TIDMBBOX
RNS Number : 3735G
Tritax Big Box REIT plc
17 March 2020
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
17 March 2020
Tritax Big Box REIT plc
(the "Group" or the "Company")
FULL YEAR RESULTS FOR THE PERIOD 1 JANUARY TO 31 DECEMBER
2019
WELL-POSITIONED TO CONTINUE DELIVERING STRONG, GROWING AND
SUSTAINABLE LONG-TERM INCOME
Tritax Big Box REIT plc (ticker: BBOX), the only real estate
investment trust giving pure exposure to Big Box logistics assets
in the UK, is today reporting its full year results for the Group
for the period from 1 January 2019 to 31 December 2019.
Highlights
31 December 31 December Increase /
2019 2018 Decrease
Dividend per share 6.85p 6.70p +2.2%
Contracted annual rent roll GBP166.6m GBP161.1m +3.4%
Operating profit(1) GBP122.5m GBP113.7m +7.7%
Adjusted earnings per share 6.64p 6.88p -3.5%
-1.2%
(+1.3% excluding
transaction
EPRA NAV 151.06p 152.83p related costs)(2)
Total Return 3.3% 12.1% -8.8ppt
(5.8% excluding
transaction
related costs)2
Portfolio value GBP3.94bn GBP3.42bn +15.2%
Weighted average unexpired 14.1yrs 14.4yrs -0.3yrs
lease term
Loan to value (LTV) 30.4% 27.3% 3.1ppt
Sir Richard Jewson KCVO, JP, Chairman of Tritax Big Box REIT
plc, commented:
"2019 was an important year in the evolution of the Company - We
acquired and integrated a prime logistics platform to complement
our high-quality investment portfolio. The core of our business
remains unchanged, with 89% of our portfolio comprising of new,
modern standing assets, strategically located in prime logistics
locations.
The occupational market remained healthy last year. Speculative
supply of larger scale logistics buildings markedly decreased and
demand outstripped supply for Grade A logistics stock. With a large
overhang of probable lettings "under offer", driven by demand for
logistics space over 500,000 sq ft, initial prospects for 2020 look
good.
Early positivity in the occupational and investment markets may
be tempered by Coronavirus (COVID-19), which is already impacting
global growth. It is impossible to know the extent to which the
virus will develop, but our Investment portfolio is occupied by a
diversified, high-quality Customer base, let on long leases. We
continue to monitor the situation.
With renewed global economic uncertainty, we think it is more
important than ever to stress the quality and longevity of our
income stream together with embedded income growth. We remain
confident in our ability to continue to deliver secure and growing
dividends to Shareholders as part of an attractive total return
over the medium term. As such we have increased our dividend target
by 2.2% to 7.00p per share for 2020."
Operational highlights: secure and predictable income
-- The Investment portfolio comprised 58 assets, which are well
diversified by building size, geography and Customer and covers
more than 30.9 million sq ft Investment portfolio(3) (31 December
2018: 29.8 million sq ft).
-- 53% of contracted rental income provide for contracted fixed
or minimum increases at the point of rent review. The blended
minimum level of increase is 1.8% per annum.
-- Our portfolio was 99% let, or pre-let and income producing
during the year as a result of two recently completed speculative
developments.(4)
-- 2.4% of total rents are from leases expiring within the next
three years, with 50% of leases with more than 15+ years to run
-- Estimated rental value ("ERV") for the investment portfolio
was GBP179.1 million, representing a 7.5% reversion.
-- Passing rent increased by GBP0.7 million per annum following
seven rent reviews settled in the year, equating to an annual
uplift of 2.0% on the rent reviewed.
-- Plans for selective Investment asset disposals are already underway for the current year.
Sustainability highlights: a strategic priority
-- 87% of the portfolio has an EPC rating of A-C (2018: 76% rated A-C).
-- Formulation of strategy with an ambition of becoming net
carbon zero across Tritax Symmetry development assets.
-- First year of participation within GRESB and disclosures made
against EPRA sustainability best practice indicators.
Development highlights: well positioned to deliver attractive
secure and growing income
-- During the year, the Group acquired an 87% economic interest
in db Symmetry (enterprise value for 100%: GBP370 million(5) ).
-- Yield on cost target across our Development portfolio of 6% to 8%.
-- 4.7 million sq ft of logistics buildings delivered during the
year, 93% pre-let or let during construction, adding GBP22.5
million to gross rental income.
-- Planning consent achieved for 2.6 million sq ft across Strategic Land sites.
-- 3.2 million sq ft of logistics assets under construction, of which 92% is pre-let.
-- Near-term development pipeline of 11.5 million sq ft (45%
with planning consent as at 31 December 2019), with gross rental
income potential of c.GBP65 million.
Financial highlights: well diversified and flexible debt
platform
-- Dividends declared in relation to 2019 totalled 6.85 pence
per share, in line with our target and a 2.2% increase on 2018.
-- Adjusted earnings per share was 6.64 pence per share for 2019 (2018: 6.88 pence per share).
-- EPRA net asset value ("NAV") per share decreased by 1.2% to
151.06 pence at 31 December 2019 (31 December 2018: 152.83 pence).
Excluding the one-off transaction costs of the Tritax Symmetry
acquisition, the underlying EPRA NAV per Share increased by 1.3%(2)
.
-- GBP250.0 million of gross equity raised in the year to part
finance the Tritax Symmetry acquisition.
-- The Loan to Value ("LTV") as at 31 December 2019 was 30%
(2018: 27%), with headroom immediately available under existing
committed borrowings of GBP500 million.
-- EPRA cost ratio of 15.1% (2018: 13.7%), reflecting the
expected short-term impact of the acquisition of Tritax
Symmetry.
Post Balance Sheet Highlights
-- Progressive dividend target of 7.00 pence per share announced
for 2020, a 2.2% increase on 2019 and the Company's sixth
successive increase.
-- Achieved a resolution to grant planning consent at Wigan for
a 1.4 million sq ft scheme and received consent for Darlington
Phase 2 (subject to s.106 agreement), for a further 0.6 million sq
ft.
Notes
1 Operating profit before changes in fair value of Investment
properties and contingent consideration, gain on bargain purchase,
impairment of intangible and other property assets and share-based
payment charges.
2 Excluding one-off transaction related cost of the Tritax
Symmetry acquisition, totalling 3.8 pence per Share.
3 The Group's Investment portfolio comprises let or Pre-let (in
the case of Forward Funded Developments) assets as well as any
speculative developments that have reached practical completion but
remain vacant.
4 Includes all 58 assets (30.9 million sq ft) held at 31
December 2019; excludes Littlebrook, Dartford.
5 Subject to certain adjustments in respect of cash, debt,
working capital, tax and other operational liabilities. Note: the
Group holds 100% of the ordinary share capital.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Tritax Group via Maitland/AMO (below)
Colin Godfrey (CEO, Fund Management)
Frankie Whitehead (Finance Director)
Maitland/AMO (Communications Adviser) Tel: 020 7379 5151
James Benjamin tritax-maitland@maitland.co.uk
Jefferies International Limited Tel: 020 7029 8000
Gary Gould
Stuart Klein
Akur Limited Tel: 020 7493 3631
Anthony Richardson
Tom Frost
Siobhan Sergeant
The Company's LEI is: 213800L6X88MIYPVR714
NOTES:
Tritax Big Box REIT plc is the only listed vehicle dedicated to
investing in very large logistics warehouse assets ("Big Boxes") in
the UK and is committed to delivering attractive and sustainable
returns for shareholders. Investing in and actively managing
existing built investments, land suitable for Big Box development
and developments predominantly delivered through pre-let forward
funded basis, the Company focuses on large, well-located, modern
Big Box logistics assets, let to institutional-grade tenants on
long-term leases (typically at least 12 years in length) with
upward-only rent reviews and geographic and tenant diversification
throughout the UK. The Company seeks to exploit the significant
opportunity in this sub-sector of the UK logistics market owing to
strong tenant demand and limited supply of Big Boxes.
The Company is a real estate investment trust to which Part 12
of the UK Corporation Tax Act 2010 applies ("REIT"), is listed on
the premium segment of the Official List of the UK Financial
Conduct Authority and is a constituent of the FTSE 250, FTSE
EPRA/NAREIT and MSCI indices.
Further information on Tritax Big Box REIT is available at
www.tritaxbigbox.co.uk
9.00am Company presentation for investors and analysts by live
conference call and webcast:
Those wishing to access the live conference call and/or webcast
are kindly asked to contact Maitland/AMO at
tritax-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379
5151
On demand recording later in the day
In addition, later in the day an audio recording of this
conference call/webcast and the presentation will also be available
on-demand via the Company's website:
http://tritaxbigbox.co.uk/investors/#results-centre
The Annual Report and Accounts will today be available on the
Company's website at w ww.tritaxbigbox.co.uk. In accordance with
Listing Rule 9.6.1, copies of these documents will also be
submitted today to the UK Listing Authority via the National
Storage Mechanism and will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM.
Hard copies of the Annual Report and Accounts will be sent to
Shareholders, along with the notice for Annual General Meeting
2020.
CHAIRMAN'S STATEMENT
A high-quality and resilient business with upside potential
One of the Board's key priorities is to oversee the successful
implementation of our strategy and ensure the business is
positioned for long-term success. Since IPO, the Company has
assembled a high-quality portfolio of logistics assets, let to an
impressive Customer base. The occupational market remains
favourable. These qualities underpin a resilient and growing income
stream, enabling us to pay an attractive and progressive dividend
to Shareholders which, for 2019, totalled 6.85 pence per share,
which was in line with our target.
Significantly, we also secured much of the Group's potential
future pipeline through the acquisition of db Symmetry in February
2019. Investor interest in logistics real estate means that prime
investment yields have tightened considerably, and the acquisition
of this Strategic Land platform allows us to develop our own
logistics real estate assets at an attractive yield on cost. We
expect this to support both our earnings growth and progressive
dividend policy, with the objective of delivering enhanced returns
to Shareholders. We will minimise development risk by primarily
undertaking this on a pre-let basis. Subsequent to our acquisition,
db Symmetry was rebranded to Tritax Symmetry.
At the end of the year, our high-quality Investment portfolio
consisted of 58 assets. These assets represent 89% of our total
portfolio value and they continue to deliver the robust rental
income that is our core focus. Our portfolio also continues to
offer opportunities to create value through asset management. The
Manager's ongoing engagement with Customers enables us to
understand their business needs and is central to our proactive
asset management strategy.
Sustainability is a strategic priority
We recognise the rapidly growing importance of delivering on
sustainability matters for a wide range of stakeholders. These
include the impact of climate change and creating social value in
the communities around our assets. The Group's clear purpose and
sustainability approach, enables us to enhance our assets and
supports our ability to deliver value beyond the financials.
A favourable market
Our business is well placed, as occupier demand for Big Boxes
continues to be fuelled by the growth in online sales and Customers
seeking greater efficiencies from their supply chains. Despite the
political backdrop, the level of take-up in 2019 was one of the
highest on record. This take-up excludes more than 10 million sq ft
of space that was reported to be under offer as we entered 2020.
This is encouraging for the year ahead.
Benefiting from the Manager's expertise
The Group's success since listing is in no small part due to the
dedication and expertise of the Manager. We benefit significantly
from the team's energy and sector specific knowledge, as well as
their exceptional network of contacts. The Board has a strong and
collaborative relationship with the Manager, while maintaining
careful oversight of its activities. The Board is also cognisant of
its responsibility for the Group's culture. While the Group has no
employees, we pay close attention to the Manager's culture and
believe that its forward thinking and entrepreneurial approach,
combined with its rigour and discipline, is the right fit for
delivering our strategy and purpose.
Good progress with developments
Five of our Forward Funded Pre-Let Developments completed during
the year, comprising 4.3 million sq ft of state-of-the-art
logistics facilities. Three further Pre-let Forward Funded
Developments covering 3.0 million sq ft remained under construction
at the year end and will practically complete by early 2021. Seven
of these have been income producing since the commencement of
construction. The development pre-let to Co-Op at Biggleswade
commenced works in December 2019 and will become income producing
following its targeted completion in early 2021. In total, the
Group has now been involved in 17 Pre-let Developments, making us
the market leader by value over recent years.
As noted in the Manager's Report, the acquisition of Tritax
Symmetry has already delivered benefits through securing planning
consents and lettings, and we are set to capture further value in
the months and years ahead.
The Group also made progress at Littlebrook in Dartford (branded
The Power House), with all demolition completed by the year end and
the related site clearance and preparation due to finish prior to
the summer of 2020. Significantly, over 98% of materials from the
demolition have been reused or recycled. The recent completion of
site preparation works for Phases 2 and 3 will extend the
flexibility of our building size offer. There has been healthy
occupational interest in the scheme, including advanced discussions
with a potential occupier on Phase 2 on a subject to planning
basis.
Portfolio and valuation
We added four assets to our Investment portfolio during the
year, all of which came through the Tritax Symmetry portfolio. At
the year end, the portfolio therefore comprised 58 Investment
assets plus the development assets at Littlebrook and within the
Tritax Symmetry portfolio. The total portfolio value was GBP3.94
billion (31 December 2018: GBP3.42 billion) as at the year end.
Financing
Consideration for the Group's 87% economic interest in Tritax
Symmetry was GBP321.5 million. To part fund this, as well as
certain developments and potential investments, we raised gross
proceeds of GBP250.0 million through a significantly oversubscribed
share issue. We expect to finance our Near-term activity primarily
from the sale of selected Investment assets, alongside debt.
Funding a proportion of our developments by disposing of Investment
assets at yields of 4-6%, while reinvesting the proceeds at a
target yield on cost of 6-8%, would allow us to benefit from an
attractive yield arbitrage and grow our earnings.
One of the Group's key achievements has been creating its
well-diversified and flexible debt platform. Our strong lender
relationships enabled us to enter into a new GBP200 million
unsecured, five-year, revolving credit facility during the year.
Given the quality of our rental income and assets, we remain
conservatively leveraged, with a loan-to-value ratio of 30% at the
year end (31 December 2018: 27%). The Group's credit rating with
Moody's remains at Baa1.
Financial results
The Group delivered a solid underlying financial performance in
2019. Excluding one-off transaction costs in relation to the Tritax
Symmetry acquisition, operating profit before changes in the fair
value of investment properties and contingent consideration, and
share-based payment charges increased by 7.7% to GBP122.5 million
(2018: GBP113.7 million). Our low and transparent cost base is
reflected in an EPRA cost ratio of 15.1% (2018: 13.7%). Adjusted
earnings per share were 6.64 pence (2018: 6.88 pence), which
covered our dividend payments totalling 6.85 pence per share by
97%. Dividends declared in respect of 2019 represented, an increase
of 2.2% compared to 2018.
The EPRA NAV at the year end was 151.06 pence per share (31
December 2018: 152.83 pence), up from 150.08 pence at the half
year. As previously noted, the share issue and associated costs of
the Tritax Symmetry transaction resulted in dilution to the EPRA
NAV of 3.8 pence per share. Absent of these specific transaction
related costs, our total return performance for the year was
5.8%.
Board and governance
On 1 February 2019, Mark Shaw retired from the Board. He made a
significant and valuable contribution since his appointment in
December 2013 and we are grateful for his guidance. Mark remains
Chairman and a Partner of our Manager, and his retirement means we
now have a fully independent Board. On 27 March 2019, Jim Prower
resigned from the Board after more than five years of service. On
behalf of the Board, I thank him for his counsel and expertise.
Aubrey Adams replaced Jim as our Senior Independent Director, with
effect from the same date.
We appointed two new Non-Executive Directors during 2019.
Alastair Hughes joined us on 1 February and Karen Whitworth on 21
October 2019. Both add to the breadth and depth of skills on the
Board. Alastair is a chartered surveyor with more than 25 years'
experience in the UK and international real estate markets, while
Karen has a strong financial and governance background and
experience in retail supply chains.
The Board has a rigorous focus on ensuring high standards of
corporate governance. During the year, we continued to evolve our
practices to ensure compliance with the 2019 edition of the AIC
Corporate Governance Code, including affirming the Group's
purpose.
Outlook
We anticipate further development activity in 2020, as we look
to recycle capital and capture profit from the Tritax Symmetry
portfolio and Littlebrook, Dartford. Investment asset sales are
expected to largely finance the Tritax Symmetry capital
requirements in the near term.
Investors continue to reweight their portfolios away from
retail, into industrial logistics and alternatives. We believe this
trend will continue in 2020. There are already signs that
investment interest has increased, particularly from overseas
buyers, having been held back by economic and political uncertainty
in 2019. Stable yields and increasing land prices may encourage
developers to seek higher rents, in order to maintain their
returns.
The occupational market remained healthy last year. Speculative
supply of larger scale logistics buildings markedly decreased and
demand outstripped supply for Grade A logistics stock. With a large
overhang of probable lettings "under offer" initial prospects for
2020 look good.
Early positivity in the occupational and investment markets may
well be tempered by Coronavirus (COVID-19), which is already
impacting global growth. It is impossible to know the extent to
which the virus will develop, but our Investment portfolio is
occupied by a diversified, high-quality Customer base, let on long
leases. We continue to monitor the situation.
The high-quality of our assets and Customer base provide
confidence in our ability to continue delivering secure and growing
dividends to Shareholders as part of an attractive total return
over the medium term. We have, therefore, increased our dividend
target by 2.2%, to 7.00 pence per share for 2020.
Sir Richard Jewson KCVO, JP
Chairman
OUR MARKET
Occupier demand remains robust
During 2019, demand continued to be driven by companies seeking
cost savings, economies of scale and the efficiencies derived from
consolidating older networks of smaller logistics buildings into
fewer, larger modern facilities. The inexorable rise in online
sales has also fuelled demand for modern, larger logistics
facilities which can be automated, and process returns.
In 2018, logistics property take-up for buildings over 100,000
sq ft was the highest on record at 31.5 million sq ft. Despite
Brexit and the UK general election, the equivalent figure in 2019
was 25.4 million sq ft, remaining above the 10-year average of 22.6
million sq ft. Importantly, the level of market demand can be
represented by combining "take-up" and "under offer" statistics;
for 500,000+ sq ft buildings (as a percentage of total market
activity), this has increased in each of the last four years,
whereas the equivalent figure for smaller-scale logistics buildings
has reduced over the same period.
Pre-let "design and build"' comprised 93% of lettings in the
500,000+ sq ft size category compared to the 100,000-250,000 sq ft
band where only 22% were design and build in 2019, suggesting a
lower readily available supply for larger buildings.
What this means for us
Structural change is maintaining a healthy level of occupier
demand and so long as this continues to outstrip the supply of
modern, large-scale logistics assets, the sector is likely to
expand, maintain positive rental growth and attract investment
interest with good liquidity. It also provides confidence in
re-lettings, should any of our assets become vacant, thereby
supporting the resilience of our rental income stream.
True Big Box supply remains constrained
Available to let logistics buildings over 100,000 sq ft totalled
27.1 million sq ft in 2019, slightly higher than take-up at 25.4
million sq ft. Speculative supply decreased from 16.2 million sq ft
in 2018 to 14.1 million sq ft in 2019.
In 2019, the speculative supply of buildings in the
100,000-250,000 sq ft size range represented 10.6 months of take-up
compared to the over 500,000 sq ft category where there was a 50%
reduction in speculative supply to just over 1 million sq ft, which
is the equivalent to just 1.4 months of 2019 take-up*.
Larger buildings are more scarce and occupier investment in
automation is greater than for smaller scale logistics facilities,
thereby influencing tenant commitment. 2019 data demonstrates that
larger buildings secure longer leases: in the 100,000-250,000 sq ft
size category the average lease length was 11.8 years, whilst for
buildings over 500,000 sq ft the average lease length was 18.3
years.
What this means for us
A limited supply of modern buildings means many occupiers can
only meet their requirements for Big Boxes through "built-to-order"
development. Despite strong occupier demand there are significant
barriers to entry which continue to restrict supply, and this
imbalance is expected to benefit our business for some time to
come.
* Includes second-hand space.
Rental growth slows
Buoyed by demand for urban buildings, 2018 witnessed regional
average rental growth of 5.6% pa for logistics buildings units over
100,000 sq ft. This reduced in 2019 to 1.2%, against which CPI was
1.3%, RPI 2.2%.
Other than in Scotland, market rental growth was stronger in Q1
2019 ahead of the original Brexit date in March, after which the
prolonged uncertainty over Brexit and then the general election
affected confidence. This was despite overall take-up remaining at
healthy levels.
Build costs and land values increased in 2019, simultaneous with
a period of static yields. This is likely to apply pressure on
developers to increase target rental levels on new leases, in order
to achieve the same levels of returns as when yields were
compressing.
What this means for us
Our portfolio rental growth outperformed the market in 2019 and
we see potential for improved market rental growth in 2020. We are
well placed to benefit, but also take comfort that 53% of our
income is subject to fixed or minimum level increases at the point
of rent review.
Investment
The all-property yield gap versus 10-year Gilts closed the year
at nearly 400bps, a wide margin in modern historical context. With
inflation and interest rates on a downward trajectory, Gilts are
not expected to rise significantly in the near term, and this could
signal the potential for further commercial property yield
compression.
Industrials topped the 2019 total return chart at 7.6% compared
with offices at 6.9% and retail at -6.2%. The all-property return
was 2.2% (MSCI).
During 2019, prime UK logistics property investment yields
remained stable at their keenest rates on record at 4.5%, according
to CBRE. Investment volumes were subdued last year due to political
and economic uncertainty. Having legally exited the EU, uncertainty
remains over the shape of the UK's trade relationships.
Nonetheless, a strong majority Government has increased confidence
in early 2020. Institutions continue to reweight portfolios away
from retail and into logistics and alternatives with some way to go
in this re-weighting exercise. We anticipate increased demand from
overseas capital seeking to invest in one of the world's strongest
logistics markets. We therefore expect increased investment volumes
and stable, if not hardening, prime yields in the coming months of
2020.
What this means for us
The UK logistics market and our investments are sought after and
there is potential for further yield-induced value gains. Our
capital efficient development platform offers the opportunity for
enhanced returns whilst minimising risk through a largely pre-let
driven strategy.
MANAGER'S REPORT
Delivering the strategy
2019 was an important year in the evolution of the Company - we
acquired a prime logistics land platform to complement our
high-quality Investment portfolio and provide opportunity for
enhanced future value growth. The core of our business has remained
unchanged, with 89% of our portfolio comprising high quality
Investment asset.
Our Investment portfolio
Investment assets comprise 89% of our portfolio value. Apart
from two small speculatively developed buildings completed in the
period, our Investment assets remained fully let throughout
2019.
The extensive geographic network of properties provides in-depth
market knowledge combined with our market intelligence has enabled
us to acquire high-quality income producing assets at an attractive
weighted average purchase yield of 5.5% since inception, compared
to a valuation yield of 4.5% as at 31 December 2019.
The Group now owns 58 geographically diverse logistics
Investment assets, individually selected based on quality and
performance criteria, which collectively comprise a unique
portfolio well placed to benefit from changes in consumer habits,
technology and operations upsizing. The properties are located
where occupiers want to be and provide flexible accommodation with
access to appropriate labour pools. The modernity of the Group's
real estate is second to none, with 92%(1) having been constructed
since the Millennium.
A WAULT of 14.1 years(2) underpins the long-term resilience of
our income. Over half of our rental income (53%) provides for a
contracted fixed or minimum level of increases at the point of rent
review, blended at a minimum annualised rate of 1.8%. Long income
is more valuable if it is also high-quality, dependable income. We
believe that the Group's tenant line-up is unrivalled among UK
REITs. The Investment portfolio contracted annual rental income was
GBP166.6 million as at 31 December 2019, underpinned by 40
institutional quality tenants, the largest of which was Amazon,
representing 13.1% of the Company's total contracted rental
income.
The independently assessed estimated rental value (ERV) for the
Investment portfolio was GBP179.1 million, representing a 7.5%
reversion (the level at which market rents are deemed to exceed the
passing rent of the Group's properties). The portfolio ERV grew by
1.1% on a like-for-like basis during the year.
The gain recognised on revaluation of the Group's Investment
properties was GBP54.5 million (2018: GBP163.0 million). The
like-for-like valuation increase for the 54 assets and the land at
Littlebrook which were held throughout the year was 1.8% (excluding
any additional capital costs incurred on those assets in the
year).
We will continue to opportunistically identify Investment assets
and Pre-let Forward Funded investments in supply constrained
locations at prices that create value at the point of purchase.
Plans are underway for selective disposals of Investment assets
with a view to recycling capital efficiently into the Company's
Strategic Land platform.
1 By contracted rental income.
2 To the earlier of lease expiry or break option
Relationships and knowledge provide opportunity
A regular engagement programme has forged strong relationships
with the Group's diverse and global Customer base, providing
invaluable insights through the supply chain. This partnership
leverages a deep understanding across various contact points within
Customer's businesses, embedding us into Customers' corporate
logistics decisions. We pride ourselves on care and attention,
which extends beyond the physical properties that we lease. The
resulting trust means that our Customers share information which
allows us to make recommendations to help them overcome the
structural challenges of a fast-changing world and capture the
opportunities that this presents.
