TIDMVIP
RNS Number : 6024T
Value and Indexed Prop Inc Tst PLC
16 November 2023
VALUE AND INDEXED PROPERTY INCOME TRUST PLC
Unaudited Half-Yearly Report
For the Six Months Ended 30 September 2023
Summary
Value and Indexed Property Income Trust PLC (VIP - previously
Value and Income Trust PLC) is an investment trust company listed
on the London Stock Exchange. It invests directly in UK commercial
property to deliver long, strong, index-related income. Its
performance benchmark is the MSCI UK Quarterly Property Index, the
main benchmark for commercial property performance. OLIM Property
Limited is the Investment Manager.
VIP's property portfolio delivered a total return of -1.8% over
the six months to end September against -0.5% for the MSCI UK
Quarterly Property Index. Over the past 5 years the VIP property
return was 4.0% p.a. (Index 1.1% p.a.) and over 10 years it was
7.7% p.a. (Index 5.9% p.a.).
VIP's dividend per share has risen every year since 1986 when
OLIM's management began. It has risen by 963% against the Retail
Price Index rise of 276%. The medium term dividend policy is for
increases at least in line with inflation, underpinned by VIP's
index-related property income. A first interim dividend of 3.2p per
share was paid on 27 October 2023. The second interim dividend of
3.2p per share will be paid on 26 January 2024 to Shareholders on
the register on 29 December 2023, with an ex-dividend date of 28
December 2023. It is intended that a third interim dividend of 3.2p
per share will be paid on 26 April 2024 to all Shareholders on the
register on 2 April 2024, with an ex-dividend date of 28 March
2024. The targeted total dividend for the full year is 13.2p
(+2.3%).
30 September 2023 31 March 2023
Portfolio GBPm % GBPm %
-------------- --------- -------- ------- ------
UK property* 135.5 94.6 150.5 98.5
-------------- --------- -------- ------- ------
Cash 7.8 5.4 2.3 1.5
-------------- --------- -------- ------- ------
143.3 100.0 152.8 100.0
-------------- --------- -------- ------- ------
* Savills valuation
Over the six months to end September, four overrented properties
(two pubs, a convenience store and a petrol filling station) were
sold for GBP8.1 million, 2.9% above their valuation. Since the end
of September VIP have reinvested part of the proceeds in an
RPI-linked Virgin Active health and fitness club at Brentwood in
Essex. Several other acquisitions are under active negotiation to
reinvest the remaining proceeds, with higher yields and better
growth prospects. Rent reviews were completed on five properties,
and 100% of rent due was collected.
The portfolio is fully let, with no voids (MSCI UK Quarterly
Property Index void rate: 8.5%). VIP has no exposure to offices,
high street retail or shopping centres. The top six tenants have
sixteen leases: Marks & Spencer, HM Government and Local
Authorities, Ten Entertainment Group, Premier Inn, Sainsbury's and
Parkdean Resorts, representing 65% of the contracted income.
Borrowings 30 September 2023 31 March 2023
----------------------------------- ------------------- -------------------
Average interest rate* 4.0% 3.9%
----------------------------------- ------------------- -------------------
Total loans (loan to value ratio) GBP50 million (35%) GBP50 million (33%)
----------------------------------- ------------------- -------------------
Loan maturity 7.4 years 7.9 years
----------------------------------- ------------------- -------------------
*96.5% of VIP's borrowings are at a fixed rate, with 3.5%
variable.
Performance 30 September 2023 31 March 2023
-------------------------- --------------------------- -------------
Net Asset Value per Share
(valuing debt at par) 228.0p 246.9p
-------------------------- --------------------------- -------------
Ordinary Share price 191.0p 204.5p
-------------------------- --------------------------- -------------
Dividend per Share 6.4p 12.9p
(first and second interims) (total)
-------------------------- --------------------------- -------------
Over the six months to 30 September 2023, VIP's share price fell
by 6.6%, while the Net Asset Value per share, valuing debt at par,
fell by 7.7%. 230,000 shares were bought back for GBP0.45 million.
VIP's independent property revaluation declined by 5.0% over the
period, giving a total return of -1.8% against -0.5% for the MSCI
UK Quarterly Property Index. The portfolio outperformed on the
income front and underperformed on capital.
ENQUIRIES:
Matthew Oakeshott
OLIM Property Limited
Email: matthew.oakeshott@olimproperty.co.uk
Tel: 020 7846 3252
Louise Cleary
OLIM Property Limited
Email: louise.cleary@olimproperty.co.uk
Tel: 020 7846 3252
Website:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
Manager's Report
Portfolio summary
VIP invests directly in UK commercial properties to deliver
long, strong, index-related income.
The portfolio comprises 35 properties across 7 well diversified
sub-sectors, all let on 38 full repairing and insuring leases
Weighted Average Unexpired Lease Term - WAULT - 11.9 years to the
tenants' option to break) to 20 different tenant covenants across
England, Scotland and Wales. All are freehold except two which are
long leasehold with 108 and 82 years to run (Doncaster and
Fareham).
Portfolio 30 September 2023 31 March 2023
========================================= ================= ==============
Capital value: GBP135,450,000 GBP150,500,000
========================================= ================= ==============
Contracted income (rent collected 100%): GBP8,795,396 GBP9,338,302
========================================= ================= ==============
Running yield 6.5% 6.2%
========================================= ================= ==============
Number of properties: 35 39
========================================= ================= ==============
Total Number of Tenants
(Portfolio is 100% let): 38 42
========================================= ================= ==============
Contracted indexed income: 95.9% 96.2%
========================================= ================= ==============
(WAULT) 11.9 Years 12.6 Years
========================================= ================= ==============
Performance and independent revaluation
Savills' independent valuation as at end September 2023 totalled
GBP135.45 million on 35 properties against GBP150.50 million on 39
properties at 31 March 2023. This reflects a net initial yield of
6.1% (31 March 2023: 5.8%) after deducting notional purchase costs.
The average lot size is GBP3.9 million.
The valuation reflects a 5.0% like-for-like reduction in capital
value of the 35 properties held over the six months. Three
properties rose in value over the six months, all pubs where the
rents rose by a third; five were unchanged - four small convenience
stores and the recently acquired bowling investment at Coventry.
The rest fell in value due to the impact of rising interest rates
across the property investment market and economic and political
turbulence.
The property portfolio has been upgraded further over the six
month period with the sale of four overrented properties - two
pubs, a convenience store and a petrol filling station for a gross
total of GBP8.1 million (+2.9% on March 2023 valuation) and an
average net sale yield of 7.1%.
