        83        67 
================  ========  ========  ========  ======== 
Net book value         125        77       148        84 
================  ========  ========  ========  ======== 
 

12 Investments

 
                          Shares 
                   in subsidiary 
                    undertakings 
                         GBP'000 
================  ============== 
Company 
================  ============== 
At 1 April 2020                - 
================  ============== 
At 31 March 2021               - 
================  ============== 
 

At 31 March 2021 McKay Securities Plc owned 100% of the ordinary share capital of Baldwin House Limited, representing 100 shares with nominal value of GBP1. Baldwin House Limited operates in England and is registered in England and Wales with a registered address of 20 Greyfriars Road, Reading, Berkshire RG1 1NL.

The principal activity of the subsidiary undertaking is property investment and development.

The Directors are of the opinion that the investment in the subsidiary undertaking is not worth less than the current book value.

13 Trade and other receivables

 
                                                         2021                2020 
                                              Group   Company     Group   Company 
                                            GBP'000   GBP'000   GBP'000   GBP'000 
=========================================  ========  ========  ========  ======== 
Current 
=========================================  ========  ========  ========  ======== 
Rent receivables                              2,072     2,072     2,360     2,360 
=========================================  ========  ========  ========  ======== 
Amounts due from subsidiary undertakings          -         -         -    43,918 
=========================================  ========  ========  ========  ======== 
Prepayments                                     336       336       822       637 
=========================================  ========  ========  ========  ======== 
Other debtors                                   655       654        18        18 
=========================================  ========  ========  ========  ======== 
                                              3,063     3,062     3,200    46,933 
=========================================  ========  ========  ========  ======== 
Non-current 
=========================================  ========  ========  ========  ======== 
IFRS 16 lease incentives                      7,403     7,404     6,982     6,982 
=========================================  ========  ========  ========  ======== 
 

Rent receivables of GBP434,000 were written off during the year and are not included in the table above.

Group trade receivables that were past due but not impaired are as follows:

 
                                       2021      2020 
                                    GBP'000   GBP'000 
=================================  ========  ======== 
Less than three months due            2,072     2,360 
=================================  ========  ======== 
Between three and six months due          -         - 
=================================  ========  ======== 
Between six and 12 months due             -         - 
=================================  ========  ======== 
                                      2,072     2,360 
=================================  ========  ======== 
 

The Group holds no collateral in respect of these receivables.

14 Liabilities

 
                                                        2021                 2020 
                                             Group   Company      Group   Company 
                                           GBP'000   GBP'000    GBP'000   GBP'000 
========================================  ========  ========  =========  ======== 
Trade and other payables 
========================================  ========  ========  =========  ======== 
  Rent received in advance                   5,806     5,806      5,389     5,389 
========================================  ========  ========  =========  ======== 
  Amounts due to subsidiary undertaking          -    25,517          -         - 
========================================  ========  ========  =========  ======== 
  Other taxation and social security 
   costs                                       521       521      1,736     1,726 
========================================  ========  ========  =========  ======== 
  Accruals                                   2,612     2,612      4,551     4,551 
========================================  ========  ========  =========  ======== 
  Other creditors                              294       294        757       757 
========================================  ========  ========  =========  ======== 
                                             9,233    34,750     12,433    12,423 
========================================  ========  ========  =========  ======== 
 

The fair value of current liabilities is estimated as the present value of future cashflows which approximate their carrying amounts due to the short-term maturities.

Creditor days for the Group were one day (2020: ten days).

Loans and other borrowings

The analysis of bank loans which are secured on certain of the freehold and leasehold properties of the Group is as follows:

 
                         2021      2020 
                      GBP'000   GBP'000 
===================  ========  ======== 
Group and Company 
===================  ========  ======== 
Secured bank loans    144,000   194,000 
===================  ========  ======== 
Bank facility fees    (2,631)   (3,495) 
===================  ========  ======== 
                      141,369   190,505 
===================  ========  ======== 
 

The bank loans are secured against land and buildings with a carrying amount of GBP412,250,000 (2020: GBP476,750,000).

 
                                       2021                2020 
                            Group   Company     Group   Company 
                          GBP'000   GBP'000   GBP'000   GBP'000 
=======================  ========  ========  ========  ======== 
Repayable in: 
=======================  ========  ========  ========  ======== 
Less than one year              -         -         -         - 
=======================  ========  ========  ========  ======== 
One to two years                -         -         -         - 
=======================  ========  ========  ========  ======== 
Two to five years          77,181    77,181   126,373   126,373 
=======================  ========  ========  ========  ======== 
Five to ten years          64,188    64,188         -         - 
=======================  ========  ========  ========  ======== 
Greater than ten years          -         -    64,132    64,132 
=======================  ========  ========  ========  ======== 
                          141,369   141,369   190,505   190,505 
=======================  ========  ========  ========  ======== 
 
 
                                                               2021      2020 
                                                            GBP'000   GBP'000 
=========================================================  ========  ======== 
Changes in liabilities arising from financing activities 
=========================================================  ========  ======== 
 
Current loans as at 1 April 
=========================================================  ========  ======== 
Non-current loans as at 1 April                             190,505   163,176 
=========================================================  ========  ======== 
Total loans as at 1 April                                   190,505   163,176 
=========================================================  ========  ======== 
Gross debt drawdowns                                         20,000    34,000 
=========================================================  ========  ======== 
Gross debt repayments                                      (70,000)   (5,000) 
=========================================================  ========  ======== 
Bank facility fees (cash)                                      (34)   (2,569) 
=========================================================  ========  ======== 
Facility fee amortisation (non-cash)                            898       898 
=========================================================  ========  ======== 
Total loans as at 31 March                                  141,369   190,505 
=========================================================  ========  ======== 
 