Where appropriate, we look to implement physical enhancements to
better meet Customer requirements, for example, extending the
property. This could link with contractual amendments such as
adjusting rental levels or extending the unexpired lease term
which, in turn, can provide growing rents and longer-term financial
security for the Group. Across the Investment portfolio we are
actively discussing such initiatives.
-- At Amazon, Chesterfield, the Group undertook refurbishment
works and modernisation of the asset, which completed in 2019. This
improved the building's EPC rating from grade "D" to "C".
-- At Tesco, Middleton, the Customer completed a major
refurbishment programme, including replacement of mechanical and
electrical equipment.
-- At New Look, Newcastle Under Lyme, the Customer completed a
fit out of the extension, refurbished the on-site cafeteria and
re-located call centre staff to the property, to create a dedicated
e-commerce service centre.
We cannot directly influence the business operations of our
Customers, but we do work with them to maximise the efficiency,
resilience and flexibility of their occupational real estate.
Although the Group's Investment portfolio is generally modern and
rates well for energy efficiency, a significant area of opportunity
lies in creating sustainable solutions, both in terms of social
welfare (from improvements in working environments) to the
implementation of renewable energy (which can be of benefit to
Customers, the Group and society more generally). We are working
hard in this area and are optimistic as to the opportunities
identified.
Sustainability is also at the heart of the development ambitions
of Tritax Symmetry which has developed strong relationships with
local authorities and communities as a result of its inclusive and
consultative approach to job creation. The Customer relationships
forged within the Group's Investment portfolio are proving of
mutual benefit to Tritax Symmetry; we are now able to offer the
in-house development of new logistics facilities - a service not
previously possible. This means that we can provide solutions of
all size categories ranging from small scale "last journey"
logistics buildings to the largest Mega Box hubs.
Lengthening income
Despite the occupational market being impacted by Brexit and the
General Election in 2019, we concluded two significant asset
management initiatives:
-- At the Sainsbury's asset in Leeds, we extended the seven-year
unexpired lease term by a further 18 years, creating 25 years
unbroken rental income, thereby endorsing the 'Foundation asset'
credentials. We also negotiated a change in the rent review basis
from five-yearly open market to CPI-linked (2% collar and 4% cap)
compounded annually, in order to provide increased income growth
certainty for the Group. The significant commitment by Sainsbury's
demonstrates the strategic importance of this asset in its supply
chain network for the north of England.
-- At the Whirlpool asset in Raunds, we concluded a five-year
extension to the lease, creating a six-year unexpired term.
Additionally, we negotiated a strengthening of the tenant financial
covenant through the addition of a guarantee from Whirlpool
Corporation. As part of the transaction, we agreed to fund certain
improvements to the property including energy efficient LED
lighting and upgraded employee welfare facilities.
Growing income
Logistics property rent reviews take place typically every five
years. The timing of each is such that we conduct a number of rent
reviews each year. The Investment portfolio also benefits from
several leases with annual rent increases, either on a fixed uplift
basis or linked to RPI or CPI.
We settled seven rent reviews during 2019, adding GBP0.7 million
(2018: GBP0.9m) to the Group's annual passing rent, representing an
average annual increase of 2.0%.
Annual inflation indexed rent reviews:
-- Morrisons, Tamworth
Linked to CPI, resulting in an uplift to the annual passing rent
of GBP0.1 million or 1.8%.
-- Morrisons, Sittingbourne
Linked to RPI with a cap of 2% per annum, resulting in a 2%
increase in passing rent, equating to GBP0.12 million per
annum.
-- Royal Mail, Daventry
Linked to RPI with a cap of 3% per annum, resulting in a 2.88%
increase in passing rent, equating to GBP0.08 million per
annum.
-- Industrial Tool Services, Harlow
Linked to RPI with a cap of 2% per annum, resulting in a 2%
increase in passing rent, equating to GBP0.02 million per
annum.
Annual fixed rent reviews:
-- Argos, Burton-on-Trent
Fixed at 3% per annum, resulting in an uplift in annual passing
rent of GBP0.13 million per annum.
Five-yearly inflation indexed rent reviews:
-- Brakes, Harlow:
Linked to RPI with a cap of 5%, resulting in a 13.01% increase
in passing rent, equating to GBP0.24 million per annum.
Open market rent reviews per annum:
-- Next, Doncaster
This open market review, dated March 2018, was settled at a nil
increase.
At the year end, the Group had six open market rent reviews that
were outstanding. These reviews are either under direct negotiation
or form part of wider negotiations relating to potential extensions
of lease length.
By December 2022, 87% of our portfolio rents are due for rent
review. In 2020 ten of our properties are subject to rent review
with a further 21 and 17 rent reviews in 2021 and 2022
respectively. We have purposefully weighted away from open market
rent reviews in favour of more reliable fixed and collared reviews,
providing us with a higher degree of embedded rental growth; in
December 2015 fixed and index linked reviews comprised 42% of rent,
compared to 31 December 2019 when fixed and collared rent reviews
comprised 53% of our income.
Our balanced Investment portfolio by rent review type
Open market rent reviews: 33%
These track the rents achieved on new lettings and rent reviews
of comparable properties in the market.
RPI/CPI-linked: 50%
These provide some inflation protection. All are subject to
caps, the highest at 5% pa. Over GBP61 million of the Group's
inflation-linked income is also collared, which means it benefits
from minimum uplifts.
Of the 24 inflation-linked leases, 20 are reviewed five- yearly,
while four provide annual rental increases.
Fixed uplift rent review: 11%
Fixed rent reviews provide certainty of income growth, at either
3.0% pa (four leases) or 2% pa (one lease). By income, 65% of these
leases have five yearly reviews and 35% are reviewed annually.
Hybrid: 6%
Hybrid rent reviews can be an amalgamation of the above, for
instance to the higher of open market rents or RPI (subject to a
cap and collar). Such arrangements provide the Group with the
potential of enhanced income growth.
Post period end activity
Following the period end, two key asset management initiatives
completed:
Removal of lease break
M&S, Stoke
The Board of M&S accepted our proposal to remove the May
2021 break option, thereby extending the unexpired term certain to
May 2026. The terms also agreed the forward settlement of the May
2021 rent review, increasing the rent from GBP5.25 per sq ft to
GBP5.50 per sq ft (equating to an increase of GBP0.1 million per
annum). This completed in February 2020.
Open Market rent review
L'Oreal, Trafford
Last year we extended this lease by five years to 8 August 2024.
The lease provided for a rebasing of the rent at the end of the
original lease term at August 2019, with the unusual provision that
the rent could increase or decrease. Following negotiation,
settlement was achieved at GBP6.18 psf (reduced from the previous
level of GBP8.47 per sq ft). The annual 3% per annum fixed review
basis continues for the remainder of the term. This completed in
February 2020.
Delivering Pre-let Forward Funded Developments
These state-of-the-art buildings are accretive to our WAULT and
portfolio modernity. The Group has now facilitated the completion
of 14 Pre-let Forward Funded Developments, totalling over 8.9
million sq ft. We believe that this makes the Group the leading
forward funder of pre-let developments in the UK market over the
last five years, by square foot.
During 2019, we enhanced our Investment portfolio with the
practical completion of the following five Pre-let Forward Funded
Developments. (see below). In aggregate these pre-let developments
delivered 4.3 million sq ft of high-quality, sustainable logistics
space with an average WAULT of 18 years.
-- Eddie Stobart, Corby, in February 2019
-- Amazon, Haydock, in July 2019
-- Amazon, Darlington, in August 2019
-- Bosch, Corby, in September 2019
-- Howdens II, Raunds, in November 2019
Using our knowledge and expertise to Forward Fund Pre-let
Developments provides the opportunity to acquire new, high
specification, sustainable, institutional calibre facilities. It
also allows us to acquire prime assets at a discount to the price
of a completed and income producing logistics investment.
Our active development pipeline
With a low risk approach to development, we aim to convert
development profit into earnings growth
Through the acquisition of Tritax Symmetry, we have gained the
expertise of an experienced land acquisition, planning and
development team which, alongside our existing development
knowledge, provides a talented group with the capability of
maximising value from the Group's Strategic Development land. We
also continue to work with third-party developers with strong
reputations of performance in their field.
The Group now owns or controls via option agreements development
land in the UK with a target gross floor area in excess of c.39
million sq ft. This land platform provides the opportunity of
creating our own sustainable investments. In doing so, we can
control the real estate quality, calibre of tenant, lease terms and
timing of delivery.
Such an arrangement will enable us to capture development
profit, which embedded within the resultant investments, enhances
the Group's yield on cost. We are targeting an average yield on
cost of 6-8% across the Group's Strategic Land assets, well above
the current Portfolio valuation yield of 4.5% at the year end, and
this profit arbitrage will be reinvested to accelerate the growth
in earnings, underpinning our progressive dividend policy.
We take a risk-averse approach to development by delivering
assets on a predominately pre-let basis. The Group's investment
policy restricts speculative development exposure to 5% of GAV, but
we have practically worked to a lower level which was 0.5% as at 31
December 2019.
At the year-end, after only 10 months, we had made good progress
with the Group's enhanced Strategic Land platform. The Current
development pipeline is progressing well, and upon completion these
assets will increase the passing rent by GBP15.2 million pa. Our
integrated team, which includes the full Tritax Symmetry team, is
proactively engaging with the Group's 40 existing Customers and
promoting our Near-term pipeline to other occupiers in the market
that currently have active logistics real estate requirements.
Current development pipeline
The Current Development Pipeline comprises both pre-let and
speculative developments which are likely to reach practical
completion within 12-18 months. Such assets are either in the
course of construction or are the subject of a construction
commitment.
At the year end, the Group had three pre-let developments under
construction including: Howdens III (Unit 6B) at Raunds; Amazon at
Durham; and Co-Op in Biggleswade. There has been a short delay to
practical completion of Howdens III at Raunds, however, there is no
financial impact on the Group and it continues to receive the full
developer's licence fee until the rent commencement.
As part of the Tritax Symmetry acquisition, the Group acquired a
pre-let to the Co-Op in Biggleswade, which became unconditional in
May 2019 following the receipt of detailed planning consent.
Construction on the project commenced towards the end of 2019.
These three developments, totalling 3.0 million sq ft, are
anticipated to reach practical completion by early 2021.
In addition, the Group inherited five small scale buildings
totalling 560,000 sq ft as part of the Tritax Symmetry acquisition,
where construction had commenced without a tenant in place. There
were two buildings, Units 2 and 3 at Aston Clinton totalling
165,000 sq ft, that remained under construction as at the year
end.
As illustrated below, the estimated cost of completion across
the five development assets that remain under construction is
approximately GBP129.9 million. Upon completion these assets will
increase the rent passing rent by GBP15.2 million pa.
The remaining expected costs to complete, across these assets,
is as follows:
Estimated Estimated cost to complete-
costs period
to complete-
total
----------------- -------------- -------------------------------------- -------- ------------
GBPm H1 2020 H2 2020 H1 2021 H2 2021 Total Contractual
sq ft rent /
ERV
----------------- --------------
GBPm GBPm GBPm GBPm million GBPm
----------------- -------------- -------- -------- -------- -------- -------- ------------
Pre-Let
Amazon, Durham* 69.8 52.5 17.3 - - 2.0 7.6
Howdens III
(Unit 6B)* 17.0 17.0 - - - 0.3 1.7
Biggleswade 42.1 4.6 22.8 14.7 0.7 4.7
128.9 74.1 40.1 14.7 - 3.0 14.0
Speculative
Aston Clinton,
Unit 2 0.3 0.3 - - - 0.1 0.4
Aston Clinton,
Unit 3 0.7 0.7 - - - 0.1 0.8
----------------- -------------- -------- -------- -------- -------- -------- ------------
1.0 1.0 - - - 0.2 1.2
----------------- -------------- -------- -------- -------- -------- -------- ------------
Total 129.9 75.1 40.1 14.7 - 3.2 15.2
* Licence fee currently being received during the construction
period.
Post period-end development activity
Following the period-end, Tritax Symmetry practically completed
two speculative developments at Aston Clinton of 0.1 million sq ft
and 0.06 million sq ft respectively. They are currently vacant but
have attracted good occupational interest.
Near-term development pipeline
Strong progress has been made with the Group's Near-term
development pipeline. This comprises land on which, as at 31
December 2019, we have either received planning consent or where
planning applications have been submitted. Notably, this excludes
assets which fall within the Current development pipeline. In terms
of time frame, sites within the Near-term pipeline are those likely
to commence development within a period of 1-3 years.
The Near term development pipeline consists of 11.5 million sq
ft, across nine separate development sites. Of this, 5.3 million sq
ft relates to land that has the benefit of planning consent and 6.2
million sq ft relates to sites where a planning application has
been submitted but a decision has yet to be made by the local
authority. Included within the Near-term development pipeline are
Phases 1 and 2 at Littlebrook, Dartford.
Of the land which has received planning consent, 1.1 million sq
ft is owned by the Group and 4.2 million sq ft is controlled by way
of option agreements. This consented land comprises seven separate
development sites, all at various stages of site preparation, from
land that is owned and ready for construction (with utility
services installed), to land held under option where infrastructure
works have yet to commence.
Key achievements in the year include the outline planning
consent received in April 2019 for 2.3 million sq ft at Kettering
and in July 2019 a further 0.3 million sq ft at Bicester.
Prior to the year-end, planning applications had been submitted
in respect of four sites and in each case the initial dialogue with
the local planning authority has been positive.
Total Current Estimated ERV Estimated gross
sq ft book vost to yield on cost
value completion
GBPm GBPm GBPm %
Land with consent 5.3 126.2 296.6 29.6 7.0%
Land with planning
submitted 6.2 75.1 435.6 35.7 7.0%
11.5 201.3 732.2 65.3 7.0%
Post period-end planning activity
Following the year-end, we achieved a resolution to grant
planning consent at Wigan for a 1.4 million sq ft scheme and
received consent for Darlington Phase 2 (subject to completion of a
s.106 agreement), for a further 0.6 million sq ft. In addition to
the Near term development pipeline of 6.2 million sq ft, we have
also submitted a detailed application on 0.06 million sq ft at
Bicester Phase 2.
Future development pipeline
The remainder of the Group's land bank for future development is
predominately controlled under option agreements which are a
capital efficient and low risk way of creating value from the
planning and development process. The total land under option is
targeting the delivery of approximately 27.5 million sq ft, the
development of which we expect to be largely pre-let triggered.
Total Target gross
sq ft yield on
million cost
Strategic Land
options 27.5 6-8%
Post period-end option activity
Following the year-end the Group signed an option over a parcel
of land, covering approximately 2.0 million sq ft or 118 acres at
Gloucester.
Development Management Agreements
Tritax Symmetry has a number of Development Management
Agreements ("DMAs") with third-party funders. These are contracts
where Tritax Symmetry will manage the delivery of an asset for a
third-party, in return for a fee and/or profit share. The asset
will not be owned by the Company during or post construction and
therefore is not included within the Group's portfolio of
assets.
DMAs are active on three separate schemes with the potential to
deliver approximately 1.2 million sq ft. During 2019, one pre-let
became unconditional under a DMA contract.
-- Goole: A pre-let of 237,150 sq ft to Croda on behalf of
LondonMetric Property has started on site and completion of the
building is schedule for H2 2020. Croda plan to occupy into the
building by the end of 2020.
In addition, there are two schemes where the Company has a
continuing economic interest and fees are potentially receivable in
the future, but without a capital outlay by the Company. The two
schemes at Lutterworth have the potential to deliver approximately
6.4 million sq ft, although these schemes are not included within
the Group's portfolio of assets.
Good progress at Littlebrook, Dartford
The Group made further progress with the 114 gross acres of
development land at Littlebrook, adjacent to the QE2 Bridge and
River Thames. Branded "The Power House" the project has the
potential to become one of London's largest Big Box logistics parks
in a core "last journey" location on the edge of London and inside
the M25. This is a rare asset so close to the heart of London.
Site preparation work has advanced significantly, with all major
structures and chimneys now demolished. Remains from the final
blowdown in late 2019 are being processed and recycled. The
demolition, remediation and site preparation works are proceeding
on budget and in accordance with the original timeline which
envisages the majority of the site being ready for development in
Q2 2020. With demolition and site preparation nearly completed and
with infrastructure works due to commence, potential new Customers
have clear visibility on what can be delivered.
Infrastructure works will commence in the near term to install
the site spine road which will provide access to the land
comprising Phases 1, 2 and 3. The Phase 1 plot already benefits
from detailed planning consent for a cross-docked logistics
building of up to 450,000 sq ft ground floor area and 21 metres in
height. The marketing programme has generated some positive
occupational interest, but as we conclude the demolition programme
and commence site access and infrastructure works, occupiers can
now appreciate the potential for an extremely swift build period of
26 weeks from signing an Agreement for Lease.
OUR SUSTAINABLE APPROACH
In 2019, we began to develop a long-term sustainability strategy
for the Group. In conjunction with our wide range of stakeholders,
we carried out a materiality assessment, which is a defined and
recognised process for determining material sustainability issues
for the Group to focus on.
This identified three core issues for the Group to build its
sustainability strategy around. We will continue to develop our
strategy for our three core issues. In the meantime, we are
reporting good progress for our established approach embedding
sustainability across the five key areas we focus on to create
value for our business, our customers and our wider
stakeholders.
Our first submission to the Global Real Estate Sustainability
Benchmark (GRESB) in 2019, and our first disclosures against the
EPRA sustainability best practice indicators, have provided
valuable insight into developing this new strategic focus.
Managing down our carbon footprint
We recognise that in order to tackle the effects of climate
change, we must take swift responsibility for reducing our carbon
impact. As we develop our sustainability strategy, we have set out
an ambition to be net zero carbon, and we are currently developing
our roadmap and targets to achieve this.
The Company is already net zero carbon for its direct
operational impact, procuring 100% renewable energy since 2018, and
we are currently mapping our indirect emissions to understand how
we can also bring these down to net zero carbon.
During 2019, we joined the UK Green Building Council (UK GBC)
and Tritax Symmetry has used the UK GBC's industry methodology to
analyse its development activities, with an ambition to achieve net
zero carbon construction. The UK GBC's definition of net zero
carbon in construction is:
"When the amount of carbon emissions associated with a
building's product and construction stages up to practical
completion is zero or negative, through the use of offsets or the
net export of on-site renewable energy."
A carbon evaluation study, undertaken by a specialist
consultancy on behalf of Tritax Symmetry, has assessed that the
development of a typical 660,000 sq ft logistics asset generates
c.28,000 tonnes of carbon. This study also highlighted the top ten
activities that make up 96% of this impact. Tritax Symmetry are now
exploring the options for using alternative construction methods,
materials and products to bring this carbon impact down to net zero
carbon.
Driving sustainable performance from our assets
We seek to enhance the sustainable performance of our assets. We
are pleased to report that we are already carbon neutral for our
direct operations, where we procure 100% renewable energy through
our third-party facilities manager. We develop Sustainability
Action Plans (SAPs) for each asset, these are informed by our SRAs.
The SAPs identify opportunities where we can promote and, where we
have the opportunity, implement initiatives to:
1. improve energy efficiency and reduce energy consumption;
2. increase provision of on-site renewable energy generation;
3. reduce water use through rainwater harvesting and low flow fixtures; and
4. encourage waste management and recycling facilities.
In line with our objective to reduce the carbon impacts of our
assets and protect value in the long term, during 2019 we focused
on improving the energy efficiency of our assets and engaging with
our Customers to identify the potential for installing renewable
energy generation.
Monitoring and improving of the assets' EPC ratings is central
to measuring the energy performance of the Group's portfolio. We
are actively managing the Group's assets to remove all "D" and "E"
grade EPCs from the portfolio. Through our asset management work
and careful acquisition processes we have achieved EPC of Grades A
to C for 87% of the portfolio (by floor area). Our active
initiatives have reduced the share of "E" grade EPCs to just
1%.
We seek to fund the installation of renewable energy initiatives
in order to reduce carbon emissions from our Customers' operations
and to secure cost savings for them. This also adds value to our
assets and generate financial returns for our Shareholders. We
progressed two new renewable energy projects in 2019. We installed
solar PV at DSG Newark delivering an additional capacity of 791 kWp
and increasing our total renewable energy production to 15,479 mWh.
In addition, we worked with Tesco in Goole to install a biomass
generator to provide combined heat and power (CHP).
EPCs by Gross Internal Area (Sq ft)
EPC Grade A 39%
EPC Grade B 23%
EPC Grade C 25%
EPC Grade D 12%
EPC Grade E 1%
Solar Photo Voltaics (PV) at Dixons Carphone Newark
We worked with Dixons Carphone to install renewable energy
capacity 791 kWp at its site in Newark. We assessed the opportunity
for installing renewable energy for our Customer and proceeded
based on a target 9.2% return on investment. The scheme has also
benefitted the Customer by reducing reliance on fossil fuels and
lowering its operating costs.
Since being commissioned in February 2019, the scheme has
generated 613 mWh of energy for our Customer. This has resulted in
173 tonnes of carbon being saved from the generation of this
renewable energy.
Developing sustainable assets and building to net zero
carbon
In 2019 Tritax Symmetry worked towards managing down the Group's
carbon footprint and we are now actively exploring the options for
using alternative construction methods, materials and products to
bring this carbon impact down to net zero, in accordance with the
UK GBC definition of net zero carbon in construction.
Tritax Symmetry's Standard Base New Building Specification sets
out requirements for new developments. Within this Specification,
we require a minimum BREAAM "Very Good" rating and an EPC rating of
"A". To achieve a 'Very Good' rating necessitates strong
sustainability performance in all aspects of the development,
including energy use, transport, responsible sourcing of materials,
waste management, land use and inclusion of facilities to enable
occupier health and wellbeing. Tritax Symmetry engages third-party
project managers, who ensure our sustainability requirements are
being followed throughout the construction phase, with regular site
audits. It also includes objectives to reduce waste and reuse
materials as far as possible.
We actively engage our communities throughout the development
process, holding regular meetings to inform them of our plans and
to listen to their views. We also regularly engage local schools to
raise awareness of careers in construction, with visits to our
development sites.
At the Group's development at Littlebrook we have held quarterly
meetings with local businesses and invited local residents to view
the demolition and ecology survey. The remediation of the site has
achieved an impressive rate of 98.8% of materials being recycled.
This saved over GBP9 million in landfill costs and enable over
97,000 tonnes of materials to be recovered and re-used in other
projects. From the site recovery and demolition, over two million
tonnes of carbon have been saved by ensuring materials recovered
can be recycled or re-used.
Looking forward
We have demonstrated good performance in 2019 and identified key
steps for next year. In particular, we will:
-- understand alternative materials and processes for the
identified aspects with the highest embodied carbon - focusing on
concrete and steel, working towards net zero carbon in accordance
with the UK GBC definition.
-- evaluate biodiversity opportunities for upcoming developments and existing assets.
-- look at ways to measure social value and work with industry
partners to determine a consistent methodology.
-- seek to improve EPCs to bring all above "E" Grade.
-- engage with Customers to begin monitoring energy, water
consumption and waste management data; and we will develop a forum
of interested and informed Customers to discuss and share best
practice.
FINANCIAL REVIEW
The Group grew its dividend in 2019, declaring dividends
totalling 6.85 pence per share, in line with our target and a 2.2%
increase on the previous year. We have also, today, announced the
6th successive increase, with a dividend target of 7.00 pence for
2020.
Our total return performance was impacted by the one-off
transaction costs incurred upon acquiring the 87% economic interest
in db Symmetry (now rebranded Tritax Symmetry). Inclusive of these
one-off costs the total return for the year was 3.3%. The Company's
total return performance, excluding these one-off transaction
costs, and better reflective of underlying performance, was
5.8%.
In February 2019, we successfully raised GBP250 million of
equity proceeds to finance the corporate acquisition of Tritax
Symmetry. This is a transaction which we believe materially
enhances the future return prospects for the Company. This equity
financing was supplemented by a new, unsecured, GBP200 million
revolving credit facility arranged in June 2019, which increases
our level of flexible debt commitments.
Presentation of financial information
The consolidated financial statements are prepared under IFRS.
The Group's subsidiaries are consolidated at 100% and its interests
in joint ventures are equity accounted for.
The Board continues to see Adjusted EPS as the most relevant
measure when assessing dividend distributions. Adjusted EPS is
based on EPRA's Best Practices Recommendations, with adjustments
made to earnings to exclude items considered to be exceptional, not
in the ordinary course of business or supported by cash flows, and
include the developer's licence fees the Group receives on Forward
Funded Developments.
Financial results
Net rental income
Net rental income for 2019 was GBP144.3 million (2018: GBP132.8
million), an increase of GBP11.5 million or 8.7%. This reflected
the benefit of the practical completion and rent commencement on
five Pre-let Forward Funded Developments, along with one Tritax
Symmetry development completion, which was let during construction.