No properties were purchased over the six months to end
September. In November, the acquisition of a freehold purpose built
health and fitness club on a 6.8 acre site with over 190 car
parking spaces in Brentwood, Essex completed for a total of GBP6.4
million at a net initial yield of 7.6%, rising to 8.4% in July
2024. It is let to Virgin Active Limited until July 2036 (WAULT
just under 13 years) with annual RPI-linked rent increases with a
minimum 1% pa and maximum 4% pa. Several other acquisitions are
under active negotiation to reinvest the remaining proceeds of the
four sales, in properties with longer leases and stronger long term
growth prospects at a higher initial yield.
The property portfolio total return on all assets, taking
capital and income together and deducting all costs was -1.8% over
the six months, against -0.5% for the MSCI UK Quarterly Property
Index. VIP's portfolio outperformed on the income front but
underperformed on capital.
Responsible impact based ESG management and EPCs
OLIM Property has always taken a cautious and responsible
approach to managing VIP's property portfolio, with environmental
impact, social responsibility and governance (ESG) taken fully into
account in selecting high quality properties with suitable tenants
for acquisition, long term management and disposal. Occupier
relationships are crucial. We engage with our tenants to understand
and establish sustainable rental levels and grow future income
streams, working closely with them to address value add energy
performance targets. All VIP's properties are regularly reviewed,
Energy Performance Certificates (EPCs) and ESG improvements
implemented wherever possible, and properties sold where
performance may be negatively impacted by ESG factors. 97% of the
portfolio now has EPC ratings A to C (31 March 2023: 96%). We
continue to work with our tenants to upgrade properties and improve
energy efficiency.
Indexed rent reviews
Contracted income from the 35 properties is GBP8.795 million per
annum as at 30 September 2023 where 95.9% (37 out of 38 tenancies)
have index-linked or fixed increases. 69.3% of the rental income is
linked to RPI, 11.5% linked to CPI and 15.2% with fixed increases.
Seven tenancies (26.1%) have annual rent reviews and thirty (69.8%)
have five yearly reviews. Only one property, the industrial at
Fareham, has three yearly open market upwards only reviews
(4.1%).
Annual rent increases were completed at five properties over the
six months, with an average uplift of +3.8% on their passing rents
(three with RPI-linked increases and two with fixed uplifts), which
contributed to a 0.8% increase on income on all held properties.
Three rent reviews due in January 2024 have been settled early with
their passing rents rising by 33.1% (in line with RPI) over the
five years from January 2019. Including five further rent reviews
due before 31 March 2024, current contracted rental income on the
portfolio should increase by around GBP350,000 (4.0%) on all held
properties over the 12 months.
Market Report
Winter has arrived early this year in the UK commercial property
market. There was a short-lived stabilisation in values in the
spring when 10 year gilt yields traded below 3.5%. But property
valuation yields have been rising again, and capital values falling
since April. Property values have now fallen by almost a quarter on
average on the MSCI UK Quarterly Property Index from their peak
last summer after property yields were pushed down to 40 year lows.
QE (Quantitative Easing) had been going on too far, for too long,
in the United Kingdom as in most Western economies, forcing
interest rates unsustainably low and capital values, especially of
low yielding assets, unsustainably high.
The Bank of England had dropped its guard and lost its focus on
its key target: to keep consumer price inflation at 2%. It has
remained well behind the curve of what was necessary to rebuild
international and local investors' confidence, as it raised base
rate repeatedly from 0.1% to 5.25% since December 2021. This meant
that UK gilt yields have had to shoot up to take the strain; and it
will ultimately be necessary to raise short-term interest rates
further to get inflation down even to hailing distance of 2%.
The dire state of the UK public finances, the costly
over-issuance of index-linked gilts, and the dangerously short
(under 4 years average) maturity of the UK gilt market makes us
effectively a forced seller to foreigners of vast quantities of
gilts every year for the foreseeable future. So no Chancellor of
the Exchequer or Governor of the Bank of England can now afford to
take risks with inflation. Consumer price inflation is still rising
at over 6% on an annual basis, with average earnings up by over 8%,
although both rates of increase are now slowing at last.
Bond and currency markets stabilised in the spring after the
economic and interest rate chaos of the Truss-Kwarteng
administration last autumn. But gilt yields have since broken
through their panic peaks of a year ago, being pushed up to 4.7% in
mid-October by stubbornly high wage and consumer price inflation
and rising oil prices following Hamas' attack on Israel and the
growing crisis in the Middle East. Turnover in commercial property
is exceptionally thin, well down on 2023 already, languishing
around the worst levels of 2009 in the Global Financial Crisis and
2020 at the start of COVID.
The collapse in office capital values has gathered pace, falling
by 11% over the first nine months of 2023, with retail down 3%,
alternatives down 4% and industrials 1% ahead according to the MSCI
UK Quarterly Property Index. But valuers are further behind this
thin and falling market than usual. Rental values are generally
flat in the office, retail and alternatives sectors but are still
rising gently in the industrial sector. Rental growth has been
slowing across all sectors recently.
Retail and industrial property void rates are now back down to
their pre-COVID levels, as shown in the Vacancy Rates table in the
Interim Report, office void rates have shot up from 13% pre-COVID
to 22% now, well above the previous record high of 15% for office
voids in 2013. This has dragged the average void rate for all
property back up to its previous 2009 peak near 11%. Retail void
rates have stabilised around 6% and retail tenants are now
generally benefitting from lower business rates bills from April,
although many shoppers are still strapped for cash. Industrial void
rates, although still below their long-term averages, have risen
from 5% two years ago to 7% today and higher business rates bills
and tenancy failures in this sector will accentuate that trend.
The main pain from voids will be in the office sector for many
years to come. Most office owners cannot cope with the long-term
structural shift to hybrid working, with two-fifths of UK adults
now working from home at least one day a week, against an eighth
pre-pandemic. Commuters into London and other large cities are now
less visible on Mondays and an endangered species on Fridays. Even
where prestige occupiers are taking expensive new space, they are
invariably downsizing, usually by at least half, as with HSBC at
Canary Wharf. Most older office buildings simply cannot be upgraded
to meet the requirements of potential occupiers (or achieve the
necessary Energy Performance Certificate ratings) at reasonable, or
often any cost. The office oversupply problem is even more serious
than that facing retail property 10-15 years ago, and valuers are
only just starting to get to grips with it.
Property valuers marked capital values down much further and
faster in the second half of 2022 than in previous property market
downturns, despite low deal volumes. For some reason, they are
proving more reluctant to move valuations down again now on
"sentiment" as they call it, rather than evidence of actual deals
completed, although values are clearly again under downward
pressure. Both rental values and rent collection may also come
under pressure in 2024, especially in the office and industrial
sectors as weaker tenants struggle and leases expire.