 
                                                        2021      2020 
                                                     GBP'000   GBP'000 
==================================================  ========  ======== 
Present value of lease liabilities as at 1 April       4,403     4,404 
==================================================  ========  ======== 
Headlease cash payments                                (282)     (285) 
==================================================  ========  ======== 
Impact of unwind of discount rate (non-cash)             282       284 
==================================================  ========  ======== 
Headlease adjustment                                     800         - 
==================================================  ========  ======== 
Headlease write off on disposal                      (1,520)         - 
==================================================  ========  ======== 
Present value of lease liabilities as at 31 March      3,683     4,403 
==================================================  ========  ======== 
 

Borrowing facilities

The Group has various undrawn committed borrowing facilities. The facilities available in respect of which all conditions precedent had been met were as follows:

 
                                     2021      2020 
                                  GBP'000   GBP'000 
===============================  ========  ======== 
Expiring in less than one year          -         - 
===============================  ========  ======== 
Expiring in one to two years            -         - 
===============================  ========  ======== 
Expiring in two to five years     101,000    51,000 
===============================  ========  ======== 
Expiring in five to ten years           -         - 
===============================  ========  ======== 
                                  101,000    51,000 
===============================  ========  ======== 
 

Liquidity risk

Liquidity risk is managed through committed bank facilities that ensure sufficient funds are available to cover potential liabilities arising against projected cashflows. The Group's facilities are revolving in part, allowing the Group to apply cash surpluses to temporarily reduce debt.

On 8 April 2019 the Company increased total facilities to GBP245 million. Three bilateral facilities (GBP125 million) were replaced with one revolving credit facility ('RCF') of GBP180 million.

The following table details the Group's remaining contractual maturities for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cashflows of financial liabilities based upon the earliest dates on which the Group can be required to pay. The table includes both interest and principal cashflows. When the amount payable is not fixed, the amount disclosed has been determined by reference to the applicable interest rate as at the balance sheet date.

Financial instrument maturity

 
                                                      Contractual cashflows 
=====================================  ==================================================== 
                                         Total  2 months     2-12     1-2     2-5      More 
                                                 or less   months   years   years      than 
                                                                                    5 years 
=====================================  =======  ========  =======  ======  ======  ======== 
At 31 March 2021 
=====================================  =======  ========  =======  ======  ======  ======== 
Non-derivative financial liabilities 
=====================================  =======  ========  =======  ======  ======  ======== 
  Bank overdraft                             -         -        -       -       -         - 
=====================================  =======  ========  =======  ======  ======  ======== 
  Secured bank loans                   144,000         -        -       -  79,000    65,000 
=====================================  =======  ========  =======  ======  ======  ======== 
  Bank interest                         28,304         -    4,114   4,114   9,349    10,727 
=====================================  =======  ========  =======  ======  ======  ======== 
  Lease liabilities                     22,252         -      230     230     690    21,102 
=====================================  =======  ========  =======  ======  ======  ======== 
  Other taxation and social security 
   costs                                   521         -      521       -       -         - 
=====================================  =======  ========  =======  ======  ======  ======== 
  Accruals                               2,612         -    2,612       -       -         - 
=====================================  =======  ========  =======  ======  ======  ======== 
  Other creditors                          294         -      294       -       -         - 
=====================================  =======  ========  =======  ======  ======  ======== 
                                       197,983         -    7,771   4,344  89,039    96,829 
=====================================  =======  ========  =======  ======  ======  ======== 
 
 
                                                       Contractual cashflows 
=====================================  ===================================================== 
                                         Total  2 months     2-12     1-2      2-5      More 
                                                 or less   months   years    years      than 
                                                                                     5 years 
=====================================  =======  ========  =======  ======  =======  ======== 
At 31 March 2020 
=====================================  =======  ========  =======  ======  =======  ======== 
Non-derivative financial liabilities 
=====================================  =======  ========  =======  ======  =======  ======== 
  Bank overdraft                             -         -        -       -        -         - 
=====================================  =======  ========  =======  ======  =======  ======== 
  Secured bank loans                   194,000         -        -       -  129,000    65,000 
=====================================  =======  ========  =======  ======  =======  ======== 
  Bank interest                         38,798         -    5,709   5,709   14,040    13,340 
=====================================  =======  ========  =======  ======  =======  ======== 
  Lease liabilities                     25,798         -      285     285      857    24,371 
=====================================  =======  ========  =======  ======  =======  ======== 
  Other taxation and social security 
   costs                                 1,736         -    1,736       -        -         - 
=====================================  =======  ========  =======  ======  =======  ======== 
  Accruals                               4,551         -    4,551       -        -         - 
=====================================  =======  ========  =======  ======  =======  ======== 
  Other creditors                          757         -      757       -        -         - 
=====================================  =======  ========  =======  ======  =======  ======== 
                                       265,640         -   13,038   5,994  143,897   102,711 
=====================================  =======  ========  =======  ======  =======  ======== 
 

Credit risk

Credit evaluations are performed on all tenants looking to enter into lease or pre-lease agreements with the Group. Credit risk is managed by tenants paying rent in advance. Outstanding tenants' receivables are regularly monitored.

