TIDMWHR
RNS Number : 2285S
Warehouse REIT PLC
05 November 2019
5 November 2019
Warehouse REIT plc
(the "Company" or "Warehouse REIT", together with its
subsidiaries, the "Group")
HALF-YEAR RESULTS ANNOUNCEMENT FOR THE SIX MONTHSED 30 SEPTEMBER
2019
Warehouse REIT positioned for earnings growth
Acquisition activity and asset management enhancing tenant mix
and quality of income
Warehouse REIT, the AIM-listed specialist warehouse investor,
today announces its half-year results for the six months ended 30
September 2019.
Financial highlights(1)
Six months to 30 September 30 September
2019 2018
Revenue GBP13.6m GBP10.7m
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Operating profit before gains on GBP9.7m GBP5.0m
investment properties
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IFRS profit before tax GBP2.8m GBP11.0m
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IFRS earnings per share 1.2p 6.6p
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EPRA earnings per share 3.0p 1.8p
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Adjusted earnings per share(2) 3.0p 3.1p
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Dividends per share(3) 3.0p 3.0p
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Total accounting return(4) (1.4)% 6.5%
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Total costs ratio(5) 26.5% 28.9%
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As at 30 September 31 March 2019
2019
Portfolio valuation GBP438.7m GBP307.4m
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IFRS net asset value GBP252.7m GBP182.3m
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IFRS net asset value per share 105.2p 109.8p
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EPRA net asset value per share 105.2p 109.7p
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Loan to value ratio 40.2% 39.7%
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-- Paid or declared dividends of 3.0 pence per share, in line
with our previous target of 6.0 pence per share for the full year.
As a result of being fully invested by September 2019, we will be
increasing the target for the year to March 2020
-- Successfully raised gross proceeds of GBP76.5 million through
an equity issue in April 2019, with strong support from existing
and new shareholders
-- Acquisitions totalling GBP133.2 million during the period,
adding 1.6 million sq ft to the portfolio at a net initial yield
("NIY") of 6.7%
-- Portfolio valued at GBP438.7 million at 30 September 2019,
representing a 1.0% increase on the 31 March 2019 valuation and the
purchase price for assets acquired during the period, or a 0.6%
increase on a like-for-like basis compared to the valuation at 31
March 2019
-- EPRA net asset value ("NAV") per share of 105.2 pence (31
March 2019: 109.7 pence), reflecting short-term dilution from the
share issue, equivalent to 2.8 pence per share and the costs of
acquisitions made in the period of GBP8.6 million, equivalent to
3.6 pence per share, net of increases of 1.9 pence per share
largely arising on revaluation, reflecting the short time that
recently acquired assets have been held
-- Bank debt of GBP184.0 million at the period end, following
the extension of our banking facilities to GBP210.0 million and
resulting in a loan to value ratio ("LTV") of 40.2% (31 March 2019:
39.7%), slightly above our target of 30-40% but below the maximum
of 50%. This will be managed below 40% in the near term through the
disposal of a small number of non-core assets
Operational highlights
As at 30 September 31 March 2019
2019
Contracted rent GBP30.3m GBP21.6m
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Passing rent GBP28.0m GBP20.6m
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WAULT(6) to expiry 5.1 years 4.6 years
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WAULT to first break 3.9 years 3.1 years
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EPRA net initial yield 5.7% 6.1%
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Occupancy 91.5% 92.0%
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-- Occupational markets remain favourable, with strong tenant
demand and constrained supply contributing to rental growth across
the UK
-- Continued progress unlocking value from the portfolio through active asset management
o Completed 43 lettings of vacant space, generating rent of
GBP0.9 million per annum, 8.0% ahead of 31 March 2019 estimated
rental value ("ERV"). ERV across the portfolio has grown by 1.2% on
a like-for-like basis
o Renewed 57 leases, including major renewal with Alliance
Healthcare, securing income of GBP2.1 million and a 23.4% increase
over previously contracted rents
o Capital expenditure of GBP2.4 million spent or committed in
the period (six months ended 30 September 2018: GBP1.4 million), to
drive future rental and capital value growth
o Occupancy of 91.5% (31 March 2019: 92.0%), reflecting space
taken back to undergo refurbishment. Excluding units undergoing
refurbishment and units under offer to let, occupancy was 96.8%
o Progressing value-add opportunities on 'lazy acres', focused
on generating value from surplus or adjacent land
-- Successfully invested the proceeds of the April 2019 equity
issue, acquiring 14 assets at a NIY of 6.7%
o Added 1.6 million sq ft giving a total portfolio of 6.2
million sq ft across 104 assets
o Further enhanced the quality of the tenant mix, adding strong
covenants such as John Lewis Partnership and Direct Wines as well
as increasing exposure to existing major tenants such as Amazon
o Increased the WAULT to 5.1 years (31 March 2019: 4.6 years),
reflecting the benefits of both asset management and the
acquisitions in the period
Post period end highlights
-- Completed the disposal of four assets for consideration of
GBP3.0 million, ahead of their 31 March 2019 book value of GBP2.8
million, reflecting a NIY of 5.8%
-- Completed the acquisition of the multi-let Midpoint Estate in
Middlewich, Cheshire, for GBP15.5 million, reflecting a NIY of
6.6%
Neil Kirton, Chairman of Warehouse REIT, commented:
"We have continued to successfully execute the strategy we set
out at IPO, adding value to the portfolio through active asset
management and successfully investing the proceeds of the April
2019 equity issue in line with our forecast timeframe. These
actions have further enhanced the tenant covenant portfolio and the
duration and quality of our income stream, underpinning our ability
to pay attractive dividends to shareholders."
Andrew Bird, Managing Director of the Investment Advisor,
Tilstone Partners Limited, added:
"The strength and depth of occupational demand, coupled with
continued constraints on supply, gives the Group resilient cash
flows. We remain focused on actively managing the portfolio, so the
Group captures the rental growth in the market and benefits from
rising asset values. We believe the Group is well placed for
further value creation in the second half of the financial
year."
Footnotes
1. 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 performance of
the Group, in line with market practice. EPRA EPS is set out in
note 10. EPRA NAV is set out in note 18. A glossary of terms is
shown at the end of this report.
2. Adjusted earnings per share ("EPS") is based on IFRS earnings
excluding unrealised fair value gains on investment properties,
profit on disposal of investment properties and one-off costs,
which were a property and acquisition provision in the six months
to 30 September 2018, as set out in note 16. There were no profits
on disposal or one-off costs in the six months to 30 September
2019.
3. Dividends paid and declared in relation to the period.
Dividends paid during the period also totalled 3.0 pence (six
months ended 30 September 2018: 3.0 pence per share).
4. Total accounting return based on decrease in EPRA NAV per
share of 4.5 pence per share plus dividends paid per share of 3.0
pence, as a percentage of the opening EPRA NAV of 109.7 pence per
share.
5.Total costs ratio represents the EPRA cost ratio excluding
one-off costs.
6.Weighted average unexpired lease term.
Meeting
A meeting for investors and analysts will be held at 09:00 today
at the offices of FTI Consulting, 200 Aldersgate, London, EC1A
4HD.
The conference call dial-in for the meeting is: +44 (0)330 336
9105 (Participant Passcode: 8318579).
Enquiries
Warehouse REIT plc via FTI Consulting
Tilstone Partners Limited
Andrew Bird +44 (0) 1244 470 090
G10 Capital Limited (part of the Lawson
Conner Group), AIFM
Maria Glew, Gerhard Grueter +44 (0) 20 3696 1302
Peel Hunt (Financial Adviser, Nominated
Adviser and Broker)
Capel Irwin, Harry Nicholas, Carl Gough +44 (0) 20 7418 8900
FTI Consulting (Financial PR & IR Adviser
to the Company)
Dido Laurimore, Ellie Sweeney, Richard
Gotla +44 (0) 20 3727 1000
Further information on Warehouse REIT is available on its
website:
http://www.warehousereitplc.co.uk
Notes
Warehouse REIT plc owns and manages a diversified portfolio of
warehouse real estate assets in UK urban areas.
This is a compelling market. The structural rise in e-commerce
and investment in 'last-mile' delivery contribute to high tenant
demand, while limited vacant space and our active asset management
lead to growing rents. Capturing this income allows us to offer our
shareholders an attractive dividend and the prospect of capital and
further dividend growth.