The key to outperformance by property portfolios on both the
income and total return fronts in this harsh economic climate, with
interest rates and inflation both staying stubbornly high, will be
reducing risk and sticking to strong tenants, paying affordable,
preferably index-linked, rents on long leases for sustainable
buildings in prosperous locations. Above all, that means avoiding
office investments for the foreseeable future.
Property prospects by sector
Warehouse / Industrials - Values sliding on low/negligible
volumes
Market momentum continued to decline this quarter. Volumes
remain extremely low with only GBP4.66 billion traded so far in
2023 compared to GBP9.84 billion for the same period for 2022 (53%
down). Only GBP1.46 billion was sold during the last quarter and Q4
has so far been extremely quiet. 2023 will have the lowest trading
volumes since 2009.
There are few genuine buyers and even those few have become
increasingly selective. One or two big Pension Funds are looking
for perfection - the very rare absolutely prime, ESG excellent,
high calibre buildings in the best locations with undoubted
covenants. But even in the rest of the market - now more than ever
- building quality and ESG credentials are topping the wish list.
Developers who helped fuel the 3% yields of last year have all but
vanished, along with those never to be repeated yields. Some North
American Private Equity money is now back looking at industrial
property but, given the high costs of financing, their bids are
well below what vendors want and after many weeks in due diligence,
they often wait until the eleventh hour to chip the price and
renegotiate the agreed deal. Sellers have no choice but to accept
this behaviour if they need funds quickly.
Occupational activity in the industrial market is more subdued
and now back to pre-pandemic levels after the "mega deal" furore of
recent years, which was fuelled by online retailing. Total take-up
of units in the UK of over 50,000 sq ft stood at 19.2 million sq ft
for the first half of 2023 which is down 28% on activity in the
same period in 2022 and 33% below the five-year half-yearly
average. Q3 figures, once published, will show further decline as
the wider economic turmoil reduces occupier appetite and ability to
pay rent. Like investors, occupiers have developed much more
discerning attitudes towards quality, ESG credentials and energy
efficiency and demand has slowed significantly - as an example,
Grade A space accounted for 73% of take-up in the first half of
2023. Rental growth forecasts will continue to be revised. Rents
grew by over 13% in 2022 and forecasts have been gradually scaled
back over the year from 7% for 2023 to sub 4% for the year.
Offices - An emasculated sector, weakening further
Structural change, lack of occupational demand and refinancing,
redemption and ESG pressures all continue to hammer the office
market with buyers scarce and hyper cautious. Only the very best
assets attract some interest, although heavy discounts and
double-digit yields are now available for the "rest". Turnover for
the UK office market to date now stands at GBP2.0 billion, 53%
below the five yearly average.
The occupational story is equally grim. The vacancy rate for
offices in the MSCI monthly index has risen further to 22.0% from
15.2% in January 2021, the height of Covid, an increase of 45%.
Like investors, occupiers are only looking for quality and this is
difficult to find. 62% of London's office stock is now at least 30
years old with a similar level across the rest of the UK. With
office to residential conversions no longer cost effective and
prohibitive refurbishment costs, these buildings may well remain
empty once vacated and will be so for a substantial period of
time.
The most pertinent example of the state of the occupational
office market is the recent surrender premium paid by Meta, (ex
Facebook) to their landlord, British Land, in order to vacate their
refurbished, BREEAM outstanding, EPC excellent, revolutionary low
carbon, eight storey office building near Regents Park, London, 1
Triton Square. Having leased the 300,000 sq ft of space in 2021 on
a 20 year lease, they never occupied and attempted to sublet the
space for over two years without success. Earlier this month, in
desperation, the tenant paid the owner, GBP149m to exit the
building - a payment equal to around seven years' worth of
rent.
Prices need to fall further for offices to accommodate the need
for significant refurbishment and redevelopment. The bottom of the
office market is not in sight and empty offices will be a blot on
the landscape, in and out of town, as retail once was.
Retail - Valuers not yet reflecting weaker sentiment
According to the GfK Consumer Confidence Barometer, UK consumer
confidence fell sharply in October 2023 back to the level in April
underlining the cost of living crisis with many consumers not
having enough money to make ends meet. In addition, concerns over
the cost of gas, electricity and fuel, mortgage rates and rents, a
slowing jobs market and uncertainty due to the conflict in the
Middle East are contributing to consumer worries. This sentiment
will be of concern to retailers in the run up to Christmas and is
confirmed in the latest ONS Retail Sales statistics where overall
retail sales volumes fell by -0.9% in September.
Non-food sales volumes fell by -1.9%. Unseasonably warm weather
reduced sales of autumn-weather clothing (September was the joint
warmest September on record) in addition to the impact of
continuing increases in the cost of living. Despite this, several
strong brands are actively taking high street space including
Greggs, B&M, Savers, Gails Bakery, Mint Velvet and Oliver
Bonas.
Wilko went into administration in August, the largest retail
failure since Woolworths in 2008. They closed 52 shops in
September, with rival B&M agreeing to take 51, but most of
their other 300 stores lie empty. Boots announced in June that a
series of 300 closures would take place as part of a consolidation
programme. M&S are to close a further 20 stores as part of its
turnaround plan but are expanding M&S Simply Food out of town.
Argos have closed 100 stores, moving to concessions inside owner
Sainsbury's stores. Hundreds of Lloyds Pharmacies have closed or
been sold. Shopping habits generally have changed, with more
frequent but lower spending shopping trips.
The retail warehouse occupational market is generally more
active but discretionary spending is still under pressure, as
households continue to delay big-ticket and non-essential
purchases.
Food store sales volumes growth remained positive at +0.2% but
growth is slowing in comparison to a rise of +1.4% in August.
Annual grocery price inflation is still very high, but for the
first time since last year, the prices of some staple foods are now
dropping month to month. Tesco's market share is 27.4% followed by
Sainsbury's 14.8% and Asda 13.7%. In 2010 the "big four" accounted
for over 75% of market share - today this figure is just under 65%
with Morrisons market share having fallen to 8.6% - to the benefit
of the two main discount retailers Aldi and Lidl which account for
9.9% and 7.6% respectively - the former having overtaken Morrisons
over the last 12 months. This increase in the discount retailers'
market share is due to consumers taking advantage of cheaper
products in the current economic climate.
Aldi opened its 1,000th British store in Woking in September.
Today GBP1 in every GBP10 spent on groceries is at Aldi and the
retailer has plans to open another 500 shops. Lidl has 960 stores
and opened its largest warehouse yet in Luton costing GBP300m.
M&S returned after four years to the FTSE 100 in September and
is now the third fastest growing food retailer (mainly at
Waitrose's expense) after Aldi and Lidl.
During 2023, monthly retail rental value growth has largely been
consistent, with the MSCI UK Quarterly Property Index recording
growth of +0.8% over the nine months to September, the lowest of
the three main property sectors and in comparison to +2.7% for all
property.