In addition, seven rent reviews were settled in 2019, increasing
our contracted annual rent by GBP0.7 million during the year. The
contracted annual rent roll at 31 December 2019 was GBP166.6
million across 58 assets, increasing from GBP161.1 million across
54 assets as at 31 December 2018. Included within the contracted
annual rent roll was GBP13.9 million of rent in relation to pre-let
assets currently in the course of construction.
The Group incurred one-off costs of GBP4.2 million in the year,
in relation to the acquisition of Tritax Symmetry. Excluding these
one-off transactional costs, operating profit before changes in the
fair value of Investment properties, share of profits from joint
ventures and share-based payments was GBP126.7 million, an increase
of 10.5% (2018: GBP114.7 million). This reflects the growth in
rental and other income, partially offset by higher administrative
and other expenses.
Administrative and other expenses
Administrative and other expenses, which includes all
operational costs of running the Group, totalled GBP21.7 million in
the period (2018: GBP18.1 million). Increases to administrative
costs predominantly relate to growth in the investment management
fee, by GBP2.2 million, driven by growth in the net asset value of
the Company. In addition, the Group's Adjusted earnings for the
year were affected by a GBP0.7 million charge in relation to the
Tritax Symmetry ManCo fee (noting that 85% of the Tritax Symmetry
ManCo fee is capitalised as costs directly attributable to
development projects), and GBP0.3 million in relation to costs
associated with the Tritax Symmetry rebranding.
The Group continues to have a low and transparent operating cost
base. This is despite the EPRA Cost Ratio increasing for 2019 to
15.1%, from 13.7% in 2018. The increase relates to operational
overheads growing as part of the Tritax Symmetry transaction, which
we expect to materially contribute to gross rental income over a
period of time. We expect this increase in cost ratio to be short
term. It had already reduced during the second half of the year.
and we anticipate a further reduction in 2020. The Tritax Symmetry
portfolio gives the Group the opportunity to reduce its cost ratio
over the medium term to a level that would not otherwise have been
possible prior to the acquisition, as gross rental income from the
Tritax Symmetry portfolio begins to grow relative to the operating
costs.
Share-based payment charge
The structure of the Tritax Symmetry transaction has led to the
B and C Shareholders' value being split between i) contingent
consideration, which is determined by certain provisions under the
shareholder agreement between Tritax Symmetry HoldCo and the Tritax
Symmetry Management Shareholders and ii) a share-based payment
charge, which is the compensation the B and C Shareholders will
receive as a result of their economic right held to their share of
future performance of the Tritax Symmetry Development Assets.
During the year, GBP3.3 million (2018: GBPnil) was charged to the
Group Statement of Comprehensive Income in respect of share-based
payment charges.
Financing costs
Net financing costs for the year were GBP34.0 million (2018:
GBP22.9 million), excluding the reduction in the fair value of
interest rate derivatives of GBP5.2 million (2018: GBP1.2 million).
The Group's average debt drawn throughout the period was GBP1,137.8
million, compared to GBP781.5 million in the prior year. The
drawings in the year included the receipt of proceeds from the
GBP400 million US private placement facility arranged in 2018,
which allowed for a three month delayed drawing in February 2019.
The average cost of debt remained relatively consistent during the
year (see overleaf).
Tax
The Group has continued to comply with its obligations as a UK
REIT and is therefore exempt from corporation tax on its property
rental business. The tax charge for the year was therefore GBPnil
(2018: GBPnil).
Profit and earnings
Profit before tax for the year was GBP141.2 million (2018:
GBP252.6 million). This resulted in basic earnings per share (EPS)
of 8.40 pence (2018: 17.54 pence) and basic EPRA EPS of 5.29 pence
(2018: 6.37 pence).
Adjusted EPS for the year was 6.64 pence (2018: 6.88 pence).
This included adjustments made for items not supported by cashflows
and principally includes the addition of licence fee receipts.
Adjusted EPS covers the total dividend paid in respect of the year
of 6.85 pence per share by 97%. Our earnings per share were
affected by the increase in our capital base and number of shares
in issue during the year, with the subsequent investment made into
the Tritax Symmetry portfolio and early stage development assets.
Further information on the calculation of Adjusted EPS can be found
in note 13.
Dividends
Dividends in respect of 2019 therefore totalled 6.85 pence per
share, an increase of 2.2% on the 6.70 pence per share paid in
respect of 2018. This was in line with the Group's target for the
year. The Q4 2019 interim dividend, as declared on 27 February
2020, will be paid to Shareholders on 27 March 2020, who were on
the register on 6 March 2020. The Company has a policy of operating
with a progressive dividend policy and has increased its dividend
payments each and every year since IPO. The Company has announced
its sixth consecutive increase in dividend target, increasing by
2.2% to 7.00 pence per share for 2020.
In respect of the 2019 financial year, the Group has declared
the following interim dividends:
Declared Amount per share In respect of three Paid/to be paid
months to
16-May-19 1.7125p 31-Mar-19 17-Jun-19
----------------- -------------------- ----------------
17-Jul-19 1.7125p 30-Jun-19 15-Aug-19
----------------- -------------------- ----------------
09-Oct-19 1.7125p 30-Sep-19 14-Nov-19
----------------- -------------------- ----------------
27-Feb-20 1.7125p 31-Dec-19 27-Mar-20
----------------- -------------------- ----------------
Portfolio growth
CBRE independently values all of the Group's Investment assets
that are leased, pre-leased or have reached practical completion
but remain vacant. These Investment property assets are recognised
in the Group Statement of Financial Position at fair value.
Colliers independently values all optioned land, owned land and
assets under construction which are unlet. The value of land
options and any other property assets (DMA) are recognised at cost,
less amortisation and charges for impairment.
The total Portfolio value at 31 December 2019, including
outstanding forward funded commitments and the Group's share of
joint ventures, was GBP3.94 billion. The total portfolio value is
allocated as follows:
GBPm
Investment property 3,541.2
--------
Other property assets 13.9
--------
Land options (at cost) 226.0
--------
Share of Joint Ventures 30.1
--------
Remaining forward funded development commitments 129.9
--------
Portfolio value 3,941.1
--------
The gain recognised on revaluation of the Group's Investment
properties was GBP54.5 million (2018: GBP163.0 million). The
like-for-like valuation increase for the 54 assets and the land at
Littlebrook which were held throughout the year was 1.8%, excluding
any additional capital costs incurred on those assets in the year.
The fair value gain was lower than in 2018, due to the equivalent
like-for-like growth being 4.7% in the prior year. The portfolio's
average valuation yield across its Investment portfolio at 31
December 2019 remained stable at 4.45% (2018: 4.43%).
At the year end, the Group had total commitments relating to two
Pre-let Forward Funded Developments and three Tritax Symmetry
developments, totalling GBP129.9 million (31 December 2018:
GBP366.0 million).
Embedded value within land options
Under IFRS, land options are recognised at cost and subject to
impairment review. Any upside between the cost and the fair value
of the associated options is not reflected in the Group's EPRA NAV
and hence there is an element of embedded value that is expected to
be realised in the future.
In theory, as the land options approach the point of receipt of
planning consent, any associated risk could be considered to have
reduced and in such circumstances the fair value might be expected
to increase. Until the Group physically draws the land down from
the landowner, this potential uplift in fair value would not be
recognised within EPRA NAV and would remain unrealised in respect
of any increase in land value.
As an example, the site at Kettering received planning consent
during 2019. We are yet to draw the land down from the landowner
and therefore the increase in value as a result of receiving
planning consent has not yet been realised.
Net assets
The EPRA NAV per share at 31 December 2019 was 151.06 pence (31
December 2018: 152.83 pence), a reduction of 1.77 pence or
1.16%.
This movement in the EPRA NAV includes a reduction of 3.83 pence
per share, as a result of the one-off transaction costs associated
with the Tritax Symmetry acquisition. These dilutive costs stem
from the February 2019 share issue, required to finance the
corporate purchase, along with the other transactional costs
incurred. These costs were indicated at the time of the 2018 Annual
Results in March 2019. Excluding these extraordinary costs,
underlying EPRA NAV grew by 1.3% over the year, supported by the
net valuation increase gained across the property portfolio and the
positive impact from the gain on bargain purchase recognised
following the Tritax Symmetry acquisition. We have identified
near-term value within the Tritax Symmetry portfolio that will more
than offset this one-off transaction cost.
The total return, equating to the growth in EPRA NAV plus
dividends paid, was 3.3% for 2019. Again, excluding the one-off
transaction related costs noted above, the total return measures
5.8%.
Financial liquidity
Equity capital
On 11 February 2019, the Company raised gross proceeds of
c.GBP250.0 million, through the issue of 192,291,313 Ordinary
Shares at a price of 130 pence each. Whilst the equity was fully
underwritten ahead of launch, the open offer was significantly
oversubscribed and therefore no utilisation of the underwrite was
necessary.
These gross proceeds were used to part fund the acquisition of
Tritax Symmetry, along with the issue of 40,450,234 new Ordinary
Shares on 22 February 2019, also at a price of 130 pence, as
further part consideration to the vendors.
Debt capital
Towards the end of 2018, the Company put in place longer-term
finance by issuing its first unsecured loan notes in the US private
placement market, across two separate tranches totalling GBP400
million. The funds were drawn on 28 February 2019, at which point
the Company's existing GBP250 million, 12-month RCF was cancelled
in full.
In June 2019, the Company entered into a new, unsecured GBP200
million RCF, providing further evidence of the strength of its
banking relationships and lender support for its strategy. The
facility will give the Group flexibility to help it to pursue the
next phase of its growth, allowing it to commit further capital
into land and pre-let developments and investments in an efficient
manner. The syndicate for the new RCF comprises Banco Santander,
S.A., London Branch; Barclays Bank PLC; BNP Paribas, London Branch;
The Royal Bank of Scotland International Limited, London Branch;
Wells Fargo Bank, N.A., London Branch; and HSBC UK Bank plc. The
new RCF has an initial maturity of five years, which can be
extended to a maximum of seven years with lenders' consent. It also
contains an uncommitted GBP100 million accordion option. The
current margin is 1.10% over LIBOR.
At 31 December 2019, the Group had the following borrowings:
Lender Maturity Loan commitment Amount drawn
GBPm at 31 December
2019 GBPm
Loan notes
--------------- ---------------- ----------------
2.625% Bonds 2026 Dec-26 250.0 249.2
--------------- ---------------- ----------------
2.86% Loan notes 2028 Feb-28 250.0 250.0
--------------- ---------------- ----------------
2.98% Loan notes 2030 Feb-30 150.0 150.0
--------------- ---------------- ----------------
3.125% Bonds 2031 Dec-31 250.0 247.1
--------------- ---------------- ----------------
Bank borrowings
--------------- ---------------- ----------------
RCF (syndicate of seven
banks) Dec 2023/2024 350.0 50.0
--------------- ---------------- ----------------
RCF (syndicate of six Jun-24 200.0 -
banks)
--------------- ---------------- ----------------
Helaba Jul-25 50.9 50.9
--------------- ---------------- ----------------
PGIM Real Estate Finance Mar-27 90.0 90.0
--------------- ---------------- ----------------
Canada Life Apr-29 72.0 72.0
--------------- ---------------- ----------------
Total 1,662.9 1,159.2
---------------- ----------------
Of the Group's debt commitments, 63.9% is at fixed term interest
rates. The Group's hedging strategy for its variable rate debt is
to use interest rate caps which run coterminous with the respective
loan. These allow the Group to benefit from current historically
low interest rates, while minimising the effect of a significant
increase in interest rates in the future. Combined with the
fixed-rate debt, the Group's derivative instruments hedge 99.9% of
its drawn debt.
As a consequence of the fixed-rate debt and hedging policy, the
Group has a capped cost of debt of 2.68% (31 December 2018: 2.73%).
The all-in running cost of borrowing at the year end was 2.52% (31
December 2018: 2.63%).
At 31 December 2019, the Group's debt had an average maturity of
7.5 years (31 December 2018: 8.7 years).
Loan to value (LTV)
The Company has a conservative leverage policy, with a
medium-term LTV target of 35% and a maximum of 40%. At the year
end, the LTV was 30% (31 December 2018: 27%) with headroom
immediately available under existing committed borrowings of GBP500
million.
The Group also has capital commitments under its development
contracts totalling GBP129.9 million (see note 33).
Net debt
Over the year our net debt increased by GBP356.3 million, to
GBP1,137.8 million. The principal elements behind this increase are
set out in our cash flow statement.
Net operating cash flow including licence fees received was
GBP109.1 million, offset by dividends paid of GBP115.5 million.
Capital expenditure across the Group's Investment and Development
portfolio was GBP286.6 million during the year. There were no
disposals during the year.
31-Dec-19 31-Dec-18
Net debt GBP1,137.8m GBP781.5m
------------ ----------
Group LTV 30.40% 27.30%
------------ ----------
Weighted average cost of debt 2.52% 2.63%
------------ ----------
Business combination - Tritax Symmetry
The Group's acquisition of an 87% economic interest in Tritax
Symmetry has been accounted for as a business combination in the
Group consolidated financial statements, in accordance with IFRS 3.
As at the date of acquisition, the Group therefore recognised the
fair value of the identifiable assets acquired and liabilities
assumed from the transaction. Along with the identifiable assets
and liabilities, the Group has secured the services of the Tritax
Symmetry development management team via an exclusive, unassignable
development management agreement.
Gain on bargain purchase
A gain on bargain purchase (or negative goodwill) has arisen on
acquisition due to the fair value of the consideration for Tritax
Symmetry being lower than the aggregate of the fair value of the
net assets acquired. The gain on bargain purchase of GBP7.8 million
has been recognised in full in the Statement of Comprehensive
Income during the year. See note 22 for further details.
B and C Shares
The B and C Shares issued to Tritax Symmetry Management
Shareholders are treated as a combination of:
-- contingent consideration for the acquisition of a 13%
economic interest in the development assets of the Symmetry
Portfolio; and
-- a 13% economic right held to their share of future
performance of the Tritax Symmetry Development Assets, over and
above the completion NAV on the completion of the transaction.
The treatment is split as such due to certain vesting conditions
attached to the B and C Shares, over the first five years of the
development management agreement.
As a result, any value derived by the Tritax Symmetry Management
Shareholders through holding the B and C Shares, over and above
that which would have been derived regardless of vesting
conditions, capped at the completion NAV, is considered
remuneration for additional value created post-transaction. This is
accounted for separately and appears as a share-based payment
expense, under IFRS 2.
The Company has the current intention to settle the B and C
Share obligation in cash. The value due to the B and C Shareholders
for post-combination services is accounted for as a cash-settled
share-based payment and recognised as a liability in the Group
Statement of Financial Position. The liability is fair valued at
each reporting date, with a corresponding share-based payment
charge recognised in the Statement of Comprehensive Income over the
vesting period. The 13% economic interest is not a minority
interest, due to the B and C Shareholders not receiving normal
voting rights or the right to secure income distributions. Notes 22
and 23 of the financial statements give further details.
Investment in joint ventures
As part of the Tritax Symmetry acquisition, the Group acquired a
50% interest in two sites at Middlewich and Northampton relating to
land and land options. These two sites are equity accounted for and
appear as a single line item in the Statement of Comprehensive
Income and Statement of Financial Position.
Other property assets
The Tritax Symmetry portfolio included a number of other
property assets where there is the potential to generate income and
profits without a legal ownership of the land, usually through
development management agreements and land promotion agreements.
These other property assets are recognised at cost, less
amortisation and any charges for impairment.
Going concern
The Group has a strong liquidity position, a favourable debt
maturity profile and substantial headroom against financial
covenant levels. It is considered reasonable that the Group can
expect to continue to have access to the capital markets in the
future, alongside other sources of financing.
As a result, the Directors have a reasonable expectation that
the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future (which is
considered to be a period of at least 12-months from the date of
approval of the financial statements).
Credit rating
The Company has a Baa1 long-term credit rating and stable
outlook from Moody's, which was reaffirmed in October 2019.
Alternative Investment Fund Manager (AIFM)
The Manager is authorised and regulated by the Financial Conduct
Authority as a full-scope AIFM. The Manager is therefore authorised
to provide services to the Group and the Group benefits from the
rigorous reporting and ongoing compliance applicable to AIFMs in
the UK.
As part of this regulatory process, Langham Hall UK Depositary
LLP (Langham Hall) is responsible for cash monitoring, asset
verification and oversight of the Company and the Manager. In
performing its function, Langham Hall conducts a quarterly review
during which it monitors and verifies all new acquisitions, share
issues, loan facilities and other key events, together with
Shareholder distributions, the quarterly management accounts, bank
reconciliations and the Company's general controls and processes.
Langham Hall provides a written report of its findings to the
Company and to the Manager, and to date it has not identified any
issues. The Company therefore benefits from a continuous real-time
audit check on its processes and controls.
Key Performance Indicators
Our objective is to deliver attractive, low-risk returns to
Shareholders, by executing the Investment Policy and operational
strategy. Set out below are the key performance indicators we use
to track our progress. For a more detailed explanation of
performance, please refer to the Manager's Report.
KPI and definition Relevance to strategy Performance Result
--------------------- --------------------------- ------------------- ---------------------------
1. Total return TR measures the 3.3% The underlying
(TR) ultimate outcome for the year Total return performance
of our strategy, to 31 December was 5.8% when
which is to deliver 2019 (2018: excluding one-off
value to our Shareholders 12.1%). transactional
through our portfolio costs incurred
and to deliver in the year.
a secure and growing
income stream.
--------------------- --------------------------- ------------------- ---------------------------
2. Dividend(1) The dividend reflects 6.85p per Achieved our 2019
our ability to share target of 6.85
deliver a low risk for the year pence. Our target
but growing income to 31 December dividend for 2020
stream from our 2019 (2018: has been increased
portfolio and is 6.70 pence to 7.00 pence.
a key element of per share)
our TR.
--------------------- --------------------------- ------------------- ---------------------------
3. EPRA NAV per The EPRA NAV reflects 151.06p Decrease in EPRA
share(2) our ability to at 31 December NAV per share
grow the portfolio 2019 (31 December over the year
and to add value 2018: 152.83 of 1.77 pence
to it throughout pence). (1.2%). Excluding
the lifecycle of the one-off transactional
our assets. costs incurred,
the EPRA NAV per
share increased
by 2.06 pence
or 1.3%.
--------------------- --------------------------- ------------------- ---------------------------
4. Loan to value The LTV measures 30.4% Within our medium-term
ratio (LTV) the prudence of at 31 December LTV target of
our financing strategy, 2019 (31 December up to 40%.
balancing the potential 2018: 27.3%).
amplification of
returns and portfolio
diversification
that come with
using debt against
the need to successfully
manage risk.
--------------------- --------------------------- ------------------- ---------------------------
5. Adjusted earnings The Adjusted EPS 6.64p per Adjusted EPS supports
per share reflects our ability share the total dividend
to generate earnings for the year for the year.
from our portfolio, to 31 December
which ultimately 2019 (2018:
underpins our dividend 6.88 pence).
payments. See note 13
6. Total expense This is a key measure 0.87% Our TER is expected
ratio (TER) of our operational for the year to reduce as the
performance. Keeping to 31 December Company grows
costs low supports 2019 (2018: and we successfully
our ability to 0.87%). deliver the development
pay dividends. pipeline.
7. Weighted average The WAULT is a 14.1 years Remaining above
unexpired lease key measure of at 31 December our 12-year target.
term (WAULT) the quality of 2019 (31 December
our portfolio. 2018: 14.4
Long lease terms years).
underpin the security
of our income stream.
8. GRESB score(3) GRESB reflects 55/100 One-star We have firm plans
the sustainability rating (2018: to improve our
of our assets and No rating) score and achieve
how well we are two stars in 2020
managing ESG risks and up to five
and opportunities. stars over the
Sustainable assets long term.
protect us against
climate change
and help our Customers
operate efficiently.
1 This is a target only and not a profit forecast. There can be
no assurances that the target will be met and it should not be
taken as an indicator of the Company's expected or actual future
result.
2 EPRA NAV is calculated in accordance with the Best Practices
Recommendations of the European Public Real Estate Association
(EPRA). We use these alternative metrics as they provide a
transparent and consistent basis to enable comparison between
European property companies.
3 Global Real Estate Sustainability Benchmark (GRESB)
EPRA Performance Indicators
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association (EPRA). We provide
these measures to aid comparison with other European real estate
businesses.
For a full reconciliation of all EPRA performance indicators,
please see Notes to the EPRA and other key performance
indicators.
KPI and definition Purpose Performance
---------------------- ------------------------------------ ---------------------
1. EPRA Earnings A key measure of a company's GBP89.4m/5.29p
(Diluted) underlying operating results per share
See note 13 and an indication of the for the year to
extent to which current dividend 31 December 2019
payments are supported by (2018: GBP91.8
earnings. million/6.37 pence
per share).
---------------------- ------------------------------------ ---------------------
2. EPRA NAV (Diluted) Makes adjustments to IFRS GBP2,578.6m/151.06p
See note 28 NAV to provide stakeholders per share
with the most relevant information as at 31 December
on the fair value of the 2019 (31 December
assets and liabilities within 2018: GBP2,253.1
a true real estate investment million/152.83
company, with a long-term pence per share).
investment strategy
---------------------- ------------------------------------ ---------------------
3. EPRA Triple Makes adjustments to EPRA GBP2,508.2m/146.94p
Net Asset Value NAV to provide stakeholders per share
(NNNAV) with the most relevant information as at 31 December
on the current fair value 2019 (31 December
of all the assets and liabilities 2018: GBP2,257.7
within a real estate company. million/153.14p
per share).
---------------------- ------------------------------------ ---------------------
4.1 EPRA Net This measure should make 4.34%
Initial Yield it easier for investors to at 31 December
(NIY) judge for themselves how 2019 (31 December
the valuations of portfolios 2018: 4.37%).
compare.
---------------------- ------------------------------------ ---------------------
4.2 EPRA 'Topped-Up' This measure should make 4.60%
(NIY) it easier for investors to at 31 December
judge for themselves how 2019 (31 December
the valuations of portfolios 2018: 4.68%).
compare.
5. EPRA Vacancy A "pure" (%) measure of Investment 1.2%
property space that is vacant, as at 31 December
based on ERV. 2019 (31 December
2018: 0.0%).
6. EPRA Cost A key measure to enable meaningful 15.1%
Ratio measurement of the changes for the year to
in a company's operating 31 December 2019
costs. (2018: 13.7%).
Both the 2019 and
2018 ratios include
and exclude vacancy
costs.
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and
internal controls, with the Audit & Risk Committee reviewing
the effectiveness of the risk management process on its behalf.
We aim to operate in a low-risk environment, focusing on a
single subsector of the UK real estate market to deliver an
attractive, growing and secure income for Shareholders, together
with the opportunity for capital appreciation. The Board recognises
that effective risk management is important to the Group's success.
Risk management ensures a defined approach to decision making that
decreases uncertainty surrounding anticipated outcomes, balanced
against the objective of creating value for Shareholders.
Approach to managing risk
Our risk management process is designed to identify, evaluate,
manage and mitigate (rather than eliminate) the significant risks
we face. The process can therefore only provide reasonable, and not
absolute, assurance. As an investment company, we outsource key
services to the Manager, the Administrator and other service
providers, and rely on their systems and controls.
At least twice a year, the Board undertakes a formal risk
review, with the assistance of the Audit & Risk Committee, to
assess the effectiveness of our risk management and internal
control systems. During these reviews, the Board has not identified
or been advised of any failings or weaknesses which it has
determined to be material.
Risk appetite
We have a specific Investment Policy, which we adhere to and for
which the Board has overall responsibility. During the year the
Company increased its exposure to land and options over land. We
have a limit within our Investment Policy which we adhere to and
for which the Board has overall responsibility, which allows our
exposure to land and unlet development to be up to 15% of gross
asset value, of which up to 5% can be invested in speculative
development.
Principal risks and uncertainties
Further details of our principal risks and uncertainties are set
out below. They have the potential to materially affect our
business. Some risks are currently unknown, while others that we
currently regard as immaterial, and have therefore not included
here, may turn out to be material in the future. The principal
risks are the same as detailed in the 2018 Annual Report, with the
key changes relating to the increase in land following the
acquisition of Tritax Symmetry in February 2019.
Emerging risks
As well as the Principal risks, the Directors have identified a
number of emerging risks, encompassing those that are presently
either immaterial due to appropriate mitigation, or do not pose a
material threat to the Company in the short term. This could,
however, change depending on how these risks evolve over time.
These risks could impact the Company's performance and cover a
range of subjects which include but are not restricted to climate
change, sustainability and technological advancement. Furthermore,
and more recently, the Board has identified the added risk that the
developing worldwide health concerns over Coronavirus (COVID-19)
could cause a slow down to the global economy. The full effects of
this are currently unknown, but this has the potential to become a
significant risk over a period of time.