Our portfolio of well-located assets is let to occupiers ranging
from pure e-commerce to traditional light industrial. As we expand,
our vision is for Warehouse REIT to become the warehouse provider
of choice across the UK.
The Company's shares were admitted to trading on AIM in
September 2017.
Forward-looking Statements
Certain information contained in these half-year results may
constitute forward looking information. This information relates to
future events or occurrences or the Company's future performance.
All information other than information of historical fact is
forward looking information. The use of any of the words
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", "should", "believe", "predict" and "potential"
and similar expressions are intended to identify forward looking
information. This information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information. No assurance can be given that this
information will prove to be correct and such forward looking
information included in this announcement should not be relied
upon. Forward-looking information speaks only as of the date of
this announcement.
The forward-looking information included in this announcement is
expressly qualified by this cautionary statement and is made as of
the date of this announcement. The Company and its Group does not
undertake any obligation to publicly update or revise any
forward-looking information except as required by applicable
securities laws.
Chairman's statement
Overview
This was another active period for the Group, during which we
were able to acquire high-quality assets in economically active
areas, enhancing both our tenant covenant portfolio and the WAULT.
We have also continued to extract asset management gains from the
existing portfolio through Tilstone's pro-active approach, which
supports building strong occupier relationships and helps us
achieve a deep understanding of our tenants' needs. As I discuss in
more detail below, these activities have improved the quality and
length of our income stream, supporting our dividends to
shareholders.
At the start of April 2019, we raised gross proceeds of GBP76.5
million through a successful equity issue. Together with our
extended debt facilities, this provided us with around GBP120
million of firepower. We felt that there were opportunities to
advantageously deploy these funds and we have done this within the
six month period anticipated at the time of the equity raise.
During the period we acquired 25 units in attractive locations
across the UK, increasing the Midlands weighting with towns such as
Northampton and enhancing the portfolio with tenants such as John
Lewis Partnership, Direct Wines and Amazon. Acquisition prices
remain below replacement cost and the purchases in the period
reflected a blended NIY of 6.7%.
In my previous reports, I indicated that the Board would very
carefully monitor any macroeconomic developments that may be
relevant to your Company and we continue to do this. The short end
of the yield curve has inverted during the last 12 months and some
commentators see this as a sign of impending recession. We remain
extremely vigilant about tenant risk and review this in detail at
each Board meeting. Our ten largest tenants now provide 28% of our
rental income and include excellent covenants such as John Lewis,
Amazon, Direct Wines, Alliance Healthcare, Iron Mountain and
Howdens Joinery. Another example of the strength of our tenant line
up is the fully-let eight-asset portfolio we acquired in September
2019, which has 100% of its income secured against D&B-rated
minimum-risk covenants. At the same time, we benefit from the
diversity of our tenant mix, which includes 638 occupiers in
numerous different sectors, meaning we are not reliant on any
individual tenant for the security of our income.
The asset management highlight for the period was re-letting our
unit in Basingstoke to Alliance Healthcare (part of Walgreens Boots
Alliance) on a new ten-year lease without a break, at a 42.3%
uplift to the previous rent. This demonstrates our ability to work
with our tenant partners to secure deals that benefit both them and
us. More broadly, we achieved rental levels above ERV for new
leases, while the length of leases continues to increase,
reflecting occupier demand for space and the improvements we are
making through capital expenditure.
We have also continued with our efforts to extract potentially
significant returns from surplus or adjacent land within the
portfolio, in particular making further progress with our
development plans at Queenslie in Glasgow. This 'lazy acres' aspect
to some of our assets provides good opportunity for development and
I am sure that we will be able to extract this value while
retaining our core focus on building the income stream.
With this in mind, one of our focuses is to extend the
portfolio's WAULT. At the start of the period, our WAULT was 4.6
years to expiry. The steps we have taken, in terms of both asset
management and acquisitions, have extended the WAULT to 5.1 years
at 30 September 2019. The September portfolio acquisition had a
WAULT of 5.3 years, resulting from a number of longer leases and
some shorter leases offering the potential to capture rental growth
in the near term. We continue to identify opportunities to asset
manage for higher returns and to extend the WAULT further.
Dividends
We declared and paid an interim dividend of 1.5 pence during the
period. We are also declaring a second interim dividend of 1.5
pence per share with these results, in relation to the three months
to 30 September 2019, which will be paid in full as a Property
Income Distribution ("PID") on 27 December 2019, to shareholders on
the register at 29 November 2019.
This gives a total dividend for the period of 3.0 pence. This
total dividend is 101% covered by earnings. Following the
successful deployment of our capital by September 2019 we will be
increasing our dividend target for the year to March 2020 and with
a progressive policy thereafter, in line with anticipated growth in
earnings. As a REIT, we are required to distribute at least 90% of
our property income.
Financial results
The EPRA NAV per share at 30 September 2019 was 105.2 pence (31
March 2019: 109.7 pence). This reflects the dilutive effect of the
equity raise in April 2019, the limited time we have held the
GBP133.2 million of assets subsequently acquired, which gave little
scope for growth in their value, and the costs of GBP8.6 million
associated with making those acquisitions.
At the period end, the Group had GBP184.0 million of debt (31
March 2019: GBP127.0 million) and a LTV ratio of 40.2% (31 March
2019: 39.7%). While this is slightly above our longer--term target
range of 30-40%, it remains below the 50% limit in our investment
policy and with the sale of a number of smaller non-core assets we
soon expect to manage our LTV to below 40%.
Governance
One of the Board's principal responsibilities is to ensure that
the Group's strategy remains appropriate and is being effectively
implemented. In October 2019, we undertook our second strategy day
since the IPO, to retest the proposition we set out at that time.
The day was chaired by Non-Executive Director Aimée Pitman and
attended by all the Board members and a number of Tilstone's senior
staff. The topics we reviewed included the sector dynamics, the
deployment of capital, acquisitions and asset management, the
Group's financial outlook, the management of investor relations and
our longer-term ambition for the Group. We concluded that the
strategy, which Tilstone is successfully implementing, continues to
be the right one for our business.
Conclusion
The Board remains positive about the outlook for the Group.
Occupational demand is strong, with employment in the UK at record
levels, and we are not so far seeing any negative Brexit-related
impact on demand for warehouse space in our target markets. Low
vacancy rates coupled with the disconnect between investment values
and replacement costs mean that the sector is positioned for
further rental growth and we will continue to capture this at lease
renewal and through new lettings. Our activities in the first half
of the year have substantially increased the portfolio ERV to
GBP34.5 million, against a contracted rent roll of GBP30.3 million,
showing the reversionary potential in the portfolio. We will
continue to focus on actively managing the portfolio to drive
returns, including disposing of a small number of identified assets
where we can reinvest in attractive opportunities.
I believe that the combination of our dividend stream and its
growth is the key valuation driver of your Company. That said, I
take comfort from the fact that in the current very low interest
rate environment, the portfolio is conservatively valued on a NIY
of 6.5%, particularly given the enhancements we continue to make
both to the duration and quality of the income stream.
Our shareholder list continues to grow, which we recognise as
vital to the continued execution of our strategy.
Thank you for your continued support.
Neil Kirton
Chairman
4 November 2019
Investment Advisor's report
This was a successful period for the Group, which saw it
continue to deliver its strategy of actively managing its assets
and enhancing its portfolio through capital expenditure and
acquisitions.
Asset acquisitions
During the period, we continued to identify attractive
acquisition opportunities on the Group's behalf. These included a
number of larger assets, whose purchase was made possible by the
Group's increasing scale. The acquisitions in the period have
further enhanced the tenant covenant profile and increased the
WAULT, thereby improving the quality of the income stream that
underpins dividends to shareholders. In aggregate, the Group
acquired 25 warehouse units during the period and added a further
1.6 million sq ft of space and 31 tenants to the portfolio. The
total purchase price of these acquisitions, excluding the
associated transaction costs, was GBP124.6 million.
First quarter acquisitions
Industrial unit in Wakefield
The Group acquired a 53,000 sq ft single-let industrial unit in
Wakefield for GBP4.2 million, reflecting a NIY of 6.3%. The unit is
let to Stapleton's Tyre Services Limited, one of the UK's largest
distributors of car and van tyres. On acquisition, the tenant
agreed a new 15-year lease at GBP5.25 per sq ft, with CPI-linked
rent reviews and tenant-only break options at years five and ten.