At the Statement of Financial Position date there were no significant concentrations of credit risk, except for the low risk lease commitments which were either government departments or held a top credit rating. The maximum exposure to credit risk is represented by the carrying amount of each financial asset including derivative financial instruments on the Group Statement of Financial Position.

The Group has no exposure to currency risks.

Market risk

The Group is exposed to market risk through changes in interest rates or availability of credit. The Group actively monitors these exposures.

Interest rate risk

The Group adopts a policy of ensuring that its exposure to interest rate fluctuations is mitigated by the use of financial instruments.

A 25 basis points change in interest rate levels would increase or decrease the Group's annual profit and equity GBP197,500 (2020: GBP322,500). This sensitivity has been calculated by applying the interest rate change to the variable rate borrowings at the year end. The comparative figure for 2020 was also based on a 25 basis points change in interest rates. The 25 basis points change being used shows how the profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at the year end.

Interest rate derivatives

The Group does not hold any interest rate derivatives as at 31 March 2021.

 
                                      2021   2020 
===================================  =====  ===== 
Weighted average cost of borrowing   3.10%  3.35% 
===================================  =====  ===== 
 

There are no liabilities at maturity and no material unrecognised gains or losses.

In both 2021 and 2020 there was no difference between the book value and the fair value of all the other financial assets and liabilities of the Group and Company.

15 Lease liabilities

 
                                                   Minimum lease payments 
                                                  ======================== 
                                                         2021         2020 
                                                      GBP'000      GBP'000 
================================================  ===========  =========== 
Group lease liabilities are payable as follows: 
================================================  ===========  =========== 
Year one                                                  230          285 
================================================  ===========  =========== 
Year two                                                  230          286 
================================================  ===========  =========== 
Year three                                                230          286 
================================================  ===========  =========== 
Year four                                                 230          285 
================================================  ===========  =========== 
Year five                                                 230          285 
================================================  ===========  =========== 
Greater than five years                                21,102       24,371 
================================================  ===========  =========== 
                                                       22,252       25,798 
================================================  ===========  =========== 
Less future finance charges                          (18,569)     (21,395) 
================================================  ===========  =========== 
Present value of lease obligations                      3,683        4,403 
================================================  ===========  =========== 
 

The above lease liabilities relate to investment properties with a carrying value of GBP26,000,000 (2020: GBP95,900,000). The terms of these lease agreements are for periods of between 97 and 125 years. There are no restrictions imposed by the lease agreements. No contingent rents are payable.

Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in event of default.

The annual obligation for the first five years is GBP230,000 pa.

16 Operating leases

The Group leases out all of its investment properties under operating leases.

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

 
                                                        2021      2020 
                                                     GBP'000   GBP'000 
==================================================  ========  ======== 
Not later than one year                               20,081    20,224 
==================================================  ========  ======== 
Later than one year but not later than five years     52,613    52,964 
==================================================  ========  ======== 
Later than five years                                 24,987    55,336 
==================================================  ========  ======== 
                                                      97,681   128,524 
==================================================  ========  ======== 
 

17 Share-based payments

During the year to 31 March 2021, the Group had one share-based payment arrangement, which is described below. In the case of the PSP awards, the expected volatility was determined by calculating historical volatility of the Group's share price.

Performance Share Plan

The performance targets for PSP awards are a combination of TSR and absolute NAV performance over a three-year period. If the performance criteria have not been met at the end of the vesting period then the awards will lapse.

The nil cost awards outstanding at 31 March 2021 have been fair valued using a Monte Carlo valuation pricing model using the following main assumptions:

 
                       23 June  10 June   8 June  18 July 
                          2020     2019     2018     2017 
=====================  =======  =======  =======  ======= 
Share price            GBP1.94  GBP2.40  GBP2.67  GBP2.26 
=====================  =======  =======  =======  ======= 
Term                   3 years  3 years  3 years  3 years 
=====================  =======  =======  =======  ======= 
Risk free rate         (0.05)%    0.49%    0.80%    0.26% 
=====================  =======  =======  =======  ======= 
Dividend yield              0%       0%       0%       0% 
=====================  =======  =======  =======  ======= 
Volatility - Company     37.0%    31.0%    31.0%    29.0% 
=====================  =======  =======  =======  ======= 
TSR fair value         GBP1.10  GBP1.34  GBP1.73  GBP1.42 
=====================  =======  =======  =======  ======= 
NAV fair value         GBP1.94  GBP2.40  GBP2.70  GBP2.26 
=====================  =======  =======  =======  ======= 
 

Share-based payments

 
                                                   2021        2020 
                                                 Number      Number 
                                              of shares   of shares 
===========================================  ==========  ========== 
Outstanding at the beginning of the period    1,721,829   1,732,473 
===========================================  ==========  ========== 
Granted during the period                       733,655     638,465 
===========================================  ==========  ========== 
Forfeited during the period                           -    (18,880) 
===========================================  ==========  ========== 
Exercised during the period                    (75,477)   (139,573) 
===========================================  ==========  ========== 
Expired during the period                     (273,287)   (490,656) 
===========================================  ==========  ========== 
Outstanding at the end of the period          2,106,720   1,721,829 
===========================================  ==========  ========== 
 

During the year 75,477 shares were issued to settle the 2017 PSP (First Grant) on 12 August 2020. These shares were issues out of distributable revenues under the Company's Articles of Association.