Retail investment transaction volumes are down by around 80%
over the year to date. There is a little activity in small lot
sizes, but the bigger end of the market is desperately quiet.
A glut of supermarket stock is now on the market at unrealistic
pricing (around 29 assets quoting around GBP540m). There is no
investment market for the larger, often over-rented stores and
weaker tenants except at much higher yields. John Lewis are trying
to raise GBP150m from the sale and leaseback of 12 well located
Waitrose supermarkets with 20-year inflation linked leases. The
uncertainty in the market should present some interesting retail
investment opportunities with higher yields offering better
protection against current debt costs.
Alternatives - The trend of "flight to quality" gains
momentum
Property in the "Alternatives" sector - i.e. everything except
offices, retail and industrial/warehouse property - accounts for
23% of the MSCI UK Quarterly Property Index. Volatile, often
disappointing returns in the traditional office, retail and
industrial sectors have led investors to search for higher returns
and lower risk to diversify their portfolios over the past decade.
Properties in this sector often offer strong defensive
characteristics such as long, index-linked leases and a wide range
of property types and tenants. Capital values are, however, now
under pressure from rising bond yields in this sector like others.
Private property companies and individual investors are still
active in the sector, but generally for sub GBP5 million lot sizes.
Funds that were buying the larger lot sizes are now selling, with
redemption pressures on the increase.
In some cases, index-linked rents have risen too high and the
additional burden of increasing operating costs is clearly hitting
tenants who were already struggling post pandemic. This is
particularly true of the leisure sector and there are warning signs
from independent operators and those backed by private equity. But
robust tenants who run a well-managed business are thriving like
Shepherd Neame, Britain's oldest brewer, and owner and operator of
296 pubs in Kent and the Southeast. Its recent results showed
record revenues and an increase in underlying profits with consumer
demand strong, but increased costs across the business, such as the
national living wage rising 40% over the past 5 years.
Recovery of confidence in London pubs and restaurants continues
as visitor numbers top pre-pandemic levels and office workers
return to the capital (except on Mondays and Fridays). Good quality
pubs in the country with outside space have generally been trading
well, with inevitable weather-related fluctuations. Consumers
remain eager to eat and drink out despite the pressure on
disposable incomes, but they are increasingly selective about where
they spend their money. Well financed operators who keep investing
and upgrading their properties, like Greene King, Wetherspoons and
Youngs are gaining market share but stretched private equity-backed
chains like Stonegate are suffering where they let standards
slide.
Cinemas benefitted briefly from the double bubble of 'Barbie'
and 'Oppenheimer' but are still seriously structurally challenged
by rising costs and competition from streaming. The fourth largest
UK player, Empire Cinemas, has just gone into administration - they
will not be the last.
Bowling remains one of the only affordable family outings and
both main operators (Ten Entertainment Group & Hollywood Bowl)
are reporting strong trading figures. Ten Entertainment does not
expect to raise pricing in the near term (pricing having been
frozen since 2019) with increase in footfall apparently more than
sufficient to offset mid-single digit % inflation.
Modern budget hotels and caravan parks in rural areas and
tourist hot spots are well placed to benefit from the more
cost-conscious consumer who are reconsidering holidays abroad amid
a cost-of-living crisis. City centre hotels are also benefiting
from returning tourists. Whitbread, the parent company of Premier
Inn, recently reported that pre-tax profits have risen by almost a
third in the past 6 months with London bookings rising by nearly a
quarter year-on-year. Premier Inn remain a much more secure
investment than Travelodge or other weaker operators, but capital
values are under pressure from rising yields as pension funds focus
on selling rather than buying.
Capital values for Health and Fitness clubs have been falling,
particularly those in city centres affected by the decline in
commuting.
Care homes are still struggling. Staff shortages and
insufficient public sector funding remain a cause for concern with
no short-term solution in sight. Only the strongest operators in
both sectors are likely to attract investment, particularly where
value is underpinned by the future residential development
potential of sites they occupy.
Established Garden Centre operators have continued to invest in
their sites expanding their offer by focusing on better
restaurants, soft play areas for children, toys, books, pet food,
clothes etc, with concession partnerships now being more carefully
considered with the consumer in mind. Operators occupy large sites
and so investments in affluent locations are in demand,
particularly as they are infrequently offered to the market.
Student numbers are rising and investments on long leases to
well-established universities have been in great demand. But
capital values of student housing, as of other residential
investment types, are declining as investment competition had
driven prices up too far. However, many universities are facing a
critical shortage of student housing with new local supply limited
and likely to remain so with construction costs rising, so values
should now be near the bottom in strong locations.
The economy
The UK economy is still stagnating, after a slightly stronger
recovery from COVID than the Central Statistical Office first
reported. The main Eurozone economies are flat or weakening. Russia
is at war, China has serious problems in the property sector and
most of the developing world is growing well behind their long term
averages.
US economic growth is still running at 2%-3% a year, with the
Treasury bond market under considerable strain. This is hard to
explain on the normal market metrics of investors' concern about
rising inflation or short term interest rates. It may just be a
symptom of a wider malaise among international bond investors,
worried about a vast overhang of debt worldwide, partly from
Central Banks turning from buyers to sellers of their bond holdings
built up during Quantitative Easing, (The Bank of England, for
example, now holds GBP750 billion of the GBP2.5 trillion of UK
national debt. Our annual debt interest bill averaged 2% of
national income between 2000 and 2020, rose to 4.4% in 2022-23 and
will still settle at over 3% a year, costing the country more than
any other public service except the NHS). Investors may also be
concerned about geopolitical instability in the Middle East and
Ukraine, and the possible return of President Trump next year. As
the 10-year government bond yield chart, displayed in the Interim
Report shows, the 40 year long bull market in bonds is well and
truly over and yields have clearly turned upwards for the
foreseeable future.
UK consumer price inflation, despite last month's rise in petrol
prices, will clearly fall back down soon through 5% on an annual
basis. But keeping it in a 3%-5% range will be very hard, with
wages rising at over 6% a year and productivity growth negligible.
2% is, therefore, now clearly an unrealistic and unachievable
target number for inflation for the UK, and for many Central Banks
in the developed world. Underlying inflation in the USA, UK and
Eurozone did average around 2% with relatively minor fluctuations
between the early 2000's and COVID in 2020 but is now well above
that level, and squeezing inflation back down to 2% in the Western
economies will be a long, hard slog. The Bank of England has been
slow since the pandemic to raise their forecasts for inflation for
one year ahead - but at least they have raised them. Their
forecasts for two years ahead have, however, stuck firmly in cloud
cuckoo land around 2% p.a., falling to 1% from 2023!