Wakefield is widely considered to be Yorkshire's premier
distribution location.
Distribution units in Northampton and an Aberdeen industrial
estate
In Northampton, the Group acquired the freehold of two John
Lewis distribution units, totalling 336,000 sq ft. John Lewis has
the highest available 5A1 covenant rating and has been on site for
over 25 years. It signed new five-year leases, with a headline rent
of GBP1,836,000 per annum across both units. The units are within
the 'Golden Triangle' on the Brackmills Industrial Estate, one of
the UK's premier distribution locations, with excellent access to
the M1 motorway.
In Aberdeen, the Group acquired the long-leasehold Murcar
Industrial Estate. On acquisition, the 125,000 sq ft estate was
100% let to a range of occupiers, with a WAULT of 8.0 years (5.2
years to break) and total net passing rent of GBP776,000 per annum.
The 8.5-acre site is within the Bridge of Don Industrial Estate, a
major industrial and business area, which fronts the A90 dual
carriageway and is four miles from Aberdeen city centre.
These acquisitions had a combined cost of GBP37.0 million and a
blended NIY of 6.6%.
Three warehouse units in Tewkesbury
The Group purchased a further three units providing an
additional 54,600 sq ft next to its existing holding at Tewkesbury
Business Park. The purchase price of GBP3.8 million reflected a NIY
of 6.9% and is comfortably below replacement cost at less than
GBP70 per sq ft. The WAULT on acquisition was 7.0 years.
Second quarter acquisitions
Warehouse assets in Chorley and Doncaster
In Chorley, Lancashire, the Group acquired a 47,500 sq ft
modern, purpose-built warehouse for GBP3.6 million. The property
had recently undergone a complete refurbishment and is let to an
established manufacturing business as its distribution centre,
generating a net passing rent of approximately GBP260,000 per
annum. The lease had 4.5 years remaining on acquisition.
The Group also increased its holding on the popular Sky Business
Park in Doncaster, acquiring units 1 and 2 which total 20,700 sq ft
of space, to add to the 36,000 sq ft already owned across six
units. The tenant signed a new ten-year lease with a break at year
five, off a passing rent of GBP5.81 per sq ft, which compares
favourably with lettings the Group has recently achieved on the
estate. The purchase price was GBP1.68 million.
The blended NIY of the two purchases was 6.8%.
1 million sq ft portfolio
In September 2019, the Group acquired a portfolio of one
multi-let and seven single-let warehouses, totalling 995,100 sq ft.
The purchase price was GBP70.0 million, with a further payment of
up to GBP5.0 million due on or before September 2023, and reflected
a NIY of 6.7%. The assets are fully let and generate annual rent of
GBP5.38 million.
The assets range in size from approximately 50,000 sq ft to
217,000 sq ft and are all close to major conurbations and on or
near arterial routes. All the income is secured against
D&B-rated 'minimum risk' covenants, with occupiers including
Amazon, Direct Wines, Iron Mountain and Sytner Group. The portfolio
has a WAULT of 5.3 years and a low average rent of GBP5.40 per sq
ft. A number of short leases and below-market rents offer scope to
unlock value through active asset management.
Asset management
The Group continued to undertake a wide range of asset
management activities during the period, contributing to rental
growth and increased capital values.
Disposals
Part of the Group's asset management strategy is to dispose of
mature, lower-yielding or non-core assets, so it can redeploy the
capital to generate further income growth and higher total returns.
A number of such disposal opportunities were identified during the
period with four completing since the period end (see post period
end activity below). The Group continues to review a number of
further asset sales.
Capital expenditure
Capital expenditure is key to enhancing the quality of the
Group's assets, so as to attract occupiers and increase rental
levels and capital values. It also enables the Group to support its
occupiers' growth plans, through value-enhancing improvements or
extensions to units, in exchange for higher rents or extended
leases. The Group therefore aims to invest 0.75% of its gross asset
value in capital expenditure each year. The financial year ending
31 March 2020 is expected to represent a period of higher capital
expenditure for the Group and during the first six months, it spent
or committed GBP2.4 million on capital expenditure (six months
ended 30 September 2018: GBP1.4 million).
One of the larger elements of this spend was the refurbishment
of the Group's multi-let asset in Witney, Oxfordshire. Since the
beginning of the period, the Group has taken back approximately
70,600 sq ft of space for refurbishment and received a surrender
premium and dilapidations payment of GBP0.8 million, providing
effective income cover through to early 2020 and a contribution to
refurbishment works. The focus is now on completing the
refurbishment, returning the single-let unit to a range of smaller
units and securing new occupiers at higher rents. Pleasingly, an
encouraging level of enquiries has already been received. As a
result of this and other refurbishment work, approximately 3.8% of
the portfolio's ERV was under refurbishment at the period end,
reflecting the fact that rent-enhancing refurbishments can only
take place in empty units.
Other notable items of capital expenditure included
refurbishment work on two units at Stadium Industrial Estate,
Luton, roof works on units at Nexus, Knowsley, and refurbishment
work on two units and roof works at Farthing Road Industrial
Estate, Ipswich, all of which have facilitated new lettings at
rents ahead of ERV.
Leasing activity
The Group made further progress with letting vacant space and
renewing leases during the period. This progress was supported by
the capital expenditure described above and reflects the Group's
'space intelligence', which incorporates its strong relationships
with occupiers and its ongoing work to understand their space
requirements.
New leases
The Group secured 43 new leases on 137,000 sq ft of space during
the period. These will generate annual rent of GBP0.9 million,
which is 8.0% ahead of the 31 March 2019 ERV. On average, new
leases continue to lengthen, with seven leases of ten years or more
signed in the period. Incentives also continue to reduce.
Key examples of new lettings in the first half of the year
included:
-- a ten-year lease, without a break, on a unit at Vantage
Point, Leeds, at a rental level 22.9% ahead of ERV;
-- a ten-year lease, with a break at year five, on a unit at
Kingsditch Trading Estate, Cheltenham, at a rental level 13.2%
ahead of ERV;
-- a nine-year lease, with a break at year six, on a unit at
Shieling Court, Corby, at a rental level 11.1% ahead of ERV;
-- a five-year lease, with a break at year three, on a unit at
Kingsditch Trading Estate, at a rental level 17.4% ahead of ERV;
and
-- a ten-year lease, with a break at year five, on a unit at New
England Industrial Estate, Hoddesdon, at a rent of GBP150,000 per
annum, in line with ERV.
Lease renewals
The Group continues to retain the majority of its occupiers,
with 80% remaining in occupation at expiry and 62% with a break
arising in the period. Of the 38% that did exercise breaks, 63%
were re-let at rents 19.9% ahead of previous rents. As in previous
periods, occupiers who chose not to renew typically did so because
the Group was unable to offer them more space on the same site. In
total, there were 57 lease renewals on approximately 369,500 sq ft
of space during the period. The renewals resulted in average rental
growth of 23.4% above the previous passing rent and 2.8% above the
ERV.
Examples of notable lease renewals in the period included:
-- a major renewal with Alliance Healthcare (Distribution)
Limited, the distribution arm of Walgreens Boots Alliance Inc., at
Daneshill Industrial Estate in Basingstoke. The ten-year lease
renewal, with no breaks, in return for market standard incentives,
was agreed at a 42.3% uplift to the previous rent, with a headline
rent of GBP925,000 per annum or GBP8.19 per sq ft. Boots has
occupied the 113,300 sq ft unit since 1989;
-- a ten-year lease, without a break, on a unit at Kingsditch
Trading Estate, at a rental level 19.1% ahead of the previous
rent;
-- a ten-year lease, without a break, on units at Queenslie
Business Park, Glasgow, at a rental level 8.8% ahead of the
previous rent;
-- a ten-year lease, with a break at year five, on a unit at
Witan Park, Witney, at a rental level 24.6% ahead of the previous
rent; and
-- a six-year lease, with a break at year three, on a unit at
Yale Business Park, Ipswich, at a rental level 37.8% ahead of the
previous rent.
Development activity
Having received outline planning permission during the year
ended 31 March 2019 for up to 250,000 sq ft of employment-led space
at Queenslie Business Park, Glasgow, the Group has continued to
progress its plans for the site. The Group will not build new
accommodation without first achieving a pre-let on some of the
space. It has already received strong interest from potential
occupiers, on what is a key motorway-fronting location. Securing
pre-lets will enable the Group to seek detailed planning consent
for the occupiers' specific requirements. Activity during the
period included continuing the process for clearing planning
pre-conditions and beginning to market a trade counter scheme.