The above table includes outstanding shares at the end of the year relating to deferred bonus shares of 144,921 (2020: 107,055), of which 37,866 were granted during the year (2020: 50,845) and nil exercised in the period (2020: 57,480).

The weighted average life of the 2,106,720 shares outstanding is 7.82 years (2020: 8.29 years). The weighted average price on the date of exercise for options exercised during the year was GBP1.88 (2020: GBP2.40).

18 Called up share capital

 
                                                      2021                    2020 
                                        Issued      Number      Issued      Number 
                                           GBP   of shares         GBP   of shares 
==================================  ==========  ==========  ==========  ========== 
Ordinary 20 pence shares in issue 
==================================  ==========  ==========  ==========  ========== 
At 1 April                          18,852,794  94,263,998  18,824,879  94,124,425 
==================================  ==========  ==========  ==========  ========== 
Issue of shares in year(1)              15,095      75,477      27,915     139,573 
==================================  ==========  ==========  ==========  ========== 
Repurchase of shares                 (107,708)   (538,542)           -           - 
==================================  ==========  ==========  ==========  ========== 
At 31 March                         18,760,181  93,800,933  18,852,794  94,263,998 
==================================  ==========  ==========  ==========  ========== 
 

1. During the year 75,477 shares (2020: 139,573) were issued to settle the 2017 PSP (First Grant) on 12 August 2020.

19 Capital management

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, to provide returns to shareholders and to maintain an appropriate capital structure to minimise the cost of capital. The current capital structure of the Group comprises a mix of equity and debt. Equity comprises issued share capital, reserves and retained earnings, as disclosed in the Group Balance Sheet.

The Group uses a number of key metrics(1) to manage its capital structure, including:

   --    gearing 
   --    LTV(1) 

The Board monitors the ability of the Group to pay dividends out of available cash and distributable profits.

   1.     See glossary. 

20 Related party transactions

 
                           Balance owed to/(owing 
                                    from) 
                          ======================== 
                                 2021         2020 
                              GBP'000      GBP'000 
========================  ===========  =========== 
Subsidiary undertakings 
========================  ===========  =========== 
Baldwin House Limited          25,516     (43,918) 
========================  ===========  =========== 
                               25,516     (43,918) 
========================  ===========  =========== 
 

There were no transactions with Directors, who are considered key management personnel, other than remuneration, details of which are provided in the Directors' Annual Remuneration Report.

See note 23 for details on the pension scheme.

These related party transactions are between Baldwin House Limited and the Company. They relate to property payments and receipts for the two properties held in Baldwin House Limited during the year. This balance is zero at Group level.

The Parent Company funded capital expenditure on behalf of Baldwin House in the year amounting to GBP6,088 (2020: GBP544,795).

 
                                                2021      2020 
                                             GBP'000   GBP'000 
==========================================  ========  ======== 
Interest charge by McKay to Baldwin House         91     1,321 
==========================================  ========  ======== 
Management fee charged by McKay                  174       338 
==========================================  ========  ======== 
 

21 Net asset value per share

In October 2019, EPRA issued new best practice reporting guidelines for Net Asset Value ('NAV') metrics. These recommendations are effective for accounting periods starting on 1 January 2020 and have been adopted by the Group in reporting the 31 March 2021 position.

EPRA have introduced three new NAV metrics: Net Tangible Assets ('NTA'), Net Reinvestment Value ('NRV') and Net Disposal Value ('NDV'). EPRA NTA is considered to be the most appropriate measure for McKay's operating activity and is now the primary measure of net asset value, replacing EPRA NAV.

 
                            31 March 2021                   31 March 2020 
                    ==============================  ============================== 
                                               NAV                             NAV 
                    Net assets  Shares   per share  Net assets  Shares   per share 
                       GBP'000    '000       pence     GBP'000    '000       pence 
==================  ==========  ======  ==========  ==========  ======  ========== 
Basic                  289,902  93,801         309     309,166  94,264         328 
==================  ==========  ======  ==========  ==========  ======  ========== 
Number of shares 
 under option                -     145           -           -     143         (1) 
==================  ==========  ======  ==========  ==========  ======  ========== 
Diluted/EPRA NDV       289,902  93,946         309     309,166  94,407         327 
==================  ==========  ======  ==========  ==========  ======  ========== 
Deferred taxation            -       -           -       1,392       -           2 
==================  ==========  ======  ==========  ==========  ======  ========== 
EPRA NTA               289,902  93,946         309     310,558  94,407         329 
==================  ==========  ======  ==========  ==========  ======  ========== 
 

The table below shows the calculation for each of the three new EPRA metrics compared to those previously reported.