The Board considers these net risks have increased since last
year
1. Tenant default
5. Execution of Development business plan
6. The exposure to land and land options
The Board considers these net risks to be broadly unchanged from
last year
2. Portfolio strategy
4. Performance will depend on the performance of the UK retail
sector, specifically the continued growth of online retail
7. Variable rate debt
9. Debt covenant compliance
10. We rely on the continuance of the Manager
11. UK REIT status
12. Disruptive Brexit
The Board considers these net risks have decreased since last
year
3. Competition for investment in properties in the Big Box sector
8. Debt financing
Property Risks
1. Tenant default - the risk around one or more of our tenants defaulting
Net probability
Moderate
Impact
Medium - The default of one or more of our tenants would
immediately reduce revenue from the relevant asset(s). If the
tenant cannot remedy the default and we have to evict the tenant,
there may be a continuing reduction in revenues until we are able
to find a suitable replacement tenant, which may affect our ability
to pay dividends to Shareholders. This may also affect our ability
to meet our debt servicing covenants. Similarly, a default of one
or more tenants will impact on the NAV of the Company and will
result in an increase in LTV (also refer to covenant compliance
risk below).
Mitigation
The Investment Policy limits our exposure to any one tenant to
20% of gross assets or, where tenants are members of the FTSE, up
to 30% each for two such tenants. This prevents significant
exposure to a single Customer. To mitigate geographical shifts in
tenants' focus, we invest in assets in a range of locations. Before
investing, we undertake thorough due diligence, particularly over
the strength of the underlying covenant and the group of the
covenants. We typically select assets with strong property
fundamentals (good location, modern design, sound fabric), which
should be attractive to other tenants if the current tenant fails.
We continually monitor and keep the strength of our tenant
covenant's under review. We typically focus on assets let to
tenants of good financial covenant strength at the time of purchase
and assets that are strategically important to the tenant's
business. Our maximum exposure to any one tenant (calculated by
contracted rental income) is 13.1% as at 31 December 2019.
2. Portfolio strategy - The ability of the Company to execute on
its strategy and deliver performance
Net probability
Slight
Impact
Medium - An adverse change in the performance of our property
portfolio may lead to lower returns for Shareholders or a breach of
our banking covenants. Market conditions may lead to a reduction in
the revenues we earn from our property assets, which may affect our
ability to pay dividends to Shareholders. A severe fall in values
may result in a fall in our NAV as well as a need to sell assets to
repay our loan commitments.
Mitigation
The Group is focused on a single sector of the commercial
property market, which is benefiting from structural change in
consumer shopping habits following the continued impact of
e-commerce on the retail market. The property portfolio is 99% let,
with long weighted average unexpired lease terms and a largely
institutional-grade tenant base. All the leases contain upward-only
rent reviews, which are either fixed, RPI/CPI linked or at open
market value. These factors help support our asset values and
overall portfolio performance. We undertake ongoing reviews of
asset performance along with a review over the balance of our
portfolio, split between Foundation, Value Add, Growth and Land. We
monitor covenant, location and building type and its suitability to
meet a tenant's evolving requirements. We constantly monitor our
covenant headroom on LTV and interest cover. This headroom is
currently substantial. The Company has an LTV policy of borrowing
up to 40% against gross asset values.
3. Competition for investment in the Big Box sector
Net probability
Negligible
Impact
Low - Competitors in the sector may be better placed to secure
property acquisitions, as they may have greater financial
resources, thereby partly restricting the ability to grow our NAV
and further diversify the portfolio.
Mitigation
We have extensive contacts in the sector and often benefit from
off-market transactions. We also maintain close relationships with
a number of investors and developers in the sector, giving us the
best possible opportunity to secure future acquisitions. We are not
exclusively reliant on acquisitions to grow the portfolio. Since
the Tritax Symmetry acquisition, we now own and control one of the
largest development land banks in the UK. This acquisition
significantly reduces the risk that competition will impact our
ability to grow as we will seek to develop our own assets. Our
leases contain upward-only rent review clauses and we have a number
of current asset management initiatives within the portfolio, which
means we can generate additional income and value from the existing
portfolio.
4. Performance of the UK retail sector
Net probability
Moderate
Impact
Low - Our focus on the Big Box sector means we directly rely on
the distribution requirements of UK retailers and manufacturers.
Insolvencies and CVAs among the larger retailers and online
retailers could affect our revenues and property valuations.
Mitigation
The diversity of our institutional-grade tenant base means the
impact of default for any one of our tenants is low (other than
Amazon, where our contracted rental income exposure is 13.1%). In
addition to our due diligence on tenants before an acquisition or
letting, we regularly review the performance of the retail sector,
the position of our tenants against their competitors and, in
particular, the financial performance and position of our tenants.
We have increasingly been diversifying our tenant exposure to
various sub-sectors of the retail sector, i.e. online, food,
homeware, fashion, other. Whilst retailers are vacating units on
the high-street, this is partly as a result of increasing
e-commerce spending. This is, generally speaking, positive for our
assets and in many instances the logistics supply chain is integral
to a tenant's online strategy whilst also supplying direct to
stores.
5. Execution of development business plan - there may be a
higher degree of risk within our Development portfolio
Net probability
Slight
Impact
Medium - Our development activities are likely to involve a
higher degree of risk than is associated with standing assets. This
could include general construction risks, delays in the development
or the development not being completed, cost overruns or developer/
contractor default and general financing risk. For Forward Funded
Developments we are reliant on third-party developers to undertake
and complete development. We are also reliant on the Tritax
Symmetry management team in respect of execution of the development
strategy on land within our control. If any of the risks associated
with our developments materialise, this could affect the value of
these assets or result in a delay to lease commencement. Following
the acquisition of Tritax Symmetry we are reliant on the
development expertise of the Tritax Symmetry management team for
the performance of the Tritax Symmetry portfolio.
Mitigation
At the year end, only three of the Company's assets were pre-let
and in the course of development, whilst another two assets are
under speculative development from within the Tritax Symmetry
portfolio. These assets represent a small element of our total
portfolio by floor area 0.5%. Any risk of investment into
forward-funded projects is minimal, as the developer takes on a
significant amount of construction risk and the risk of cost
over-runs. Our appetite for speculative development is low and we
have a limit of 5% of GAV exposed to speculative developments
within our Investment Policy. Having acquired the development
expertise of Tritax Symmetry from February 2019, the risk of cost
overruns is mitigated by our experienced development team which
includes a thorough procurement and tender process on all
contracts. Tritax Symmetry senior management are incentivised
through holding of B and C shares in Tritax Symmetry Limited and
therefore their interests are, in many respects, aligned with that
of the Company. We undertake thorough covenant analysis and ongoing
review of our contractors and secure guarantees in relation to
construction contracts where possible.
Land Risks
6. Land exposure - The exposure to land or options over land may
involve a higher degree of risk than that associated with existing
and built investments or development activities
Net probability
Moderate
Impact
Low - The failure to obtain planning consent could lead to a
planning appeal with associated costs and/or to the land being held
or sold prior to any development. The value of the land may be
reduced due to the refusal of planning consent and the costs
incurred to that date could be significant and may be
irrecoverable. This would reduce the Company NAV. This also applies
to options over land, whilst any costs in respect of the option or
associated planning and appeal costs may have to be written off. If
the Company fails to attract a suitable pre-let it is unlikely to
proceed with the development of a larger scale big box. This would
impact on the potential future development profit and revenues the
Company could make from the land and failure to secure a pre-let
may have a negative effect on the valuation. The Company may choose
to develop smaller scale buildings on a speculative basis if it
makes sense to do so. The land may be subject to an environmental
risk which requires significant investment to remediate prior to
commencing the development works. The costs associated with
developing land may fluctuate over the course of the development
due to market conditions.
Mitigation
The purchase of land and funding of speculative development is
subject to a maximum level of 15% of GAV, at the time of purchase.
Within this total the Company can only undertake limited
speculative development of buildings, subject to a maximum level of
5% of GAV. It can also undertake land preparation works but the
Company will continue, in most cases to seek a pre-let prior to
commencing the vertical construction of a larger scale big box.
Following the acquisition of Tritax Symmetry, this has provided the
Company with access to one of the UK's largest Strategic Land
portfolios held via direct land holdings and options over land. The
Tritax Symmetry assets have been subject to due diligence, but
prior to the exercise of land draw down under an option agreement,
the Company will carry out extensive due diligence to limit
exposure to environmental risks and other hazards. The Company also
undertakes due diligence over the surrounding power and highways
infrastructure, the surrounding environment and the state of the
market to assess the viability of the scheme ahead of acquiring the
options over land. The Company takes expert advice from local
planning specialists over the likelihood of timing of achieving
planning consent.
Financial Risks
7. Variable rate debt - Our use of floating rate debt will
expose the business to underlying interest rate movements
Net probability
Slight
Impact
Low - Interest on some of our debt facilities is payable based
on a margin over Libor. Any adverse movements in Libor could impact
our profitability and ability to pay dividends to Shareholders.
Mitigation
The Company has entered into interest rate derivatives to hedge
our direct exposure to movements in Libor. These derivatives cap
our exposure to Libor rises and have terms coterminous with the
loans. We aim, where reasonable, to minimise the level of unhedged
debt with Libor exposure, by taking out hedging instruments with a
view to keeping the drawn levels of variable rate debt
approximately 90%+ hedged. As at 31 December 2019, 64% of the
Group's drawn borrowings were fixed rate loans.
8. Debt financing and liquidity - A lack of debt funding at
appropriate rates may restrict our ability to grow and deliver
attractive returns
Net probability
Negligible
Impact
Medium - Without sufficient debt funding, we may be unable to
pursue suitable investment opportunities in line with our
investment objectives. If we cannot source debt funding at
appropriate rates, either to increase the level of debt or
re-finance existing debt, this may impair our ability to maintain
our targeted dividend level and deliver attractive returns to
shareholders.
Mitigation
The Group has diversified sources of long-term unsecured
borrowings in the form of GBP500 million in public Bonds and GBP400
million in unsecured private Loan Notes. We also have GBP550
million of flexible bank finance available split across two
revolving credit facilities. This helps keep lending terms
competitive. This access to multiple debt markets should enable the
Group to raise future liquidity in a more efficient and effective
manner via an unsecured platform at competitive rates. The Board
keeps our liquidity and gearing levels under review. We have
headroom of GBP500 million of undrawn debt commitments, within our
credit facilities at 31 December 2019.
9. Debt covenant compliance - We must be able to operate within
our banking covenants
Net probability
Slight
Impact
Low - If we were unable to operate within our banking covenants,
this could lead to default and our bank funding being recalled.
This may result in us selling assets to repay loan commitments, or
be forced to sell assets, possibly resulting in a fall in NAV.
Mitigation
We continually monitor our banking covenant compliance, to
ensure we have sufficient headroom and to give us early warning of
any issues that may arise. We have an LTV policy of up to 40%, with
LTV and Gearing covenants substantially higher than this. We enter
into interest rate caps to mitigate the risk of interest rate
rises. We operate with a predominantly fixed rate debt platform.
This will mitigate the effect on the Group from interest rate
rises. We invest in assets let to institutional-grade tenants and
we also seek to maintain a long WAULT, which should reduce the
volatility in our property values.
Corporate Risk
10. We rely on the continuance of the Manager
Net probability
Slight
Impact
Medium - We continue to rely on the Manager's services and its
reputation in the property market. As a result, the Company's
performance will, to a large extent, be underpinned by the
Manager's abilities in the property market and its ability to asset
manage and develop its property portfolio. Termination of the
Investment Management Agreement would significantly affect the
Company's ability effectively to manage its operations and may have
a negative impact on the share price of the Company.
Mitigation
Unless there is a default, either party may terminate the
Investment Management Agreement by giving not less than 24 months'
written notice. The Management Engagement Committee regularly
reviews and monitors the Manager's performance. In addition, the
Board meets regularly with the Manager, to ensure we maintain a
positive working relationship.
Taxation Risk
11. UK REIT status - We are a UK REIT and have a tax-efficient
corporate structure, which is advantageous for UK Shareholders. Any
change to our tax status or in UK tax legislation could affect our
ability to achieve our investment objectives and provide favourable
returns to Shareholders.
Net probability
Slight
Impact
Low - If the Company fails to remain a REIT for UK tax purposes,
our property profits and gains will be subject to UK corporation
tax.
Mitigation
The Board is ultimately responsible for ensuring we adhere to
the UK REIT regime. It monitors the REIT compliance reports
provided by:
- the Manager on potential transactions
- the Administrator on asset levels; and
- our Registrar and broker on shareholdings.
The Board has also engaged third-party tax advisers and auditors
to help monitor REIT compliance requirements.
Political Risk
12. Disruptive Brexit
Net probability
Moderate
Impact
Low - The UK departed from the EU with effect from 31 January
2020. There will now be a transition period from 31 January 2020 to
31 December 2020. Economic volatility is not a new risk for the
Group; however, until the terms of Brexit become clearer the exact
outcome on the business remains difficult to predict at this
stage.
Mitigation
The Group operates with a focus in the UK Big Box market which
has a supply shortage against current levels of demand, which,
along with the structural shift to online retailing will assist in
supporting portfolio performance. We have regular engagement with
key occupiers to understand how Brexit is affecting their
businesses and whether this is affecting their need for logistics
space. If the outcome is a 'hard Brexit', this is likely to put
greater barriers in the form of freedom of movement across our
borders. This could lead to further distribution space required in
the UK to stock more inventory onshore. The Group is currently well
positioned with long and secure leases and a diverse blue chip
tenant line up, with a focus on tenants with financial strength,
which are well positioned to withstand any uncertainty in the UK
economy.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Year ended
Year ended 31 December
31 December 2019 2018
Note GBPm GBPm
=============================================================================== ==== ================= ============
Gross rental income 6 144.4 133.9
Service charge income 6 4.1 3.9
Service charge expense 7 (4.2) (5.0)
=============================================================================== ==== ================= ============
Net rental income 144.3 132.8
Other operating income 6 4.1 -
Administrative and other expenses 8 (21.7) (18.1)
Acquisition-related costs 8 (4.2) (1.0)
=============================================================================== ==== ================= ============
Operating profit before changes in fair value of investment properties and
contingent consideration,
gain on bargain purchase, impairment of intangible and other property assets
and share-based
payment charges 122.5 113.7
Changes in fair value of investment properties 15 54.5 163.0
Gain on bargain purchase 22 7.8 -
Share-based payment charge 23 (3.3) -
Impairment of intangible and other property assets (0.6) -
Changes in fair value of contingent consideration payable 23 (0.5) -
=============================================================================== ==== ================= ============
Operating profit 180.4 276.7
Finance income 10 0.4 0.2
Finance expense 11 (34.4) (23.1)
Changes in fair value of interest rate derivatives 25 (5.2) (1.2)
=============================================================================== ==== ================= ============
Profit before taxation 141.2 252.6
Taxation 12 - -
=============================================================================== ==== ================= ============
Profit and total comprehensive income 141.2 252.6
Earnings per share - basic 13 8.40p 17.54p
Earnings per share - diluted 13 8.38p 17.54p
=============================================================================== ==== ================= ============
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
At At
31 December 2019 31 December 2018
Note GBPm GBPm
========================================= ==== ================= =================
Non-current assets
Intangible assets 2.3 -
Investment property 15 3,541.2 3,038.3
Investment in land options 16 226.0 -
Investment in joint ventures 17 30.1 -
Other property assets 22 13.9 -
Interest rate derivatives 25 1.3 5.2
========================================= ==== ================= =================
Total non-current assets 3,814.8 3,043.5
Current assets
Rent and other receivables 19 25.7 42.3
Cash at bank 20 21.4 48.3
========================================= ==== ================= =================
Total current assets 47.1 90.6
========================================= ==== ================= =================
Total assets 3,861.9 3,134.1
========================================= ==== ================= =================
Current liabilities
Deferred rental income (35.3) (30.2)
Trade and other payables 21 (76.1) (42.4)
Tax liabilities 12 (18.7) (0.1)
========================================= ==== ================= =================
Total current liabilities (130.1) (72.7)
========================================= ==== ================= =================
Non-current liabilities
Bank borrowings 24 (256.2) (327.8)
Loan notes 24 (891.5) (492.7)
Amounts due to B and C shareholders 23 (22.9) -
========================================= ==== ================= =================
Total non-current liabilities (1,170.6) (820.5)
========================================= ==== ================= =================
Total liabilities (1,300.7) (893.2)
========================================= ==== ================= =================
Total net assets 2,561.2 2,240.9
========================================= ==== ================= =================
Equity
Share capital 28 17.1 14.8
Share premium reserve 28 446.7 153.6
Capital reduction reserve 28 1,188.1 1,304.4
Retained earnings 28 909.3 768.1
========================================= ==== ================= =================
Total equity 2,561.2 2,240.9
========================================= ==== ================= =================
Net asset value per share - basic 29 150.04p 152.00p
Net asset value per share - diluted 29 150.04p 152.00p
EPRA net asset value per share - diluted 29 151.06p 152.83p
========================================= ==== ================= =================
These financial statements were approved by the Board of
Directors on 16 March 2020 and signed on its behalf by:
Sir Richard Jewson KCVO, JP
Chairman
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Share capital Share premium Capital reduction reserve Retained earnings Total
Note GBPm GBPm GBPm GBPm GBPm
=========================== ==== ============= ============= ========================= ================= =======
1 January 2019 14.8 153.6 1,304.4 768.1 2,240.9
Net profit for the year - - - 141.2 141.2
=========================== ==== ============= ============= ========================= ================= =======
14.8 153.6 1,304.4 909.3 2,382.1
Contributions and
distributions:
Shares issued in relation
to equity issue 28 1.9 248.1 - - 250.0
Shares issued in relation
to equity consideration 28 0.4 51.9 - - 52.3
Share issue costs - (6.9) - - (6.9)
Share-based payments - - - 2.3 2.3
Transfer of share-based
payments to liabilities to
reflect settlement - - - (2.3) (2.3)
Dividends paid 14 - - (116.3) - (116.3)
=========================== ==== ============= ============= ========================= ================= =======
31 December 2019 17.1 446.7 1,188.1 909.3 2,561.2
=========================== ==== ============= ============= ========================= ================= =======
1 January 2018 13.7 932.4 467.9 515.5 1,929.5
Net profit for the year - - - 252.6 252.6
=========================== ==== ============= ============= ========================= ================= =======
13.7 932.4 467.9 768.1 2,182.1
Contributions and
distributions:
Cancellation of share
premium account 28 - (932.4) 932.4 - -
Shares issued in relation
to further equity issue 28 1.1 154.4 - - 155.5
Associated share issue
costs - (2.6) - - (2.6)
Shares issued in relation
to management contract - 1.8 - - 1.8
Share-based payments - - - 2.0 2.0
Transfer of share-based
payments to liabilities to
reflect settlement - - - (2.0) (2.0)
Dividends paid 14 - - (95.9) - (95.9)
=========================== ==== ============= ============= ========================= ================= =======
31 December 2018 14.8 153.6 1,304.4 768.1 2,240.9
=========================== ==== ============= ============= ========================= ================= =======
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2019
Year ended
31 December Year ended
2019 31 December 2018
Note GBPm GBPm
=============================================================== ==== ============ =================
Cash flows from operating activities
Profits for the period (attributable to the Shareholders) 141.2 252.6
Add: tax charge - -
Add: changes in fair value of contingent consideration payable 0.5 -
Add: finance expense 34.4 23.1
Add: changes in fair value of interest rate derivatives 5.2 1.2
Add: share-based payment charges 3.3 -
Add: impairment of intangible and other property assets 0.6 -
Less: changes in fair value of investment properties (54.5) (163.0)
Less: gain on bargain purchase (7.8) -
Less: finance income (0.4) (0.2)
Accretion of tenant lease incentive 15 (6.1) (11.1)
Decrease/(increase) in rent and other receivables 2.3 (14.1)
Increase in deferred income 5.1 2.6
(Decrease)/increase in trade and other payables (7.9) 3.3
Cash received as part of asset acquisitions - (0.1)
=============================================================== ==== ============ =================
Cash generated from operations 115.9 94.3
Taxation paid 12 (22.6) (0.4)
=============================================================== ==== ============ =================
Net cash flow generated from operating activities 93.3 93.9
=============================================================== ==== ============ =================
Investing activities
Additions to investment properties (286.6) (283.2)
Additions to land options (10.9) -
Additions to joint ventures (0.1) -
Licence fees received 15.8 16.5
Interest received 0.5 0.2
Amount transferred out of restricted cash deposits 0.7 5.2
Acquisition of subsidiary, net of cash acquired 22 (194.0) -
=============================================================== ==== ============ =================
Net cash flow used in investing activities (474.6) (261.3)
=============================================================== ==== ============ =================
Financing activities
Proceeds from issue of Ordinary Share Capital 249.9 157.4
Cost of share issues (6.9) (2.6)
Bank borrowings drawn 24 135.0 180.3
Bank and other borrowings repaid 24 (273.7) (69.3)
Amounts received on issue of loan notes 24 400.0 -
Loan arrangement fees paid (4.1) (1.2)
Bank interest paid (28.2) (21.8)
Interest rate cap premium paid 25 (1.3) (4.5)
Dividends paid to equity holders (115.5) (95.5)
=============================================================== ==== ============ =================
Net cash flow generated from financing activities 355.2 142.8
=============================================================== ==== ============ =================
Net decrease in cash and cash equivalents for the year (26.1) (24.6)
Cash and cash equivalents at start of year 20 47.3 71.9
=============================================================== ==== ============ =================
Cash and cash equivalents at end of year 20 21.2 47.3
=============================================================== ==== ============ =================
NOTES TO THE CONSOLIDATED ACCOUNTS
1. Corporate information
The consolidated financial statements of the Group for the year
ended 31 December 2019 comprise the results of Tritax Big Box REIT
plc ("the Company") and its subsidiaries (together, "The Group")
and were approved by the Board for issue on 16 March 2020. The
Company is a public limited company incorporated and domiciled in
England and Wales. The Company's Ordinary Shares are admitted to
the official list of the UK Listing Authority, a division of the
Financial Conduct Authority, and traded on the London Stock
Exchange. The registered address of the Company is disclosed in the
Company Information.
The nature of the Group's operations and its principal
activities are set out in the Strategic Report.
Accounting policies
2. Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) as
adopted by the European Union and in accordance with the Companies
Act 2006 and Article 4 of the IAS Regulations.
The comparative information disclosed relates to the year ended
31 December 2018.
The Group's financial statements have been prepared on a
historical cost basis, as modified for the Group's investment
properties, interest rate derivatives and amounts due to B and C
shareholders of Tritax Symmetry Limited, which have been measured
at fair value through the Group profit or loss.
The consolidated financial statements are presented in Sterling,
which is also the Company's functional currency, and all values are
rounded to the nearest 0.1 million (GBPm), except where otherwise
indicated.
The Group has chosen to adopt EPRA (European Public Real Estate
Association) best practice guidelines for calculating key metrics
such as net asset value and earnings per share
(www.epra.com/finance/financial-reporting/guidelines).
2.1. Going concern
During the period the Group raised gross proceeds of GBP250
million from the issue of new equity and entered into a new GBP200
million unsecured revolving credit facility. The Group had a
cumulative GBP500 million of undrawn commitments under its senior
debt facilities as at the year end, of which GBP129.9 million was
committed under various development contracts. At the year-end date
the Group's loan to value ratio stood at 30.4%, with an average
maturity term of approximately 7.5 years.
In respect of the loan to value covenant testing, the LTV
default position is set at a minimum of 60% across certain Group
loan facilities. There is currently significant headroom across all
Group loan facilities in respect of financial covenants, while the
Group has been compliant with each loan facility during the year
and following the year end.
The Directors have assessed the Group's ability to continue as a
going concern and are satisfied that the Group has the resources to
continue in business for at least 12 months from the date of
approval of these financial statements. Furthermore, the Directors
are not aware of any material uncertainties that may cast
significant doubt upon Group's ability to continue as a going
concern.
3. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
3.1. Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Business combinations
The Group acquires subsidiaries that own property and other
property interests. At the time of acquisition, the Group considers
whether each acquisition represents the acquisition of a business
or the acquisition of an asset. The Group accounts for an
acquisition as a business combination where an integrated set of
activities is acquired in addition to the property that are capable
of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic
benefits directly to investors or other owners, members or
participants. Where such acquisitions are not judged to be the
acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition
date. Accordingly, no goodwill or deferred tax arises. The fair
value of assets and liabilities are established using
industry-leading third-party professionals, instructed by the
Company.
On 19 February 2019, the Group completed the acquisition of db
Symmetry Group Ltd and db Symmetry BVI Limited together with their
subsidiary undertakings and joint venture interests ("db
Symmetry"), subsequently rebranded to Tritax Symmetry. The
Directors have reviewed the terms of the acquisition and determined
that a business, as defined by IFRS 3, was acquired. In the context
of the Tritax Symmetry acquisition the principal consideration was
whether substantive processes were acquired. As part of the
acquisition a Development Management Agreement ("DMA") was entered
into with Symmetry ManCo allowing for the management team to
continue to manage the development activities of Tritax Symmetry.