Occupancy in the existing estate at Queenslie remains high.
In addition, at Nexus, Knowsley, the Group achieved outline
planning consent for 30,000 sq ft of industrial space on two acres
of the development land, along with a petrol and electric charging
station and a drive-through on the remaining 2.2 acres. This is a
further example of the Group seeking to extract value from unused
or underutilised 'lazy acres'.
Portfolio analysis
As a result of the acquisitions and asset management activity
described above, at the period end the portfolio was valued at
GBP438.7 million and totalled 6.2 million sq ft of space. The table
below analyses the portfolio as at 30 September 2019:
Warehouse sector Occupancy Valuation Net Reversionary WAULT WAULT Average Average
GBPm initial yield to expiry to break rent capital
yield Years Years GBP per value
sq ft GBP per
sq ft
Warehouse storage
and distribution 92.5% 348.4 6.2% 7.0% 5.3 4.0 5.30 71
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
Light manufacture
and assembly 84.1% 45.4 7.2% 8.5% 4.3 2.8 4.59 53
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
Warehouse -
trade use 100.0% 12.4 7.1% 7.3% 6.1 4.6 7.19 93
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
Warehouse -
retail use 100.0% 10.8 8.2% 9.4% 5.0 5.0 10.44 119
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
Workspace and
office 85.0% 21.7 7.3% 8.8% 3.9 3.3 10.00 106
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
Total portfolio 91.5% 438.7 6.5% 7.3% 5.1 3.9 5.47 71
---------- ---------- --------- ------------- ----------- ---------- --------- ---------
At the period end, the contracted rent roll was GBP30.3 million,
resulting in a NIY of 6.5%. The portfolio's ERV was GBP34.5
million, giving a reversionary yield of 7.3%. The ERV typically
assumes that a unit is re--let in its current condition and does
not take account of the potential to increase rents through
refurbishment, repositioning or change in permitted planning use.
The Group's asset management is progressively unlocking the
portfolio's reversionary potential, with new lettings frequently
securing rental levels ahead of ERV.
The acquisitions and letting activity in the period have further
lengthened the WAULT, which stood at 5.1 years at 30 September
2019, up from 4.6 years at the start of the period and 4.2 years at
30 September 2018. This more than offset the natural reduction in
the WAULT over time.
In response to the positive way the market responds to
refurbishment, the Group has actively taken back units where
possible and is carrying out targeted refurbishment. Whilst this
has reduced the occupancy to 91.5%, slightly below the 92.0% at the
start of the period, the effective vacancy is only 3.2% as 3.8% of
the portfolio ERV was under refurbishment at the period end and a
further 1.5% was under offer to let. Occupancy excluding units
under offer and units undergoing refurbishment was 96.8%, versus
94.9% as at 31 March 2019.
Financial review
Performance
Rental income for the period was GBP12.4 million (six months
ended 30 September 2018: GBP9.9 million), up 25.3%, reflecting
growth in the portfolio and the benefits of asset management. Total
revenue, which includes insurance recharges, dilapidation income
and any surrender premiums, was GBP13.6 million (six months ended
30 September 2018: GBP10.7 million). As noted above, the Group
received a surrender premium and dilapidations payment of GBP0.8
million in respect of the units taken back at Witney, which is
included in total revenue for the period.
The Group's operating costs include its running costs (primarily
the management, audit, company secretarial, other professional and
Directors' fees), and property-related costs (including legal
expenses, void costs and repairs). Total operating costs for the
period were GBP3.9 million (six months ended 30 September 2018:
GBP5.7 million). Operating costs in the six months ended 30
September 2018 included one-off costs of GBP2.2 million associated
with a terminated acquisition and the default of the tenant at
Deeside, who entered into administration.
The Group continues to exercise tight control of its costs. The
EPRA cost ratio, which is calculated as costs as a percentage of
revenue, was 26.5% for the period (six months ended 30 September
2018: 28.9% excluding one-off costs). The ongoing charges ratio,
representing the costs of running the REIT as a percentage of NAV,
was 1.0% (six months ended 30 September 2018: 2.2%).
There was no profit on disposal in the six months to 30
September 2019. In the six months ended 30 September 2018, the
Group recorded a profit of GBP3.7 million on the sale of four
investment properties.
At the period end, the Group recognised a loss of GBP4.3 million
on the revaluation of its investment properties (six months ended
30 September 2018: gain of GBP4.4 million) reflecting the one-off
costs associated with the acquisitions in the period of GBP8.6
million net of a revaluation uplift of GBP4.3 million.
Net financing costs, which include the interest costs associated
with the Group's revolving credit facility ("RCF") and term loan,
totalled GBP2.5 million (six months ended 30 September 2018: GBP2.1
million).
Statutory profit before tax for the period was GBP2.8 million
(six months ended 30 September 2018: GBP11.0 million).
As a REIT, the Group's profits and gains from its property
investment business are exempt from corporation tax. The
corporation tax charge for the period was therefore GBPnil (six
months ended 30 September 2018: GBPnil).
Earnings per share ("EPS") under IFRS was 1.2 pence (six months
ended 30 September 2018: 6.6 pence). EPRA EPS was 3.0 pence (six
months ended 30 September 2018: 1.8 pence, or 3.1 pence when
adjusted to exclude one-off costs).
Dividends
The Company has declared the following interim dividends in
respect of the six months to 30 September 2019:
-- an interim dividend of 1.5 pence per share in relation to the
three months to 30 June 2019, which was paid as a PID on 27
September 2019; and
-- the Board has also declared an interim dividend of 1.5 pence
per share in relation to the three months to 30 September 2019,
which will be paid in full as a PID on 27 December 2019, to
shareholders on the register at 29 November 2019. The ex-dividend
date will be 28 November 2019.
The total dividend for the period was therefore 3.0 pence per
share (six months ended 30 September 2018: 3.0 pence), in line with
the initial target of at least 6.0 pence for the full year. The
total dividend was 101% covered by EPRA EPS.
The cash cost of the total dividend for the period was GBP7.2
million (six months ended 30 September 2018: GBP5.0 million).
Valuation and net asset value
The portfolio was independently valued by CBRE as at 30
September 2019, in accordance with the RICS Valuation - Global
Standards 2017 (incorporating the International Valuation
Standards) and the UK National Supplement 2018 (the 'Red
Book').
The portfolio valuation of GBP438.7 million (31 March 2019:
GBP307.4 million) represented a 0.6% like-for-like increase on the
valuation at 31 March 2019, and taking into account the capital
expenditure in the period of GBP2.4 million. The like-for-like
valuation increase was primarily driven by income growth. The EPRA
NIY was 5.7% (31 March 2019: 6.1%).
The valuation resulted in an EPRA NAV of 105.2 pence per share
at the period end (31 March 2019: 109.7 pence per share). The
reduction reflects the dilutive effect of the share issue (see
below), the limited time that the assets subsequently acquired were
held, which restricted the scope for valuation growth, and most
significantly the costs associated with acquisitions in the period,
which totalled GBP8.6 million and largely comprised stamp duty land
tax and agents' fees.
Equity financing
On 2 April 2019, the Company raised gross proceeds of GBP76.5
million through a placing, open offer and offer for subscription.
In total, the Company issued 74,254,043 new ordinary shares at
103.0 pence each. The net proceeds raised, after associated costs,
were GBP74.8 million.
Debt financing and hedging
At the start of the period, the Group had a GBP30.0 million term
loan and a GBP105.0 million RCF, both with HSBC. These five-year
facilities run to November 2022, have a margin of 225 basis points
above LIBOR and are secured on all properties within the Group.
During the period, the Group extended its debt facilities twice
to support its acquisition programme. The first extension increased
the RCF by GBP45.0 million to GBP150.0 million. The second
extension was a short-term increase to the term loan of GBP30.0
million to GBP60.0 million, giving total facilities at the period
end of GBP210.0 million. The incremental facilities are at a lower
cost of 195 basis points above LIBOR, reflecting the Group's
increased scale, the diversity of risk and the LTV covenant.
At the period end, the term loan was fully drawn and GBP124.0
million had been drawn against the RCF. Total debt was therefore
GBP184.0 million (31 March 2019: GBP127.0 million) and headroom
within the facilities was GBP26.0 million. The LTV ratio at 30
September 2019 was 40.2% (31 March 2019: 39.7%).