 
                                        Current measures         Previous measures 
                                  ============================  =================== 
                                      EPRA      EPRA      EPRA       EPRA      EPRA 
                                       NTA       NRV       NDV        NAV     NNNAV 
As at 31 March 2021                GBP'000   GBP'000   GBP'000    GBP'000   GBP'000 
================================  ========  ========  ========  =========  ======== 
Equity attributable to ordinary 
 shareholders                      289,902   289,902   289,902    289,902   289,902 
================================  ========  ========  ========  =========  ======== 
Deferred taxation                        -         -         -          -         - 
================================  ========  ========  ========  =========  ======== 
Net assets                         289,902   289,902   289,902    289,902   289,902 
================================  ========  ========  ========  =========  ======== 
 
Diluted shares ('000)               93,946    93,946    93,946     93,946    93,946 
================================  ========  ========  ========  =========  ======== 
Diluted net assets per share 
 (pence)                               309       309       309        309       309 
================================  ========  ========  ========  =========  ======== 
 
 
                                        Current measures         Previous measures 
                                  ============================  =================== 
                                      EPRA      EPRA      EPRA       EPRA      EPRA 
                                       NTA       NRV       NDV        NAV     NNNAV 
As at 31 March 2020                GBP'000   GBP'000   GBP'000    GBP'000   GBP'000 
================================  ========  ========  ========  =========  ======== 
Equity attributable to ordinary 
 shareholders                      309,166   309,166   309,166    309,166   309,166 
================================  ========  ========  ========  =========  ======== 
Deferred taxation                    1,392     1,392         -      1,392         - 
================================  ========  ========  ========  =========  ======== 
Net assets                         310,558   310,588   309,166    310,558   309,166 
================================  ========  ========  ========  =========  ======== 
 
Diluted shares ('000)               94,407    94,407    94,407     94,407    94,407 
================================  ========  ========  ========  =========  ======== 
Diluted net assets per share 
 (pence)                               329       329       327        329       327 
================================  ========  ========  ========  =========  ======== 
 

22 Commitments and contingent liabilities

 
                                        2021                2020 
                                       Group   Company     Group   Company 
                                     GBP'000   GBP'000   GBP'000   GBP'000 
==================================  ========  ========  ========  ======== 
Capital expenditure committed but 
 not provided for                          -         -       672       672 
==================================  ========  ========  ========  ======== 
 

The 2020 commitments related to the Group's one development in place at the end of the year.

23 Pensions

The Group and Company operate a defined benefit pension scheme in the UK providing benefits based on final pensionable salary. The assets of the scheme are held separately from those of the Group, being invested with insurance companies and managed funds. The contributions are determined by a qualified actuary on the basis of a triennial valuation using the attained age method. The most recent actuarial valuation was as at 31 March 2020. The assumption which has the most significant effect on the results of the valuation are those relating to the rate of return on investments. It was assumed that the investment returns would be 5.0% per annum.

The Group contributes GBP240,000 per annum into the Scheme. This was reviewed as part of the 2020 triennial valuation.

At the 31 March 2020 actuarial valuation the scheme was 78.0% funded on the statutory funding objective basis. A recovery plan and schedule of contributions has been agreed designed to address this shortfall.

The IAS 19 valuation for the pension scheme disclosures is based on the most recent actuarial valuation at 31 March 2020 and updated by First Actuarial in order to assess the liabilities of the scheme at 31 March 2021. Scheme assets are stated at their market value at 31 March 2021.

The Scheme has been closed to new entrants since 1989.

The assets of the scheme have been taken at market value and the liabilities have been calculated using the following principal actuarial assumptions:

 
                               2021  2020 
=============================  ====  ==== 
Inflation                      3.3%  2.6% 
=============================  ====  ==== 
Salary increases                n/a   n/a 
=============================  ====  ==== 
Rate of discount               1.7%  2.3% 
=============================  ====  ==== 
Pension in payment increases   3.2%  2.6% 
=============================  ====  ==== 
 

The mortality assumptions adopted at 31 March 2021 imply the following life expectancies for members currently aged 60:

Male = 27.8 years

 
                                                      2021      2020 
                                                   GBP'000   GBP'000 
================================================  ========  ======== 
The fair value of scheme assets are as follows: 
================================================  ========  ======== 
Equities                                             2,134     1,693 
================================================  ========  ======== 
Gilts                                                  557       264 
================================================  ========  ======== 
Corporate and overseas bonds                           266       252 
================================================  ========  ======== 
Absolute return portfolios                           2,173     1,984 
================================================  ========  ======== 
Property                                               152       120 
================================================  ========  ======== 
Cash                                                   315       443 
================================================  ========  ======== 
Other                                                   89        83 
================================================  ========  ======== 
                                                     5,686     4,839 
================================================  ========  ======== 
 

100.0% of the equities are in quoted equities.

The asset split is approximated using the current fund splits for each manager.

The plan assets do not expose the entity to any significant concentration risk.

 
                                                     2021      2020 
                                                  GBP'000   GBP'000 
===============================================  ========  ======== 
Changes in the value of scheme assets over the 
 year 
===============================================  ========  ======== 
Market value of assets at start of year             4,839     5,332 
===============================================  ========  ======== 
Return on scheme assets                               109       115 
===============================================  ========  ======== 
Actuarial gain                                        931     (417) 
===============================================  ========  ======== 
Employer contributions                                240       240 
===============================================  ========  ======== 
Benefits paid                                       (433)     (431) 
===============================================  ========  ======== 
Market value of assets at end of year               5,686     4,839 
===============================================  ========  ======== 
 

Analysis of changes in the value of the defined benefit obligation over the period:

 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
=====================================================  ========  ======== 
Value of defined benefit obligation at start of 
 period                                                   6,936     7,440 
=====================================================  ========  ======== 
Interest cost                                               155       159 
=====================================================  ========  ======== 
Benefits paid                                             (433)     (431) 
=====================================================  ========  ======== 
Actuarial gains: experience differing from that 
 assumed                                                    167        83 
=====================================================  ========  ======== 
Actuarial gains: changes in demographic assumptions         313         - 
=====================================================  ========  ======== 
Actuarial gains: changes in financial assumptions           728     (315) 
=====================================================  ========  ======== 
Value of defined benefit obligation at end of period      7,866     6,936 
=====================================================  ========  ======== 
 

Sensitivity analysis

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The RPI inflation assumption sensitivity factors in the impact of inflation on the rate of increase in pension in payment assumptions.