These activities are determined to be substantive processes.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired. As it is a balancing figure of the assets and liabilities
acquired, it is a judgement, as a result of the fair value of some
of the other assets and liabilities acquired also being estimated.
Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the Group profit or loss on the
acquisition date as a gain on bargain purchase or negative
goodwill. The fair value of assets and liabilities are established
using industry-leading third-party professionals, instructed by the
Company. Ultimately, the negative goodwill recognised is a
judgement applied to various balances recognised within fair value
of net assets acquired (see note 22 Business Combination for
further details).
Land options
Classification
A number of land options were acquired as part of the Tritax
Symmetry acquisition. These were bought for the potential to
exercise the option and develop the land into a pipeline of
Foundation assets. The Directors have considered whether the land
options meet the definition of Investment property and concluded
that as the options do not represent a current direct interest in
land they cannot be classified as Investment property and carried
at fair value. The Directors have concluded that the land options
should be classified as a non-financial asset and measured at cost
less provision for impairment in accordance with IAS 36.
Measurement
Land options, and other non-financial assets, are initially
capitalised at cost and considered for any impairment indication
annually. The impairment review includes consideration of the
resale value of the option, likelihood of achieving planning
consent and current recoverable value as determined by an
independent valuer.
B and C Shares
As part of the acquisition of Tritax Symmetry, shares were
issued in Tritax Symmetry Limited to the management shareholders of
Tritax Symmetry ("Symmetry Management Shareholders") in the form of
B and C shares (the "B and C Shares"). The terms of these shares
are complex and as a result the Directors have had to make a number
of judgements in order to conclude on the appropriate accounting
treatment. The significant judgements applied in relation to the B
and C Shares were as follows:
1. Subject to remaining in continued employment these shares
entitle the holders to 13% of the Adjusted NAV of Tritax Symmetry
Limited. Were an individual to leave employment and be deemed a bad
leaver, the amount payable is the lower of the value of the shares
on the completion date and 50% of Adjusted NAV. The Directors have
therefore concluded that the unconditional amount payable to the B
and C Shareholders, being 50% of the value of the B and C Shares on
acquisition, should be treated as contingent consideration in
accordance with IFRS 3. The fair value of the contingent
consideration is remeasured at each reporting date. Any additional
amounts paid to the B and C Shareholders as a result of their
continued service is accounted for as payment for the provision of
post-combination services.
2. The B and C Shares have put options in place at various
points in time over an eight-year period from completion, along
with a put and call option at the end of eight years from the
completion date. The B and C Shares are not considered to represent
a present ownership interest in the Group as an element of the
amount due to the B and C Shareholders is dependent on them
continuing to remain in employment and provide services to the
Group. Therefore, the Directors have concluded that the B and C
Shares do not represent a non-controlling interest and the amounts
owed to the B and C Shareholders should instead be presented as a
financial liability.
3. When settled the B and C Shares are settled 25% in cash with
the remaining 75% settled in either cash or shares at the
discretion of the Company. Both elements are considered to
represent share-based payments as the amounts due are based on the
Adjusted NAV of the underlying business of Tritax Symmetry Limited.
The Directors will endeavour to settle all of the B and C Shares in
cash, subject to sufficient funds being available to the Group at
the time of settlement without adversely impacting the operations
of the Group. In accordance with IFRS 2 this is accounted for as a
cash settled share-based payment. In conformity with the
requirements of IFRS 2 for cash settled share-based payments, the
share-based payment charge is the fair value of the settlement
value of the B and C Shares in Tritax Symmetry Limited, established
by a Monte Carlo simulation model and reassessed at each reporting
date.
3.2. Estimates
Fair valuation of Investment property
The market value of Investment property is determined by an
independent property valuation expert (see note 15) to be the
estimated amount for which a property should exchange on the date
of the valuation in an arm's-length transaction. Properties have
been valued on an individual basis. The valuation expert uses
recognised valuation techniques and the principles of both IAS 40
and IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation - Global Standards July 2017 ("the Red Book"). Factors
reflected include current market conditions, annual rentals, lease
lengths and location. The significant methods and assumptions used
by the valuers in estimating the fair value of Investment property
are set out in note 15.
4. Summary of significant accounting policies
4.1. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries, as at the year--end
date.
4.2. Subsidiaries
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed wherever facts and circumstances indicate
that there may be a change in any of these elements of control.
4.3. Segmental information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in Big Box assets and
land options in the United Kingdom. The Directors consider that
these properties have similar economic characteristics in nature
and as a result they have been reported as a single reportable
operating business. All of the Group's revenue and assets are based
in the United Kingdom.
4.4. Investment property and Investment property under construction
Investment property comprises completed property that is held to
earn rentals or for capital appreciation, or both. Property held
under a lease is classified as Investment property when it is held
to earn rentals or for capital appreciation or both, rather than
for sale in the ordinary course of business or for use in
production or administrative functions.
The corresponding entry upon recognising lease incentives or
fixed/minimum rental uplifts is made to Investment property. For
further details see Accounting Policy note 4.15.1.
Investment property is recognised once practical completion is
achieved and is measured initially at cost including transaction
costs. Transaction costs include transfer taxes, professional fees
for legal services and other costs incurred in order to bring the
property to the condition necessary for it to be capable of
operating. Subsequent to initial recognition, Investment property
is stated at fair value. Gains or losses arising from changes in
the fair values are included in the Group profit or loss in the
year in which they arise under IAS 40 Investment property.
Long leaseholds are accounted for as Investment property as they
meet the criteria for right of use assets.
Investment properties under construction are financed by the
Group where the Group enters into contracts to forward-fund the
development of a pre -- let property. All such contracts specify a
fixed amount of consideration. Following the acquisition of Tritax
Symmetry the Group enters into construction contracts to develop
logistics assets, in the form of pre-let development, with an
allowance of up to 5% of GAV in speculative development (with no
pre-let secured). Investment properties under construction are
initially measured at cost (including the transaction costs), which
reflect the Group's investment in the assets. Subsequently, the
assets are remeasured to fair value at each reporting date. The
fair value of investment properties under construction is estimated
as the fair value of the completed asset less any costs still
payable in order to complete, which include an appropriate
developer's margin.
Additions to properties include costs of a capital nature only.
Expenditure is classified as capital when it results in
identifiable future economic benefits, which are expected to accrue
to the Group. All other property expenditure is expensed in the
Group profit or loss as incurred.
Investment properties cease to be recognised when they have been
disposed of or withdrawn permanently from use and no future
economic benefit is expected from disposal. The difference between
the net disposal proceeds and the carrying amount of the asset
would result in either gains or losses at the retirement or
disposal of Investment property. Any gains or losses are recognised
in the Group profit or loss in the year of retirement or
disposal.
4.5. Financial instruments
Fair value hierarchy
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
reassessing categorisation at the end of each reporting period.
4.5.1. Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group's accounting policy for each category
is as follows:
Fair value through profit or loss
This category comprises in -- the -- money derivatives and out
-- of -- money derivatives where the time value offsets the
negative intrinsic value. They are carried in the Group Statement
of Financial Position at fair value with changes in fair value
recognised in the Group profit or loss in the finance income or
expense line. Other than derivative financial instruments which are
not designated as hedging instruments, the Group does not have any
assets held for trading nor does it voluntarily classify any
financial assets as being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and
services to Customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
being the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non -- current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non -- payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from tenant default (being the failure of a
tenant to timely pay rent due) to determine the lifetime expected
credit loss for the trade receivables. On confirmation that the
trade receivable will not be collectable, the gross carrying value
of the asset is written off against the associated provision.
The Group's financial assets measured at amortised cost comprise
rent and other receivables and cash and cash equivalents in the
Group Statement of Financial Position.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less.
4.5.2. Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
acquired.
The Group's accounting policy for each category is as
follows:
Fair value through profit or loss
This category comprises out -- of -- the -- money derivatives
where the time value does not offset the negative intrinsic value;
and the amounts due to B and C shareholders. They are carried in
the Group Statement of Financial Position at fair value with
changes in fair value recognised in the Group profit or loss. Other
than these derivative financial instruments, the Group does not
have any liabilities held for trading nor has it designated any
financial liabilities as being at fair value through profit or
loss.
Other financial liabilities
Other financial liabilities include the following items:
Bank borrowings and the Group's loan notes are initially
recognised at fair value net of any transaction costs directly
attributable to the issue of the instrument. Such interest bearing
liabilities are subsequently measured at amortised cost using the
effective interest rate method, which ensure that any interest
expense over the period to repayment is at a constant rate on the
balance of the liability carried in the Group Statement of
Financial Position. For the purposes of each financial liability,
interest expense includes initial transaction costs and any premium
payable on redemption, as well as any interest or coupon payment
while the liability is outstanding.
4.6. Forward funded pre -- let investments
The Group enters into forward funding development agreements for
pre -- let investments. The Group will enter into a forward funding
agreement with a developer and simultaneously enter into an
agreement for lease with a prospective tenant willing to occupy the
building once complete.
4.6.1. Licence fees receivable
During the period between initial investment in a forward funded
agreement and the rent commencement date under the lease, the Group
receives licence fee income. This is payable by the developer to
the Group throughout this period and typically reflects the
approximate level of rental income that is expected to be payable
under the lease, as and when practical completion is reached. IAS
40.20 states that Investment Property should be recognised
initially at cost, being the consideration paid to acquire the
asset, therefore such licence fees are deducted from the cost of
the investment and are shown as a receivable. Any economic benefit
of the licence fee is reflected within the Group profit or loss as
a movement in the fair value of Investment property and not within
gross rental income. License fees received are treated as gross
receipts within the Group Cash Flow Statement. In addition, IAS
16.21 indicates that income and expenses from operations that are
not to bring an asset to the location and condition necessary for
it to be capable of operating in the manner intended, should be
recognised in profit or loss.
4.7. Joint arrangements
The Group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as
either:
- Joint ventures: where the Group has rights to only the net assets of the joint arrangement
- Joint operations: where the Group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
- The structure of the joint arrangement
- The legal form of joint arrangements structured through a separate vehicle
- The contractual terms of the joint arrangement agreement
- Any other facts and circumstances (including any other contractual arrangements).
The Group does not have any joint operations.
Joint ventures are initially recognised in the Group Statement
of Financial Position at cost. Subsequently joint ventures are
accounted for using the equity method, where the Group's share of
post-acquisition profits and losses and other comprehensive income
is recognised in the Group profit or loss.
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
joint venture's profits and losses resulting from these
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in joint venture.
Provision for impairment in value is made where there is objective
evidence that the investment in a joint venture has been
impaired.
4.8. Goodwill
Goodwill is capitalised as an intangible asset, with any
impairment in carrying value being charged to the Group profit or
loss. Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the Group profit or loss on the
acquisition date as a gain on bargain purchase or negative
goodwill.
In relation to the purchase of Tritax Symmetry, a gain on
bargain purchase has arisen. See note 22, Business combination for
further details.
4.9. Intangible assets
As a result of the acquisition of Tritax Symmetry, the DMA is
assessed as a favourable contract. It is recognised as an
intangible asset on the group Statement of Financial Position and
is amortised over the original eight year term of the DMA. The
favourable element of the DMA was assessed with reference to a
reasonable mark-up that may be expected for these services if the
agreement were set up at arms' length, discounted over the eight
year period.
4.10. Land options
Land options are classified as non-financial assets as they are
non-liquid assets with no active market and they cannot be readily
converted into cash. The options are exercisable at a future date
subject to receiving planning consent. They are initially carried
at cost and are tested for impairment annually and whenever events
or changes in circumstances indicate that their carrying amount may
not be recoverable. Where the carrying value of an asset exceeds
its recoverable amount (the higher of value in use and fair value
less costs to sell), the option is written down accordingly as a
charge to the Group profit or loss. Once the options are exercised
and the land is drawn down, they are transferred into Investment
property.
4.11. Impairment of assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets including intangible
assets, investment in joint ventures and land options are subject
to annual impairment tests, or whenever events or changes in
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount (the higher of value in use and fair value less
costs to sell), the asset is impaired accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash-generating units
("CGUs"). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in Group profit or loss. An
impairment loss recognised for goodwill is not reversed.
4.12. Business combination
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. Under IFRS 3, a business is defined as an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends, lower costs or other economic benefits directly
to investors or other owners, members or participants. A business
will usually consist of inputs, processes and outputs. Therefore
the Group accounts for an acquisition as a business combination
where an integrated set of activities is acquired in addition to
the property.
Where an acquisition is considered to be a business combination
the consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the Group
Statement of Financial Position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. Any excess
of the cost of a business combination over the Group's interest in
the fair value of identifiable assets, liabilities and contingent
liabilities acquired is treated as goodwill. Where the fair value
of identifiable assets, liabilities and contingent liabilities
acquired exceeds the fair value of the purchase consideration, the
difference is treated as gain on bargain purchase and credited to
the Group profit or loss. The results of acquired operations are
included in the Group profit or loss from the date on which control
is obtained until the date on which control ceases.
Where such acquisitions are not judged to be the acquisition of
a business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred tax arises.
Where amounts payable for the acquisition of a business are
subject to a contingent consideration arrangement in which the
payments are automatically forfeited if employment terminates, the
amounts are treated as remuneration for post-combination services
rather than consideration for the acquisition of a business.
4.13. Share-based payments
The Company has entered into an agreement with the Symmetry
Management Shareholders where future amounts payable are based on
the Adjusted NAV of the underlying business and subject to certain
provisions around continuing employment. 25% of the amounts payable
are to be settled in cash with the remaining 75% settled in cash or
shares at the discretion of the Company. Where the Company has a
present obligation to settle the amounts in cash, either through
its stated intention or past practice, the Company accounts for the
amounts as cash settled share-based payments. The fair value of the
cash settled obligation is recognised over the vesting period and
presented as a liability in the Group Statement of Financial
Position. The liability is remeasured at each reporting date with
the charge to the profit or loss updated over the vesting
period.
4.14. Dividends payable to Shareholders
Equity dividends are recognised when they become legally
payable. Interim equity dividends are recognised when paid. Final
equity dividends are recognised when approved by the Shareholders
at an Annual General Meeting.
4.15. Property income
4.15.1. Rental income
Rental income arising from operating leases on Investment
property is accounted for on a straight--line basis over the lease
term and is included in gross rental income in the Group profit or
loss. A rental adjustment is recognised from the rent review date
in relation to unsettled rent reviews, where the Directors are
reasonably certain that the rental uplift will be agreed. Initial
direct costs incurred in negotiating and arranging an operating
lease are recognised as an expense over the lease term on the same
basis as the lease income. Rental income is invoiced, either
monthly or quarterly in advance, and for all rental income that
relates to a future period this is deferred and appears within
current liabilities on the Group Statement of Financial
Position.
For leases, which contain fixed or minimum uplifts, the rental
income arising from such uplifts is recognised on a straight--line
basis over the lease term.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight--line basis over the term of the lease. The
lease term is the non--cancellable period of the lease together
with any further term for which the tenant has the option to
continue the lease where, at the inception of the lease, the
Directors are reasonably certain that the tenant will exercise that
option.
When the Group enters into a forward funded transaction, the
future tenant signs an agreement for lease. No rental income is
recognised under the agreement for lease, but once practical
completion has taken place the formal lease is signed, at which
point rental income commences to be recognised in the Group profit
or loss from the rent commencement date.
4.16. Finance income
Finance income is recognised as interest accrues on cash
balances held by the Group. Interest charged to a tenant on any
overdue rental income is also recognised within finance income.
4.17. Finance costs
Finance costs consist of interest and other costs that an entity
incurs in connection with bank and other borrowings. Any finance
costs that are separately identifiable and directly attributable to
the acquisition or construction of an asset that takes a period of
time to complete are capitalised as part of the cost of the asset.
All other finance costs are expensed to the Group profit or loss in
the period in which they occur.
4.18. Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Current tax
is expected tax payable on any profit not relating to the property
rental business for the year, using tax rates enacted or
substantively enacted at the year end date, including any
adjustment to tax payable in respect of previous years.
5. New standards issued
5.1. New standard issued and effective from 1 January 2019
IFRS 16 - Leases
This accounting policy has been adopted for the year ended 31
December 2019. The long leasehold properties have immaterial
peppercorn rental. The impact of IFRS 16 is considered to be
immaterial as the Group does not hold any material operating or
leasehold agreements as lessee.
5.2. New standards issued but not yet effective
Amendments to IFRS 3 Business Combinations (subject to EU
endorsement) effective for financial years commencing on or after 1
January 2020 provides a revised framework for evaluating a business
and introduces an optional "concentration test". The amendment will
impact the assessment and judgements used in determining whether
future property transactions represent an asset acquisition or
business combination. As a result of the amendment it is expected
that future transactions are more likely to be treated as an asset
acquisition.
Amendments to IAS 1 Presentation of Financial Statements
effective for financial years commencing on or after 1 January 2020
are designed to address concerns about existing presentation and
disclosure requirements and to encourage entities to use judgement
in the application of IAS 1 when considering the layout and content
of their financial statements. The amendments clarify the
definition of material and how it should be applied. It is expected
that the amendments will not have a significant impact on the
entity's financial statements. However, it could potentially impact
how materiality judgements are made in practice, by elevating the
importance of how the information is organised in the financial
statements.
Amendments to IAS 1 on Classification of liabilities as Current
or Non-Current are effective for the financial years commencing on
or after 1 January 2022 and are to be applied retrospectively. It
is expected that the amendments may have an impact on the
presentation and classification of liabilities in the Group
Statement of Financial Position based on rights that are in
existence at the end of the reporting period.
There are no other standards that are not yet effective that
would be expected to have a material impact on the Group in the
current or future reporting periods and on the foreseeable future
transactions.
6. Total property income
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
============================================================= ============ ============
Rental income - freehold property 108.9 93.7
Rental income - long leasehold property 29.2 29.1
Spreading of tenant incentives and guaranteed rental uplifts 6.1 11.1
Other income 0.2 -
============================================================= ============ ============
Gross rental income 144.4 133.9
============================================================= ============ ============
Property insurance recoverable 3.2 2.9
Service charges recoverable 0.9 1.0
============================================================= ============ ============
Total property insurance and service charge income 4.1 3.9
============================================================= ============ ============
Total property income 148.5 137.8
============================================================= ============ ============
There were no individual tenants representing more than 10% of
gross rental income present during either year.
The other income included in the Group profit or loss in
relation to Tritax Symmetry is GBP4.1 million. This income was
receivable across Development Management Agreements in place during
the year.
7. Service charge expenses
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
=========================== ============ ============
Property insurance expense 3.4 3.2
Service charge expense 0.8 1.8
=========================== ============ ============
Total property expenses 4.2 5.0
=========================== ============ ============
8. Administrative and other expenses
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
============================================================== ============ ============
Investment management fees 17.5 15.3
Directors' remuneration (note 9) 0.4 0.3
Auditor's fees
Fees payable for the audit of the Company's annual accounts 0.2 0.1
Fees payable for the review of the Company's interim accounts 0.1 0.1
Fees payable for the audit of the Company's subsidiaries 0.1 0.1
============================================================== ============ ============
Total Auditor's fee 0.4 0.3
Development management fees 0.7 -
Corporate administration fees 0.5 0.5
Regulatory fees 0.1 0.1
Legal and professional fees 1.1 1.1
Marketing and promotional fees 0.4 0.1
Other administrative costs 0.6 0.4
============================================================== ============ ============
Total administrative and other expenses 21.7 18.1
============================================================== ============ ============
Acquisition-related costs(1) 4.2 1.0
============================================================== ============ ============
1 Acquisition-related costs have been incurred in the year, due
to the one-off nature of these costs which have been expensed in
accordance with IFRS 3: Business combinations.
The Auditor has also received GBP0.1 million (2018: GBP0.1
million) in respect of providing reporting accountant services in
connection with the equity issuance occurring during the year.
The Auditor provided audit services in respect of Joint Ventures
of GBP12,500 (2018: GBPnil).
Fees relating to the share issuances have been treated as share
issue expenses and offset against share premium. The fees related
to the bond issuance have been treated as part of the arrangement
fees for issuing the bond. The fees in relation to the acquisition
of assets have been capitalised into the cost of the respective
assets.
9. Directors' remuneration
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
============================== ============ ============
Directors' fees 0.3 0.2
Employer's National Insurance 0.1 0.1
============================== ============ ============
0.4 0.3
============================== ============ ============
A summary of the Directors' emoluments, including the
disclosures required by the Companies Act 2006, is set out in the
Directors' Remuneration Report.
10. Finance income
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
=================================== ============ ============
Interest received on bank deposits 0.4 0.2
=================================== ============ ============
11. Finance expense
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
------------------------------------------- ------------ ------------
Interest payable on bank borrowings 6.1 6.0
Interest payable on loan notes 24.1 14.3
Commitment fees payable on bank borrowings 1.8 1.4
Swap interest payable - 0.1
Amortisation of loan arrangement fees 2.4 1.3
------------------------------------------- ------------ ------------
34.4 23.1
------------------------------------------- ------------ ------------
None of the interest payable on financial liabilities and
amortisation of loan arrangement fees were capitalised in the
current and preceding year.
12. Taxation
a) Tax charge in the Group Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
================== ============ ============
UK corporation tax - -
================== ============ ============
The UK corporation tax rate for the financial year is 19%.
Accordingly, this rate has been applied in the measurement of the
Group's tax liability at 31 December 2019.
b) Factors affecting the tax charge for the year
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK. The differences are explained below:
Year ended
Year ended
31 December 31 December
2019 2018
GBPm GBPm
================================================================================ ============ ============
Profit on ordinary activities before taxation 141.2 252.6
Theoretical tax at UK corporation tax rate of 19.00% (31 December 2018: 19.00%) 26.8 48.0
REIT exempt income (18.7) (17.3)
Non-taxable items (11.0) (33.0)
Transfer pricing adjustment 1.8 1.1
Residual losses 1.1 1.2
================================================================================ ============ ============
Total tax charge - -
================================================================================ ============ ============
Non -- taxable items include income and gains that are derived
from the property rental business and are therefore exempt from UK
corporation tax in accordance with Part 12 of CTA 2010.
REIT exempt income includes property rental income that is
exempt from UK corporation tax in accordance with Part 12 of CTA
2010.
The current year tax liability of GBP18.7 million relates to
appropriation tax charges in relation to the business combination
as well as tax payable on non-property profits arising in the year
(see note 22). During the year GBP22.6 million was paid relating to
the appropriation tax charges (2018: GBPnil). In the financial year
2018, GBP0.4 million was paid in relation to the tax liabilities
from acquired SPVs.
13. Earnings per share
Earnings per share (EPS) are calculated by dividing profit for
the period attributable to ordinary equity holders of the Company
by the weighted average number of Ordinary Shares in issue during
the period. As there are dilutive instruments outstanding, basic
and diluted earnings per share are shown below.
In relation to the dilutive shares to be issued in respect of
the B and C Shares, the Directors have indicated a current
intention to settle these 100% in cash. The calculation of basic
and diluted earnings per share is based on the following:
Net profit attributable to Weighted* average number of
For the year ended 31 December Ordinary Shareholders Ordinary Shares(1) Earnings per share
2019 GBPm '000 pence
================================ =============================== =============================== ==================
Basic EPS 141.2 1,681,525 8.40
Adjustment for dilutive shares:
Changes in fair value of
contingent consideration
payable 0.5
Dilutive shares in respect of
management fee -
Dilutive shares in respect of B
and C Shareholders(3) 8,521
================================ =============================== =============================== ==================
Diluted EPS(2) 141.7 1,690,046 8.38
Adjustments to remove:
Changes in fair value of
contingent consideration
payable (0.5)
Changes in fair value of
Investment property (54.5)
Changes in fair value of
interest rate derivatives 5.2
Costs associated with a business
combination 4.2
Gain on bargain purchase and
impairment of intangible
contract (7.2)
================================ =============================== =============================== ==================
EPRA EPS 88.9 1,681,525 5.29
Add back: Changes in fair value
of contingent consideration
payable 0.5
================================ =============================== =============================== ==================
EPRA diluted EPS(2) 89.4 1,690,046 5.29
================================ =============================== =============================== ==================
Adjustments to include:
Licence fee receivable on
Forward Funded Developments 21.4
Fixed rental uplift adjustments (4.9)
Share-based payments charges 3.3
Amortisation of loan arrangement
fees and intangibles (see note
11) 2.4
================================ =============================== =============================== ==================
Adjusted EPS 111.6 1,681,525 6.64
================================ =============================== =============================== ==================
Adjusted diluted EPS 111.6 1,690,046 6.60
================================ =============================== =============================== ==================
1. Based on the weighted average number of Ordinary Shares in
issue throughout the year.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the year, plus potentially issuable dilutive
shares (see below).
3. Relates to dilutive shares in respect of contingent
consideration. This being the 75% of the amounts due to the B and C
Shareholders that could potentially be settled as equity. The
share-based payments charges are non-dilutive at year end.