The Group has two interest rate caps of GBP30.0 million each.
They run until November 2022 and November 2023 and have respective
rates of 1.50% and 1.75%, excluding lending margin. At the period
end, the Group had therefore hedged the interest costs on 29% of
its debt. There were no changes to the Group's interest rate
hedging arrangements during the period.
Post period end activity
Since the end of the period, the Group has completed the
following transactions:
-- the disposal of two office premises, a retail warehouse and
an industrial warehouse, in four separate transactions for a
combined consideration of GBP3.0 million. This compares with their
aggregated 31 March 2019 book value of GBP2.8 million and reflects
a NIY of 5.8%; and
-- the acquisition of the Midpoint Estate, a multi-let estate of
20 high-quality individual warehouse units. The purchase price was
GBP15.5 million, reflecting a NIY of 6.6%. The estate totals
182,500 sq ft, with units ranging from 2,300 sq ft to 31,600 sq ft.
It is strategically located off the M6 motorway in Middlewich,
Cheshire, and offers a number of opportunities to grow rents and
the WAULT through pro-active lease re-gears and renewals.
Investment Manager
The Company is an alternative investment fund for the purposes
of the Alternative Investment Fund Managers Directive and, as such,
is required to have an investment manager who is duly authorised to
undertake that role. G10 is the Company's AIFM, with Tilstone
providing advisory services to both G10 and the Company.
Tilstone Partners Limited
Investment Advisor
4 November 2019
Condensed consolidated statement of comprehensive income
(unaudited)
For the six months ended 30 September 2019
1 April to
30 1 April to
September 30 September
2019 2018
Continuing operations Notes GBP'000 GBP'000
-------------------------------------------- ----- ---------- -------------
Revenue 3 13,579 10,736
Property operating expenses 4 (1,664) (1,815)
-------------------------------------------- ----- ---------- -------------
Gross profit 11,915 8,921
Administration expenses 4 (2,256) (1,670)
Property and acquisition provision - (2,204)
-------------------------------------------- ----- ---------- -------------
Operating profit before gains on investment
properties 9,659 5,047
Profit on disposal of investment properties - 3,679
Fair value (losses)/gains on revaluation of
investment properties 11 (4,283) 4,364
Operating profit 5,376 13,090
Finance income 5 21 11
Finance expenses 6 (2,554) (2,143)
Profit before tax 2,843 10,958
Taxation 7 - -
-------------------------------------------- ----- ---------- -------------
Total comprehensive income for the period 2,843 10,958
-------------------------------------------- ----- ---------- -------------
EPS (basic and diluted) (pence) 10 1.2 6.6
-------------------------------------------- ----- ---------- -------------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of financial position
(unaudited)
As at 30 September 2019
30 September 31 March
2019 2019
Notes GBP'000 GBP'000
-------------------------------------- ----- ------------ ---------
Assets
Non-current assets
Investment property 11 446,902 311,791
Interest rate derivatives 13 76 249
-------------------------------------- ----- ------------ ---------
446,978 312,040
-------------------------------------- ----- ------------ ---------
Current assets
Cash and cash equivalents 7,732 4,866
Trade and other receivables 12 8,085 4,400
-------------------------------------- ----- ------------ ---------
15,817 9,266
-------------------------------------- ----- ------------ ---------
Total assets 462,795 321,306
-------------------------------------- ----- ------------ ---------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 14 (182,645) (125,510)
Finance lease obligations 15 (7,783) (4,170)
-------------------------------------- ----- ------------ ---------
(190,428) (129,680)
-------------------------------------- ----- ------------ ---------
Current liabilities
Finance lease obligations 15 (493) (284)
Other payables and accrued expenses 16 (13,448) (3,996)
Property and acquisition provision 16 (595) (1,434)
Deferred income 16 (5,104) (3,585)
-------------------------------------- ----- ------------ ---------
(19,640) (9,299)
-------------------------------------- ----- ------------ ---------
Total liabilities (210,068) (138,979)
-------------------------------------- ----- ------------ ---------
Net assets 252,727 182,327
-------------------------------------- ----- ------------ ---------
Equity
Share capital 17 2,403 1,660
Share premium 74,022 -
Capital reduction reserve 161,149 161,149
Retained earnings 15,153 19,518
-------------------------------------- ----- ------------ ---------
Total equity 252,727 182,327
-------------------------------------- ----- ------------ ---------
Number of shares in issue (thousands) 240,254 166,000
NAV per share (pence) 18 105.2 109.8
-------------------------------------- ----- ------------ ---------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of changes in equity
(unaudited)
For the six months ended 30 September 2019
Capital
Share Share Retained reduction
capital premium earnings reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----- ------- ------- -------- --------- -------
Balance at 1 April 2019 1,660 - 19,518 161,149 182,327
--------------------------- ----- ------- ------- -------- --------- -------
Total comprehensive income - - 2,843 - 2,843
Ordinary shares issued 743 75,739 - - 76,482
Share issue costs - (1,717) - - (1,717)
Dividends paid 9 - - (7,208) - (7,208)
--------------------------- ----- ------- ------- -------- --------- -------
Balance at 30 September
2019 2,403 74,022 15,153 161,149 252,727
--------------------------- ----- ------- ------- -------- --------- -------
Capital
Share Share Retained reduction
capital premium earnings reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----- ------- ------- -------- --------- -------
Balance at 1 April 2018 1,660 - 6,705 161,149 169,514
Total comprehensive income - - 10,958 - 10,958
Dividends paid 9 - - (4,980) - (4,980)
--------------------------- ----- ------- ------- -------- --------- -------
Balance at 30 September
2018 1,660 - 12,683 161,149 175,492
--------------------------- ----- ------- ------- -------- --------- -------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended 30 September 2019
1 April 1 April
to 30 to 30
September September
2019 2018
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- ---------
Cash flows from operating activities
Operating profit 5,376 13,090
Adjustments to reconcile profit for the period
to net cash flows:
Losses/(gains) from change in fair value of
investment properties 11 4,283 (4,364)
Realised gains on disposal of investment properties - (3,679)
Finance lease depreciation 47 -
Property and acquisition provision - 2,204
------------------------------------------------------ ----- --------- ---------
Operating cash flows before movements in working
capital 9,706 7,251
Increase in other receivables and prepayments (3,084) (1,211)
Increase/(decrease) in other payables and accrued
expenses 6,500 (1,537)
Movement in property and acquisition provision (839) -
------------------------------------------------------ ----- --------- ---------
Net cash flows generated from operating activities 12,283 4,503
------------------------------------------------------ ----- --------- ---------
Cash flows from investing activities
Acquisition of investment properties (129,293) (2,568)
Capital expenditure (2,571) (1,372)
Disposal of investment properties - 18,689
------------------------------------------------------ ----- --------- ---------
Net cash (used in)/generated from investing
activities (131,864) 14,749
------------------------------------------------------ ----- --------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary shares 76,482 -
Share issuance costs paid (1,717) -
Bank loans drawn down 14 57,000 -
Bank loans repaid 14 - (15,000)
Interest received 5 21 11
Interest and other finance expenses paid (2,208) (2,253)
Dividends paid in the period (7,131) (4,698)
------------------------------------------------------ ----- --------- ---------
Net cash flows generated from/(used in) financing
activities 122,447 (21,940)
------------------------------------------------------ ----- --------- ---------
Net increase/(decrease) in cash and cash equivalents 2,866 (2,688)
Cash and cash equivalents at start of the period 4,866 6,572
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents at end of the period 7,732 3,884
------------------------------------------------------ ----- --------- ---------
The accompanying notes form an integral part of these financial
statements.
Notes to the condensed consolidated financial statements
(unaudited)
For the six months ended 30 September 2019
1. General information
Warehouse REIT plc (the "Company") is a closed-ended Real Estate
Investment Trust ("REIT") incorporated in England and Wales on 24
July 2017. The Company began trading on 20 September 2017. The
registered office of the Company is Beaufort House, 51 New North
Road, Exeter EX4 4EP. The Company is admitted to trading on AIM, a
market operated by the London Stock Exchange.
2. Basis of preparation
These interim condensed consolidated unaudited financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting and International Financial Reporting Standards
("IFRS") and interpretations issued by the International Accounting
Standards Board ("IASB") as adopted by the European Union.
