TIDMBBOX
RNS Number : 2939V
Tritax Big Box REIT plc
06 August 2020
6 August 2020
TRITAX BIG BOX REIT PLC
Results for the six months ended 30 June 2020
HIGH-QUALITY PORTFOLIO AND STRATEGY DELIVERING RESILIENT INCOME
AND GROWTH
Tritax Big Box REIT plc (the Group) reports its results for the
six months from 1 January to 30 June 2020 and announces its Q2 2020
dividend.
30 June 2020 30 June 2019 % change
Operating profit(1) GBP70.6m GBP56.6m +24.7%
Adjusted earnings per share(2) 3.26p 3.41p -4.4%
Dividend per share 3.125p 3.425p -8.8%
Dividend pay-out ratio 96% 100% -4.0 pts
Total accounting return for the
six months 4.2% 0.4% +3.8 pts
EPRA cost ratio 14.1% 15.3% -1.2pts
30 June 2020 31 Dec 2019
EPRA net tangible assets per
share(3) 154.85p 151.79p +2.0%
Portfolio value(4) GBP4.18bn GBP3.94bn +6.1%
Contracted annual rent roll GBP178.9m GBP166.6m +7.4%
Weighted average unexpired lease 14.1 yrs 14.1 yrs n/a
term (WAULT)
Loan to value (LTV) 31.8% 30.4% +1.4 pts
Strong financial profile with capacity to support growth
-- H1 adjusted earnings stable and in line with expectations(5)
, overall FY20 earnings growth expected to be H2 weighted with
increased income from successful development activity in part
offset by anticipated disposals.
-- Declared Q2 dividend of 1.5625p resulting in H1 2020 dividend
of 3.125p per share (H1 2019: 3.425p) representing a pay-out ratio
of 96%. The Board will continue to monitor the dividend position
for FY2020 with the potential to progressively increase the
dividend when it has better visibility.
-- LTV of 31.8% at the period end (31 December 2019: 30.4%) in
line with our stated target range of 30-35%.
-- Several asset disposals in final documentation stages with an
attractive pipeline of development and investment opportunities to
redeploy capital.
High-quality and resilient income-generating portfolio
-- Strong market fundamentals increasing occupational and
investment demand for prime logistics assets.
-- Strong rent collection during the Covid-19 pandemic,
receiving 97% of Q2 2020 rent and 99% of Q3 2020 rent expected to
be received by the end of the quarter.
-- Total portfolio value has grown 6.1% to GBP4.18 billion at 30
June 2020 (31 December 2019: GBP3.94 billion), including a
portfolio capital value gain of 1.5% net of costs.
-- Growth from development and rent reviews driving a 7.4%
increase in contracted annual rent roll to GBP178.9 million (31
December 2019 GBP166.8 million), including four reviews settled at
a 1.6% annual like for like increase.
-- WAULT of 14.1 years at 30 June 2020 (31 December 2019: 14.1
years), with 53.7% of rent generated by leases having an unexpired
term of more than 15 years.
Maximising the development potential of the UK's largest land
bank focused on logistics
-- Pre-let of Europe's largest state of the art sustainable
logistics facility following Littlebrook planning consent:
o 20-year pre-let agreed with Amazon for 2.3 million sq ft
subject to index linked annual upward only rent reviews.
o From the start of construction (June 2020) the project will
generate 21 years of income at a yield on cost of 6%.
o Delivers the original expectations for overall development
profit on the entire Littlebrook site with the remaining phases
providing further value upside potential.
-- Tritax Symmetry performing well and in line with our expectations:
o One building let post the period end and lettings imminent on
two buildings from the speculatively developed assets, expected to
generate annual rental income of GBP2.5 million p.a; in advanced
discussions on letting the remaining speculatively developed
building.
o Planning consent achieved or committee resolution to grant(6)
on a further 2.2 million sq ft of prime logistics space bringing
total in the period to 4.5 million sq ft.
o Near-term development pipeline of 9.2 million sq ft, across 12
different sites of which 63.4% had planning consent at 30 June
2020.
-- New sustainability strategy launched during the period,
including near-term targets and long-term objectives, including
commitment to build net carbon zero buildings in the Symmetry
portfolio.
Sir Richard Jewson Chairman of Tritax Big Box REIT plc,
commented:
"Covid-19 created a challenging backdrop, but our Company has
performed well during the first half of the year delivering high
levels of rent collection, stable earnings and an increase in
portfolio value and rents driven by effective asset management and
development activity. Significant strategic progress has also been
made during the period, particularly within our development
pipeline including securing a pre-let with Amazon on Europe's
largest logistics facility in addition to a number of lettings in
the Symmetry portfolio.
"While our performance during the first half of the year
provides reassurance, with the UK experiencing the sharpest
reduction in GDP since the 1970s we believe it is appropriate to
continue to maintain a cautious approach in the long-term interest
of shareholders. In the face of the crisis, we took a number of
decisive short-term actions to preserve the financial strength of
the Company, including a modest reduction to our quarterly
dividend. The long-term impacts of Covid-19 are only just beginning
to be felt and we believe it is right to ensure the business has
the financial headroom to ride-out a potentially protracted period
of economic weakness.
"With high-quality assets, a strong balance sheet and gathering
momentum in our development pipeline we believe the Company is well
placed to take advantage of the strength of the UK logistics real
estate market. As a Board, we will continue to monitor closely the
likely long-term impact from Covid-19, with a view to potentially
increasing the dividend on a progressive basis over time when we
believe there is a sufficient level of economic visibility,
financial headroom, and it is in our shareholders' interest."
Results presentation
The Company will host a results webcast today at 8:30am. To view
the webcast please register at:
https://www.investis-live.com/tritax-big-box/5f1af37b8ade181000faa086/sdbb
An audio only dial in is also available using the following
details:
Phone number: +44 20 3936 2999
Participant Access Code: 850929
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. See Note 6 to the financial statements for reconciliation.
3. Following the October 2019 update to EPRA's Best Practice
Recommendations Guidelines, the Group has adopted EPRA net tangible
assets (NTA) as its primary measure of net asset value and restates
its December 2019 position in line with this change. A
reconciliation of this change is provided within the Notes to EPRA
NAV calculations.
4. The Group's Investment portfolio comprises let or pre-let
assets as well as any speculative developments that have reached
practical completion but remain vacant (inclusive of all forward
funded development commitments).
5. Per share reduction of 4.4% for the period driven by increased average share count.
6. 1.4 million sq ft of consent at Wigan subject to call in by
the Secretary of State for the Department of the Environment
FOR FURTHER INFORMATION, PLEASE CONTACT:
Investor relations Tel: 020 8051 5060
Ian Brown - Head of Investor investors@tritaxbigbox.co.uk
Relations
Jo Blackshaw - Investor Relations
Director
Media relations Tel: 020 7379 5151
James Benjamin tritax-maitland@maitland.co.uk
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
CHAIRMAN'S STATEMENT
A resilient portfolio in a vital sector delivering income
security
Our 61 properties are large, modern, in excellent locations and
form critical infrastructure to our occupiers and their businesses.
During the Covid-19 pandemic all our buildings were operational,
playing a critical role in keeping our customers businesses
functioning and, in many cases, meeting significant surges in
e-commerce demand. Big Box logistics properties have helped to keep
the UK running, supplying food and other vital goods, and
demonstrating their infrastructure-like characteristics.
Their critical nature is reflected in our rent collection
performance, which also benefited from deep and proactive
relationships with our customers and an active approach to asset
management. This has helped to enable us to collect 97% of rent
falling due for Q2 2020 and we expect to collect 99% of Q3 2020
rent by the end of August 2020, with payment schedules agreed for
the remainder without rent holidays or reductions being agreed.
This is a robust performance and rent collection for the logistics
sector as a whole has been significantly ahead of the other major
property sectors, supporting the valuations of Big Box assets. As a
consequence of this, the total portfolio value grew to GBP4.18
billion at the period end (31 December 2019: GBP3.94 billion).
The Group generated a strong financial performance with
operating profit* increasing by 25% to GBP70.6 million (H1 2019:
GBP56.6 million). Our EPRA cost ratio improved, reducing to 14.1%
(H1 2019: 15.3%), reflecting our low and transparent cost base.
Adjusted earnings for the period was stable but on a per share
basis reduced to 3.26 pence (H1 2019: 3.41 pence), due to a higher
comparative number of shares in issue in the current period.
* 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.
Well aligned to long-term market trends that have seen recent
acceleration
One of the most important market trends in recent years has been
the growth in e-commerce, which has a direct correlation to demand
for logistics space. The pandemic has accelerated consumer adoption
of online shopping in the UK, with pure online retailers, food
retailers and producers, and homewares/DIY among the biggest
beneficiaries. These sectors are also the three largest among our
customer base, representing 53.6% of annual rental income. Many new
adopters are expected to continue shopping online once the pandemic
has passed, requiring new logistics space to fill this permanent
uplift in e-commerce. Pre Covid-19, we estimated e-commerce will
drive cumulative demand for new logistics space in the UK of
between 65 and 155 million sq ft by 2030 but the pandemic has
accelerated the rate of adoption and is likely to narrow this time
horizon.