Weighted average
Net profit attributable to Ordinary number of Ordinary
Shareholders Shares(1) Earnings per share
For the year ended 31 December 2018 GBPm '000 pence
====================================== ===================================== =================== ==================
Basic EPS 252.6 1,440,013 17.54
Adjustment for dilutive shares:
Dilutive shares in respect of
management fee -
Dilutive shares in respect of B and C
Shareholders(3) -
Diluted EPS(2) 252.6 1,440,013 17.54
====================================== ===================================== =================== ==================
Adjustments to remove:
Changes in fair value of Investment
property (163.0)
Changes in fair value of interest rate
derivatives 1.2
Costs associated with a business
combination 1.0
====================================== ===================================== =================== ==================
EPRA EPS 91.8 1,440,013 6.37
====================================== ===================================== =================== ==================
EPRA diluted EPS(2) 91.8 1,440,013 6.37
====================================== ===================================== =================== ==================
Adjustments to include:
Licence fee receivable on Forward
Funded Developments 10.3
Fixed rental uplift adjustments (4.3)
Amortisation of loan arrangement fees
and intangibles (see note 11) 1.3
====================================== ===================================== =================== ==================
Adjusted EPS 99.1 1,440,013 6.88
====================================== ===================================== =================== ==================
Adjusted diluted EPS 99.1 1,440,013 6.88
====================================== ===================================== =================== ==================
1. Based on the weighted average number of Ordinary Shares in
issue throughout the year.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the year, plus potentially issuable dilutive
shares (see below).
3. Relates to dilutive shares in respect of contingent
consideration. This being the 75% of the amounts due to the B and C
Shareholders that could potentially be settled as equity. The
share-based payments charges are non-dilutive at year end.
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. The metric reduces EPRA
earnings by other non-cash items credited or charged to the Group
Statement of Comprehensive Income, such as fixed rental uplift
adjustments and amortisation of loan arrangement fees. Licence fees
received during the period are added to earnings on the basis noted
below as the Board sees these cash flows as supportive of dividend
payments. The Board compares the Adjusted earnings to the available
distributable reserves when considering the level of dividend to
pay.
The adjustment for licence fees receivable is calculated by
reference to the proportion of the total period of completed
construction during the year, multiplied by the total licence fee
receivable on a given forward funded asset. Licence fees will
convert into rental income once practical completion has occurred
and therefore rental income will flow into EPRA and Adjusted
earnings from this point.
Fixed rental uplift adjustments relate to adjustments to net
rental income on leases with fixed or minimum uplifts embedded
within their review profiles. The total minimum income recognised
over the lease term is recognised on a straight-line basis and
therefore not supported by cash flows during the early term of the
lease, but this reverses towards the end of the lease.
Share-based payment charges relate to the B and C Shareholders.
Whilst impacting on earnings, this value is considered capital in
nature from the perspective it relates to an equity holding in
Tritax Symmetry Limited. It is therefore removed from Adjusted
earnings.
14. Dividends paid
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
========================================================================================== ============ ============
Fourth interim dividend in respect of period ended 31 December 2018 at 1.675 pence per
Ordinary
Share
(fourth interim for 31 December 2017 at 1.60 pence per Ordinary Share) 28.6 21.8
First interim dividend in respect of year ended 31 December 2019 at 1.7125 pence per
Ordinary
Share
(31 December 2018: 1.675 pence) 29.2 24.7
Second interim dividend in respect of year ended 31 December 2019 at 1.7125 pence per
Ordinary
Share
(31 December 2018: 1.675 pence) 29.2 24.7
Third interim dividend in respect of year ended 31 December 2019 at 1.7125 pence per
Ordinary
Share
(31 December 2018: 1.675 pence) 29.3 24.7
------------------------------------------------------------------------------------------ ------------ ------------
Total dividends paid 116.3 95.9
========================================================================================== ============ ============
Total dividends paid for the year 5.138p 5.025p
========================================================================================== ============ ============
Total dividends unpaid but declared for the year 1.713p 1.675p
========================================================================================== ============ ============
Total dividends declared for the year 6.85p 6.70p
========================================================================================== ============ ============
On 27 February 2020, the Company announced the declaration of
the fourth interim dividend in respect of the year ended 31
December 2019 of 1.7125 pence per share payable on 27 March 2020.
In relation to the total dividends declared for the year of 6.85
pence, 5.14 pence is a property income distribution (PID) and 1.71
pence is an ordinary dividend.
15. Investment property
In accordance with IAS 40: Investment property, the Investment
property has been independently valued at fair value by CBRE
Limited ("CBRE") and Colliers International Valuation UK LLP
("Colliers"), both accredited independent valuers with recognised
and relevant professional qualifications and with recent experience
in the locations and categories of the investment properties being
valued. CBRE value all Investment property with leases attached or
assets that have reached practical completion. Colliers value all
land holdings and assets under construction with no pre-agreed
letting. The valuations have been prepared in accordance with the
RICS Valuation - Global Standards July 2017 ("the Red Book") and
incorporate the recommendations of the International Valuation
Standards and the RICS valuation - Professional Standards UK
January 2014 (Revised April 2015) which are consistent with the
principles set out in IFRS 13.
The Valuer in forming its opinion make a series of assumptions,
which are typically market related, such as net initial yields and
expected rental values and are based on the Valuer's professional
judgement. The Valuer has sufficient current local and national
knowledge of the particular property markets involved and has the
skills and understanding to undertake the valuations
competently.
The valuations are the ultimate responsibility of the Directors.
Accordingly, the critical assumptions used in establishing the
independent valuation are reviewed by the Board.
Investment
Property Investment property Investment
freehold long leasehold property under construction Total
GBPm GBPm GBPm GBPm
============================================== ========== =================== ============================ =======
As at 1 January 2019 2,053.7 635.6 349.0 3,038.3
Property additions(1) 16.1 0.7 297.1 313.9
Property acquired through business combination
(see note 22) - - 128.4 128.4
Fixed rental uplift and tenant lease
incentives(2) 4.3 1.8 - 6.1
Transfer of completed property to Investment
property 503.3 - (503.3) -
Change in fair value during the year 0.6 2.7 51.2 54.5
============================================== ========== =================== ============================ =======
As at 31 December 2019 2,578.0 640.8 322.4 3,541.2
============================================== ========== =================== ============================ =======
Investment
Property Investment property Investment
freehold long leasehold Property under construction Total
GBPm GBPm GBPm GBPm
============================================== ========== =================== ============================ =======
As at 1 January 2018 1,924.3 612.4 62.5 2,599.2
Property additions(1) 42.5 - 222.5 265.0
Fixed rental uplift and tenant lease
incentives(2) 9.3 1.8 - 11.1
Change in fair value during the year 77.6 21.4 64.0 163.0
============================================== ========== =================== ============================ =======
As at 31 December 2018 2,053.7 635.6 349.0 3,038.3
============================================== ========== =================== ============================ =======
1. Licence fees deducted from the cost of Investment property
under construction totalled GBP0.6 million in the year (2018:
GBP35.0 million).
2. Included within the carrying value of Investment property is
GBP43.0 million (2018: GBP37.0 million) in respect of accrued
contracted rental uplift income. This balance arises as a result of
the IFRS treatment of leases with fixed or minimum rental uplifts
and rent -- free periods, which requires the recognition of rental
income on a straight -- line basis over the lease term. The
difference between this and cash receipts change the carrying value
of the property against which revaluations are measured. Also see
note 6.
31 December 31 December
2019 2018
GBPm GBPm
============================================================================ =========== ===========
Investment property at fair value per Group Statement of Financial Position 3,541.2 3,038.3
License fee receivable 2.5 18.3
Capital commitments 128.1 361.6
============================================================================ =========== ===========
Total Investment property valuation* 3,671.8 3,418.2
============================================================================ =========== ===========
* Including costs to complete on forward funded development
assets.
Capital commitments represent costs to bring the asset to
completion under the developer's funding agreements which include
the developer's margin. These commitments could also represent
commitments made in respect of asset management initiatives and
development land. These costs are not provided for in the Group
Statement of Financial Position (refer to note 33).
Cash received in respect of future rent -- free periods
represents amounts that were topped up by the vendor on acquisition
of the property to cover future rent -- free periods on the lease.
The valuation assumes the property to be income generating
throughout the lease and therefore includes this cash in the
value.
Licence fees that have been billed but not received from the
developer in relation to the property are included within rent and
other receivables. The valuation assumes the property to be income
generating and therefore includes this receivable in the value.
Fees payable under the DMA totalling GBP3.7 million (2018: nil)
have been capitalised in the year being directly attributable to
the ongoing development projects.
The valuation summary is set out in the Strategic Report.
Fair value hierarchy
The Group considers that all of its investment properties fall
within Level 3 of the fair value hierarchy as defined by IFRS 13.
There have been no transfers between Level 1 and Level 2 during any
of the periods, nor have there been any transfers between Level 2
and Level 3 during any of the periods.
The valuations have been prepared on the basis of Market Value
(MV), which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's -- length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without
compulsion."
Market Value as defined in the RICS Valuation Standards is the
equivalent of fair value under IFRS.
The following descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values are as follows:
Valuation techniques
The yield methodology approach is used when valuing the Group's
properties which uses market rental values capitalised with a
market capitalisation rate. This is sense-checked against the
market comparable method (or market comparable approach) where a
property's fair value is estimated based on comparable transactions
in the market.
For Investment property under construction and the majority of
land held for development, properties are valued using a residual
method approach. Under this approach, the valuer initially assesses
the investment value (using the above methodology for completed
properties). Then, the total estimated costs to complete (including
notional finance costs and developer's profit) are deducted from
the value to take into account the hypothetical purchaser's
management of the remaining development process and their
perception of risk with regard to construction and the property
market (such as the potential cost overruns and letting risks).
Land values are sense-checked against the rate per acre derived
from actual market transactions.
The key unobservable inputs made in determining fair values are
as follows:
Unobservable input: estimated rental value (ERV)
The rent per square foot at which space could be let in the
market conditions prevailing at the date of valuation (range:
GBP3.80 - GBP10.75 per annum).
Passing rents are dependent upon a number of variables in
relation to the Group's property. These include: size, location,
tenant covenant strength and terms of the lease.
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase (range: 3.67% - 6.22%).
Sensitivities of measurement of significant unobservable
inputs
As set out within significant accounting estimates and
judgements above, the Group's property portfolio valuation is open
to judgements and is inherently subjective by nature.
As a result the following sensitivity analysis has been
prepared:
-5% in +5% in
passing rent passing rent +0.25% in initial yield -0.25% net initial yield
GBPm GBPm GBPm GBPm
===================================== ============= ============= ======================= ========================
(Decrease)/increase in the fair value
of investment properties as at 31
December 2019 (175.6) 175.6 (187.1) 209.4
===================================== ============= ============= ======================= ========================
(Decrease)/increase in the fair value
of investment properties as at 31
December 2018 (170.9) 170.9 (183.2) 205.3
===================================== ============= ============= ======================= ========================
16. Investment in land options
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
============================================== ============ ============
Opening balance - -
Land options acquired in business combination 217.4 -
Costs capitalised in the year 16.8 -
Transferred to Investment property (2.7) -
Disposals (5.5) -
============================================== ============ ============
Closing balance 226.0 -
============================================== ============ ============
The average maturity date across land options held is
approximately nine years term remaining.
17. Investment in joint ventures
As at 31 December 2019 the Group has two joint ventures which
have been equity accounted for. There were no equity accounted
joint ventures prior to the acquisition of Tritax Symmetry in
February 2019.
The Group has the following joint ventures as at 31 December
2019:
Principal activity Country of incorporation Ownership Joint venture partner
=========================== ==================== ========================== ============== =======================
HBB (J16) LLP Property development UK 50% HB Midway Limited
=========================== ==================== ========================== ============== =======================
Magnitude Land LLP
(previously known as DBS
Pochin LLP) Property investment UK 50% Pochin Midpoint Limited
=========================== ==================== ========================== ============== =======================
The registered office for the above joint ventures is: Unit B,
Grange Park Court, Roman Way, Northampton, England NN4 5EA.
Total 100% Group's share
Net investment GBPm GBPm
=============================================== ========== =============
At beginning of period - -
Acquired from business combination acquisition 60.0 30.0
Total comprehensive income 0.1 -
Cash contributed 0.1 0.1
================================================= ========== =============
As at 31 December 2019 60.2 30.1
================================================= ========== =============
50% share 30.1
================================================= ========== =============
The joint ventures have a 31 December year end (previously 31
January 2019). The aggregate amounts recognised in the Group
Statement of Financial Position and Statement of Comprehensive
Income are as follows:
Comprehensive income statement
Total 100% Group's share
Year ended 31 December 2019 GBPm GBPm
============================ ========== =============
Revenue 0.1 -
============================== ========== =============
Profit before taxation 0.1 -
Taxation - -
============================ ========== =============
Total comprehensive income 0.1 -
============================== ========== =============
Statement of Financial Position
Total 100% Group's share
As at 31 December 2019 GBPm GBPm
========================= ========== =============
Investment property 8.5 4.3
Options to acquire land 51.5 25.7
=========================== ========== =============
Non-current assets 60.0 30.0
=========================== ========== =============
Other receivables 0.2 0.1
Cash 0.1 0.1
=========================== ========== =============
Current assets 0.3 0.2
=========================== ========== =============
Trade and other payables (0.1) (0.1)
=========================== ========== =============
Current liabilities (0.1) (0.1)
=========================== ========== =============
Net assets 60.2 30.1
=========================== ========== =============
The Group's share of contingent liabilities in the joint
ventures is GBPnil (December 2018: GBPnil).
18. Investments
The Group comprises a number of SPV subsidiaries. All SPV
subsidiaries that form these financial statements are noted within
the Company financial statement in note 5.
19. Rent and other receivables
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
================================================== ============ ============
Rent receivables 7.8 7.0
Licence fee receivable 2.5 18.4
Prepayments, accrued income and other receivables 3.3 4.0
VAT 12.1 12.9
================================================== ============ ============
25.7 42.3
================================================== ============ ============
The carrying value of rent and other receivables classified at
amortised cost approximates fair value.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables. To measure expected credit losses
on a collective basis, trade receivables are grouped based on
similar credit risk and ageing.
The expected loss rates are based on the Group's historical
credit losses experienced over the three -- year period prior to
the period end. The historical loss rates are then adjusted for
current and forward-looking information on macroeconomic factors
affecting the Group's Customers. Both the expected credit loss
provision and the incurred loss provision in the current and prior
year are immaterial. No reasonably possible changes in the
assumptions underpinning the expected credit loss provision would
give rise to a material expected credit loss.
20. Cash held at bank
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
================================================== ============ ============
Cash and cash equivalents to agree with cash flow 21.2 47.3
Restricted cash 0.2 1.0
================================================== ============ ============
21.4 48.3
================================================== ============ ============
No cash was ring-fenced in the year. In 2018, GBP0.03 million
was included within cash and cash equivalents representing amounts
related to future rent -- free periods on certain assets within the
portfolio or rental top -- up amounts, where a cash deduction
against the net purchase price was agreed with the vendor.
Restricted cash is cash where there is a legal restriction to
specify its type of use, i.e. this may be where there is a joint
arrangement with a tenant under an asset management initiative.
Cash and cash equivalents reported in the Consolidated Statement
of Cash Flows totalled GBP21.2 million (2018: GBP47.3 million) as
at the year end, which excludes long -- term restricted and
ring-fenced cash deposits totalling GBP0.2 million (2018: GBP1.0
million). Total cash held at bank as reported in the Group
Statement of Financial Position is GBP21.4 million (2018: GBP48.3
million).
21. Trade and other payables
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
=========================== ============ ============
Trade and other payables 62.6 32.5
Bank loan interest payable 5.7 2.0
Accruals 7.8 7.9
=========================== ============ ============
76.1 42.4
=========================== ============ ============
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
22. Business combination
On 19 February 2019, the Group acquired an 87% economic interest
in Tritax Symmetry, a development group with ownership of a
combination of land and land options. Upon acquisition, the
portfolio had the potential to add approximately 38 million sq ft
of logistics assets to the Group's existing portfolio. The
portfolio also allows the Group to develop a pipeline of assets at
an attractive yield on cost which is expected to be in the region
of 7 - 8%. The structure of the deal, mostly consisting of land
options, minimises cash drag and allows the Group to bring each
site forward at a time that suits the Group and wider market
conditions. The portfolio was acquired for a total consideration of
GBP273.1 million as per the table below.
Fair value
GBPm
=========================================== ==========
Cash 201.7
Share consideration in the Company 52.3
Contingent consideration of B and C Shares 19.1
=========================================== ==========
Total purchase consideration 273.1
=========================================== ==========
Details of the fair value of the assets and liabilities acquired
and the resultant gain on bargain purchase are as follows:
Fair value
GBPm
============================================================== ==========
Investment property 128.4
Investment in land options 217.4
Investment in joint ventures 30.0
Other property assets 14.3
Intangible assets 2.6
Cash and cash equivalents 7.7
Other items (9.1)
Deep discounted bonds (fully redeemed after acquisition) (67.7)
Deferred tax liabilities (42.7)
============================================================== ==========
Fair value of acquired interest in net assets of subsidiaries 280.9
Gain on bargain purchase (7.8)
============================================================== ==========
Total purchase consideration 273.1
============================================================== ==========
The acquisition-date fair value of the total consideration
transferred is GBP273.1 million. The gain on bargain purchase is a
result of the fair value determined for the assets purchased
exceeding the fair value of consideration transferred. The gain on
bargain purchase of GBP7.8 million has been recognised in the Group
profit or loss immediately in the year. This gain on bargain
purchase arises partly in relation to the accounting treatment of
the B and C Shares, which is detailed in note 23. This results in
GBP19.6 million recognised as contingent consideration, and
included within liabilities on acquisition in line with IFRS 3
"Business Combinations" with the remaining balance of GBP3.3
million treated as payments for future services in accordance with
IFRS 2 "Share-Based Payment".
Acquisition costs of GBP4.2 million have been included in the
Group profit or loss in the year.
The total loss for Tritax Symmetry since acquisition included in
the Group profit or loss is GBP2.3 million.
Had Tritax Symmetry been part of the Group since 1 January 2019,
the combined revenue for the Group at 31 December 2019 would have
been GBP122.7 million; the combined total profit for the Group
would have been GBP140.6 million.
At the point of completion of the acquisition the Group also
redeemed in full deep discounted bonds with a value of GBP67.7
million (see note 24).
The enterprise value was determined as GBP370 million at the
time of the transaction. This was arrived at by taking the total
purchase consideration and adding the deep discounted bonds that
were fully redeemed and the tax liabilities that the vendor agreed
to fund totalling c. GBP29 million. The Group's 87% economic share
therefore totalled GBP321.5 million.
The B and C Shares issued to Symmetry Management Shareholders
are treated as a combination of both contingent consideration for
the acquisition of 13% economic interest in the Symmetry Portfolio
and a 13% economic right held to their share of future performance
of the Tritax Symmetry Development assets. This is as a result of
certain vesting conditions attached to the B and C Shares over the
first five years of the contract (see note 23 below).
A non-controlling interest has not been recognised at the
acquisition date for the 13% economic interest held by the Symmetry
Management Shareholders due to the put and call options attached to
the shares issued, which are expected to be exercised on or around
the eighth anniversary of the acquisition at the latest. The
Symmetry Management Shareholders have a put option, on the third to
eighth anniversary of the acquisition allowing them to sell 1.5% of
their 13% economic interest to the Company at each date. The
Company has a call option, to buy any remaining economic interest
still due to the Symmetry Management Shareholders on the eighth
anniversary.
The acquisition included other property assets of GBP14.3
million. These assets were amortised by GBP0.4 million during the
year resulting in a net position on the Group Statement of
Financial Position of GBP13.9 million.
23. Amounts due to B and C shareholders
Amounts due to B and C Shareholders comprise the fair value of
the contingent consideration element of B and C Shares along with
the fair value of the obligation under the cash settled share-based
payment element of B and C Shares.
Amounts due to B and C Shareholders are detailed in the table
below:
Fair value
Contingent consideration Share-based payment GBPm
=================================================== ======================== =================== ==========
Contingent consideration recognised on acquisition 19.1 - 19.1
Fair value movement recognised 0.5 - 0.5
Cash settled share-based payment charge - 3.3 3.3
=================================================== ======================== =================== ==========
Closing balance 19.6 3.3 22.9
=================================================== ======================== =================== ==========
The Group considers that the amounts due to the B and C
Shareholders fall within Level 3 of the fair value hierarchy as
defined by IFRS 13. There have been no transfers between Level 1
and Level 2 during any of the periods, nor have there been any
transfers between Level 2 and Level 3 during any of the
periods.
1. Contingent consideration
The B and C Shares vest over a five-year period and require the
Symmetry Management Shareholders to, amongst other things, remain
in the employment of the Symmetry ManCo for the vesting period. The
value of the amount due (subject to certain vesting conditions) is
the lower of 50% of the adjusted NAV of Tritax Symmetry at the
relevant future point in time and the value of the B and C Shares
at the original completion date. In accordance with IFRS 3
"Business Combinations" the unconditional amount due under
Shareholders agreement is accounted for as contingent
consideration.
The adjusted NAV of Tritax Symmetry is the NAV of Tritax
Symmetry at the reporting date, adjusted for various matters
impacting on the fair value of those land options where planning
permission has been obtained but the land has not been
acquired.
2. Share-based payment
In accordance with IFRS 3 "Business Combinations" the
requirement to remain in continued employment in order to realise
the full value of the B and C Shares has resulted in the excess
value (over and above the amount recognised as contingent
consideration) being accounted for as payments for post combination
services which reflect the 13% economic right held to their share
of future performance of the Tritax Symmetry Development assets
over and above the completion NAV. The amount due to Symmetry
Management Shareholders is based on the adjusted NAV of Tritax
Symmetry and is settled in cash to the value of 25% with the
balance settled in either cash and/or shares in the Company, at the
sole discretion of the Company.
The fair value of the B and C Shares has been calculated using a
Monte Carlo simulation model, for the cash settled element of the
liability. This approach has the benefits of being flexible, not
reliant on a single case scenario and removes the inherent
difficulties with determining discount rate to assign to a
particular class of share as the risk would change every time the
NAV moved. The change in volatility assumptions does not lead to a
significant change in the resulting fair values of the B and C
Shares because there are limited hurdles attached to them and it is
assumed that all will be exercised at some point over the eight
year horizon. The key unobservable inputs for the Monte-Carlo
simulation purposes are the net initial yield of completed
developments, future costs of debt and the timing of the completion
of the developments.
The Company has the legal option of settling the share-based
payment either via cash or equity, with a minimum of 25% being
settled in cash. The Directors have a current intention to maximise
the cash element of the settlement as they believe this would
minimise dilution to existing shareholders. The Directors will
endeavour to settle all of the B and C Shares in cash, subject to
sufficient funds being available to the Group at the time of
settlement without adversely impacting the operations of the
Group.
Amounts due to B and C Shareholders are shown as a liability at
fair value in the Group Statement of Financial Position. The
liability is fair valued at each reporting date with a
corresponding charge recognised in the Group profit or loss over
the vesting period. For the year ended 31 December 2019, GBP3.3
million was charged in the Group profit or loss for the share-based
payment.
24. Borrowings
As part of the acquisition of Tritax Symmetry the Group acquired
GBP67.7 million of Deep Discounted Bonds, which were immediately
redeemed post-acquisition as per note 22.
The Company signed a new private placement of GBP400 million
senior unsecured loan notes (the "Loan Notes") with a number of new
institutional investors on 4 December 2018. The Loan Notes
comprised of two tranches with a weighted average coupon of the
fixed rate notes equating to 2.91% and a weighted average maturity
of 9.8 years. The funds were drawn on 28 February 2019.
Upon receipt of the Loan Note proceeds above, the Group
cancelled the GBP250 million senior, short -- term, unsecured
banking facility with a syndicate of its relationship lenders with
effect from 1 March 2019.
A large part of the Group's borrowings are unsecured financing
arrangements. On 17 June 2019, the Group announced that it had
agreed a new GBP200 million unsecured revolving credit facility
(RCF) with a syndicate of relationship lenders comprising Banco
Santander S.A. London Branch, Barclays Bank PLC, BNP Paribas London
Branch, HSBC UK Bank plc, The Royal Bank of Scotland International
Limited London Branch and Wells Fargo Bank N.A. London Branch. The
new facility has an initial maturity of five years and can be
extended (subject to consent) by two further years to a maximum of
seven years. The new facility also has a GBP100 million accordion
option and has an opening margin of 1.10% per annum over LIBOR.
The Group also has a second RCF of GBP350 million which provides
the Group with a significant level of operational flexibility. The
syndicate for the GBP350 million unsecured RCF comprises Barclays
Bank PLC, BNP Paribas London Branch, HSBC Bank plc, Sumimoto Mitsui
Banking Corporation, The Royal Bank of Scotland plc, Santander UK
plc and Wells Fargo Bank N.A. London Branch. On 17 December 2019
the Group announced that it had agreed to extend the termination
date of GBP300 million of the GBP350 million RCF from 10 December
2023 to 10 December 2024.