The Bank of England's Monetary Policy Committee should be
restructured to make it genuinely independent, with more outside
economists and professional investors who really understand how the
UK economy works and fewer Bank insiders and, especially, retired
Treasury officials reinforcing conventional groupthink. The end of
ultra-low interest rates has inevitably been a stressful and uneven
process, but it is ultimately helpful for the economy. Too much
cheap money has inflated asset bubbles, encouraged speculative
frenzies ranging from over-hyped technology stocks to crypto
currencies, diverted too much capital into financial engineering by
private equity, pushed up UK house prices unaffordably and
unsustainably and kept too many zombie companies alive for too
long. Bankruptcies are now clearly rising.
Investment in the UK has suffered not only from constantly
chopping and changing Government policy over the past decade, but
also from the effects of perverse and over prescriptive regulation
of pension funds for far longer. 30 years ago, UK pension funds
typically held over half their assets in UK equities and property,
with nearly a quarter in bonds and a quarter overseas. Then strict
new accounting rules post the Maxwell scandal forced them into
artificial annual valuations of notional surpluses and deficits
depending on short-term fluctuations in bond yields and based on
highly hypothetical assumptions about how and when pension funds
might be wound up. As bond yields were forced down almost to zero
after the Great Financial Crash in 2008, so called pension fund
deficits ballooned, companies had to make large and unforeseeable
contributions to their pension funds, and the pension fund
investment climate changed from calm, balanced long-term analysis
to extreme short-term myopic risk aversion. Funds were forced to
invest ever more heavily in bonds guaranteeing rotten long term
negative real returns. This highly artificial process of
"derisking" pension funds culminated in the actually extremely
risky debacle of LDI (Liability Driven Investment) in 2022. This
has predictably produced much hand-wringing and no action from the
Bank of England and the other relevant regulators.
Radical reform and simplification of pension regulation is
urgently needed, to enable UK pension funds to go back to prudent
long-term investment policies based on common sense, not artificial
rules, with substantial investment again in their natural homes, UK
equities, property and infrastructure which provide high yields and
positive prospective long term real returns, instead of dangerous
costly debt-driven private equity funds and "structured products".
Reform of savings taxation for private investors would also help
stimulate investment, especially in UK mid and small cap companies
quoted on The London Stock Exchange, and rebuild the City of
London's competitive position in raising capital for growing
companies post Brexit. British ISA and personal pension fund tax
breaks, worth many billions a year, could be redirected to focus on
UK shares and investments - it makes no economic sense for UK
taxpayers' money to subsidise British investors buying shares in
Amazon, Chinese property, Singapore small company equities or Saudi
Aramco.
The UK housing market, with prices and rents both significantly
higher than in our main Western competitor countries, remains a
real hindrance to productivity and growth. The ongoing mortgage
crisis proves yet again that it is both a source of financial
instability and a barrier to geographic and social mobility. Only
210,000 homes were completed in the year to April 2023, against
330,000 in 1972 and about 400,000 in 1962, and this year will be
even worse. Private sector completions have shown little change,
but social housebuilding by local authorities and housing
associations has collapsed. Changes to stamp duty, interest
deductibility and tenure for private landlords in recent years have
also led to an exodus of small landlords and explosive upward
pressure on rents.
Only 30% of households now have mortgages, against 40% in the
late 1980s, but there are more renters (9.2 million against 7.4
million mortgage holders) who are also often now facing
unaffordable housing costs, especially as private landlords sell
up. The last two occasions that mortgages were this unaffordable
were in 1989 and 2007. Real house prices then fell by 20% each
time, and they are well on their way there in this downturn. The
obvious sustainable solution to the UK housing crisis is to rebuild
the long lost genuinely affordable social housebuilding programme,
along with radical reform of the planning system to stop the so
called major "housebuilders" being really land speculators with
little building businesses on the side.
The international economic outlook and business confidence are
flat at best, but three big question marks remain over economic
forecasts until end-2024. On the upside, if the war in Ukraine were
to end in an effective Russian defeat, inflation and interest rates
would move lower worldwide. But that becomes less likely, the more
the West turns its foreign policy focus and resources to the
intractable crisis in Israel and Palestine. On the downside, world
bond markets are showing serious signs of strain. A non-bank credit
crunch may have already started in the USA and UK as the private
equity bubble bursts. Most significant of all, global warming is
here and now, with 2022 the world's hottest year and June and part
of October 2023 easily England's hottest on record.
Conclusion - UK commercial property now attractive at real deal
prices, not historic valuations
Valuers are further behind the real market than usual in UK
commercial property, because genuine cash buyers are few and far
between. But at average yields, now really around 7%, UK non-office
property now offers a realistic yield premium over UK equities and
conventional long-dated gilts, despite short term UK interest rates
having to stay at or above current levels for some time until
inflation falls much nearer the Bank of England's target.
Rising bond yields and lower liquidity are never good for
property prices, commercial or residential, but property has always
been a cyclical market and always will be. The key to long term
outperformance in any market, but especially property where so many
players overdose on debt, is to buy from the frightened and sell to
the greedy. The real bargain is lower down the risk curve. Safe,
non-office property let at sustainable rents on long, index-linked
leases to strong tenants in prosperous parts of the UK, typically
available at initial yields of 5%-6%, now offers both very good
absolute investment value and an outstandingly high 4 point margin
over long dated UK index-linked gilts, now trading at only 1%
real.
Matthew Oakeshott & Louise Cleary
OLIM Property Limited
15 November 2023
Interim Board Report
Management and administration of VIP
Value and Indexed Property Income Services Limited (VIS), a
wholly owned subsidiary of the Company, is the Company's
Alternative Investment Fund Manager (AIFM). As AIFM, VIS has
responsibility for the overall portfolio management and risk
management of the assets of the Company. VIS has delegated its
portfolio management responsibilities for the property portfolio to
OLIM Property Limited (OLIMP) (the Investment Manager). The
delegation by VIS of its portfolio management responsibilities is
in accordance with the delegation requirements of the Alternative
Investment Fund Managers Directive (AIFMD). The Investment Manager
remains subject to the supervision and direction of VIS. The
Investment Manager is responsible to VIS and ultimately to the
Company in regard to the management of the investment of the assets
of the Company in accordance with the Company's investment
objective and policy. VIS has a risk committee which reviews the
effectiveness of the Company's internal controls and risk
management systems and procedures and identifies, measures, manages
and monitors the risks identified as affecting the Company's
business.
BNP Paribas Trust Corporation UK Limited is the Company's
Depositary and oversees the Company's custody and cash
arrangements.
Principal and Emerging Risks and Uncertainties
The Board carries out a regular review and robust assessment of
the principal and emerging risks facing the Group, including those
that would threaten its business model, future performance,
solvency or liquidity. These principal and emerging risks and
uncertainties are set out in full in the Strategic Report within
the 2023 Annual Report, and remain applicable to the rest of the
financial year.