Delivering significant value through development
In June 2020, we received planning consent for a "Mega Box"
logistics building at our Littlebrook, Dartford, development site
and exchanged contracts with Amazon to pre-let the facility. The
state-of-the art building has a gross internal area of c. 2.3
million sq ft, including three mezzanine floors. This delivery
against our strategy validates our decision to acquire development
land and will generate an attractive return for our shareholders.
With a 20-year lease and yield on cost of 6%, this pre-let on its
own delivers all of our original profit expectations for the entire
site with Phase 1, and the remainder of Phases 3 and 4 providing
the opportunity for further upside. Littlebrook, Dartford
demonstrates an integrated approach in identifying and successfully
delivering large scale and complex development opportunities in
order to drive growth in value and income for our shareholders.
We see considerable opportunities to apply the logistics
knowledge and expertise gained from our portfolio and
long-established track record into the development process. Our
strategy reduces development risk by applying our understanding of
market needs, leveraging strong relationships, buying well and
using a largely pre-let driven development model. The acquisition
of Tritax Symmetry in 2019 aligns with this strategy and provides
access to well-located sites across the UK at an attractive target
yield on cost of 6% to 8%.
A well-funded balance sheet and rigorous approach to capital
allocation and returns
The Group has a strong balance sheet and adopts a conservative
approach to leverage.
We will fund growth opportunities in our attractive development
pipeline through a combination of existing balance sheet resources
and the recycling of capital by disposing of assets that have
delivered our planned returns. By selling into a strong investment
market and redeploying the proceeds into our development pipeline
we can create attractive returns for our shareholders.
We will only deploy significant capital when we have agreed a
lease with a tenant (known as a "pre-let") thereby reducing the
risks associated with the development process and giving us clear
line-of-sight on returns. There are occasions where some, small
speculative development does make sense, taking the form of smaller
units to open up sites and increase the probability of securing a
larger pre-let development. In such cases, our total speculative
development will remain small and currently represents less than
1.0% of the portfolio value.
While logistics real estate market fundamentals remain strong,
uncertainty initially triggered by Brexit and then Covid-19 has
meant sale processes have progressed at a slower pace than we
originally anticipated. We expect to conclude several disposals
during the remainder of the year in line with our previously stated
ambitions to recycle between GBP125 million to GBP175 million per
annum into higher returning opportunities.
Ensuring good governance in shareholders' interest
Across the global economy, Covid-19 has created significant
uncertainty. As a Board, we have been focused on ensuring that our
business continues to operate effectively and safely both during
the immediate crisis as well as taking a long-term view on the
future strength of the Company. The Board has been in regular
communication with members of the Manager during this period, which
included a number of additional Board meetings to those scheduled.
Through this process, and with reporting from the Manager, we were
able to satisfy ourselves, as a Board, that the Group's internal
controls were functioning effectively, despite the challenges
created with extensive home working.
Taking a longer-term view, the Board took steps to maintain the
financial strength of the business. These steps included a prudent
review of capital expenditure, making sure we could continue to
progress our development opportunities without overstretching
financially. While our financial performance, and particularly our
strong rent collection during the crisis, remains robust, we
believe it is appropriate to maintain a cautious stance in the
long-term interests of our shareholders.
While much of the Board's focus has been on ensuring our
business continues to perform during the pandemic including regular
assessment over the risks to the business, we have continued to
fulfil our normal governance responsibilities. We are making good
progress against our broader objectives covering Board succession
planning, including my own, ongoing evaluation of risk and internal
controls, and engagement with our wider stakeholder base.
Paying an attractive yet prudent dividend to support long-term
growth
Although the Group is well-capitalised and has significant
covenant headroom, the Board considered it prudent to withdraw its
dividend guidance for 2020, given the uncertainty over the economic
impact and duration of the Covid-19 pandemic. In parallel, the
Group's development pipeline is gathering momentum presenting
attractive opportunities to deploy capital and grow our income
stream.
The resilience of the business does give us the confidence to
continue paying a quarterly dividend and the Board has declared two
interim dividends of 1.5625 pence per share each, to give a total
first-half dividend of 3.125 pence per share (H1 2019: 3.425
pence). This dividend level represents a pay-out ratio of 96% which
is both attractive versus our broader market peers, sustainable and
in the long-term interests of the Group and shareholders alike. The
Board will continue to monitor regularly the dividend position with
the potential to increase the dividend progressively when we have
better visibility.
Continuing to advance and further embed our sustainability
agenda
Sustainability is a strategic priority and increasingly central
to the way we run the business. During the period, the Board
approved the Group's new sustainability strategy, with objectives
and targets covering healthy and sustainable buildings, energy and
carbon, nature and wellbeing, and socio-economic impact. We are
undertaking initiatives that support these objectives, while
further developing our reporting, all of which we believe will
increase sustainability of returns to investors. As part of our
strategy, Tritax Symmetry announced its commitment to all new
developments being net carbon zero whilst under construction.
2020 outlook
While Covid-19 remains a live issue and is impacting the UK
economy, our sector remains resilient and our portfolio continues
to collect a high proportion of rent. In line with our
expectations, full year 2020 financial performance is likely to be
weighted to the second half of the year as the positive impact from
our development portfolio is realised. Incremental rent from
developments such as Littlebrook will in part be offset by
anticipated disposals as we effectively recycle capital into
higher-returning opportunities within our portfolio. We are at an
advanced stage on a number of disposals and expect to complete
several by the end of the financial year.
Longer-term outlook
The outlook for logistics real estate remains strong and
increasingly positive. Occupational and investment demand has
remained elevated with the Covid-19 pandemic appearing only to
accelerate the tailwinds that have benefitted the sector in recent
years. Despite these positives, it is prudent to maintain a
cautious outlook on the longer-term impacts from Covid-19,
particularly in the face of a potentially deep and protracted
recession.
Our excellent progress at Littlebrook, Dartford, validates our
decision to acquire development land and to leverage the Manager's
deep knowledge of the sector and our customers' needs, to deliver
new assets at an attractive yield on cost. Tritax Symmetry
continues to make good progress on both planning consents and
lettings despite the challenges of Brexit and Covid-19, providing
us with a long-term pipeline of attractive opportunities to deliver
value growth to shareholders.
We are maintaining an appropriately cautious stance in light of
potential longer-term effects from Covid-19 on our customers and
the wider economy. With a strong market backdrop, high-quality
portfolio, and a thoughtful approach to development and asset
management, the Group is well positioned to deliver resilient,
growing and sustainable income and attractive capital growth.
Sir Richard Jewson, Chairman
5 August 2020
MANAGER'S REPORT
This was an extremely important period for the owners and
occupiers of UK logistics real estate. During the Covid-19
pandemic, Big Box logistics assets (over 500,000 sq ft) have
demonstrated their critical importance to the economy and their
occupiers, by ensuring the resilience of the supply chain. As with
other infrastructure assets, Big Boxes generate secure, growing and
attractive income as well as capital appreciation over the
long-term.
Impact of Covid-19 on the logistics real estate market
The duration and extent of the economic impact of Covid-19
remains unclear. What is clear is the significant shift towards
online spending as consumers stayed at home, effectively
accelerating the trend recorded prior to the outbreak of the
pandemic. UK online retail sales grew 31% during the first six
months of 2020 compared to the same period a year ago, with May's
elevated year on year growth of 58% continuing in June (73% year on
year) according to ONS data. This rate of growth through June has
translated into GBP11.6 billion of additional online spend. Online
retailers such as Amazon, food retailers and producers such as
Ocado and homeware/DIY businesses, such as B&Q and Screwfix,
have been the biggest beneficiaries. These sectors also account for
53.6% of annual rental income (see the Portfolio section
below).
We believe this pandemic may act as a catalyst for change,
accelerating business plans to invest into e-commerce platforms as
consumers increasingly shop online. Managing inventory levels
during volatile periods also has proved challenging as the flow of
goods slowed. Looking further ahead, operating companies are likely
to reassess their real estate supply chains to build in resilience
and capacity to limit future potential disruptions. Automation
deployed in logistics properties could provide a solution to the
cost-effectiveness of shifting supply chains closer to domestic
markets as it leads to increased efficiency and consistency in
quality. All of these changes could produce further substantial
demand tailwinds supporting the positive long-term outlook of the
logistics real estate sector.
Logistics real estate continues to be an attractive and growing
sub-sector
Over the last four years, every GBP1 billion of additional
online sales in the UK has resulted in increased demand for new
logistics property averaging at nearly 900,000 sq ft per annum. The
table below shows the estimated additional logistics space
requirements for different levels of online penetration. For
context, Retail Economics forecast in July 2019 that online sales
could reach 53% of total UK retail sales by 2028, reflecting
substantially faster growth than assumed below, even before
Covid-19. There has been no evidence this relationship has changed
as the pandemic has evolved. Year to date, there has been 7.6
million sq ft take-up from online retailers compared to GBP11.6
billion of additional online sales.
New projected UK logistics demand based on growth in e-commerce
-------------------------------------------------------------------------------
E-commerce penetration New logistics buildings Total demand for logistics
required to meet online buildings
demand
----------------------- ------------------------- ---------------------------
30% 65m sq ft 270m sq ft
40% 110m sq ft 315m sq ft
50% 155m sq ft 360m sq ft
Estimated total logistics demand comprises both online and
non-online potential take-up, and we have assumed non-online demand
to continue in line with its previous five-year average. With
take-up by online retailers averaging 6.9 million sq ft per annum
since 2016, the projected demand for logistics space from online
retail suggests it could create substantial new demand under
scenarios of e-commerce penetration rising above 30%. The Group's
development pipeline is attractively placed to benefit from these
increasing levels of demand.