As at 31 December 2019, 64% (2018: 73%) of the Group's debt
facility commitments are fixed term, with 36% floating term (2018:
27%). When including interest rate hedging the Group has fixed term
or hedged facilities totalling 99% of drawn debt (see note 25).
As at 31 December 2019, the weighted average running cost of
debt was 2.52% (2018: 2.63%) and the Group's average capped cost of
debt was 2.68% (2018: 2.73%). As at the same date the Group had
undrawn debt commitments of GBP500.0 million.
The Group has been in compliance with all of the financial
covenants of the Group's bank facilities as applicable throughout
the year covered by these financial statements.
A summary of the drawn and undrawn bank borrowings in the year
is shown below:
Bank borrowings
Bank borrowings Bank borrowings
drawn undrawn Total
GBPm GBPm GBPm
============================================================= =============== =============== =======
As at 1 January 2019 333.9 879.0 1,212.9
New bank borrowings agreed in the year - 200.0 200.0
Bank borrowings drawn in the year under existing facilities 135.0 (135.0) -
Bank borrowings repaid in the year under existing facilities (206.0) 206.0 -
Cancellation of bank borrowing facility - (250.0) (250.0)
Loan notes drawn in the year - (400.0) (400.0)
============================================================= =============== =============== =======
As at 31 December 2019 262.9 500.0 762.9
============================================================= =============== =============== =======
As at 1 January 2018 222.9 340.0 562.9
New bank borrowings agreed in the year - 650.0 650.0
Bank borrowings drawn in the year under existing facilities 180.3 (180.3) -
Bank borrowings repaid in the year under existing facilities (69.3) 69.3 -
============================================================= =============== =============== =======
As at 31 December 2018 333.9 879.0 1,212.9
============================================================= =============== =============== =======
Included in the undrawn borrowings in 2018 is GBP400.0 million
loan notes.
Any associated fees in arranging the bank borrowings and loan
notes that are unamortised as at the year end are offset against
amounts drawn on the facilities as shown in the table below:
Bank borrowings drawn
31 December 31 December
2019 2018
GBPm GBPm
================================================= =========== ===========
Bank borrowings drawn: due in more than one year 262.9 333.9
Less: unamortised costs on bank borrowings (6.7) (6.1)
================================================= =========== ===========
256.2 327.8
================================================= =========== ===========
Loan notes
31 December 31 December
2019 2018
Bonds GBPm GBPm
====================================== =========== ===========
2.625% Bonds 2026 249.2 249.1
3.125% Bonds 2031 247.1 246.8
2.860% USPP 2028 250.0 -
2.980% USPP 2030 150.0 -
Less: unamortised costs on loan notes (4.8) (3.2)
====================================== =========== ===========
891.5 492.7
====================================== =========== ===========
The weighted average term to maturity of the Group's debt as at
the year end is 7.5 years (31 December 2018: 8.9 years).
Maturity of borrowings
31 December 31 December
2019 2018
GBPm GBPm
===================================== =========== ===========
Repayable between one and two years - -
Repayable between two and five years 50.0 121.0
Repayable in over five years 1,109.2 708.8
===================================== =========== ===========
1,159.2 829.8
===================================== =========== ===========
25. Interest rate derivatives
To mitigate the interest rate risk that arises as a result of
entering into variable rate loans, the Group has entered into a
number of interest rate derivatives. A number of interest rate caps
and one interest rate swap have been taken out in respect of the
Group's variable rate debt to fix or cap the rate to which three
month Libor can rise. Each runs coterminous to the initial term of
the respective loans.
The weighted average capped rate, excluding any margin payable,
for the Group as at the year end was 1.26% (2018: 1.26%), which
effectively caps the level to which Libor can rise to, therefore
limiting any effect on the Group of an interest rate rise. The
interest rate derivatives mean that the Group's borrowing
facilities at the year end have an all -- inclusive capped interest
rate payable of 2.52% (2018: 2.63%). The total premium payable in
the year towards securing the interest rate caps was GBP1.3 million
(2018: GBP4.5 million).
31 December 31 December
2019 2018
GBPm GBPm
============================================== =========== ===========
Non-current assets: interest rate derivatives 1.3 5.2
============================================== =========== ===========
The interest rate derivatives are valued by the relevant
counterparty banks on a quarterly basis in accordance with IFRS 9.
Any movement in the mark to market values of the derivatives are
taken to the Group profit or loss.
31 December 31 December
2019 2018
GBPm GBPm
=================================================== =========== ===========
Interest rate derivative valuation brought forward 5.2 1.9
Interest rate cap premium paid 1.3 4.5
Changes in fair value of interest rate derivatives (5.2) (1.2)
=================================================== =========== ===========
1.3 5.2
=================================================== =========== ===========
It is the Group's target to hedge at least 90% of the total debt
portfolio either using interest rate derivatives or entering fixed
rate loan arrangements. As at the year -- end date the total
proportion of drawn debt either hedged via interest rate
derivatives or subject to fixed rate loan agreements equated to
99.87%, as shown below.
31 December 31 December
2019 2018
Drawn Drawn
GBPm GBPm
=========================================================================== =========== ===========
Total borrowings drawn (note 24) 1,159.2 829.8
Notional value of effective interest rate derivatives and fixed rate loans 1,157.6 828.3
=========================================================================== =========== ===========
Proportion of hedged debt 99.87% 99.81%
=========================================================================== =========== ===========
Fair value hierarchy
The fair value of Group's interest rate derivatives is recorded
in the Group Statement of Financial Position and is determined by
forming an expectation that interest rates will exceed strike rates
and discounting these future cash flows at the prevailing market
rates as at the year end. This valuation technique falls within
Level 2 of the fair value hierarchy as defined by IFRS 13. There
have been no transfers between Level 1 and Level 2 during any of
the years, nor have there been any transfers between Level 2 and
Level 3 during any of the years.
26. Financial risk management
Financial instruments
The Group's principal financial assets and liabilities are those
that arise directly from its operations: rent and other
receivables, trade and other payables and cash held at bank. The
Group's other principal financial assets and liabilities are
amounts due to B and C Shareholders, bank borrowings and interest
rate derivatives. The main purpose of bank borrowings and
derivatives is to finance the acquisition and development of the
Group's Investment property portfolio and hedge against the
interest rate risk arising.
Set out below is a comparison by class of the carrying amounts
and fair value of the Group's financial instruments that are
carried in the financial statements:
Book value Fair value Book value Fair value
31 December 31 December 31 December 31 December
2019 2019 2018 2018
GBPm GBPm GBPm GBPm
==================================== ============ ============ ============ ============
Financial assets
Interest rate derivatives 1.3 1.3 5.2 5.2
Rent and other receivables(1) 10.3 10.3 25.3 25.3
Cash held at bank 21.4 21.4 48.3 48.3
==================================== ============ ============ ============ ============
Financial liabilities
Trade and other payables(2) 76.1 76.1 42.4 42.4
Amounts due to B and C Shareholders 22.9 22.9 - -
Borrowings 1,159.2 1,212.2 829.8 813.0
==================================== ============ ============ ============ ============
1. Excludes certain VAT prepayments and other debtors.
2. Excludes tax and VAT liabilities.
Interest rate derivatives and amounts due to B and C
Shareholders are the only financial instruments measured at fair
value through profit and loss. All other financial assets and all
financial liabilities are measured at amortised cost. All financial
instruments were designated in their current categories upon
initial recognition.
The following table sets out the fair value of those financial
liabilities measured at amortised cost where there is a difference
between book value and fair value.
Quoted prices in active Significant observable Significant unobservable
Total markets (Level 1) inputs (Level 2) inputs (Level 3)
Date of valuation GBPm GBPm GBPm GBPm
=========== ================== ======= ========================= ====================== =========================
Borrowings 31 December 2019 1,110.9 943.1 167.8 -
=========== ================== ======= ========================= ====================== =========================
Borrowings 31 December 2018 682.2 521.0 161.2 -
=========== ================== ======= ========================= ====================== =========================
The Group has two fixed rate loans totalling GBP162 million,
provided by PGIM (GBP90 million) and Canada Life (GBP72 million).
The fair value is determined by comparing the discounted future
cash flows using the contracted yields with the reference gilts
plus the margin implied. The reference Gilts used were the Treasury
1.5% 2026 Gilt and Treasury 4.75% 2030 Gilt respectively, with an
implied margin that is unchanged since the date of fixing. The
loans are considered to be a Level 2 fair value measurement. For
all other bank loans there is considered no other difference
between fair value and carrying value.
The fair value of financial liabilities traded on active liquid
markets, including the 2.625% Bonds 2026, 3.125% Bonds 2031, 2.860%
USPP 2028 and 2.980% USPP 2030, is determined with reference to the
quoted market prices. These financial liabilities are considered to
be a Level 1 fair value measure.
The fair value of the financial liabilities at Level 1 fair
value measure were GBP943.1 million (2018: GBP521.0) and the
financial liabilities at Level 2 fair value measure were GBP167.8
million (2018: GBP161.2 million).
Risk management
The Group is exposed to market risk (including interest rate
risk), credit risk and liquidity risk. The Board of Directors
oversees the management of these risks. The Board of Directors
reviews and agrees policies for managing each of these risks that
are summarised below.
Market risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
financial instruments held by the Group that are affected by market
risk are principally the Group's cash balances, bank borrowings
along with a number of interest rate derivatives entered into to
mitigate interest rate risk.
The Group monitors its interest rate exposure on a regular
basis. A sensitivity analysis performed to ascertain the impact on
the Group profit or loss and net assets of a 50 basis point shift
in interest rates would result in an increase of GBP0.4 million
(2018: GBP0.6 million) or a decrease of GBP0.5 million (2018:
GBP0.9 million). The difference between the increase and decrease
absolute figure is due to the interest rate caps in place.
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risks
from both its leasing activities and financing activities,
including deposits with banks and financial institutions. Credit
risk is mitigated by tenants being required to pay rentals in
advance under their lease obligations. The credit quality of the
tenant is assessed based on an extensive credit rating scorecard at
the time of entering into a lease agreement.
Outstanding trade receivables are regularly monitored. The
maximum exposure to credit risk at the reporting date is the
carrying value of each class of financial asset.
Trade receivables
Trade receivables, primarily tenant rentals, are presented in
the Group Statement of Financial Position net of allowances for
doubtful receivables and are monitored on a case by case basis.
Credit risk is primarily managed by requiring tenants to pay
rentals in advance and performing tests around strength of covenant
prior to acquisition and on an ongoing annual basis. Refer to note
19 for details regarding credit risk management of trade
receivables.
Credit risk related to financial instruments and cash
deposits
One of the principal credit risks of the Group arises with the
banks and financial institutions. The Board of Directors believes
that the credit risk on short -- term deposits and current account
cash balances is limited because the counterparties are banks, who
are committed lenders to the Group, with high credit ratings
assigned by international credit -- rating agencies.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital, the finance charges, principal repayments on its
borrowings and its commitments under forward funded development
arrangements. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due,
as the majority of the Group's assets are property investments and
are therefore not readily realisable. The Group's objective is to
ensure it has sufficient available funds for its operations and to
fund its capital expenditure. This is achieved by continuous
monitoring of forecast and actual cash flows by management ensuring
it has appropriate levels of cash and available drawings to meet
liabilities as they fall due.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments:
On demand <3 months 3-12 months 1-5 years >5 years Total
GBPm GBPm GBPm GBPm GBPm GBPm
==================================== ========= ========= =========== ========= ======== =======
31 December 2019
Borrowings - 8.1 24.3 179.4 1,239.6 1,451.4
Amounts due to B and C Shareholders - - - - 22.9 22.9
Trade and other payables - 76.1 - - - 76.1
==================================== ========= ========= =========== ========= ======== =======
- 84.2 24.3 179.4 1,262.5 1,550.4
==================================== ========= ========= =========== ========= ======== =======
31 December 2018
Borrowings - 5.6 16.7 260.4 761.0 1,043.7
Trade and other payables - 42.4 - - - 42.4
==================================== ========= ========= =========== ========= ======== =======
- 48.0 16.7 260.4 761.0 1,086.1
==================================== ========= ========= =========== ========= ======== =======
Included within the contracted payments is GBP286.1 million
(2018: GBP209.8 million) of loan interest payable up to the point
of maturity across the facilities.
27. Capital management
The Board, with the assistance of the Investment Manager,
monitors and reviews the Group's capital so as to promote the long
-- term success of the business, facilitate expansion and to
maintain sustainable returns for Shareholders. The Group considers
proceeds from share issuances, bank borrowings and retained
earnings as capital. The Group's policy on borrowings is as set out
below:
The level of borrowing will be on a prudent basis for the asset
class, and will seek to achieve a low cost of funds, while
maintaining flexibility in the underlying security requirements,
and the structure of both the portfolio and the REIT Group.
The Directors intend that the Group will maintain a conservative
level of aggregate borrowings with a medium -- term limit of 40% of
the Group's gross assets.
The Group has complied with all covenants on its borrowings up
to the date of this report. All of the targets mentioned above sit
comfortably within the Group's covenant levels, which include loan
to value ("LTV"), interest cover ratio and loan to projected
project cost ratio. The Group LTV at the year end was 30.4% (2018:
27.3%).
Debt is secured at the asset and corporate level, subject to the
assessment of the optimal financing structure for the Group and
having consideration to key metrics including lender diversity,
debt type and maturity profiles.
28. Equity reserves
Share capital
The share capital relates to amounts subscribed for share
capital at its nominal value:
31 December
2019 31 December 2019 31 December 2018 31 December 2018
Issued and fully paid at 1 pence each Number GBPm Number GBPm
================================================= ============= ================ ================ ================
Balance at beginning of year - GBP0.01 Ordinary
Shares 1,474,233,401 14.8 1,363,598,083 13.7
Shares issued in relation to further Equity
issuance 192,291,313 1.9 109,364,308 1.1
Shares issued in relation to the consideration
for a corporate acquisition 40,450,234 0.4 - -
Shares issued in relation to management contract - - 1,271,010 -
================================================= ============= ================ ================ ================
Balance at end of year 1,706,974,948 17.1 1,474,233,401 14.8
================================================= ============= ================ ================ ================
On 8 February 2019, the Company announced that 192,291,313 new
Ordinary Shares were issued via an Open Offer for Subscription at
an issue price of 130.00 pence per Ordinary Share, raising gross
proceeds of GBP250 million.
On 19 February 2019, the Company announced that 40,450,234 new
Ordinary Shares were issued as part of the consideration for the
acquisition of Tritax Symmetry for an issue price of 130.00 pence
per Ordinary Share.
Share premium
The share premium relates to amounts subscribed for share
capital in excess of its nominal value.
Capital reduction reserve
On 3 June 2015, the Company by way of Special Resolution,
cancelled the then value of its share premium account, by an Order
of the High Court of Justice, Chancery Division. As a result of
this cancellation, GBP422.6 million was transferred from the share
premium account into the capital reduction reserve account. The
capital reduction reserve account is classed as a distributable
reserve. Movements in the current year relate to dividends
paid.
Retained earnings
Retained earnings relates to all net gains and losses not
recognised elsewhere.
29. Net asset value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the
Group Statement of Financial Position attributable to ordinary
equity holders of the Parent by the number of Ordinary Shares
outstanding at the end of the year. As there are dilutive
instruments outstanding, both basic and diluted NAV per share are
shown below.
31 December 31 December
2019 2018
GBPm GBPm
===================================================== ============= =============
Net assets per Group Statement of Financial Position 2,561.2 2,240.9
EPRA NAV (see Additional Information) 2,578.6 2,253.1
Ordinary Shares:
Issued share capital (number) 1,706,974,948 1,474,233,401
Basic net asset value per share 150.04p 152.00p
Dilutive shares in issue (number) - -
===================================================== ============= =============
Diluted net asset value per share 150.04p 152.00p
Basic EPRA NAV per share 151.06p 152.83p
Dilutive shares in issue (number) - -
===================================================== ============= =============
Diluted EPRA NAV per share 151.06p 152.83p
===================================================== ============= =============
EPRA NAV is calculated as net assets per the Group Statement of
Financial Position excluding cumulative fair value adjustments for
debt-related derivatives.
30. Operating leases
The future minimum lease payments under non -- cancellable
operating leases receivable by the Group are as follows:
<1 year 2-5 years >5 years Total
GBPm GBPm GBPm GBPm
================= ======= ========= ======== =======
31 December 2019 148.7 588.1 1,484.3 2,221.1
31 December 2018 129.0 504.4 1,201.9 1,835.3
================= ======= ========= ======== =======
The Group's investment properties are leased to single tenants,
with the exception of one asset which is leased to two separate
tenants, some of which have guarantees attached, under the terms of
a commercial property lease. Each has upward only rent reviews that
are linked to either RPI/CPI, open market or with fixed uplifts.
The weighted average unexpired lease term is 14.1 years (2018: 14.4
years).
31. Transactions with related parties
For the year ended 31 December 2019, all Directors and the
Partners of the Manager are considered key management personnel.
The terms and conditions of the Investment Management Agreement are
described in the Management Engagement Committee Report. Details of
the amount paid for services provided by Tritax Management LLP
("the Manager") are provided in note 8.
The total amount outstanding at the year end relating to the
Investment Management Agreement was GBP4.5 million (2018: GBP4.0
million).
The total expense recognised in the Group profit or loss
relating to share-based payments under the Investment Management
Agreement was GBP2.3 million (2018: GBP2.0 million), of which
GBP1.2 million (2018: GBP1.1 million) was outstanding at the year
end.
Details of amounts paid to Directors for their services can be
found within the Directors' Remuneration Report. No fees were paid
to SG Commercial in the year ended 31 December 2019 (2018: GBP0.3
million) in respect of agency services for the year; this
represents a total of 0% (2018: 7%) of agency fees paid by the
Group during the year. There were GBPnil (2018: GBP0.3 million)
fees outstanding as at the year end. The six Members of the
Manager, namely Mark Shaw, Colin Godfrey, James Dunlop, Henry
Franklin, Petrina Austin and Bjorn Hobart, are also Members of SG
Commercial.
Mark Shaw did not vote at any meeting of the Board during his
time prior to resignation in February 2019 relating to contractual
terms to be agreed between the Company, the Manager and SG
Commercial, nor with respect to any investment decision where SG
Commercial is acting as agent in any capacity.
During the year the Directors who served during the year
received the following dividends: Richard Jewson: GBP5,944 (2018:
GBP5,113), Jim Prower: GBPnil (2018: GBP1,574), Aubrey Adams:
GBP8,334 (2018: GBP6,625), Susanne Given: GBPnil (2018: GBPnil),
Alastair Hughes: GBP2,384 (2018: GBPnil), Richard Laing: GBP3,122
(2018: GBP2,212) and Mark Shaw: GBP90,225 (2018: GBP63,870).
During the year the six Members of the Manager received the
following dividends: Mark Shaw as above, Colin Godfrey: GBP90,650
(2018: GBP58,552), James Dunlop: GBP86,402 (2018: GBP55,176), Henry
Franklin: GBP64,415 (2018: GBP41,256), Petrina Austin: GBP9,123
(2018: GBP4,297) and Bjorn Hobart: GBP10,946 (2018: GBP7,142).
32. Reconciliation of liabilities to cash flows from financing activities
Borrowings Derivative financial instruments Loan notes Total
GBPm GBPm GBPm GBPm
=================================================== ========== ================================ ========== =======
Balance on 1 January 2019 327.9 (5.3) 492.7 815.3
Cash flows from financing activities:
Bank borrowings advanced 135.0 - - 135.0
Bank borrowings repaid (273.7) - - (273.7)
Amounts received on the issue of loan notes - - 400.0 400.0
Interest rate cap premium paid - (1.2) - (1.2)
Loan arrangement fees paid (2.1) - (2.0) (4.1)
Non-cash movements:
Change in debtors for loan receipts (0.1) - - (0.1)
Change in creditors for loan arrangement fees
payable - - (0.1) (0.1)
Amortisation of loan arrangement fees 1.5 - 0.9 2.4
Fair value movement - 5.2 - 5.2
=================================================== ========== ================================ ========== =======
Balance on 31 December 2019 188.5 (1.3) 891.5 1,078.7
=================================================== ========== ================================ ========== =======
Balance on 1 January 2018 216.8 (2.0) 492.2 707.0
Cash flows from financing activities:
Bank borrowings advanced 180.3 - - 180.3
Bank borrowings repaid (69.3) - - (69.3)
Interest rate cap premium paid - (4.5) - (4.5)
Loan arrangement fees paid (0.8) - (0.4) (1.2)
Non-cash movements:
Change in creditors for loan arrangement fees
payable 0.2 - 0.2 0.4
Amortisation of loan arrangement fees 0.7 - 0.7 1.4
Fair value movement - 1.2 - 1.2
=================================================== ========== ================================ ========== =======
Balance on 31 December 2018 327.9 (5.3) 492.7 815.3
=================================================== ========== ================================ ========== =======
33. Capital commitments
The Group had capital commitments of GBP129.9 million in
relation to its forward funded pre -- let development assets, asset
management initiatives and commitments under development land,
outstanding as at 31 December 2019 (31 December 2018: GBP371.1
million). All commitments fall due within one year from the date of
this report.
34. Subsequent events
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
Company Registration Number: 08215888
At At
31 December 31 December
2019 2018
Note GBPm GBPm
============================== ==== ============ ============
Non-current assets
Investment in subsidiaries 5 1,973.9 1,319.3
============================== ==== ============ ============
Total non-current assets 1,973.9 1,319.3
Current assets
Rent and other receivables 6 976.5 946.8
Cash held at bank 7 3.4 9.6
============================== ==== ============ ============
Total current assets 979.9 956.4
============================== ==== ============ ============
Total assets 2,953.8 2,275.7
============================== ==== ============ ============
Current liabilities
Trade and other payables 8 (13.7) (10.7)
Loans from Group companies (58.7) (58.8)
============================== ==== ============ ============
Total current liabilities (72.4) (69.5)
============================== ==== ============ ============
Non-current liabilities
Loan notes 9 (891.5) (492.7)
============================== ==== ============ ============
Total non-current liabilities (891.5) (492.7)
============================== ==== ============ ============
Total liabilities (963.9) (562.2)
============================== ==== ============ ============
Total net assets 1,989.9 1,713.5
============================== ==== ============ ============
Equity
Share capital 10 17.1 14.8
Share premium reserve 446.7 153.6
Capital reduction reserve 1,188.1 1,304.4
Retained earnings 338.0 240.7
============================== ==== ============ ============
Total equity 1,989.9 1,713.5
============================== ==== ============ ============
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in these financial statements. The profit
attributable to the Parent Company for the year ended 31 December
2019 amounted to GBP97.3 million (31 December 2018: GBP82.2
million).
These financial statements were approved by the Board of
Directors on 16 March 2020 and signed on its behalf by:
Sir Richard Jewson KCVO, JP
Chairman
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Undistributable reserves Distributable reserves
========================== ====================================
Share Share Retained
capital premium Capital reduction reserve earnings Total
Note GBPm GBPm GBPm GBPm GBPm
===================================== ==== ============ ============ ========================= ========= =======
1 January 2019 14.8 153.6 1,304.4 240.7 1,713.5
Net profit for the year - - - 97.3 97.3
14.8 153.6 1,304.4 338.0 1,810.8
Contributions and distributions
Shares issued in relation to further
equity issue 10 1.9 248.1 - - 250.0
Shares issued in relation to equity
consideration 10 0.4 51.9 - - 52.3
Share issue costs - (6.9) - - (6.9)
Share-based payments - - - 2.3 2.3
Transfer of share-based payments to
liabilities to reflect settlement - - - (2.3) (2.3)
Dividends paid 4 - - (116.3) - (116.3)
===================================== ==== ============ ============ ========================= ========= =======
31 December 2019 17.1 446.7 1,188.1 338.0 1,989.9
===================================== ==== ============ ============ ========================= ========= =======
1 January 2018 13.7 932.4 467.9 158.5 1,572.5
Net profit for the year - - - 82.2 82.2
13.7 932.4 467.9 240.7 1,654.7
Contributions and distributions
Cancellation of share premium account - (932.4) 932.4 - -
Shares issued in relation to further
equity issue 10 1.1 154.4 - - 155.5
Share issue expenses in relation to
equity issue - (2.6) - - (2.6)
Shares issued in relation to
management contract - 1.8 - - 1.8
Share-based payments - - - 2.0 2.0
Transfer of share-based payments to
liabilities to reflect settlement - - - (2.0) (2.0)
Dividends paid 4 - - (95.9) - (95.9)
===================================== ==== ============ ============ ========================= ========= =======
31 December 2018 14.8 153.6 1,304.4 240.7 1,713.5
===================================== ==== ============ ============ ========================= ========= =======
NOTES TO THE COMPANY ACCOUNTS
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS
101").