These interim condensed consolidated unaudited financial
statements should be read in conjunction with the Company's last
financial statements for the year ended 31 March 2019. These
interim condensed consolidated unaudited financial statements do
not include all of the information required for a complete set of
annual financial statements proposed in accordance with IFRS as
adopted by the EU, however, they have been prepared using the
accounting policies adopted in the audited financial statements for
the year ended 31 March 2019 and selected explanatory notes have
been included to explain events and transactions that are
significant in understanding changes in the Company's financial
position and performance since the last financial statements.
The financial statements have been prepared under the historical
cost convention, except for investment property and interest rate
derivatives, which have been measured at fair value. The interim
financial statements are presented in Pound Sterling and all values
are rounded to the nearest thousand pounds (GBP'000), except when
otherwise indicated.
The financial information contained within these interim results
does not constitute full statutory accounts as defined in section
434 of the Companies Act 2006. The financial statements for the six
months ended 30 September 2019 have not been either audited or
reviewed by the Company's Auditor. The information for the year
ended 31 March 2019 has been extracted from the latest published
annual report and financial statements, which has been filed with
the Registrar of Companies. The Auditor reported on those accounts;
its report was unqualified, and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future,
for a period of not less than 12 months from the date of this
report. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. It is noted that whilst
there are net current liabilities of GBP3.8 million, there is
GBP26.0 million headroom readily available under the RCF.
Therefore, the financial statements have been prepared on the going
concern basis.
2.1 Changes to accounting standards and interpretations
There were a number of new standards and amendments to existing
standards which are required for the Group's accounting period
beginning on 1 April 2019, which have been considered and applied
as follows:
-- IFRS 16 Leases. In January 2016, the IASB published the final
version of IFRS 16 Leases. IFRS 16 specifies how an IFRS reporter
will recognise, measure, present and disclose leasing
arrangements.
Under IFRS 16, the Group recognises the right-to-use asset in
the Consolidated Statement of Financial Position at fair value and
this is amortised over the life of the lease. Amortisation is
recognised in the Consolidated Statement of Comprehensive Income.
In addition, a financial liability is recognised in the
Consolidated Statement of Financial Position which is valued at the
present value of future lease payments using the discount rate
implicit in the lease, if readily determinable, or if not the Group
incremental borrowing rate.
Under IFRS 16, comparative information is not required to be
restated. This new standard has been applied with no significant
impact on the financial statements.
The following have been considered, but have had no impact on
the Group for the reporting period:
-- Amendments to IFRS 9;
-- IFRIC 23, Uncertainty over Income Tax Treatments;
-- Amendments to IAS 28 Long Term Interests in Associates and Joint Ventures; and
-- Amendments to IAS 19 Plan Amendment, Curtailment or Settlement.
There are a number of new standards and amendments to existing
standards which have been published and are mandatory for the
Group's accounting periods beginning on or after 1 April 2020 or
later. The Group is not adopting these standards early. The
following are the most relevant to the Group:
-- Definition of Material - amendments to IAS 1 and IAS 8; and
-- Annual improvements to IFRS 2015-2017 Cycle: amendments to
IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12
Income Taxes and IAS 23 Borrowing Costs.
It is not considered that these new accounting standards and
amendments will have a significant impact on the Group's financial
statements.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of an asset or
liability in the future.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimate, which has the most
significant effect on the amounts recognised in the consolidated
financial statements:
Valuation of property
The valuations of the Group's investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation - Global Standards 2017 (incorporating the International
Valuation Standards) and the UK National Supplement 2018 (the 'Red
Book') and in accordance with IFRS 13. See notes 11 and 19 for
further details.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are consistent with those applied within
the Company's Annual Report and Financial Statements for the year
ended 31 March 2019.
Functional and presentation currency
The objective of the Group is to generate returns in Pound
Sterling and the Group's performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have
therefore adopted it as the functional and presentation
currency.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment in and provision
of UK urban warehouses.
3. Revenue
1 April
1 April to to 30
30 September September
2019 2018
GBP'000 GBP'000
-------------------- ------------- ----------
Rental income 12,416 9,927
Insurance recharged 463 394
Dilapidation income 664 390
Other income 36 25
-------------------- ------------- ----------
Total 13,579 10,736
-------------------- ------------- ----------
4. Property operating and administration expenses
1 April
1 April to 30
to 30 September September
2019 2018
GBP'000 GBP'000
----------------------------------- ---------------- ----------
Premises expenses 1,035 1,030
Insurance 368 281
Rates 155 67
Utilities 56 43
Loss allowance 50 248
Head rent - 146
Property operating expenses 1,664 1,815
----------------------------------- ---------------- ----------
Investment management fees 1,407 919
Directors' remuneration 81 42
Finance lease depreciation 47 -
Other administration expenses 721 709
----------------------------------- ---------------- ----------
Administration expenses 2,256 1,670
----------------------------------- ---------------- ----------
Property and acquisition provision - 2,204
Total 3,920 5,689
----------------------------------- ---------------- ----------
5. Finance income
1 April to 1 April
30 September to 30
September
2019 2018
GBP'000 GBP'000
----------------------------------------- ------------- ----------
Income from cash and short-term deposits 21 11
----------------------------------------- ------------- ----------
Total 21 11
----------------------------------------- ------------- ----------
6. Finance expenses
1 April
1 April to 30 to 30
September September
2019 2018
GBP'000 GBP'000
-------------------------------------------------- ------------- ----------
Loan interest 1,879 1,882
Finance lease interest 241 -
Loan arrangement fees amortised 261 253
Bank charges - 8
-------------------------------------------------- ------------- ----------
2,381 2,143
Change in fair value of interest rate derivatives 173 -
-------------------------------------------------- ------------- ----------
Total 2,554 2,143
-------------------------------------------------- ------------- ----------
7. Taxation
Corporation tax has arisen as follows:
1 April
1 April to to 30
30 September September
2019 2018
GBP'000 GBP'000
----------------------------------------------------- ------------- ----------
Corporation tax on residual income for current period - -
----------------------------------------------------- ------------- ----------
Total - -
----------------------------------------------------- ------------- ----------
Reconciliation of tax charge to profit before tax:
1 April to 1 April
30 September to 30
September
2019 2018
GBP'000 GBP'000
----------------------------------------- ------------- ----------
Profit before tax 2,843 10,958
Corporation tax at 19.0% (2018: 19%) 540 2,082
Change in value of investment properties 814 (829)
Tax exempt property rental business (1,354) (1,253)
----------------------------------------- ------------- ----------
Total - -
----------------------------------------- ------------- ----------
8. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its
investment property portfolio. These non-cancellable leases have a
remaining term of up to 38 years.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 September 2019 are as follows:
30 September 31 March
2019 2019
GBP'000 GBP'000
--------------------------- ------------ --------
Within one year 28,040 17,198
Between one and five years 81,276 47,068
More than five years 45,605 22,585
--------------------------- ------------ --------
Total 154,921 86,851
--------------------------- ------------ --------
9. Dividends
1 April to
30 September
Pence 2019
per share GBP'000
------------------------------------------------------------------------------- --------- -------------
Fourth interim dividend for year ended 31 March 2019 paid on 28 June 2019 1.50 3,604
First interim dividend for year ending 31 March 2020 paid on 27 September 2019 1.50 3,604
------------------------------------------------------------------------------- --------- -------------
Total dividends paid during the period 3.00 7,208
------------------------------------------------------------------------------- --------- -------------
Paid as:
Property income distributions 3.00 7,208
Ordinary dividends - -
------------------------------------------------------------------------------- --------- -------------
Total 3.00 7,208
------------------------------------------------------------------------------- --------- -------------
1 April to
30 September
Pence 2018
per share GBP'000
------------------------------------------------------------------------------ --------- -------------
Interim dividend for period ended 31 March 2018 paid on 6 July 2018 1.50 2,490
First interim dividend for year ended 31 March 2019 paid on 28 September 2018 1.50 2,490
------------------------------------------------------------------------------ --------- -------------
Total dividends paid during the period 3.00 4,980
------------------------------------------------------------------------------ --------- -------------
Paid as:
Property income distributions 2.65 4,399
Ordinary dividends 0.35 581
------------------------------------------------------------------------------ --------- -------------
Total 3.00 4,980
------------------------------------------------------------------------------ --------- -------------
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
10. Earnings per share
Basic EPS is calculated by dividing profit for the period
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the period. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical.