 
                                                Change 
                                            in defined 
                                   Change      benefit 
                            in assumption   obligation 
========================  ===============  =========== 
Assumption 
========================  ===============  =========== 
                                  +/-0.5% 
Discount rate                          pa        -/+5% 
========================  ===============  =========== 
                                  +/-0.5% 
RPI inflation                          pa      +4%/-3% 
========================  ===============  =========== 
Assumed life expectancy           +1 year          +6% 
========================  ===============  =========== 
 

Analysis of the amount charged to operating profit:

 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
=====================================================  ========  ======== 
Operating profit 
=====================================================  ========  ======== 
Current service cost                                          -         - 
=====================================================  ========  ======== 
Analysis of the amount (credited)/charged to finance 
 (income) /costs 
=====================================================  ========  ======== 
Return on pension scheme assets                           (109)     (115) 
=====================================================  ========  ======== 
Interest on pension scheme liabilities                      155       159 
=====================================================  ========  ======== 
Total charge to profit and loss                              46        44 
=====================================================  ========  ======== 
 

Analysis of the movement in the balance sheet deficit:

 
                                             2021      2020 
                                          GBP'000   GBP'000 
=======================================  ========  ======== 
Deficit in scheme at beginning of year    (2,097)   (2,108) 
=======================================  ========  ======== 
Movement in year: 
=======================================  ========  ======== 
 Current service cost                           -         - 
=======================================  ========  ======== 
 Net interest/return on assets               (46)      (44) 
=======================================  ========  ======== 
 Contributions                                240       240 
=======================================  ========  ======== 
 Actuarial loss                             (277)     (185) 
=======================================  ========  ======== 
Deficit in scheme at end of year          (2,180)   (2,097) 
=======================================  ========  ======== 
 

The last active member reached retirement age in May 2013.

The weighted average maturity profile of the defined benefit obligation at the end of the year is ten years (2020: ten years).

24 Post balance sheet events

There has been no material post balance events between the balance sheet date and the signing of the accounts.

Supplementary information (unaudited)

Table 1: EPRA Summary

 
                                                      2021              2020 
==================================              ================  ================ 
                                     Reference   GBP'000   Pence   GBP'000   Pence 
                                                             per               per 
                                                           share             share 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA Earnings                                2     9,626   10.21    10,019   10.63 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA NTA                                     3   290,556     309   310,558     329 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA NRV                                     3   290,556     309   310,558     329 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA NDV                                     3   289,902     309   309,166     327 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA NIY                                     4              4.5%              3.8% 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA NIY (topped-up)                         4              5.2%              5.2% 
==================================  ==========  ========  ======  ========  ====== 
                                         Table 
EPRA Vacancy rate                            5             14.6%             11.3% 
==================================  ==========  ========  ======  ========  ====== 
EPRA Cost Ratio (excluding vacant        Table 
 property costs)                             6             25.9%             25.3% 
==================================  ==========  ========  ======  ========  ====== 
EPRA Cost Ratio (including vacant        Table 
 property costs)                             6             31.8%             34.3% 
==================================  ==========  ========  ======  ========  ====== 
 

Table 2: EPRA Earnings

 
                                                               2021      2020 
                                                    Notes   GBP'000   GBP'000 
=================================================  ======  ========  ======== 
Earnings per IFRS income statement                         (16,450)     8,095 
=========================================================  ========  ======== 
 
Adjustments to calculate EPRA Earnings: 
=================================================  ======  ========  ======== 
 
Movement in revaluation of investment properties             23,356     2,200 
=========================================================  ========  ======== 
Loss/(profit) on disposal of investment 
 properties                                                   2,854   (1,668) 
=========================================================  ========  ======== 
Taxation                                                      (134)     1,392 
=========================================================  ========  ======== 
EPRA Earnings                                                 9,626    10,019 
=========================================================  ========  ======== 
Basic number of shares (000's)                               94,292    94,234 
=========================================================  ========  ======== 
EPRA Earnings per share                                       10.21     10.63 
=========================================================  ========  ======== 
Company specific adjustments: 
=================================================  ======  ========  ======== 
Share Based Payments (IFRS 2)                                   489     (222) 
=========================================================  ========  ======== 
Other property income                                         (157)      (70) 
=========================================================  ========  ======== 
Adjusted earnings                                             9,959     9,727 
=========================================================  ========  ======== 
Adjusted EPS                                                  10.56     10.32 
=========================================================  ========  ======== 
 

Table 3: EPRA Net Asset Measures

In October 2019, the European Public Real Estate Association ('EPRA') published new Best Practices Recommendations ('BPR') for financial disclosures by public real estate companies. The BPR introduced three new measures of net asset value: EPRA net tangible assets ('NTA'), EPRA net reinstatement value ('NRV') and EPRA net disposal value ('NDV').

These recommendations are effective for accounting periods starting on 1 January 2020 and have been adopted by the Group in reporting the 31 March 2021 position.