Climate Change and Social Responsibility Risk
The Board recognises that climate change is an important
emerging risk that all companies should take into consideration
within their strategic planning, but as an investment trust
company, the Company has no direct employee or environmental
responsibilities. The Board encourages the Manager to take
environmental, social and governance matters fully into account, as
set out in the 2023 Interim Report.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed set of Financial Statements within the
Half-Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting';
and
-- the Interim Report includes a true and fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure,
Guidance and Transparency Rules.
For and on behalf of the Board of Value and Indexed Property
Income Trust PLC
John Kay
Chairman
15 November 2023
Group Statement of Comprehensive Income
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March 2023 (audited)
(unaudited) (unaudited)
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Rental income 2 4,540 - 4,540 4,053 - 4,053 8,358 - 8,358
Investment
income 2 - - - 168 - 168 168 - 168
Other income 2 100 - 100 33 - 33 314 - 314
-------- -------- --------- -------- -------- --------- -------- --------- ---------
4,639 - 4,639 4,254 - 4,254 8,840 - 8,840
Gains and
losses on
investments
Realised
gains on
held-at-fair-value
investments
and investment
properties - 108 108 - 1,355 1,355 - 1,446 1,446
Unrealised
(losses)/gains
on
held-at-fair-value
investments
and investment
properties - (7,405) (7,405) - (4,432) (4,432) - (24,695) (24,695)
-------- -------- --------- -------- -------- --------- -------- --------- ---------
Total income 4,639 (7,297) (2,658) 4,254 (3,077) 1,777 8,840 (23,249) (14,409)
-------- -------- --------- -------- -------- --------- -------- --------- ---------
Expenses
Investment
management
fees (440) - (440) (515) - (515) (990) - (990)
Other operating
expenses (443) - (443) (412) - (412) (895) - (895)
Finance
costs (1,078) - (1,078) (1,197) (6,269) (7,466) (1,779) (6,269) (8,048)
-------- -------- --------- -------- -------- --------- -------- --------- ---------
Total expenses (1,961) - (1,961) (2,124) (6,269) (8,393) (3,664) (6,269) (9,933)
-------- -------- --------- -------- -------- --------- -------- --------- ---------
Profit/(loss)
before taxation 2,678 (7,297) (4,619) 2,130 (9,346) (7,216) 5,176 (29,518) (24,342)
Taxation (644) - (644) (395) 1,648 1,253 (979) 1,425 446
Profit/(loss)
attributable
to equity
shareholders
of parent
company 2,034 (7,297) (5,263) 1,735 (7,698) (5,963) 4,197 (28,093) (23,896)
-------- -------- --------- -------- -------- --------- -------- --------- ---------
Earnings
per Ordinary
Share (pence) 3 4.76 (17.06) (12.30) 3.99 (17.71) (13.72) 9.70 (64.92) (55.22)
The total column of this statement represents the Statement of
Comprehensive Income of the Group, prepared in accordance with
IFRS. The revenue return and capital return columns are
supplementary to this and are prepared under guidance issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations.
All income is attributable to the equity holders of Value and
Indexed Property Income Trust PLC, the parent company. There are no
minority interests.
The Board has declared a first quarterly dividend of 3.20p per
share (2023 - 3.00p) which was paid on 27 October 2023 to all
Shareholders on the register on 29 September 2023 (ex-dividend date
of 28 September 2023). A second quarterly dividend of 3.20p per
share (2023 - 3.10p) will be paid on 26 January 2024 to those
Shareholders on the register on 29 December 2023 with and
ex-dividend date of 28 December 2023. It is intended that a third
quarterly dividend of 3.20p (2023 - 3.20p) will be paid on 26 April
2024 to those Shareholders on the register on 2 April 2024. The
ex-dividend date will be 28 March 2024.
The Notes form part of these Financial Statements.
Group Statement of Financial Position
As at As at As at
30 September 30 September
2023 31 March 2023 2022
(unaudited) (audited) (unaudited)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non current assets
Investment properties 135,660 150,636 158,572
Investments held at fair
value through profit
or loss - - -
--------- --------- --------- --------- --------- ---------
8 135,660 150,636 158,572
Deferred tax asset 3,893 4,537 5,344
Receivables 2,366 2,366 2,161
--------- --------- --------- --------- --------- ---------
141,919 157,539 166,077
Current assets
Cash and cash equivalents 7,808 2,273 13,519
Receivables 2,787 599 433
10,595 2,872 13,952
--------- --------- --------- --------- --------- ---------
Total assets 152,514 160,411 180,029
Current liabilities
Payables (3,012) (2,376) (621)
(3,012) (2,376) (621)
--------- --------- --------- --------- --------- ---------
Total assets less current
liabilities 149,503 158,035 179,408
Non-current liabilities
Payables (2,918) (2,845) (2,849)
Borrowings (49,036) (49,000) (49,430)
(51,954) (51,845) (52,279)
--------- --------- --------- --------- --------- ---------
Net assets 97,549 106,190 127,129
--------- --------- --------- --------- --------- ---------
Equity attributable
to equity shareholders
Called up share capital 4,555 4,555 4,555
Share premium 18,446 18,446 18,446
Retained earnings 6 74,547 83,189 104,128
--------- --------- --------- --------- --------- ---------
Total equity 97,549 106,190 127,129
--------- --------- --------- --------- --------- ---------
Net asset value per
Ordinary Share (pence) 228.01 246.88 294.37
These Financial Statements were approved by the Board on 15
November 2023 and were signed on its behalf by:
John Kay
Chairman
The Notes form part of these Financial Statements.
Group Statement of Changes in Equity
6 months ended 30 September 2023 (unaudited)
Share capital Share premium Retained earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2023 4,555 18,446 83,189 106,190
Profit for the year - - (5,264) (5,264)
Dividends paid 4 - - (2,925) (2,925)
Buyback of Ordinary Shares
for Treasury - - (453) (453)
-------------- -------------- ------------------ ---------
Net assets at 30 September
2023 4,555 18,466 74,548 97,549
-------------- -------------- ------------------ ---------
Year ended 31 March 2023 (audited)
Share capital Share premium Retained earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2022 4,555 18,446 113,899 136,900
Loss for the year - (23,896) (23,896)
Dividends paid 4 - (5,507) (5,507)
Buyback of Ordinary Shares
for Treasury - (1,307) (1,307)
-------------- -------------- ------------------ ---------
Net assets at 31 March
2023 4,555 18,446 83,189 106,190
-------------- -------------- ------------------ ---------
6 months ended 30 September 2022 (unaudited)
Share capital Share premium Retained earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2022 4,555 18,446 113,899 136,900
Loss for the year - - (5,963) (5,963)
Dividends paid 4 - - (2,875) (2,875)
Buyback of Ordinary Shares
for Treasury - - (933) (933)
-------------- -------------- ------------------ ---------
Net assets at 30 September
2022 4,555 18,446 104,128 127,129
-------------- -------------- ------------------ ---------
The Notes form part of these Financial Statements.