Occupational demand remains robust
Analysing demand trends in recent years shows that occupiers
increasingly favour 500,000+ sq ft buildings as they seek cost
savings, economies of scale and efficiencies derived from
consolidating supply chain networks into larger modern facilities.
Leasing activity of 500,000 sq ft buildings as a proportion of
total take-up (including under offer) has grown from around 35% in
2016 to nearly 50% in 2019 when approximately 8.8 million sq ft was
let. At the end of 2019, 10.4 million sq ft of logistics property
(over 100,000 sq ft) was reported to be under offer, of which
approximately 8.8 million sq ft was over 500,000 sq ft in size
(representing 88% of the total space under offer).
CBRE reported UK logistics take-up was up 44.1% year on year to
19.1 million sq ft in the first half of 2020, reaching a record
level despite the pandemic, as online retailers (40% of take-up)
and third party logistics companies (3PLs) (16.5%) continued to
move forward with investments into their logistics networks. Total
space under offer continued to remain high at 8.1 million sq ft,
with Big Box representing the majority of this demand, bringing its
proportion of leasing activity to 68% over the first half of
2020.
Big Boxes naturally lend themselves to social distancing, which
will continue to remain important. Staff can more easily maintain a
safe distance than in smaller units and high levels of automation
can reduce or eliminate staff interaction when moving product. This
has helped highly automated logistics buildings to remain
operational throughout the pandemic.
Supply of larger logistics assets remains constrained
Big Box speculative supply has been limited by the material
upfront costs to build these larger buildings compared to smaller
boxes. CBRE data shows that since 2016, only seven buildings or 3.8
million sq ft of Big Box space has been speculatively developed.
Including the two buildings currently under construction this rises
to 5.1 million sq ft.
The shortage of supply of new Big Boxes in the UK is evident
with only two buildings available to let immediately and two more
speculatively under construction. This has resulted in the
construction of new Big Boxes being primarily driven by occupier
demand - 93% of Big Box take-up in 2019 was on a 'build-to-suit'
basis.
Sustainable long-term rental growth prospects for larger
logistics assets
CBRE UK reports that prime logistics rents have been growing
since 2012 although the pace of growth began to slow as speculative
supply in small and medium-sized boxes picked up in 2018. This,
coupled with economic uncertainty caused by Covid-19, saw rents
hold steady in Q2 2020 versus the prior quarter after rising c.
0.7% year on year in Q1 2020. As a point of comparison, June annual
inflation growth was recorded at 0.6% and 1.1% for CPI and RPI
respectively.
We consider the rate of rental growth for Big Boxes to be more
sustainable over the long-term underpinned by the lack of readily
available buildings to let as well as scale derived attributes such
as operational efficiencies and cost savings which are not inherent
in smaller buildings.
Our long leases and high-quality customers provide income
resilience with in-built predictable rental growth and upward only
rent reviews. 56% of the portfolio rent roll has guaranteed uplifts
within their rent review structure, either through fixed increases
or collars. We anticipate a minimum average uplift of 1.7% on an
annualised basis across these leases providing an element of
reliable growth.
In addition, rent collection performance within prime logistics
assets, particularly for larger scale buildings, has remained
resilient through the Covid-19 pandemic.
Investment into logistics property likely to continue
Logistics investment volume for the first half of 2020 reached
GBP2.5 billion, down 7% year on year due to less capital deployed
from April through June 2020. Q2 2020 investment volumes across all
commercial real estate declined by 57% year on year, but it was
encouraging to see Logistics investment volumes were only down 18%
as it remains one of the most sought-after sub-sectors for real
estate investment. Investors continue to be attracted by structural
consumer trends and the secure long income offered by modern
logistics buildings let on 10+ year terms.
The balance of occupational demand and supply helps to ensure
that logistics real estate remains highly attractive to investors.
With interest rates cut in response to Covid-19, the yield gap
between prime industrial property and 10-year gilts is currently
around 440 basis points, showing the potential for further yield
compression.
As a result of these factors, logistics asset values have
remained robust during the pandemic, in contrast to various other
sectors of the commercial property market. There has been some
polarisation within the logistics market, with the values of truly
prime assets let to investment grade covenants holding up well.
Conversely, prices have softened for some secondary assets, let to
weaker covenants such as small and medium-sized enterprises.
Smaller businesses may be more vulnerable to external shocks than
blue-chip tenants and typically do not invest substantial sums into
the building, for example in automation, making it easier for them
to relocate. Consequently, the security of income from smaller
logistics assets is lower.
A clear strategy to deliver sustainable income and growth in
value
Our vision is to be the leading REIT focused on high-quality UK
logistics real estate assets delivering sustainable, long-term
income and value growth for shareholders.
We have a clear and compelling strategy to capture the
opportunities this attractive market presents, underpinned by a
disciplined approach to capital allocation.
The Group's strategy has three mutually reinforcing aspects,
which is expected to deliver sustainable income and growth in value
to shareholders whilst ensuring we meet our wider
responsibilities:
1) Direct and active management - protecting, adding and realising value
We actively and directly manage our existing property portfolio,
developing long term relationships with our customers, ensuring
their needs are met while identifying and realising opportunities
to add value. We also monitor the broader market for opportunities
where we can acquire assets and add value through active asset
management.
By constantly evaluating and managing the portfolio, we aim to
grow value and generate secure and increasing income. When we
believe an asset has reached its full potential within our
ownership, we look to crystallise this value through disposals,
recycling capital into higher returning development and investment
opportunities.
2) Insight driven development and innovation - creating value
Through the Group's Littlebrook, Dartford site and capital
efficient acquisition of Tritax Symmetry, we have access to the
largest land bank for the development of logistics assets in the
UK. The customer insights developed from our existing portfolio and
long-established successful track record inform the development
process, ensuring we tailor the development pipeline to meet demand
at an attractive yield on cost. Most of the Group's development
will be undertaken on a demand driven pre-let basis, significantly
de-risking the process and ensuring we only deploy the Group's
capital when we are confident that the returns are appropriate and
attractive to our shareholders.
3) High-quality assets attracting world leading companies -
delivering high quality, resilient and growing income
Our logistics assets are critical to the supply chains of some
of the world's best companies. We are crafting a portfolio that
will perform well through the economic cycle, providing resilient
income even during tougher times. We weight our tenant exposure to
defensive and high-growth sectors.
Underpinned by a disciplined approach to capital allocation and
emphasis on sustainability
Underpinning our strategy is a disciplined approach to capital,
where we aim to maximise returns to shareholders while minimising
risk. By evaluating the Group's existing assets and identifying
ways to maximise and then realise value, we will effectively
recycle capital to support the Group's objectives, using debt
appropriately and potentially raising additional capital when in
shareholders' interests.
Sitting alongside this is the Group's commitments to ESG which
forms an intrinsic and overarching part of our strategy. During the
period, we further embedded our commitment to ESG through the
launch of our sustainability strategy and targets, more about which
can be read below.
1) Direct and active management
Understanding and supporting customers
A key feature of the period was our proactive interaction with
customers, so we could understand Covid-19's impact on their
operations and offer support where possible and appropriate. This
included high-level conversations with our customers' Property and
Finance Directors and regular interactions with other key people,
such as their Heads of Logistics. Our customer conversations have
endorsed the quality of our relationships with them, enabling us to
have transparent discussions about any issues. By performing our
property management activities in-house we are responsible for
every customer interaction, thereby maximising the potential to
pursue opportunities.
We conduct ongoing covenant analysis of our customers and
strengthened our team to support this work during the period. The
analysis combines publicly available financial and trading
information with our own observations and customer conversations.
This prudent approach enables us to identify any customer-related
risks and opportunities, driving strategies to help us to capture
growth and/or mitigate risks.
Lengthening income
In February 2020, we agreed with Marks & Spencer to remove
the May 2021 break option in its lease relating to the asset at
Stoke, extending the unexpired certain term by five years to May
2026. In tandem, we agreed the forward settlement of the next 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) from
May 2021.
We are in discussions with Dunelm in respect of an asset in
Stoke where the leases are due to expire in August 2020 and the
customer has indicated its intention to extend the term.
Growing income
Four rent reviews were completed during the period:
-- Argos, Burton : we completed the annual rent review, with a
fixed increase of 3% per annum from February 2020.
-- Amazon, Peterborough : the five-yearly inflation linked rent
review resulted in a 10% increase from April 2020, equating to 2.0%
on an annual basis over the five-yearly review period.
-- Morrisons, Birch Coppice : the annual inflation linked rent
review resulted in an uplift of 1.7% from May 2020.
-- Morrisons, Sittingbourne : the annual inflation linked rent
review resulted in an increase of 1.1% from June 2020.
Across the five rent reviews, the GBP0.5 million of rental
growth equated to a like for like growth rate of 1.6% per annum. We
are in discussions across three open market reviews where the
review dates occurred in the previous year. We expect to document
uplifts on these open market reviews during the remainder of
2020.