EPRA NTA is considered to be most consistent with McKay Securities' business as a UK REIT providing long-term progressive and sustainable returns. EPRA NTA now acts as the primary EPRA measure of net asset value.

A reconciliation of the three new EPRA NAV metrics is shown in the table below. The previously reported EPRA NAV and EPRA NNNAV have also been included for comparative purposes.

 
As at 31 March 2021                     Current Measures         Previous Measures 
================================  ============================  ==================== 
                                  EPRA NTA  EPRA NRV  EPRA NDV  EPRA NAV  EPRA NNNAV 
                                   GBP'000   GBP'000   GBP'000   GBP'000     GBP'000 
================================  ========  ========  ========  ========  ========== 
Equity attributable to ordinary 
 shareholders                      289,902   289,902   289,902   289,902     289,902 
================================  ========  ========  ========  ========  ========== 
Deferred taxation                        -         -         -         -           - 
================================  ========  ========  ========  ========  ========== 
 
Net assets                         289,902   289,902   289,902   289,902     289,902 
================================  ========  ========  ========  ========  ========== 
Diluted shares ('000)               93,946    93,946    93,946    93,946      93,946 
================================  ========  ========  ========  ========  ========== 
Diluted net assets per share 
 (p)                                   309       309       309       309         309 
================================  ========  ========  ========  ========  ========== 
 
 
As at 31 March 2020                     Current Measures         Previous Measures 
================================  ============================  ==================== 
                                  EPRA NTA  EPRA NRV  EPRA NDV  EPRA NAV  EPRA NNNAV 
                                   GBP'000   GBP'000   GBP'000   GBP'000     GBP'000 
================================  ========  ========  ========  ========  ========== 
Equity attributable to ordinary 
 shareholders                      309,166   309,166   309,166   309,166     309,166 
================================  ========  ========  ========  ========  ========== 
Deferred taxation                    1,392     1,392         -     1,392           - 
================================  ========  ========  ========  ========  ========== 
 
Net assets                         310,558   310,558   309,166   310,558     309,166 
================================  ========  ========  ========  ========  ========== 
Diluted shares ('000)               94,407    94,407    94,407    94,407      94,407 
================================  ========  ========  ========  ========  ========== 
Diluted net assets per share 
 (p)                                   329       329       327       329         327 
================================  ========  ========  ========  ========  ========== 
 

Table 4: EPRA NIY

 
                                                              2021      2020 
                                                   Notes   GBP'000   GBP'000 
================================================  ======  ========  ======== 
Investment property - wholly owned                         437,900   510,000 
========================================================  ========  ======== 
Investment property - share of JVs/Funds 
================================================  ======  ========  ======== 
Trading property (including share of JVs) 
================================================  ======  ========  ======== 
Less: developments                                               -  (24,000) 
========================================================  ========  ======== 
Completed property portfolio                               437,900   486,000 
========================================================  ========  ======== 
Allowance for estimated purchasers' costs 
================================================  ======  ========  ======== 
Gross valuation of completed property portfolio        A   437,900   486,000 
================================================  ======  ========  ======== 
 
Annualised cash passing rental income                       22,197    21,897 
========================================================  ========  ======== 
Property outgoings                                         (2,645)   (3,252) 
========================================================  ========  ======== 
Annualised net rents                                   B    19,552    18,645 
================================================  ======  ========  ======== 
Adjustment for notional rent and other 
 lease adjustments                                           3,415     6,431 
========================================================  ========  ======== 
Topped-up net annualised rent                          C    22,967    25,076 
================================================  ======  ========  ======== 
 
EPRA NIY                                             B/A      4.5%      3.8% 
================================================  ======  ========  ======== 
EPRA 'topped-up' NIY                                 C/A      5.2%      5.2% 
================================================  ======  ========  ======== 
 

Table 5: EPRA Vacancy Rate

 
                                                        2021    2020 
                                               Notes   GBP'm   GBP'm 
============================================  ======  ======  ====== 
Annualised estimated rental value of vacant 
 premises                                          A     4.6     4.0 
============================================  ======  ======  ====== 
Annualised estimated rental value of the 
 completed property portfolio                      B    31.5    34.9 
============================================  ======  ======  ====== 
EPRA Vacancy Rate                                A/B   14.6%   11.3% 
============================================  ======  ======  ====== 
 

Table 6: EPRA Cost Ratio

 
                                                           2021      2020 
                                                Notes   GBP'000   GBP'000 
=============================================  ======  ========  ======== 
Administrative expenses                                   5,175     5,385 
=====================================================  ========  ======== 
Net service charge costs                                  1,191       986 
=====================================================  ========  ======== 
Direct vacancy costs                                      1,454     2,266 
=====================================================  ========  ======== 
Management fees                                           (361)     (293) 
=====================================================  ========  ======== 
Other operating income                                        -         - 
=============================================  ======  ========  ======== 
EPRA costs (including direct vacancy costs)         A     7,820     8,637 
=============================================  ======  ========  ======== 
Group vacant property costs                             (1,454)   (2,266) 
=====================================================  ========  ======== 
EPRA costs (excluding direct vacancy costs)         B     6,366     6,371 
=============================================  ======  ========  ======== 
 
Gross rental income less ground rents               C    24,624    25,164 
=============================================  ======  ========  ======== 
 
EPRA costs ratio (including vacant property 
 costs)                                         A / C     31.8%     34.3% 
=============================================  ======  ========  ======== 
EPRA costs ratio (excluding vacancy property 
 costs)                                         B / C     25.9%     25.3% 
=============================================  ======  ========  ======== 
 

The Report and Financial Statements will be posted to shareholders on 2 June 2021 with copies available from the Company's registered office at 20 Greyfriars Road, Reading, RG1 1NL from the same date, and from the Company's website www.mckaysecurities.plc.uk .