Group Statement of Cashflows
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2023
2023 (unaudited) 2022 (unaudited)
(audited)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Rental income received 2,759 2,950 8,936
Dividend income received - 168 266
Interest and other income
received/(paid) 105 33 295
Operating expenses paid (798) (1,238) (1,974)
Taxation paid - - (29)
---------- --------- ---------- --------- --------- ---------
Net cash inflow from operating
activities 2,066 1,913 7,494
Cash flows from investing
activities
Purchase of investments
held at fair value through
profit or loss - (7,215) (7,215)
Purchase of investment
properties (7,300) (11,376) (25,353)
Sale of investments held
at fair value through profit
or loss - 35,720 35,720
Sale of investment properties 15,158 8,399 9,746
---------- --------- ---------- --------- --------- ---------
Net cash inflow/(outflow)
from investing activities 7,857 25,528 12,898
Cash flow from financing
activities
Repayment of debenture
stock - (26,380) (26,380)
Drawdown of loan - 13,000 13,000
Fees paid on new loan - - (176)
Interest paid on new loans (969) (1,844) (2,815)
Finance costs of leases (40) (39) (78)
Payment of lease liabilities (5) (4) (9)
Dividends paid (2,925) (2,875) (5,507)
Buyback of Ordinary Shares
for Treasury (451) (933) (1,307)
---------- --------- ---------- --------- --------- ---------
Net cash outflow from
financing activities (4,389) (19,075) (23,272)
---------- --------- ---------- --------- --------- ---------
Net increase /decrease
in cash and cash equivalents 5,535 8,366 (2,880)
Cash and cash equivalents
at the start of the period 2,273 5,153 5,153
---------- --------- ---------- --------- --------- ---------
Cash and cash equivalent
at the end of the period 7,808 13,519 2,273
---------- --------- ---------- --------- --------- ---------
The Notes form part of these Financial Statements.
Notes to the Financial Statements
1. Accounting policies
The Financial Statements have been prepared in accordance with
UK adopted international accounting standards.
The functional and presentational currency of the Group is
pounds sterling because that is the currency of the primary
economic environment in which the Group operates. The Financial
Statements and the accompanying notes are presented in pounds
sterling and rounded to the nearest thousand pounds except where
otherwise indicated.
(a) Basis of preparation
The Financial Statements have been prepared on a going concern
basis and on the historical cost basis, except for the revaluation
of investment properties and investment in subsidiaries, both of
which are valued at fair value through profit and loss. Where
presentational guidance set out in the Statement of Recommended
Practice Financial Statements of Investment Trust Companies and
Venture Capital Trusts (the SORP) issued by the Association of
Investment Companies (AIC) in July 2022 is consistent with the
requirements of IFRSs, the Directors have sought to prepare the
Financial Statements on a basis compliant with the recommendations
of the SORP.
The Board has considered the requirements of IFRS 8, 'Operating
Segments'. The Board is charged with setting the Group's investment
strategy. The Board has delegated the day to day implementation of
this strategy to the Investment Manager but the Board retains
responsibility to ensure that adequate resources of the Group are
directed in accordance with its decisions. The Board is of the view
that the Group is engaged in a single segment of business, being
investments in UK commercial properties. The view that the Group is
engaged in a single segment of business is based on the fact that
one of the key financial indicators received and reviewed by the
Board is the total return from the investment portfolio taken as a
whole. A review of the investment portfolio is included in the
Investment Manager's Report in the Interim Report.
All expenses and finance costs are accounted for on an accruals
basis. Expenses are presented as capital where a connection with
the maintenance or enhancement of the value of investments can be
demonstrated. In this respect and in accordance with the SORP, the
investment management fees are allocated 100% to income, in line
with the general practice of property companies.
The Group's Financial Statements have been prepared using the
same accounting policies as those applied for the Financial
Statements for the year ended 31 March 2023 which received an
unqualified audit report.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, are set
out in the Interim Report. The financial position of the Group as
at 30 September 2023 is shown in the Statement of Financial
Position. The cash flows of the Group for the half year to 30
September 2023, which are not untypical, are set out in the Group
Statement of Cashflows in the Interim Report. The Group had fixed
debt totalling GBP49,036,225 as at 30 September 2023; none of the
borrowings is repayable before 2026. As at 30 September 2023, the
Group's total assets less current liabilities exceeded its total
non current liabilities by a factor of over 2.8.
The assets of the Group consist mainly of investment properties
that are held in accordance with the Group's investment policy, as
set out in the Interim Report. The Directors, who have reviewed
carefully the Group's forecasts for the coming year and having
taken into account the liquidity of the Group's investment
portfolio and the Group's financial position in respect of cash
flows, borrowing facilities and investment commitments (of which
there is none of significance), are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. Accordingly, the Directors
believe that it is appropriate to continue to adopt the going
concern basis in preparing the Group's Financial Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and the entity controlled by the Company
(its subsidiary). An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and has ability to affect those returns through
its power over the investee. The Company consolidates the investee
that it controls. All intra-group transactions, balances, income
and expenses are eliminated on consolidation. The investment in the
subsidiary is recognised at fair value in the Financial Statements
of the Company. This is considered to be the net asset value of the
Shareholders' funds, as shown in its Statement of Financial
Position.
Value and Indexed Property Income Services Limited is a private
limited company incorporated in Scotland under company number
SC467598. It is a wholly owned subsidiary of the Company and has
been appointed to act as the Alternative Investment Fund Manager of
the Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
In accordance with the Company's Articles, net capital returns may
be distributed by way of dividend.
(e) Dividends payable
Interim dividends are recognised as a liability in the period in
which they are paid as no further approval is required in respect
of such dividends. Final dividends are recognised as a liability
only after they have been approved by Shareholders in general
meeting.
(f) Investments
Investment properties
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Any subsequent capital
expenditure incurred in improving investment properties is
capitalised in the period incurred and included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value. Gains and losses arising from changes in fair value are
included in net profit or loss for the period as a capital item in
the Statement of Comprehensive Income and are ultimately recognised
in retained earnings.
The Group leases out all of its properties on operating leases.
A property held under an operating lease is classified and
accounted for as an investment property where the Group holds it to
earn rental, capital appreciation or both. Any such property leased
under an operating lease is carried at fair value. Fair value is
established by half-yearly professional valuation on an open market
basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and
in accordance with the RICS Valuation - Global Standards January
2020 (the 'RICS Red Book'). The determination of fair value by
Savills is supported by market evidence.