Realising value and recycling capital through disposals
Over the past six and a half years we have created a leading
portfolio of high-quality logistics assets which we constantly
monitor and evaluate to deliver attractive returns for our
shareholders. In line with our strategy, we will look to sell those
assets where we feel that under our ownership we have achieved our
return objectives or where the nature of the asset no longer fits
our portfolio profile.
As our portfolio matures, we see opportunities to crystallise
gains in value and redeploy the capital in attractive opportunities
elsewhere. Through this constant evaluation of the portfolio, we
expect to sell an appropriate number of assets each year, with the
first sales possible in the second half of 2020, to support our
growth objectives and the delivery of our strategy.
2) Insight driven development and innovation
Approximately 9% of the Group's Gross Asset Value is focused on
development and we use our understanding of the market and customer
insights to deliver value growth for our shareholders and mitigate
risks.
We have a high-quality land bank that provides a pipeline of
attractive development opportunities. The land within this
portfolio is well located to transport hubs and near to significant
population areas. We either acquire development land directly or
make use of capital-efficient long-term option agreements. These
options benefit from staggered strike prices that are aligned to
key planning milestones and the pre-letting of developments. This
significantly decreases the risk associated with development,
avoiding concentrations of capital and ensuring we deploy our
capital when we are confident of a successful pre-let.
We describe our development portfolio based upon timing of
opportunities related to the planning process:
1) Current - assets that are under construction and/or are
pre-let having received planning consent
2) Near-term - sites with planning consent either received or submitted
3) Future - longer term land opportunities principally held under option
In addition, we have several Development Management Agreements
(DMA) with third-party funders that were included as part of our
acquisition of Tritax Symmetry. Under a DMA, Tritax Symmetry will
manage the delivery of an asset in return for a fee and/or profit
share. The Group will not own the asset at any point and DMAs are
therefore not included within the Group's asset portfolio.
Successful development led letting activity
The positive market trends seen in 2019 continued in H1 2020
with take-up increasing by 44.1% year on year to 19.1 million sq ft
(as reported by CBRE) despite the effects of Covid-19 and the
prospect of a domestic recession. Additionally, 8 million sq ft
remained under offer at the end of the half year. Anecdotally,
agencies and developers are reporting a positive increase in
occupational enquiries as Covid-19 related restrictions are relaxed
and businesses move toward an increased level of normalised
activity. Local authorities and Government may come under pressure
to ease planning restrictions in order to stimulate logistics based
job creation to help the UK economy in the near-term recession,
although any incremental supply will be rapidly absorbed by
strengthening demand.
In line with these market trends, in the year to date the Group
has agreed lettings in respect of three assets and 2.5 million sq
ft of logistics space. These new lettings include:
-- June 20: a pre-let to Amazon for a 20-year term with annual
CPI reviews at Littlebrook, Dartford covering 2.3 million sq
ft.
-- July 20: A 15-year lease to Butternut Box, an online pet food
retailer at Doncaster covering approximately 152,000 sq ft.
-- July 20: A 25-year lease to DPD at Bicester, covering approximately 59,000 sq ft.
In aggregate these transactions have been completed within our
target development yield range of 6-8% and add a combined annual
contracted rental income of GBP13.9 million to the portfolio.
In addition, we are at advanced stages of legal documentation,
with lettings on the following two assets imminent:
-- July 20: Aston Clinton Unit II covering approximately 56,000 sq ft.
-- July 20: Aston Clinton Unit III covering approximately 112,000 sq ft.
1) Current Development Pipeline
At the period end, the Current Development Pipeline comprised
four pre-let developments totalling 5.3 million sq ft. These were
Howdens III (Unit 6B) at Raunds, Amazon in Durham, and Co-Op in
Biggleswade, which were all in construction at the start of the
period, plus the Amazon pre-let development at Littlebrook,
Dartford described below. Despite the Covid-19 pandemic, good
progress has continued to be made on the development with no
notable delays to expected completion dates.
The Howdens III unit at Raunds reached practical completion in
July 2020, shortly after the period end.
The estimated cost to completion across the four assets is
approximately GBP222.0 million, as shown in the table below:
Estimated Costs (GBPm)
Total Period Total Contractual
sq ft rent /
Million ERV
GBPm
--------------------- ------ ---------------------------- --------- ------------
Pre-let GBPm H2 2020 H1 2021 H2 2021 m GBPm
GBPm GBPm GBPm
--------------------- ------ -------- -------- -------- --------- ------------
Amazon, Durham* 20.4 20.4 - - 2.0 7.6
Howdens III
(Unit 6B)* 11.4 11.4 - - 0.3 1.7
Co-Op, Biggleswade 38.1 29.0 9.1 - 0.7 4.7
--------------------- ------ -------- -------- -------- --------- ------------
Amazon, Littlebrook 152.1 73.8 49.5 28.8 2.3 12.3
--------------------- ------ -------- -------- -------- --------- ------------
Total 222.0 134.6 58.6 28.8 5.3 26.3
* Licence fee received during the construction period.
The Group's investment policy limits its exposure to speculative
development up to 5% of GAV. Speculative development exposure is
currently 1.0% of GAV. Occupier demand for standing stock has been
strong, evidenced with high levels of take up, not only of Tritax
Symmetry buildings, but across the sector. Further speculative
development is currently under consideration to cater for
occupational demand and to replace the speculative stock now let or
shortly to be let. Future speculative development will be focused
on those locations where market dynamics are strongest and at sites
where consent has recently been secured and the early construction
of space would assist and promote the development of that
project.
2) Near-term development pipeline
The Group's Near-term Development Pipeline comprises land on
which we have either received planning consent or submitted
planning applications, as at 30 June 2020. This excludes assets in
the Current Development Pipeline and includes Phase 1 at
Littlebrook, Dartford (see below). Sites in this pipeline are
likely to start development within one to three years.
At the period end, the pipeline consisted of 9.2 million sq ft,
across 12 sites. Of this, 5.8 million sq ft relates to land with
planning consent and 3.4 million sq ft relates to sites where a
planning application has been submitted.
Of the land with planning consent, the Group:
-- owns 0.9 million sq ft directly
-- owns a share of 0.2 million sq ft through a joint venture; and
-- controls 4.7 million sq ft through option agreements, which
are a capital efficient and low-risk way of creating value from the
planning and development process.
This consented land comprises 10 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.
At Kettering, where the Group secured consent for 2.3 million sq ft
during 2019, we are working through pre-commencement conditions to
enable construction of the infrastructure and having active
discussions with potential occupiers.
Progress over the six months to 30 June 2020 included:
-- a committee resolution to grant planning consent* at Wigan, for a 1.4 million sq ft scheme
-- planning consent for a further 0.6 million sq ft at Darlington Phase 2; and
-- planning consent for a 59,000 sq ft distribution hub for DPD
at Symmetry Park, Bicester, which will be built to net zero carbon
in construction, in line with the UK Green Building Council's
Framework.
-- planning consent for 156,000 sq ft at Middlewich, subject to Section 106 Agreement
* Called in by the Secretary of State to the Department of the
Environment
The table below provides further analysis of the Near-term
Development Pipeline at the period end:
Total Current Estimated ERV Estimated
sq ft book value cost to gross
completion yield
on cost
m GBPm GBPm GBPm %
Land with
consent 5.8 124.4 337.3 32.3 6-8%
Land with
planning submitted 3.4 40.9 240.2 21.3 6-8%
9.2 165.3 577.5 53.6 6-8%
3) Future development pipeline
The remainder of the Group's development land bank is
predominately controlled under option agreements. The total land
under option is targeting the delivery of approximately 30.2
million sq ft, with developments expected to be largely pre-let
triggered.
Total Target gross
sq ft yield on
million cost
Strategic Land options 30.2 6-8%
During the period, the Group signed options over two schemes at
Gloucester and Merseyside totalling 125 net acres with the ability
to construct approximately 2.8 million sq ft.
Our strategy in action - Littlebrook, Dartford
On 15 June 2020, the Group announced that it had received
planning consent and exchanged contracts with Amazon, to pre-let a
new "Mega Box" logistics building. The pre-let and planning consent
cover the Phase 2 plot and part of Phase 3 at Littlebrook,
totalling 35.3 acres of the site.
In line with our strategy, we worked closely with the customer
to understand its requirements and develop an optimal logistics
solution. The facility will play a key role in the customer's local
and national distribution and fulfilment network, as well as
delivering economic and employment benefits to the area. Following
completion, Amazon will occupy over 7 million sq ft of high-quality
Big Box logistics space owned by the Group, representing c.19% of
total contracted annual rent roll.
With practical completion expected in Summer 2021, this highly
sustainable building will target BREEAM Excellent and EPC A rating,
with key features including:
-- a gross internal floor area of c.2.3 million sq ft, including
three structural mezzanine floors;
-- a clear internal height of 20 metres;
-- high levels of automation through capital investment by the customer; and
-- a substantial 3.5 MW solar PV scheme.
The project will deliver attractive returns to investors, based
on:
-- a new 20-year lease, subject to annual upward only rent
reviews indexed to CPI (collared at 1% per annum and capped at 3%
per annum), with the first review in Summer 2022; and
-- the Group benefiting from a licence fee from the Developer
during the construction period, equivalent to the annual rent
payable by the customer following completion of the building.