Glossary

Adjusted EPS

Earnings per share - based on profits and adjusted to exclude certain items as set out in note 8.

Adjusted profit before tax

Profit before tax adjusted to exclude profit from the disposal of investment properties, share-based payments, other property income, the change in fair value derivatives and the movement in revaluation of investment property. These items are excluded on the bases that they relate to non-core rental activity as set out in note 4.

Book value

The amount at which assets and liabilities are reported in the accounts.

BREEAM

Building Research Establishment Environmental Assessment Method. An environmental standard that rates the sustainability of buildings in the UK.

Carrying value

The value of an asset based on prior valuation with the addition of any subsequent capital expenditure.

Contracted rent

Rent payable under the terms of a lease, less ground rent, with no allowance for the value of incentives granted at lease commencement.

CRC

Carbon Reduction Commitment. A mandatory emissions reduction standard in the UK that covers all forms of energy excluding transportation fuels.

Diluted figures

Reported amount adjusted to include the effects of potential shares issuable under employee share schemes.

Dun and Bradstreet

Provider of business information and risk management insight.

Earnings per share ('EPS')

Profit after taxation attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the year.

EPC

Energy Performance Certificate. Certificates carry ratings which measure the energy and carbon emission efficiency of the property using a grade from an 'A' to a 'G'.

EPRA

Standard calculation methods for adjusted EPS, NTA, NRV and NDV as set out by the European Public Real Estate Association ('EPRA') in their Best Practice and Policy Recommendations.

Equivalent yield (True)

The internal rate of return from an investment property, based on the value of the property assuming the current rent passing reverts to ERV and assuming the property becomes fully reoccupied over time. It assumes that rent is received quarterly in advance.

Estimated Rental Value ('ERV')

The valuers estimated amount for which floor space should let on the date of valuation on appropriate lease terms net of ground rents payable. Also known as MRV.

Extensible Business Reporting Language ('XBRL')

A computer language for electronic transmission of business and financial information.

Gearing

Drawn debt to shareholders' funds.

GRESB

Global Real Estate Sustainability Benchmark.

Industrial property

Term used to include light industrial, industrial and distribution warehouse property falling within classes B1c, B2 and B8 of the Town & Country Planning Use Classes Order. The term does not include retail warehousing, falling within class A1 of the Order.

Initial yield

Net rents payable at the valuation date expressed as a percentage of the value of property assets after allowing for notional purchasers' costs.

Interest cover ('ICR')

The number of times Group net interest payable is covered by adjusted profit before interest and taxation.

Interest rate swap

A financial instrument where two parties agree to exchange an interest rate obligation for a pre-determined amount of time.

IPD/MSCI

Investment Property Databank. Leading provider of independent statistical analysis to the commercial property sector.

Loan to value ('LTV')

Drawn debt divided by the value of property assets.

Net asset value ('NAV') per share

Total equity divided by the number of ordinary shares in issue at the period end.

Net debt

Total borrowings less cash credit balances.

Portfolio capital return ('PCR')

The annual valuation movement and realised surpluses/deficits from the Company's directly held investment portfolio expressed as a percentage return on the value at the beginning of the period, adjusted for acquisitions and capital expenditure.

Property Income Distribution ('PID')

PID dividend payments are taxable as letting income in the hands of shareholders who pay tax. They are paid after deduction of withholding tax at the basic rate.

Real Estate Investment Trust ('REIT')

A tax efficient structure for the management of property. It must be publicly quoted with 75% of its profits and assets derived from a qualifying property rental business which is exempt from tax on income and gains.

Rental value growth

Increase in rental value, as determined at the valuation date, over the period on a like-for-like basis.

Reversion

Potential uplift in rental value to market rent, as determined at the valuation date, likely to arise from a rent review, lease renewal or letting.

RPIX

Retail Price Index excluding mortgage interest.

Shareholders' funds

Total equity of the Company.

IFRS 16

The IFRS treatment in respect of letting incentives. It requires the Company to offset the value of incentives granted to lessees against the total rent due over the length of the lease, or to a break clause if earlier.

Stamp duty land tax

Government tax levied on certain legal transactions including the purchase of property.

Task force on Climate-related Financial Disclosure ('TCFD')

The TCFD climate-related financial disclosure recommendations are designed to promote advancements in the availability and quality of climate-related disclosure.

Total property return ('TPR')

Valuation surplus/(deficit) plus profit on disposal plus income from investment properties divided by the book value.

Total shareholder return ('TSR')

The growth in the value of an ordinary share plus dividends reinvested during the year expressed as a percentage of the share price at the beginning of the year.

True equivalent yield

The constant capitalisation rate, which, if applied to all cashflows from an investment property, including current net reversions and such items as voids and expenditure, equates to the market value having taken into account notional purchasers' costs and assuming rents paid quarterly in advance.

Weighted average unexpired lease term ('WAULT')

The average lease term remaining to expiry across the portfolio weighted by rental income. This is also disclosed assuming all break clauses are exercised at the earliest date.

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