Disclosure exemptions adopted
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
- Certain comparative information as otherwise required by EU endorsed IFRS;
- Certain disclosures regarding the Company's capital;
- A statement of cash flows;
- The effect of future accounting standards not yet adopted;
- The disclosure of the remuneration of key management personnel; and
- Disclosure of related party transactions with other wholly
owned members of Tritax Big Box REIT plc.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the Company's consolidated financial statements. These
financial statements do not include certain disclosures in respect
of:
- Share-based payments;
- Financial instruments;
- Fair value measurement other than certain disclosures required
as a result of recording financial instruments at fair value.
Principal accounting policies
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
Basis of accounting
These financial statements have been presented as required by
the Companies Act 2006 and have been prepared under the historical
cost convention and in accordance with applicable Accounting
Standards and policies in the United Kingdom ("UK GAAP").
Currency
The Company financial statements are presented in Sterling which
is also the Company's functional currency and all values are
rounded to the nearest 0.1 million (GBPm), except where otherwise
indicated.
Other income
Other income represents dividend income which has been declared
by its subsidiaries and is recognised when it is received.
Dividends payable for Shareholders
Equity dividends are recognised when they become legally
payable. Interim equity dividends are recognised when paid. Final
equity dividends are recognised when approved by the Shareholders
at an Annual General Meeting.
1.1. Financial assets
The Company classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Company's accounting policy for each
category is as follows:
Fair value through profit or loss
This category comprises in -- the -- money derivatives and out
-- of -- money derivatives where the time value offsets the
negative intrinsic value. They are carried in the Company Balance
Sheet at fair value with changes in fair value recognised in the
profit or loss in the finance income or expense line. Other than
derivative financial instruments which are not designated as
hedging instruments, the Company does not have any assets held for
trading nor does it voluntarily classify any financial assets as
being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and
services to Customers (such as trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
being the effective interest rate method, less provision for
impairment.
Impairment provisions for current receivables are recognised
based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses.
During this process the probability of the non -- payment of the
trade receivables is assessed. This probability is then multiplied
by the amount of the expected loss arising from default to
determine the lifetime expected credit loss for the trade
receivables. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off
against the associated provision.
Impairment provisions for receivables from related parties and
loans to related parties are recognised based on a forward --
looking expected credit loss model. The methodology used to
determine the amount of provision is based on whether there has
been a significant increase in credit risk since initial
recognition of the financial asset, 12-month expected credit losses
along with gross interest income are recognised. For those for
which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised.
For those that are determined to be credit impaired, lifetime
expected credit losses along with interest income on a net basis
are recognised.
The Company's financial assets measured at amortised cost
comprise rent and other receivables and cash and cash equivalents
in the Company Balance Sheet.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, and other short-term highly liquid investments
with original maturities of three months or less.
Investments in subsidiaries
The investments in subsidiary companies are included in the
Company's Balance Sheet at cost less provision for impairment.
Share-based payments
The expense relating to share-based payments is accrued over the
year in which the service is received and is measured at the fair
value of those services received. The extent to which the expense
is not settled at the reporting period end is recognised as a
liability as any shares outstanding remain contingently issuable.
Contingently issuable shares are treated as dilutive to the extent
that, based on market factors prevalent at the reporting year --
end, the shares would be issuable.
Significant accounting judgements, estimates and assumptions
The preparation of the Company's financial statements require
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future years. There were no significant accounting
judgements, estimates or assumptions in preparing these financial
statements.
2. Standards issued and effective from 1 January 2019
IFRS 16: Leases
The Company does not hold any material operating or leasehold
agreements as lessee. The impact of IFRS 16 has been assessed and
considered to be immaterial.
3. Taxation
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
================== ============ ============
UK corporation tax - -
================== ============ ============
The UK corporation tax rate for the financial year is 19%.
Accordingly, this rate has been applied in the measurement of the
Group's tax liability at 31 December 2019.
4. Dividends paid
For detail of dividends paid by the Company during the year,
refer to note 14 of the Group's financial statements.
5. Investment in subsidiaries
Shares Loan Total
GBPm GBPm GBPm
=========================================== ======= ===== =======
As at 1 January 2019 1,319.3 - 1,319.3
Increase in investments via share purchase 654.6 - 654.6
=========================================== ======= ===== =======
As at 31 December 2019 1,973.9 - 1,973.9
=========================================== ======= ===== =======
As at 1 January 2018 1,028.2 - 1,028.2
Increase in investments via share purchase 291.1 - 291.1
=========================================== ======= ===== =======
As at 31 December 2018 1,319.3 - 1,319.3
=========================================== ======= ===== =======
The Company has the following subsidiary undertakings as at 31
December 2019:
Principal activity Country of Incorporation Ownership %
================================================= =========================== ========================= ===========
TBBR Holdings 1 Limited Investment holding company Jersey 100%*
TBBR Holdings 2 Limited Investment holding company Jersey 100%
Baljean Properties Limited Property investment Isle of Man 100%
Tritax Acquisition 2 Limited Investment holding company Jersey 100%
Tritax Acquisition 2 (SPV) Limited Investment holding company Jersey 100%
The Sherburn RDC Unit Trust Property investment Jersey 100%
Tritax REIT Acquisition 3 Limited Property investment UK(1) 100%
Tritax Acquisition 4 Limited Property investment Jersey 100%
Tritax Acquisition 5 Limited Property investment Jersey 100%
Sonoma Ventures Limited Property investment BVI 100%
Tritax Ripon Limited Property investment Guernsey 100%
Tritax REIT Acquisition 8 Limited Investment holding company UK(1) 100%*
Tritax Acquisition 8 Limited Property investment Jersey 100%
Tritax REIT Acquisition 9 Limited Investment holding company UK(1) 100%*
Tritax Acquisition 9 Limited Property investment Jersey 100%
Tritax Acquisition 10 Limited Property investment Jersey 100%
Tritax Acquisition 11 Limited Property investment Jersey 100%
Tritax Acquisition 12 Limited Property investment Jersey 100%
Tritax Acquisition 13 Limited Property investment Jersey 100%
Tritax Acquisition 14 Limited Property investment Jersey 100%
Tritax Worksop Limited Property investment BVI 100%
Tritax REIT Acquisition 16 Limited Investment holding company UK(1) 100%*
Tritax Acquisition 16 Limited Property investment Jersey 100%
Tritax Acquisition 17 Limited Property investment Jersey 100%
Tritax Acquisition 18 Limited Property investment Jersey 100%
Tritax Harlow Limited Property investment Guernsey 100%
Tritax Lymedale Limited Property investment Guernsey 100%
Tritax Acquisition 21 Limited Property investment Jersey 100%
Tritax Acquisition 22 Limited Property investment Jersey 100%
Tritax Acquisition 23 Limited Property investment Jersey 100%
Tritax Acquisition 24 Limited Property investment Jersey 100%
Tritax Knowsley Limited Property investment Isle of Man 100%
Tritax Burton Upon Trent Limited Property investment BVI 100%
Tritax Acquisition 28 Limited Property investment Jersey 100%
Tritax Peterborough Limited Property investment Jersey 100%
Tritax Littlebrook 2 Limited Property investment Jersey 100%
Tritax Littlebrook 4 Limited Property investment Jersey 100%
Tritax Atherstone (UK) Limited Property investment UK(1) 100%
Tritax Stoke DC1&2 Limited Investment holding company Jersey 100%*
Tritax Stoke DC3 Limited Investment holding company Jersey 100%*
Tritax Holdings CL Debt Limited Investment holding company Jersey 100%*
Tritax Portbury Limited Property investment Jersey 100%
Tritax Newark Limited Property investment Jersey 100%
Tritax Carlisle Limited Investment holding company Jersey 100%*
Tritax Worksop 18 Limited Property investment Jersey 100%*
Tritax Stoke Management Limited Management company UK(1) 100%
Tritax Holdings PGIM Debt Limited Investment holding company Jersey 100%*
Tritax Merlin 310 Trafford Park Limited Property investment Jersey 100%*
Tritax West Thurrock Limited Property investment Jersey 100%
Tritax Tamworth Limited Property investment Jersey 100%
Tritax Acquisition 34 Limited Property investment Jersey 100%
Tritax Acquisition 35 Limited Property investment Jersey 100%
Tritax Acquisition 36 Limited Property investment Jersey 100%*
Tritax Acquisition 37 Limited Property investment Jersey 100%*
Tritax Acquisition 38 Limited Property investment Jersey 100%*
Tritax Acquisition 39 Limited Property investment Jersey 100%*
Tritax Acquisition 40 Limited Property investment Jersey 100%*
Tritax Acquisition 41 Limited Property investment Jersey 100%*
Tritax Littlebrook 1 Limited Property investment Jersey 100%
Tritax Littlebrook 3 Limited Property investment Jersey 100%
Tritax Atherstone Limited Investment holding company Jersey 100%*
Tritax Acquisition 42 Limited Property investment Jersey 100%*
Tritax Acquisition 43 Limited Property investment Jersey 100%*
Tritax Carlisle UK Limited Investment holding company UK(1) 100%
Tritax Edinburgh Way Harlow Limited Property investment Jersey 100%*
Tritax Crewe Limited Investment holding company Jersey 100%*
Tritax Acquisition 44 Limited Property investment Jersey 100%*
Tritax Acquisition 45 Limited Property investment Jersey 100%*
Tritax Acquisition 46 Limited Property investment Jersey 100%*
Tritax Acquisition 47 Limited Property investment Jersey 100%*
Tritax Acquisition 48 Limited Property investment Jersey 100%*
Tritax Symmetry Limited(#) Investment holding company Jersey 100%*
db Symmetry Group Ltd(#) Investment holding company UK(2) 100%
db Symmetry Ltd(#) Investment holding company UK(2) 100%
Tritax Symmetry (BVI) Ltd (formerly known as db
Symmetry (BVI) Ltd) Investment holding company British Virgin Island 100%
Tritax Symmetry Holdings (Biggleswade) Co Ltd
(formerly known as db Symmetry Holdings
(Biggleswade)
Co Ltd)(#) Investment holding company British Virgin Island 100%
Tritax Symmetry Properties (Biggleswade) Co Ltd
(formerly known as db Symmetry Properties
(Biggleswade) Co Ltd)(#) Property investment British Virgin Island 100%
Tritax Symmetry Holdings (Blyth) Co Ltd (formerly
known as db Symmetry Holdings (Blyth) Co
Ltd)(#) Investment holding company British Virgin Island 100%
Tritax Symmetry Properties (Blyth) Co. Ltd
(formerly known as db Symmetry
Properties (Blyth) Co. Ltd)(#) Property investment British Virgin Island 100%
Tritax Symmetry Holdings (Middlewich) Co. Ltd
(formerly known as db Symmetry Holdings
(Middlewich)
Co. Ltd)(#) Investment holding company British Virgin Island 100%
Tritax Symmetry Properties (Middlewich) Co. Ltd
(formerly known as db Symmetry Properties
(Middlewich) Co. Ltd)(#) Investment holding company British Virgin Island 100%
Tritax Symmetry Development (Blyth) UK Ltd
(formerly known as db Symmetry Development
(Blyth)
UK Ltd)(#) Property investment UK(2) 100%
Tritax Symmetry Development (Biggleswade) UK Ltd
(formerly known as db
Symmetry Development (Biggleswade) UK Ltd)(#) Property investment UK(2) 100%
Tritax Symmetry Ardley Limited (formerly known as
db Symmetry Ardley Jersey Ltd)(#) Property investment Jersey 100%
Tritax Symmetry Bicester 2 Limited (formerly
known as db Symmetry Bicester Jersey Ltd)(#) Property investment Jersey 100%
Tritax Symmetry Flore Ltd (formerly known as db
Symmetry Flore Jersey Limited)(#) Property investment Jersey 100%
Tritax Symmetry Rugby South Ltd (formerly known
as db Symmetry Rugby South Jersey Limited)(#) Property investment Jersey 100%
Tritax Symmetry St Helens Ltd (formerly known as
db Symmetry St Helens
Jersey Ltd)(#) Property investment Jersey 100%
Tritax Symmetry Wigan Ltd (formerly known as db
Symmetry Wigan Jersey Limited)(#) Property investment Jersey 100%
Tritax Symmetry Oxford North Ltd (formerly known
as db Symmetry Oxford North Jersey Ltd)(#) Property investment Jersey 100%
Tritax Symmetry Northampton Ltd (formerly known
as db Symmetry Northampton Jersey Ltd)# Property investment Jersey 100%
Tritax Symmetry Huyton Ltd (formerly known as db
Symmetry Huyton Jersey Ltd)# Property investment Jersey 100%
Tritax Symmetry South Elmsall Ltd (formerly known
as db Symmetry South Elmsall Jersey Ltd)# Property investment Jersey 100%
Tritax Symmetry (Goole) Ltd (formerly known as db
Symmetry (Goole) Limited)# Property investment UK(2) 100%
Tritax Symmetry (Midlands) Ltd (formerly known as
db Symmetry (Midlands) Ltd)# Investment holding company UK(2) 100%
Tritax Symmetry (Aston Clinton) Ltd (formerly
known as db Symmetry
(Aston Clinton) Ltd)# Property investment UK(2) 100%
Tritax Symmetry Leicester South Ltd (formerly
known as db Symmetry Whetstone Jersey Ltd)# Property investment Jersey 100%
Tritax Symmetry Gloucester Ltd# Property investment Jersey 100%
Tritax Symmetry (Speke) Ltd (formerly known as db
Symmetry (Speke) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Barwell) Ltd (formerly known as
db Symmetry (Barwell) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Rugby) Ltd (formerly known as db
Symmetry (Rugby) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Hinckley) Ltd (formerly known as
db Symmetry (Hinckley) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Darlington) Ltd (formerly known
as db Symmetry (Darlington) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Blyth) Ltd (formerly known as db
Symmetry (Blyth) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Bicester Reid) Ltd (formerly
known as db Symmetry
(Bicester Reid) Ltd)# Property investment UK(2) 100%
Tritax Symmetry (Wigan) Ltd (formerly known as db
Symmetry (Wigan) Ltd)# Property investment UK(2) 100%
db Symmetry North Ltd# Property investment UK(2) 100%
Tritax Symmetry (Land) LLP (formerly known as db
Symmetry (Land) LLP# Investment holding company UK(2) 100%
Tritax Symmetry (Kettering) LLP (formerly known
as db Symmetry (Kettering) LLP# Property investment UK(2) 100%
Tritax Symmetry (Lutterworth) LLP (formerly known
as db Symmetry (Lutterworth) LLP# Property investment UK(2) 100%
Tritax Symmetry (Northampton) LLP (formerly known
as db Symmetry
(Northampton) LLP# Investment holding company UK(2) 100%
Symmetry Park Darlington Management Company Ltd# Management company UK(2) 100%
Symmetry Park Aston Clinton Management Company
Limited# Management company UK(2) 100%
================================================= =========================== ========================= ===========
*These are direct subsidiaries of the Company.
#These are new investments of the Company in the year.
The registered addresses for subsidiaries across the Group are
consistent based on their country of incorporation and are as
follows:
Jersey entities: 13 -- 14 Esplanade, St Helier, Jersey JE1
1EE
Guernsey entities: PO Box 286, Floor 2, Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 4LY
Isle of Man entities: 33 -- 37 Athol Street, Douglas, Isle of
Man IM1 1LB
BVI entities: Jayla Place, Wickhams Cay 1, PO Box 3190, Road
Town, Tortola, BVI VG1110
UK(1) entities: 3rd Floor, 6 Duke Street St James's, London SW1Y
6BN
UK(2) entities: Unit B, Grange Park Court, Roman Way,
Northampton, England NN4 5EA
The Company also has interests in the following joint
arrangements as at 31 December 2019:
Country of Ownership
Principal activity incorporation %
========================================== =================== =============== =========
Symmetry Park Doncaster Management
Company Limited(#) Management company UK(2) 50%
Symmetry Park Bicester Management Company
Limited(#) Management company UK(2) 33%
========================================== =================== =============== =========
# These are new investments of the Company in the year.
All of the companies registered offshore are managed onshore and
are UK residents for UK corporation purposes, save for the Sherburn
Unit Trust.
6. Rent and other receivables
31 December 31 December
2019 2018
GBPm GBPm
======================================== =========== ===========
Amounts receivable from Group companies 973.6 943.6
Prepayments 0.1 2.1
Other receivables 2.8 1.1
======================================== =========== ===========
976.5 946.8
======================================== =========== ===========
All amounts fall due for repayment within one year. The loans to
Group companies are repayable on demand with no fixed repayment
date. Interest is charged between 0% - 10% (2018: 0%).
7. Cash held at bank
31 December 31 December
2019 2018
GBPm GBPm
================== =========== ===========
Cash held at bank 3.4 9.6
================== =========== ===========
8. Trade and other payables
31 December 31 December
2019 2018
GBPm GBPm
========================= =========== ===========
Trade and other payables 4.0 3.3
Accruals 9.7 7.4
========================= =========== ===========
13.7 10.7
========================= =========== ===========
9. Loan notes
31 December 31 December
2019 2018
Bonds GBPm GBPm
======================================== =========== ===========
2.625% Bonds 2026 249.2 249.1
3.125% Bonds 2031 247.1 246.8
2.860% USPP 2028 250.0 -
2.980% USPP 2030 150.0 -
Less: unamortised costs on loan notes (4.8) (3.2)
======================================== =========== ===========
Non-current liabilities: net borrowings 891.5 492.7
======================================== =========== ===========
31 December 31 December
2019 2018
Maturity of loan notes GBPm GBPm
===================================== =========== ===========
Repayable between one and two years - -
Repayable between two and five years - -
Repayable in over five years 896.3 495.9
===================================== =========== ===========
896.3 495.9
===================================== =========== ===========
The Company signed a private placement of GBP400 million new
senior unsecured loan notes with a number of new institutional
investors (the "Loan Notes") on 4 December 2018. The Loan Notes
comprised two tranches with a weighted average coupon of the fixed
rate notes equating to 2.91% and a weighted average maturity of 9.8
years. The funds were drawn on 28 February 2019.
10. Equity reserves
Refer to note 28 of the Group's financial statements.
11. Related party transactions
The Company has taken advantage of the exemption not to disclose
transactions with other members of the Group as the Company's own
financial statements are presented together with its consolidated
financial statements.
For all other related party transactions make reference to note
31 of the Group's financial statements.
12. Directors' remuneration
Refer to note 9 of the Group's financial statements.
13. Subsequent events
Refer to note 34 of the Group's financial statements.
NOTES TO THE EPRA AND OTHER KEY PERFORMANCE INDICATORS
1. EPRA earnings per share
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
================================================================================ ============= =============
Total comprehensive income (attributable to Shareholders) 141.2 252.6
Adjustments to remove:
Changes in fair value of investment properties (54.5) (163.0)
Changes in fair value of interest rate derivatives 5.2 1.2
Gain on bargain purchase and impairment of intangible and other property assets (7.2) -
Costs associated with a business combination 4.2 1.0
================================================================================ ============= =============
Profits to calculate EPRA earnings per share 88.9 91.8
Add back: Changes in fair value of contingent consideration payable 0.5 -
================================================================================ ============= =============
Profits to calculate EPRA diluted earnings per share 89.4 91.8
================================================================================ ============= =============
Weighted average number of Ordinary Shares 1,681,525,273 1,440,012,547
EPRA earnings per share - basic 5.29p 6.37p
Dilutive shares to be issued 8,520,625 -
================================================================================ ============= =============
EPRA earnings per share - diluted 5.29p 6.37p
================================================================================ ============= =============
2. EPRA NAV per share
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
========================================================== ============= =============
Net assets at end of period 2,561.2 2,240.9
Adjustments to calculate EPRA NAV:
Changes in fair value of interest rate derivatives - 2019 5.2 -
Changes in fair value of interest rate derivatives - 2018 1.2 1.2
Changes in fair value of interest rate derivatives - 2017 (0.7) (0.7)
Changes in fair value of interest rate derivatives - 2016 7.1 7.1
Changes in fair value of interest rate derivatives - 2015 2.0 2.0
Changes in fair value of interest rate derivatives - 2014 2.6 2.6
========================================================== ============= =============
EPRA net assets 2,578.6 2,253.1
========================================================== ============= =============
Shares in issue at 31 December 2019 1,706,974,948 1,474,233,401
Dilutive shares in issue - -
========================================================== ============= =============
1,706,974,948 1,474,233,401
Dilutive EPRA NAV per share 151.06p 152.83p
========================================================== ============= =============
3. EPRA NNNAV
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
==================================== ============= =============
EPRA net assets 2,578.6 2,253.1
Include:
Fair value of financial instruments (17.4) (12.2)
Fair value of debt(1) (53.0) 16.8
==================================== ============= =============
EPRA NNNAV 2,508.2 2,257.7
Shares in issue at 31 December 2018 1,706,974,948 1,474,233,401
Dilutive shares in issue - -
==================================== ============= =============
1,706,974,948 1,474,233,401
EPRA NNNAV per share 146.94p 153.14p
==================================== ============= =============
1 Difference between interest -- bearing loans and borrowings
included in Balance Sheet at amortised cost, and the fair value of
interest bearing loans and borrowings.
4. EPRA net initial yield (NIY) and EPRA "topped up" NIY
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
==================================================================== ============ ============
Investment property - wholly owned 3,511.9 3,418.2
Less: development properties (297.2) (730.0)
==================================================================== ============ ============
Completed property portfolio 3,214.7 2,688.2
Allowance for estimated purchasers' costs 218.0 182.3
==================================================================== ============ ============
Gross up completed property portfolio valuation (B) 3,432.7 2,870.5
==================================================================== ============ ============
Annualised passing rental income 166.6 161.1
Less: contracted rental income in respect of development properties (13.9) (31.2)
Property outgoings (0.1) (1.1)
Less: contracted rent under rent free period (3.6) (3.5)
==================================================================== ============ ============
Annualised net rents (A) 149.0 125.3
Contractual increases for fixed uplifts 8.8 8.9
==================================================================== ============ ============
Topped up annualised net rents (C) 157.8 134.2
==================================================================== ============ ============
EPRA net initial yield (A/B) 4.34% 4.37%
EPRA topped up net initial yield (C/B) 4.60% 4.68%
==================================================================== ============ ============
5. EPRA vacancy rate
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
----------------------------------------------------- ------------ ------------
Annualised estimated rental value of vacant premises 2.0 -
Portfolio estimated rental value(1) 165.2 152.7
===================================================== ============ ============
EPRA vacancy rate 1.22% 0.0%
===================================================== ============ ============
1 Excludes land held for development.
6. EPRA cost ratio
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
========================================================================= ============ ============
Property operating costs 0.1 1.1
Administration expenses 21.7 18.1
Service charge costs recovered through rents but not separately invoiced - (0.9)
========================================================================= ============ ============
Total costs including and excluding vacant property costs (A)/(B) 21.8 18.3
========================================================================= ============ ============
Gross rental income - per IFRS 144.4 133.9
Less: Service charge cost components of gross rental income - (0.9)
========================================================================= ============ ============
Gross rental income (C) 144.4 133.0
========================================================================= ============ ============
Total EPRA cost ratio (including and excluding vacant property costs) 15.1% 13.7%
========================================================================= ============ ============
7. Total return
Year ended Year ended
31 December 31 December
2019 2018
=================================================== ============ ============
Opening EPRA NAV 152.83p 142.24p
Closing EPRA NAV 151.06p 152.83p
=================================================== ============ ============
Change in EPRA NAV (1.79p) 10.59p
Dividends paid 6.81p 6.63p
=================================================== ============ ============
Total growth in EPRA NAV plus dividends paid 5.04p 17.22p
--------------------------------------------------- ------------ ------------
Total return 3.30% 12.11%
=================================================== ============ ============
One-off transactional costs 3.83p -
--------------------------------------------------- ------------ ------------
Total return excluding one-off transactional costs 5.80% 12.11%
=================================================== ============ ============
8. Total expense ratio
Year ended Year ended
31 December 31 December
2019 2018
GBPm GBPm
=================================== ============ ============
Total operating costs 21.8 18.3
Average net assets over the period 2,519.7 2,093.9
=================================== ============ ============
Total expense ratio 0.87% 0.87%
=================================== ============ ============
The financial information contained in this results announcement
has been prepared on the basis of the accounting policies set out
in the statutory financial statements for the year ended 31
December 2018 except for the adoption of IFRS 16 during the year
ended 31 December 2019 which have not had a material impact on the
results. Whilst the financial information included in this
announcement has been computed in accordance with the recognition
and measurement requirements of IFRS, as adopted by the European
Union, this announcement does not itself contain sufficient
disclosures to comply with IFRS. The financial information does not
constitute the Group's statutory financial statements for the years
ended 31 December 2019 or 31 December 2018, but is derived from
those financial statements. Financial statements for the year ended
31 December 2018 have been delivered to the Registrar of Companies
and those for the year ended 31 December 2019 will be delivered
following the Company's Annual General Meeting. The auditors'
reports on both the 31 December 2019 and 31 December 2018 financial
statements were unqualified; did not draw attention to any matters
by way of emphasis; and did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
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
FR GPUCPWUPUPWQ
(END) Dow Jones Newswires
March 17, 2020 03:00 ET (07:00 GMT)
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