The total development cost for this project, including land and
demolition, is expected to be GBP205 million, with a further GBP164
million costs to completion. This will be funded using existing
credit facilities, with the project delivering a yield on cost of
6%, which is in line with our target for this site. The profit
generated from the Phase 2 pre-let development is expected to
achieve the Company's original expectations for development profit
across the whole Littlebrook site
Littlebrook is adjacent to the QE2 Bridge, Dartford Tunnel and
the River Thames and has the potential to become one of London's
largest Big Box logistics parks, in a critical "last journey"
location inside the M25. This is a rare asset so close to London,
benefiting from exceptional transport connectivity via motorway,
rail and water, excellent infrastructure, significant power
provision and a robust labour market.
Phase 1 of the site already benefits from detailed planning
consent for up to 450,000 sq ft of ground floor area and an eaves
height of 21 metres. The infrastructure and ground preparation
works undertaken to date mean we could deliver this unit within 26
weeks of receiving a commitment from an occupier. With Phase 2 now
also secured with planning and a pre-let, the master plan for Phase
3 can be progressed, subject to planning. The precise square
footage achievable will be driven by market demand and planning,
but we anticipate a further c300,000 sq ft of ground floor area
could be achieved on the balance of the Littlebrook site.
Development Management Agreements (DMAs)
Tritax Symmetry has a number of DMAs with third-party funders,
under which Tritax Symmetry will manage the delivery of an asset in
return for a fee and/or profit share. The Group will not own the
asset at any point and DMAs are therefore not included within the
Group's asset portfolio. DMAs are active on three schemes, with the
potential to deliver approximately 1.2 million sq ft.
In addition, there are two schemes where the Group has a
continuing economic interest and fees are potentially receivable in
the future, but without a capital outlay by the Company.
3) High-quality assets attracting world leading customers
Since IPO, we have assembled an unrivalled portfolio of
investment assets underpinned by some of the world's best
companies. Portfolio composition is driven by the Group's objective
to own high-quality logistics assets capable of generating
attractive, stable, and long-term returns for its shareholders. The
characteristics that generate these returns, such as the quality of
the Group's customers, the location, size, format and age of the
assets and the income growth embedded in the leases, have made the
business highly resilient, as witnessed through the Covid-19
pandemic, and sustainable over the long term.
At the period end, the total portfolio value was GBP4.18
billion. This comprised the Investment Portfolio, which provides
the Group's long-term, stable and growing income, and the
Development Portfolio, which offers significant growth
potential:
Investment Portfolio 91% of GAV Development Portfolio 9% of GAV
Foundation assets 73% Tritax Symmetry 7%
----------- ---------------------- ----------
Value add assets 13% Littlebrook, Dartford 2%
----------- ---------------------- ----------
Growth covenant
assets 5%
----------- ---------------------- ----------
The Investment Portfolio comprises 61 assets (31 December 2019:
58 assets), following the completion of two small speculative
developments during the period at Aston Clinton, totalling 112,000
sq ft and 56,000 million sq ft respectively, and the agreement of
the 2.3 million sq ft pre-let to Amazon at Littlebrook,
Dartford.
A secure and resilient customer base
The Group has a diversified base of 40 different customers, with
82% of the Group's income derived from members of major stock
market indices in the UK, USA or Europe. We believe this tenant
line-up is one of the strongest of any quoted logistics real estate
business in Europe. When adding new customers to the portfolio, we
have sought to increase exposure to online retail and control
exposure to high street retail. As described under our approach to
asset management below, we have worked closely with customers to
support them where necessary during the pandemic, whilst protecting
our own position and our responsibility to shareholders.
Sector % of annual Customers
rent
Online retail 26.1 Amazon, Ocado, Marks & Spencer, AO.com
------------ ---------------------------------------------
Food retail 16.3 Tesco, Sainsbury's, Morrisons, Co-Op
------------ ---------------------------------------------
Homewares and DIY retail 9.1 Screwfix, Dunelm, B&Q, the Range
------------ ---------------------------------------------
Other retail 7.5 Argos, Dixons Carphone
------------ ---------------------------------------------
3PL and distribution 6.9 Kuehne+Nagel, DHL, Stobart Group, Wincanton,
Eddie Stobart
------------ ---------------------------------------------
Fashion retail 6.8 Next, TK Maxx, Matalan, New Look
------------ ---------------------------------------------
Other manufacturing 6.3 Howdens, Wolseley, Hachette
------------ ---------------------------------------------
Wholesale 4.9 Brakes, Euro Car Parts, ITS
------------ ---------------------------------------------
Electricals manufacturing 4.0 Bosch, Whirlpool
------------ ---------------------------------------------
Consumer goods manufacturing 4.0 Unilever, L'Oreal, Nice-Pak
------------ ---------------------------------------------
Automotive manufacturing 3.3 Rolls Royce, Gestamp
------------ ---------------------------------------------
Post and parcels 2.7 Royal Mail
------------ ---------------------------------------------
Food production 2.1 Kelloggs, Cerealto, Global Infusion
Group
------------ ---------------------------------------------
A long-term and reliable income stream
The long-term security of the Group's income is shown by the
weighted average unexpired lease term (WAULT) of the Investment
Portfolio, which was 14.1 years at the period end (31 December
2019: 14.1 years. Foundation assets, which provide the Group's core
income, had a WAULT of 16.0 years (31 December 2019: 16.1 years).
In addition, our customers typically commit significant capital
investment including, but not limited to, high degrees of
automation, which anchors them to our assets for the long term.
Reflecting the long WAULT, just 12.3% of total rents were from
leases expiring within five years of the period end, with 53.7%
generated by leases with 15 or more years to run.
Embedded income growth
We have assembled the Investment Portfolio to have a balanced
timing of rent reviews, supporting the Group's ability to deliver
annual income growth. The Group's leases provide for upward-only
rent reviews, of which 54% are RPI/CPI linked, 30% are open market,
10% are fixed and 6% are hybrid. In recent years, tenants have
preferred new occupational leases with index-linked rent reviews,
usually including cap and collar arrangements.
Some 88% of the portfolio rent roll is subject to review in the
period 1 January 2020 to December 2022, including those leases with
annual reviews occurring each year. Of this, 17% is due for review
in 2020, 37% in 2021 and 34% in 2022.
The attractive nature of the rent review clauses within leases
means that 56% of the portfolio's rent roll has guaranteed minimum
uplifts, i.e. a lease with either a fixed or minimum level of
increase at the point of rent review. Those leases which have a
minimum rental uplift will produce a weighted uplift of 1.7% p.a.
when a review arises. In addition, we can capture reversionary
potential in our open market rents or when signing new leases. The
independently assessed estimated rental value (ERV) for the
Investment Portfolio was GBP192.7 million at 30 June 2020,
representing a 7.8% reversion (the level at which market rents are
deemed to exceed the passing rent of the Group's properties)
including vacant assets. This will help the Group to generate
attractive rental growth over the next three years, particularly in
the context of both low inflation and interest rates.
Advancing the Group's sustainability strategy
The Group recognises the importance of sustainability to its
customers, shareholders, and communities in which its assets
operate. In addition, the Board believes a rigorous focus on
sustainability will ensure the long-term viability and commercial
success of the Group. By ensuring sustainability underpins our
overall strategy, the Board believes the Manager will be helped to
make sounds decisions in the long-term interests of all
stakeholders.
During the period, the Board approved the Group's sustainability
strategy, as summarised below:
Big Goal Objectives 2023 targets
============================================================ ============================================================
Healthy and
sustainable * Embed ESG into our Investment principles * Ensure any new acquisitions and investments align
buildings with ESG investment principles
Ensure and
demonstrate * Ensure high Green Building certification standards
the * Improve GRESB score to three Green Stars
sustainability
of our assets * Engage in key ESG indices and demonstrate
year-on-year progression * Implement green leases on all new leases
* Embed green lease clauses into our leases * Provide recommendation reports and sustainable
operations guides to customers
* Engage customers on sustainability and support
sustainable operations
=============== ============================================================ ============================================================
Energy and
Carbon * Develop new assets to be net zero carbon to the point * Identify the products and processes that remove
Net carbon of practical completion carbon from construction
zero
* Improve the energy efficiency of the portfolio, * Improve EPCs to A-C Grade
demonstrated through high EPC grades
* Install renewable energy generation projects to
* Install onsite renewable energy generation for generate 13,900 kWp
customers
* Ensure priority assets have climate resilience plans
* Ensure the assets are resilient to climate-related in place
weather risks
=============== ============================================================ ============================================================
Nature and
wellbeing * Install measures that support and enhance * Pilot 15% biodiversity net gain on new developments
Enhance biodiversity in our construction and management
biodiversity
on the Group's * Implement at least one biodiversity, climate and
land * Install measures that help to regulate the climate wellbeing measure on each asset
* Install features that support customers' wellbeing
=============== ============================================================ ============================================================
Socio-economic
impact * Ensure the Group's investments create a positive * Measure social value to demonstrate impact of the
Create a social return Group's investment
positive
socio-economic
impact through * Invest in the Group's communities and support local * Support apprenticeships and employability in
our investment community causes construction
* Create jobs in construction and support employability * Support Schoolreaders to reach beneficiaries in local
and skills in the areas we operate in communities
=============== ============================================================ ============================================================
The strategy was developed in conjunction with our stakeholders
including investors, customers and certain industry bodies, using a
materiality assessment to identify the most significant issues for
the Group. The four elements of the strategy align to the following
UN Sustainable Development Goals: Goal 11 Sustainable Cities and
Communities; Goal 13 Climate Action; Goal 15 Life on Land; and Goal
8: Decent Work and Economic Growth.