Leases
The Group leases properties that meet the definition of
investment property. These right-of-use assets are presented as
part of Investment Properties in the Statement of Financial
Position and held at fair value.
2. Income
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Other operating income
Rental income 4,540 4,053 8,358
Interest receivable on short
term deposits 100 33 155
Other income - - 159
Investment income
Dividends from listed investments
in UK - 168 168
=============== =============== ===========
Total income 4,639 4,254 8,840
=============== =============== ===========
3. Return per Ordinary Share
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
The return per Ordinary Share
is based on the following figures:
Revenue return 2,034 1,735 4,197
Capital return (7,297) (7,698) (28,093)
Weighted average Ordinary Shares
in issue 42,782,464 43,447,217 43,272,601
Return per share - revenue 4.76p 3.99p 9.70p
Return per share - capital (17.06p) (17.71p) (64.92p)
=============== =============== ===========
Total return per share (12.30p) (13.72p) (55.22p)
=============== =============== ===========
4. Dividends paid
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Dividends on Ordinary Shares:
Third quarterly dividend of
3.20p per share (2023 - 3.00p)
paid 28 April 2023 1,376 1,307 1,307
Final dividend of 3.60p per
share (2022 - 3.60p) paid 2
August 2023 1,548 1,568 1,568
First quarterly dividend of
3.00p per share paid 28 October
2022 * - - 1,296
Second quarterly dividend of
3.10p per share paid 27 January
2023* - - 1,336
=============== =============== ===========
Dividends paid in the period 2,925 2,875 5,507
=============== =============== ===========
* First and second quarterly dividends for the year to 31 March
2024 have been declared with pay dates falling after 30 September
2023. These have not been included as liabilities in these
Financial Statements. See Note 5.
5. Interim dividend
A first quarterly dividend of 3.20p per Ordinary Share was paid
on 27 October 2023 to Shareholders registered on 29 September 2023,
with an ex dividend date of 28 September 2023 (2022 - 3.00p). A
second quarterly dividend of 3.20p per share will be paid on 26
January 2024 to Shareholders registered on 29 December 2023, with
an ex dividend date of 28 December 2023 (2022 - 3.10p).
It is intended that a third quarterly dividend of 3.20p (2023 -
3.20p) will be paid on 26 April 2024 to those Shareholders on the
register on 2 April 2024, with an ex-dividend date of 28 March
2024.
6. Retained earnings
The table below shows the movement in retained earnings analysed
between revenue and capital items.
Revenue Capital Total
GBP'000 GBP'000 GBP'000
As at 31 March 2023 (5,873) 89,062 83,189
Movement during the period:
Profit/(loss) for the period 2,032 (7,297) (5,265)
Dividends paid (see Note 4) (2,925) - (2,925)
Buyback of Ordinary Shares for Treasury - (453) (453)
======== ======== ========
As at 30 September 2023 (6,765) 81,312 74,547
======== ======== ========
7. Transaction costs
During the period, expenses were incurred in acquiring and
disposing of investments classified as fair value through profit or
loss. These have been expensed through capital and are included
within gains and losses on investments in the Statement of
Comprehensive Income.
The total costs are as follows:-
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Purchases 109 9 9
Sales 117 32 32
--------------- --------------- -----------
226 41 41
8. Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS
13 Fair Value hierarchy:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2023 (unaudited)
Investment properties - - 135,660 135,660
-------- --------- -------- ---------
- - 135,660 135,660
Borrowings - (45,295) - (45,295)
-------- --------- -------- ---------
- (45,295) 135,660 90,365
-------------------------------------------- --------- -------- ---------
At 31 March 2023 (audited)
Investment properties - - 150,636 150,636
-------- --------- -------- ---------
- - 150,636 150,636
Borrowings - (48,748) - (48,748)
-------- --------- -------- ---------
- (48,748) 150,636 101,888
At 30 September 2022 (unaudited)
Investment properties - - 158,572 158,572
-------- --------- -------- ---------
- - 158,572 158,572
Borrowings - (44,219) - (44,219)
-------- --------- -------- ---------
- (44,219) 158,572 114,353
-------------------------------------------- --------- -------- ---------
Fair value categorisation within the hierarchy has been
determined on the basis of the degree to which the inputs to the
fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety as
follows:-
Level 1 - inputs are unadjusted quoted prices in an active
market for identical assets
Level 2 - inputs, not being quoted prices, are observable,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices)
Level 3 - inputs are not observable
The fair value of the loans is determined by a discounted cash
flow calculation based on the appropriate inter-bank rate plus the
margin per the loan agreement. These instruments are, therefore,
considered to be Level 2 as defined above. There were no transfers
between Levels during the period. All other assets and liabilities
of the Group are included in the Balance Sheet at fair value.
9. Relationship with the Investment Manager and other Related
Parties
Matthew Oakeshott is a Director of OLIM Property Limited which
has an agreement with the Group to provide investment management
services.
OLIM Property Limited receive an investment management fee of
0.60% of the capital assets that it manages.
OLIM Property Limited received an investment management fee of
GBP440,343 (half year to 30 September 2022: GBP515,000 and year to
31 March 2023: GBP990,000). At the period end, the balance owed by
the Group to OLIM Property Limited was GBP64,154 (31 March 2023:
GBP52,747) comprising management fees for the month of September
2023, subsequently paid in October 2023.
Value and Indexed Property Income Services Limited is a wholly
owned subsidiary of the Value and Indexed Property Income Trust PLC
and all costs and expenses are borne by Value and Indexed Property
Income Trust PLC. Value and Indexed Property Income Services
Limited has not traded during the period.
10. Half Yearly Report
The financial information contained in this Half Yearly
Financial Report does not constitute statutory accounts as defined
in sections 434 - 436 of the Companies Act 2006. The financial
information for the six months ended 30 September 2023 and 30
September 2022 has not been audited.
The information for the year ended 31 March 2023 has been
extracted and abridged from the latest published audited financial
statements and do not constitute the statutory accounts for that
year. Those Financial Statements have been filed with the Registrar
of Companies and included the Report of the Independent Auditor,
which contained no qualification or statement under section 498 of
the Companies Act 2006.
This Half-Yearly Report was approved by the Board on 15 November
2023.
Other information
A full copy of the 2023 Interim Report and Financial Statements
will be printed and issued to Shareholders. In due course, a copy
will be available on the Company's website at:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html.
The 2023 Interim Report and Financial Statements will be
submitted to the National Storage Mechanism and will be available
for inspection at:
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
Neither the content of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
By order of the Board
Maven Capital Partners UK LLP
Company Secretary
0141 306 7400
15 November 2023
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END
IR FLFSRLRLELIV
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November 16, 2023 02:00 ET (07:00 GMT)
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