1 April to
1 April to 30 30 September
September 2019 2018
GBP'000 GBP'000
--------------------------------------------------- --------------- -------------
IFRS earnings 2,843 10,958
--------------------------------------------------- --------------- -------------
EPRA earnings adjustments:
Profit on disposal of investment properties - (3,679)
Fair value gains on investment properties 4,283 (4,364)
Changes in fair value of interest rate derivatives 173 -
EPRA earnings 7,299 2,915
--------------------------------------------------- --------------- -------------
Group-specific earnings adjustments:
Property and acquisition provision - 2,204
Adjusted earnings 7,299 5,119
--------------------------------------------------- --------------- -------------
1 April to
1 April to 30 30 September
September 2019 2018
Pence Pence
Basic IFRS EPS 1.2 6.6
--------------------------------------------------- --------------- -------------
Diluted IFRS EPS 1.2 6.6
--------------------------------------------------- --------------- -------------
EPRA EPS 3.0 1.8
--------------------------------------------------- --------------- -------------
Adjusted EPS 3.0 3.1
--------------------------------------------------- --------------- -------------
30 September 30 September
2019 2018
Number Number
of shares of shares
------------------------------------------------------- ------------ ------------
Weighted average number of shares in issue (thousands) 239,848 166,000
------------------------------------------------------- ------------ ------------
11. UK investment property
30 September 31 March
2019 2019
GBP'000 GBP'000
---------------------------------------------------------------- ------------ --------
Investment property at the start of the period 307,385 291,000
Acquisition of properties 133,193 18,199
Capital expenditure 2,428 2,117
Disposal of properties - (15,160)
Fair value (losses)/gains on revaluation of investment property (4,283) 11,229
---------------------------------------------------------------- ------------ --------
438,723 307,385
Adjustment for finance lease obligations 8,179 4,406
---------------------------------------------------------------- ------------ --------
Carrying value at the end of the period 446,902 311,791
---------------------------------------------------------------- ------------ --------
Fair value loss on revaluation of investment property of GBP4.3
million reflecting the one-off costs associated with the
acquisitions in the period of GBP8.6 million net of a revaluation
uplift of GBP4.3 million.
12. Trade and other receivables
30 September 31 March
2019 2019
GBP'000 GBP'000
------------------ ------------ --------
Rent receivable 3,691 2,623
Prepayments 554 69
Other receivables 3,840 1,708
------------------ ------------ --------
Total 8,085 4,400
------------------ ------------ --------
13. Interest rate derivatives
30 September 31 March
2019 2019
GBP'000 GBP'000
--------------------------------------------------- ------------ --------
At the start of the period 249 -
Interest rate cap premium paid - 595
Changes in fair value of interest rate derivatives (173) (346)
--------------------------------------------------- ------------ --------
Balance at the end of the period 76 249
--------------------------------------------------- ------------ --------
14. Interest-bearing loans and borrowings
30 September 31 March
2019 2019
GBP'000 GBP'000
----------------------------------------------------------- ------------ --------
Loans at the start of the period 127,000 124,450
Loans drawn down 57,000 21,550
Loans repaid - (19,000)
----------------------------------------------------------- ------------ --------
Total loans drawn down at the end of the period 184,000 127,000
----------------------------------------------------------- ------------ --------
Unamortised loan arrangement fees at the start of period (1,490) (1,398)
Loan arrangement fees capitalised in the period (126) (583)
Amortisation for the period 261 491
----------------------------------------------------------- ------------ --------
Unamortised loan arrangement fees at the end of the period (1,355) (1,490)
----------------------------------------------------------- ------------ --------
Loan balance less unamortised loan arrangement fees 182,645 125,510
----------------------------------------------------------- ------------ --------
As at 30 September 2019, GBP26.0 million of the RCF remained
available to be drawn. The term loan was fully drawn. Credit
facilities are secured on all properties within the portfolio and
expire on 30 November 2022.
The debt facilities include loan to value and interest cover
covenants that are measured at Group level. The Group has
maintained significant headroom against all measures throughout the
financial period and is in full compliance with all loan covenants
at 30 September 2019.
15. Finance lease obligations
The following table analyses the minimum lease payments under
non-cancellable finance leases using an average discount rate of
6.9%:
30 September 31 March
2019 2019
GBP'000 GBP'000
-------------------------------------------- ------------ --------
Current liabilities
Within one year 493 284
-------------------------------------------- ------------ --------
Non-current liabilities
After one year but not more than five years 1,884 1,034
Later than five years 5,899 3,136
-------------------------------------------- ------------ --------
Total 8,276 4,454
-------------------------------------------- ------------ --------
16. Current liabilities - other payables and accrued expenses,
deferred income and provisions
30 September 31 March
2019 2019
GBP'000 GBP'000
-------------------------------------------- ------------ --------
Property operating expenses payable 1,070 514
Finance and administration expenses payable 1,407 1,467
Loan interest payable 791 784
Capital expenses payable 9,759 80
Other expenses payable 421 1,151
-------------------------------------------- ------------ --------
Other payables and accrued expenses 13,448 3,996
-------------------------------------------- ------------ --------
Property and acquisition provision 595 1,434
Deferred income 5,104 3,585
-------------------------------------------- ------------ --------
Total 19,147 9,015
-------------------------------------------- ------------ --------
17. Share capital
Share capital is the nominal amount of the Company's ordinary
shares in issue.
30 September 31 March
2019 2019
Ordinary shares of GBP0.01 each Number GBP'000 GBP'000
--------------------------------- ----------- ------------ --------
Issued and fully paid:
At the start of the period 166,000,000 1,660 1,660
Shares issued 74,254,043 743 -
--------------------------------- ----------- ------------ --------
Balance at the end of the period 240,254,043 2,403 1,660
--------------------------------- ----------- ------------ --------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll, to one vote for every
share held. There are no restrictions on the size of a shareholding
or the transfer of shares, except for the UK REIT restrictions.
18. Net asset value per share
Basic NAV per share is calculated by dividing net assets
attributable to ordinary equity holders of the Company in the
statement of financial position by the number of ordinary shares
outstanding at the end of the period. As there are no dilutive
instruments in issue, basic and diluted NAV per share are
identical.
30 September 31 March
2019 2019
GBP'000 GBP'000
------------------------------------------------------- ------------- ---------
IFRS net assets attributable to ordinary shareholders 252,727 182,327
IFRS net assets for calculation of NAV 252,727 182,327
Number of shares in issue (thousands) 240,254 166,000
-------------------------------------------------------- ------------- ---------
IFRS basic and diluted NAV per share (pence) 105.2 109.8
-------------------------------------------------------- ------------- ---------
The NAV is calculated as:
30 September 31 March
2019 2019
GBP'000 GBP'000
------------------------------------------------------- ------------- ---------
IFRS net assets attributable to ordinary shareholders 252,727 182,327
IFRS net assets for calculation of NAV 252,727 182,327
Adjustment to net assets:
Fair value of interest rate derivatives (see note 13) (76) (249)
-------------------------------------------------------- ------------- ---------
EPRA net assets 252,651 182,078
-------------------------------------------------------- ------------- ---------
EPRA NAV per share (pence) 105.2 109.7
-------------------------------------------------------- ------------- ---------
19. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying value of the loans and borrowings approximate
their fair value due to the contractual terms and conditions of the
loan. The loans are at a variable interest rates of 1.95% - 2.25%
above LIBOR.
Six-monthly valuations of the investment properties are
performed by CBRE, an accredited external valuer with recognised
and relevant professional qualifications and recent experience of
the location and category of the investment property being valued.
The valuations are the ultimate responsibility of the Directors,
however, who appraise these six-monthly.
The valuation of the Group's investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation -
Professional Standards January 2017 (incorporating the
International Valuation Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams), the
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property and discount rates applicable to those assets.