We made further progress with implementing the strategy during
the period, with particular highlights as follows:
-- Net zero carbon : we are piloting our net zero carbon
ambitions on the developments at Biggleswade and Bicester, with
carbon reduction initiatives identified in relation to the
highest-impact materials - concrete, aggregates and steel. We are
also reviewing opportunities to progress net zero carbon
initiatives for standing assets, for example using green energy
where the Group is responsible for external lighting.
-- Biodiversity : we have enhanced our approach to biodiversity
by analysing how we can achieve a 15% net biodiversity gain at new
developments, as well as creating a biodiversity framework for
standing assets. In addition, our sustainability lead, Helen Drury,
was appointed to the UK Green Building Council's Nature-Based
Solutions Steering Group.
-- Social value and community : our three-year partnership is
progressing with Schoolreaders, a charity that supports primary
school children to improve their literacy through one-to-one
reading practice. This partnership funds new volunteers to increase
the scheme's coverage in locations where the Group has assets.
While Covid-19 has reduced the service, the charity is still
supporting young online.
We continue to develop the Group's ESG reporting. The 2019
annual report included ESG disclosures against EPRA sustainability
best practice indicators for the first time. We have also completed
submissions for GRESB, with results expected in October 2020, and
Dow Jones Sustainability Indices, with results expected in November
2020.
To enhance the environmental performance of the Group's assets
and help customers improve their own performance and reduce costs,
we continue to explore opportunities to install solar PV energy
generation. At the Newark asset let to DSG, the installation
increased the EPC rating from D to C. Three other PV projects are
currently on hold, due to Covid-19. We have also received energy
consumption data from one fifth of customers, enabling us to create
benchmark reports that will support them to improve consumption.
Once the pandemic allows, we will invite customers and wider
stakeholders to a sustainability forum, to share best practice and
drive operational performance.
Financial review
Set against the backdrop of the Covid-19 pandemic, we have
delivered a strong financial performance during the period. Data
from various agencies shows that the industrial and logistics
sector has been one of the top performers in terms of rent
collection, with on average c. 70% of June 2020 rent collected
after 21 days. The strength of the Group's customer base and our
regular and proactive customer communications meant that as at the
reporting date, we had collected 97% of the Q2 rent billed in March
2020 and 90% of the Q3 rent billed in June with an expectation to
reach 99% by the end of August 2020. A number of customers opted to
make payments monthly in advance instead of quarterly in advance
during this period to manage their near-term cash flows. We
continue to discuss payment of the outstanding amounts with
customers, although we expect the recovery of these rental sums
over the rest of 2020 and into 2021 following the agreement of
certain payment plans. The Group has not agreed any rent free
periods or rent holidays with customers. Calculated in accordance
with IFRS 9, the Group has reflected a small provision of GBP0.2
million against rental arrears at the period end.
As noted in the Chairman's statement, and considering the
unprecedented uncertainty caused by Covid-19, on 8 April 2020 we
withdrew our dividend guidance for 2020. The Company has declared
interim dividends of 1.5625 pence per share in respect of each of
the first two quarters of the year, to give a total dividend for
the first half of 3.125 pence per share (H1 2019: 3.425 pence per
share) representing a pay-out ratio of 96%.
We will continue to monitor the position of the business
considering the impact of Covid-19, particularly around rent
collection and the performance of our tenants. We will update the
market on the dividend position further as the year progresses,
with the potential to progressively increase the dividend with
improving visibility and in the context of the Company's financial
headroom.
As at 30 June 2020, the Group had undrawn committed borrowing
facilities of GBP371.0 million, against capital commitments of
GBP222.0 million in relation to Forward Funded Pre-let
Developments, asset management initiatives and development land.
There are no significant refinancing events until 2024 and we
continue to enjoy strong and supportive relationships with our debt
providers.
Presentation of financial information
The condensed financial information is 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, and excludes items
considered to be exceptional, not in the ordinary course of
business or supported by cash flows, and includes the developer's
licence fees that the Group receives on Forward Funded
Developments.
Financial results
Net rental income
Net rental income for the period was GBP78.8 million (H1 2019:
GBP69.2 million), up GBP9.6 million or 13.9%. The increase
reflected:
-- prior-year development activity, with four Pre-let Forward
Funded Developments reaching practical completion and rent
commencement in 2019, along with one Tritax Symmetry development
completion, which was let during construction in 2019; and
-- additional rent generated from rent reviews settled in 2019 and the first half of 2020.
The contracted annual rent roll at 30 June 2020 was GBP178.9
million across 61 assets (31 December 2019: GBP166.6 million across
58 assets). Included in the contracted annual rent is GBP26.2
million of rent in relation to pre-let assets in the course of
construction at the period end, the majority of which has a licence
fee equivalent payable from the developer.
Operating profit
Operating profit before changes in the fair value of Investment
properties, share of profits from joint ventures and share-based
payments was GBP70.6 million (H1 2019: GBP60.7 million, excluding
GBP4.1 million of exceptional costs relating to the acquisition of
Tritax Symmetry). The increase reflected higher rental income (as
noted above) and marginally higher other income in the form of
development management fee income, partially offset by growth in
administrative and other expenses.
Administrative and other expenses
Administrative and other expenses, which includes all the
operational costs of running the Group, totalled GBP11.2 million in
the period (H1 2019: GBP10.5 million). Due to the growth in average
NAV over the corresponding periods, the Investment Manager fee
increased by GBP0.3 million. There was also an IFRS 9 provision
adjustment of GBP0.2 million, based on an expected credit loss
analysis.
The EPRA Cost Ratio for the period reduced to 14.1% (H1 2019:
15.3%). The Group has a low and transparent operating cost base and
while the Tritax Symmetry acquisition in 2019 had increased
operating costs relative to rental income in the short term, this
was done so in the knowledge that multiple developments that were
under construction during 2019 would become income producing and
positively affect our cost ratio in 2020. The development portfolio
has the potential to grow rental income materially over time,
giving the Group the opportunity to reduce its cost ratio further
considering the yield on cost targets that we believe are
achievable through the development pipeline.
Share based payment charge and contingent consideration
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 period, GBP1.9 million (H1 2019: GBP1.4 million) was
charged to the Group Statement of Comprehensive Income in respect
of share-based payment charges.
Financing costs
Net financing costs for the period were GBP18.7 million (H1
2019: GBP15.9 million), excluding the reduction in the fair value
of interest rate derivatives of GBP2.1 million (H1 2019: GBP4.4
million). The Group's average debt drawn throughout the period was
GBP1.2 billion, compared to GBP1.0 billion in the first half of the
prior year. The average cost of debt remained relatively consistent
during the period and therefore this increase was ascribed to
higher levels of drawings to finance the Group's pre-let
developments which were under construction during the period.
Tax
The Group has continued to comply with its obligations as a UK
REIT and is exempt from corporation tax on its property rental
business. The tax charge for the period was therefore GBPnil (H1
2019: GBP0.2 million).
Profit and earnings
Profit before tax for the period was GBP103.2 million (H1 2019:
GBP67.8 million). This resulted in basic earnings per share (EPS)
of 6.04 pence (H1 2019: 4.08 pence) and basic EPRA EPS of 2.94
pence (H1 2019: 2.62 pence).
Adjusted EPS for the period was 3.26 pence (H1 2019: 3.41 pence)
and the total dividend for the period was 3.125 pence per share
resulting in a pay-out ratio of 96%. Adjusted earnings were broadly
stable in comparison to the prior period, however due to an average
higher share count in issue throughout the period, when reporting
on a per share basis, this has fallen marginally during the period.
The calculation of Adjusted EPS can be found in Note 6.
Dividends
The Company conservatively withdrew its dividend guidance for
2020 due to the uncertainty surrounding the impact and length of
the Covid-19 pandemic.
Since the start of the year, the Board has declared the
following interim dividends in respect of 2020:
-- 8 April 2020: 1.5625 pence per share, in relation to the
period from 1 January to 31 March 2020, which was paid on 21 May
2020; and
-- 6 August 2020: 1.5625 pence per share, in relation to the
period from 1 April to 30 June 2020, which will be paid on or
around 28 August 2020 to shareholders on the register on 14 August
2020.
Portfolio valuation
CBRE independently values the Group's Investment assets that are
leased, pre-leased or have reached practical completion but remain
vacant. These 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. Land options and any other property assets (DMAs) are
recognised at cost, less amortisation and impairment charges. The
share of joint ventures relates to 50% interests 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.
The total portfolio value at 30 June 2020, including all
remaining contractual development commitments and the Group's share
of joint ventures, was GBP4.18 billion:
GBPm
-------------------------------------------------- --------
Investment properties 3,678.8
Other property assets 13.9
Land options (at cost) 232.0
Share of joint ventures 30.4
Remaining forward funded development commitments 222.0
-------------------------------------------------- --------
Portfolio value 4,177.1
The gain recognised on revaluation of the Group's Investment
properties was GBP55.3 million (H1 2019: GBP25.8 million). This
equates to a portfolio capital revaluation gain of 1.5% across the
six month period.
Despite the onset of Covid-19 in Q1 2020, the demand from the
investment market for logistics assets has remained robust. The
Company's external valuations which are undertaken by CBRE and
Colliers as at 30 June 2020, did not include a material uncertainty
clause, which was included in the valuations for many other
property sectors. The valuers had determined that transaction
volumes in the UK provided a sufficient amount of up-to-date
comparable market evidence upon which to base opinions of value. It
is difficult to predict the impact Covid-19 might have on the real
estate market in the future, therefore, we will continue to monitor
the performance of the portfolio closely through ongoing
discussions with the Company's external valuers and pay a
particular regard to comparable market evidence over the coming
months.
This has translated into relative strong performance for the
Group's portfolio including a stable valuation yield at 4.4%. The
gain recognised on revaluation in the period is largely attributed
to the Group's development portfolio.
Embedded value within land options
Under IFRS, land options are recognised at cost and subject to
impairment review. As at 30 June 2020 the Group's investment in
land options totalled GBP232.0 million (31 December 2019: GBP226.0
million). As the land options approach the point of receiving
planning consent, any associated risk should reduce, and the fair
value should increase. However, until the Group draws the land down
from the landowner, this potential uplift in fair value is not
recognised in the Group's IFRS net asset value and any increase in
land value remains unrealised.
Net assets
EPRA's updated Best Practice Recommendations Guidelines issued
in October 2019, which became effective for financial years
beginning on 1 January 2020, include three replacement Net Asset
Valuation metrics, namely EPRA Net Reinstatement Value (NRV), EPRA
Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). We
will report all three metrics going forwards, whilst choosing to
adopt EPRA NTA as our primary metric as it is the closest to our
previous primary metric, EPRA NAV. A reconciliation of all three
metrics has been provided in the notes to the EPRA NAV
calculations.
At 30 June 2020, the EPRA NTA per share was 154.85 pence (31
December 2019: 151.79 pence), an increase of 2.0%. The primary
driver of this increase during the period was the fair value
movement on the property portfolio which generated a valuation gain
of 1.5% over the period, as highlighted above.
The total return for the period, equating to the growth in EPRA
NTA plus dividends paid, was 4.2% (H1 2019: 0.4%).
Debt capital
At 30 June 2020, the Group had the following borrowings:
Lender Maturity Loan commitment Amount drawn
GBPm at 30 June
2020
GBPm
------------------------------ ------------- ---------------- -------------
Loan notes
2.625% Bonds 2026 Dec 2026 250.0 249.3
2.86% Loan notes 2028 Feb 2028 250.0 250.0
2.98% Loan notes 2030 Feb 2030 150.0 150.0
3.125% Bonds 2031 Dec 2031 250.0 247.2
Bank borrowings
RCF (syndicate of seven
banks) Dec 2023/24 350.0 116.5
RCF (syndicate of six banks) Jun 2024/25 200.0 66.0
Helaba Jul 2025 50.9 50.9
PGIM Real Estate Finance Mar 2027 90.0 90.0
Canada Life Apr 2029 72.0 72.0
------------------------------ ------------- ---------------- -------------
Total 1,662.9 1,291.9
In June 2020, the maturity date in respect of GBP190 million of
its GBP200 million unsecured revolving credit facility (the
Facility), was extended from June 2024 to June 2025. The maturity
date of the residual GBP10 million that was not covered as part of
this extension will remain June 2024.
The Facility, which is with a syndicate of lenders, retains its
uncommitted GBP100 million accordion option and the margin payable
under the Facility of 1.10% per annum over three-month LIBOR
remains unchanged. The Facility was entered into in June 2019 for
an initial period of five years and this extension is the first of
two, one-year extension options that are available to the Company
under the original terms.
Of the Group's debt commitments, 64% is at fixed 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 100% 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 2019: 2.68%).
The all-in running cost of borrowing at the period end was 2.43%
(31 December 2019: 2.52%).
At 30 June 2020, the Group's debt had an average maturity of 7.1
years (31 December 2019: 7.5 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 period
end, the LTV was 31.8% (31 December 2019: 30.4%), additional
drawings have been made in the period to finance the Group's
development activity.
Net debt and operating cash flow
Net debt at the period end was GBP1,256.5 million (31 December
2019: GBP1,137.8 million).
Net operating cash flow plus the addition of licence fees
received was GBP56.3 million for the half year. Capital expenditure
across the Group's Investment and Development portfolios was
GBP100.8 million. There were no disposals during the period.
Going concern
The Group has a healthy liquidity position, a favourable debt
maturity profile and substantial headroom against financial
covenant levels.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about its
future trading performance including the impact of Covid-19.
Various forms of sensitivity analysis have been performed having a
particular regard to the financial performance of its Customers,
taking into account any discussions held with customers surrounding
their operational performance, including the current status on rent
collection.
As at 30 June 2020, the Group had an aggregate GBP371.0 million
of undrawn commitments under its senior debt facilities, of which
GBP222.0 million (see note 18) was committed under various pre-let
development contracts.
The Group's loan to value ratio stood at 31.8%, with the debt
portfolio having an average maturity term of approximately 7.1
years. As at the date of approval of this report, the Group has
substantial headroom within its financial loan covenants. Since the
start of the pandemic, the Group has agreed an extension to the
maturity of its GBP190 million revolving credit facility (see Note
13), indicating that additional liquidity is available in the
current environment. The Group's financial covenants have been
complied with for all loans throughout the period and up to the
date of approval of these financial statements.
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 Group's 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 Relevance to strategy Performance
1. Total return TR measures the ultimate outcome 4.18% for the
(TR) of our strategy, which is to deliver period to 30 June
value to our shareholders through 2020 (H1 2019:
our portfolio and to deliver a secure 0.42%).
and growing income stream.
-------------------------------------------- ---------------------
2. Dividend The dividend reflects our ability 3.125p per share
to deliver a low-risk but growing (H1 2019: 3.425p
income stream from our portfolio per share)
and is a key element of our TR.
-------------------------------------------- ---------------------
3. EPRA NTA per The EPRA NTA assumes that entities 154.85p at 30
share(1) buy and sell assets, thereby crystallising June 2020 (31
certain levels of unavoidable deferred December 2019:
tax. 151.79p).
-------------------------------------------- ---------------------
4. Loan to value The LTV measures the prudence of 31.8% at 30 June
ratio (LTV) our financing strategy, balancing 2020 (31 December
the potential amplification of returns 2019: 30.4%).
and portfolio diversification that
come with using debt against the
need to successfully manage risk.
-------------------------------------------- ---------------------
5. Adjusted earnings The Adjusted EPS reflects our ability 3.26p (H1 2019:
per share to generate earnings from our portfolio, 3.41p). See note
which ultimately underpins our dividend 6.
payments.
-------------------------------------------- ---------------------
6. Weighted average The WAULT is a key measure of the 14.1 years at
unexpired lease quality of our portfolio. Long lease 30 June 2020 (31
term (WAULT) terms underpin the security of our December 2019:
income stream. 14.1 years).
-------------------------------------------- ---------------------
7. GRESB(2) score The GRESB score reflects the sustainability 55/100, 1 star
of our assets and how well we are rating.
managing ESG risks and opportunities. This is our 2019
Sustainable assets protect us against score, with the
climate change and help our customers 2020 score expected
operate efficiently. in October 2020.
-------------------------------------------- ---------------------
1 EPRA NTA 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.
2 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 the new EPRA NAV measures,
please see Notes to the EPRA NAV calculations.
Measure and Definition Purpose Performance
1. EPRA Earnings (Diluted) A key measure of a company's GBP50.0m/2.91p per share
See note 6 underlying operating (H1 2019: GBP43.2 million/2.60p
results and an indication per share).
of the extent to which
current dividend payments
are supported by earnings.
------------------------------- -------------------------------------
2. EPRA Net Tangible Assumes that entities GBP2.6bn/154.85p per
Assets buy and sell assets, share as at 30 June
(NTA) thereby crystallising 2020
certain levels of unavoidable (31 December 2019: GBP2.6bn/151.79p
deferred tax. per share).
------------------------------- -------------------------------------
3. EPRA Net Reinstatement Assumes that entities GBP2.9bn/171.22p per
Value (NRV) never sell assets and share as at 30 June
aims to represent the 2020
value required to rebuild (31 December 2019: GBP2.8bn/166.96p
the entity. per share).
------------------------------- -------------------------------------
4. EPRA Net Disposal Represents the shareholders' GBP2.5bn/148.69p per
Value (NDV) value under a disposal share as at 30 June
scenario, where deferred 2020
tax, financial instruments (31 December 2019: GBP2.5bn/147.8p
and certain other adjustments per share).
are calculated to the
full extent of their
liability, net of any
resulting tax.
------------------------------- -------------------------------------
5. EPRA Net Initial This measure should 4.32% as at 30 June
Yield (NIY) make it easier for investors 2020
to judge for themselves (31 December 2019: 4.34%).
how the valuations of
the two portfolios compare.
------------------------------- -------------------------------------
6. EPRA 'Topped-Up' This measure should 4.60% at 30 June 2020
NIY make it easier for investors
to judge for themselves
how the valuations of
the two portfolios compare.
(31 December 2019: 4.60%).