The following tables show an analysis of the fair values of
investment properties recognised in the statement of financial
position by level of the fair value hierarchy(1) :
30 September 2019
----------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ------- ------- -------
Investment properties - - 438,723 438,723
Interest rate derivatives - 76 - 76
---------------------------------------------- ------- ------- ------- -------
Total - 76 438,723 438,799
---------------------------------------------- ------- ------- ------- -------
31 March 2019
----------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at
fair value GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------- ------- ------- -------
Investment properties - - 307,385 307,385
Interest rate derivatives - 249 - 249
----------------------------------- ------- ------- ------- -------
Total - 249 307,385 307,634
----------------------------------- ------- ------- ------- -------
1. Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
The following table analyses:
-- the fair value measurements at the end of the reporting period;
-- a description of the valuation techniques applied;
-- the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-- for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Fair value Valuation Key Range
GBP'000 technique unobservable
inputs
----------------- ----------- --------------------- ---------------- ----------------------------
30 September 2019 GBP438,723 Income capitalisation ERV 23-1,880 (GBP'000 per annum)
Equivalent yield 5.2%-13.1%
----------------- ----------- --------------------- ---------------- ----------------------------
31 March 2019 GBP307,385 Income capitalisation ERV 25-1,490 (GBP'000 per annum)
Equivalent yield 5.2%-13.1%
----------------- ----------- --------------------- ---------------- ----------------------------
Significant increases/decreases in the ERV (per sq ft per annum)
and rental growth per annum in isolation would result in a
significantly higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft per annum) is accompanied by:
-- a similar change in the rent growth per annum and discount rate (and exit yield); and
-- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to GBP(4,283,000) (six months to 30 September
2018: GBP4,364,000) and are presented in the condensed consolidated
statement of comprehensive income in line item 'fair value
gains/(losses) on investment properties'.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Group's assets and liabilities is
considered to be the same as their fair value.
20. Related party transactions
Directors
The Directors (all Non-Executive) of the Company and its
subsidiaries are considered to be the key management personnel of
the Group. Directors' remuneration for the period totalled
GBP80,585 (six months to 30 September 2018: GBP42,031) and at 30
September 2019, a balance of GBPnil (31 March 2019: GBPnil) was
outstanding.
Investment Advisor
The Company is party to an Investment Management Agreement with
the Investment Manager, pursuant to which the Investment Manager
has appointed the Investment Advisor to provide investment advisory
services relating to the respective assets on a day-to-day basis in
accordance with their respective investment objectives and
policies, subject to the overall supervision and direction by the
Investment Manager and the Board of Directors.
For its services to the Group, the Investment Advisor receives
an annual fee at a rate of 1.1% of the NAV of the Company's
portfolio.
During the period, the Group incurred GBP1,407,000 (30 September
2018: GBP919,000) in respect of investment advisor fees. GBP847,000
(31 March 2019: GBP465,000) was outstanding as at the period end
date.
Subsidiaries
At 30 September 2019, the Company owns a 100% controlling stake
in Tilstone Holdings Limited, Tilstone Warehouse Holdco Limited,
Tilstone Industrial Warehouse Limited, Tilstone Retail Warehouse
Limited, Tilstone Industrial Limited, Tilstone Retail Limited,
Tilstone Trade Limited, Tilstone Basingstoke Limited, Tilstone
Glasgow Limited, Quantum North Limited, CHIP (One) Limited, CHIP
(Two) Limited, CHIP (Three) Limited, CHIP (Four) Limited, CHIP
(Five) Limited, CHIP (Ipswich) One Limited and CHIP (Ipswich) Two
Limited.
21. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
22. Post balance sheet events
A second interim dividend of 1.5 pence per share in respect of
the year ending 31 March 2020 will be paid in full as a PID on 27
December 2019, to shareholders on the register at 29 November 2019.
The ex-dividend date will be 28 November 2019.
Glossary
Adjusted earnings per share ("Adjusted EPS")
EPRA EPS adjusted to exclude non-recurring costs, divided by the
weighted average number of shares in issue during the year
Admission
The admission of Warehouse REIT plc onto the London Stock
Exchange on 20 September 2017
AGM
Annual General Meeting
AIC
The Association of Investment Companies
AIFM
Alternative Investment Fund Manager
AIFMD
Alternative Investment Fund Managers Directive
AIM
A market operated by the London Stock Exchange
Contracted rent
Gross annual rental income currently receivable on a property
plus rent contracted from expiry of rent-free periods and uplifts
agreed at the balance sheet date less any ground rents payable
under head leases
EPRA
The European Public Real Estate Association, the industry body
for European REITs
EPRA cost ratio
The sum of property and administration expenses as a percentage
of gross rental income calculated both including and excluding
vacant property costs
EPRA earnings
IFRS profit after tax excluding movements relating to changes in
fair value of investment properties, gains/losses on property
disposals, changes in fair value of financial instruments and the
related tax effects
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying
earnings from core operating activities based on the weighted
average number of shares in issue during the year
EPRA guidelines
The EPRA Best Practices Recommendations Guidelines November
2016
EPRA NAV
The value of net assets, adjusted to include properties and
other investment interests at fair value and to exclude items not
expected to be realised in a long-term property business, such as
the fair value of any financial derivatives and deferred taxes on
property valuation surpluses
EPRA NAV per share
The NAV per share figure based on EPRA NAV divided by the number
of shares outstanding at the balance sheet date
EPRA net initial yield ("EPRA NIY")
The annualised passing rent generated by the portfolio, less
estimated non--recoverable property operating expenses, expressed
as a percentage of the portfolio valuation (adding notional
purchaser's costs), excluding development properties
EPRA vacancy rate
Total open market rental value of vacant units divided by total
open market rental value of the portfolio
EPS
Earnings per share
Equivalent yield
The weighted average rental income return expressed as a
percentage of the investment property valuation, plus purchaser's
costs
Estimated rental value ("ERV")
The estimated annual open market rental value of lettable space
as assessed by the external valuer
FCA
Financial Conduct Authority
GAV
Gross asset value
Group
Warehouse REIT plc and its subsidiaries
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards as adopted by the
European Union
IFRS earnings per share ("EPS")
IFRS earnings after tax for the year divided by the weighted
average number of shares in issue during in the year
IFRS NAV per share
IFRS net asset value divided by the number of shares outstanding
at the balance sheet date
IPO
Initial public offering
LIBOR
The basic rate of interest used in lending between banks on the
London interbank market and also used as a reference for setting
the interest rate on other loans
Like-for-like rental income growth
The increase in contracted rent of properties owned throughout
the period under review, expressed as a percentage of the
contracted rent at the start of the period, excluding properties
undergoing refurbishment
Like-for-like valuation increase
The increase in the valuation of properties owned throughout the
period under review, net of capital expenditure, expressed as a
percentage of the valuation at the start of the period
Loan to value ratio ("LTV")
Gross debt less cash, short-term deposits and liquid
investments, divided by the aggregate value of properties and
investments
NAV
Net asset value
Net initial yield ("NIY")
Contracted rent on investment properties at the balance sheet
date, expressed as a percentage of the investment property
valuation, plus purchaser's costs
Net rental income
Gross annual rental income receivable after deduction of ground
rents and other net property outgoings including void costs and net
service charge expenses
Net reversionary yield ("NRY")
The anticipated yield to which the net initial yield will rise
(or fall) once the rent reaches the estimated rental value
Occupancy
Total open market rental value of the units leased divided by
total open market rental value of the portfolio, equivalent to one
minus the EPRA vacancy rate
Passing rent
Gross annual rental income currently receivable on a property as
at the balance sheet date less any ground rents payable under head
leases
Property income distribution ("PID")
Profits distributed to shareholders which are subject to tax in
the hands of the shareholders as property income. PIDs are usually
paid net of withholding tax (except for certain types of tax-exempt
shareholders). REITs also pay out normal dividends called
non-PIDs
QCA
Quoted Companies Alliance
Real Estate Investment Trust ("REIT")
A listed property company which qualifies for, and has elected
into, a tax regime which is exempt from corporation tax on profits
from property rental income and UK capital gains on the sale of
investment properties
RCF
Revolving credit facility
RPI
Retail price index
Total accounting return
The movement in EPRA NAV over a period plus dividends paid in
the period, expressed as a percentage of the EPRA NAV at the start
of the period
Total costs ratio
EPRA cost ratio excluding non-recurring costs calculated both
including and excluding vacant property costs
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry across the
investment portfolio weighted by contracted rent
The full half-yearly report can be accessed via the Company's
website at www.warehousereit.co.uk.
Neither the contents of Warehouse REIT plc's website nor the
contents of any website accessible from hyperlinks on the website
(or any website) is incorporated into, or forms part of this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGGPPGUPBGRC
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November 05, 2019 02:00 ET (07:00 GMT)
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