------------------------------- -------------------------------------
7. EPRA Vacancy A "pure" (%) measure 2.0% as at 30 June 2020
of investment property
space that is vacant,
based on ERV.
(31 December 2019: 1.2%).
------------------------------- -------------------------------------
8. EPRA Cost Ratio A key measure to enable 14.1% for the six months
meaningful measurement to 30 June 2020
of the changes in a (H1 2019: 15.3%). Both
company's operating the 2020 and 2019 ratios
costs. are the same, inclusive
or exclusive of vacancy
costs.
------------------------------- -------------------------------------
PRINCIPAL RISKS
The Audit & Risk Committee, which assists the Board with its
responsibilities for managing risk, considers that the principal
risks and uncertainties presented on pages 76-79 of our 2019 Annual
Report, dated 16 March 2020, remained valid during the half year
period and are expected to remain valid for the full year. These
risks are summarised below. In addition, the Board has added a new
principal risk relating to the impact of the Covid-19 pandemic.
Property risks
-- The default of one or more of our customers would reduce
revenue and may affect our ability to pay dividends or meet our
debt servicing covenants, while reducing our net asset value and
increasing our LTV.
-- An adverse change in the performance of our property
portfolio may lead to lower returns to shareholders or a breach of
our banking covenants.
-- Our ability to grow the Portfolio may be affected by
competition for investment properties in the Big Box sector.
-- Our property performance will depend on the performance of
the UK retail sector and the continued growth of online retail.
-- Development activities may involve more 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. We are reliant on third-party
developers to complete Forward Funded Developments and the Tritax
Symmetry management team for the performance of the Tritax Symmetry
portfolio.
Land risk
-- 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.
Financial risks
-- Our use of floating rate debt will expose the business to
underlying interest rate movements.
-- A lack of debt funding at appropriate rates may restrict our
ability to grow and deliver attractive returns.
-- We must be able to operate within our banking covenants and
failure to do so could lead to default and our bank funding being
recalled.
Corporate risk
-- As an externally managed company, we rely on the Manager's
services and its reputation in the property market.
Taxation risk
-- We are a UK REIT and have a tax-efficient corporate
structure, with advantageous consequences 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.
Political risk
-- The terms of the UK's future relationship with the EU remain
unclear and the potential impact on the business remains difficult
to predict at this stage.
Severe economic downturn risk
-- The length and duration of the Covid-19 pandemic, including
the UK government's response and the consequent impact on the UK
and global economy remain uncertain. A prolonged pandemic and deep
recession could negatively affect performance of the Company. On 23
March 2020 the Covid-19 pandemic caused the UK Government to place
the UK into lockdown and issue significant support to the UK
economy. All evidence points to a likely severe technical
recession. The Group mitigates the impact of this by investing in
high-quality investment assets that operate in a sector that has
strong structural drivers and a supply demand imbalance in favour
of landlords. The Group's assets are let on long leases to strong
customers, all leases provide for upward only rent reviews. The
Manager monitors its customer's financial health regularly and
maintains regular dialogue throughout various levels of the
customers business. The Company, along with key suppliers moved
onto their business continuity plans to be able to continue to
provide their services to the business, including providing all
staff with equipment to be able to work within the government
restrictions. The Manager continues to assess the impact that
Covid-19 has had on the Groups assets and its tenants in order to
protect the Groups cash flow re rent collection, impact on
dividends and banking covenants. We are maintaining significant
shareholder engagement during the lockdown period. Covid-19 is
likely to accelerating behavioural patterns such as online
shopping, which over the medium term is highly supportive of our
business model.
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed financial statements and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
of the financial year as disclosed in note 17 and any material
changes in the related party transactions disclosed in the 2019
Annual Report.
Shareholder information is as disclosed on the Tritax Big Box
REIT plc Website.
For and on behalf of the Board
Sir Richard Jewson KCVO, JP, Chairman
5 August 2020
INDEPENT REVIEW REPORT TO TRITAX BIG BOX REIT PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim report for the six months
ended 30 June 2020 which comprises the Condensed Group Statement of
Comprehensive Income, the Condensed Group Statement of Financial
Position, the Condensed Group Statement of Changes in Equity, the
Condensed Group Cash Flow Statement and related notes.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim financial report is the responsibility of and has
been approved by the directors. The directors are responsible for
preparing the interim financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this interim
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for the six months ended 30 June
2020 is not prepared, in all material respects, in accordance with
International Accounting Standard 34, as adopted by the European
Union, and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of interim financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, United Kingdom
5 August 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2020
Six months Six months ended
ended 30 June 2019 (unaudited) Year ended
30 June 2020 GBPm 31 December 2019
(unaudited) (audited)
Note GBPm GBPm
================================================== ==== ============= ========================== =================
Gross rental income 78.9 69.2 144.4
Service charge income 2.3 2.0 4.1
Service charge expense (2.4) (2.0) (4.2)
================================================== ==== ============= ========================== =================
Net rental income 78.8 69.2 144.3
Other operating income 3.0 2.0 4.1
Administrative and other expenses (11.2) (10.5) (21.7)
Acquisition-related costs - (4.1) (4.2)
================================================== ==== ============= ========================== =================
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 70.6 56.6 122.5
Changes in fair value of investment properties 8 55.3 25.8 54.5
Gain on bargain purchase - 7.1 7.8
Share-based payment charge 14 (1.9) (1.4) (3.3)
Impairment of intangible and other property assets (0.2) (0.5) (0.6)
Changes in fair value of contingent consideration
payable 14 0.2 0.5 (0.5)
================================================== ==== ============= ========================== =================
Operating profit 124.0 88.1 180.4
Finance income - 0.2 0.4
Finance expense 4 (18.7) (16.1) (34.4)
Changes in fair value of interest rate derivatives 10 (2.1) (4.4) (5.2)
================================================== ==== ============= ========================== =================
Profit before taxation 103.2 67.8 141.2
Taxation 5 - (0.2) -
================================================== ==== ============= ========================== =================
Profit and total comprehensive income 103.2 67.6 141.2
Earnings per share - basic 6 6.04p 4.08p 8.40p
Earnings per share - diluted 6 5.99p 4.06p 8.38p
================================================== ==== ============= ========================== =================
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Six months Year ended
ended 31 December
Six months ended 30 June 2019 2019
30 June 2020 (unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
======================================================== ==== ========================= ============= ============
Non-current assets
Intangible assets 2.2 2.5 2.3
Investment property 8 3,678.8 3,341.6 3,541.2
Investment in land options 9 232.0 220.8 226.0
Investment in joint ventures 30.4 30.0 30.1
Other property assets 13.9 13.9 13.9
Interest rate derivatives 10 0.4 2.0 1.3
======================================================== ==== ========================= ============= ============
Total non-current assets 3,957.7 3,610.8 3,814.8
Current assets
Rent and other receivables 11 27.2 15.2 25.7
Cash at bank 12 35.3 177.5 21.4
======================================================== ==== ========================= ============= ============
Total current assets 62.5 192.7 47.1
======================================================== ==== ========================= ============= ============
Total assets 4,020.2 3,803.5 3,861.9
======================================================== ==== ========================= ============= ============
Current liabilities
Deferred rental income (33.5) (28.1) (35.3)
Trade and other payables (69.4) (69.3) (76.1)
Tax liabilities (1.9) (41.1) (18.7)
======================================================== ==== ========================= ============= ============
Total current liabilities (104.8) (138.5) (130.1)
======================================================== ==== ========================= ============= ============
Non-current liabilities
Interest rate derivatives 10 (1.2) - -
Bank borrowings 13 (389.2) (205.8) (256.2)
Loan notes 13 (891.9) (891.1) (891.5)
Deferred tax liabilities - (1.9) -
Amounts due to B and C shareholders 14 (24.6) (20.0) (22.9)
======================================================== ==== ========================= ============= ============
Total non-current liabilities (1,306.9) (1,118.8) (1,170.6)
======================================================== ==== ========================= ============= ============
Total liabilities (1,411.7) (1,257.3) (1,300.7)
======================================================== ==== ========================= ============= ============
Total net assets 2,608.5 2,546.2 2,561.2
======================================================== ==== ========================= ============= ============
Equity
Share capital 15 17.1 17.1 17.1
Share premium reserve 15 446.7 446.8 446.7
Capital reduction reserve 15 1,132.2 1,246.6 1,188.1
Retained earnings 15 1,012.5 835.7 909.3
======================================================== ==== ========================= ============= ============
Total equity 2,608.5 2,546.2 2,561.2
======================================================== ==== ========================= ============= ============
Net asset value per share - basic 16 152.81p 149.17p 150.04p
Net asset value per share - diluted 16 152.81p 149.10p 150.04p
EPRA net tangible asset per share - basic and diluted(1) 16 154.85p 151.07p 151.79p
======================================================== ==== ========================= ============= ============
1. Note the prior periods have been restated in line with the
EPRA guidance over Net Asset Value.
These financial statements were approved by the Board of
Directors on 5 August 2020 and signed on its behalf by:
Sir Richard Jewson KCVO, JP (Chairman)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
Capital reduction
Six months ended 30 Share capital Share premium reserve Retained earnings Total
June 2020 (unaudited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 1 January 2020 17.1 446.7 1,188.1 909.3 2,561.2
Profit and total
comprehensive income - - - 103.2 103.2
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
17.1 446.7 1,188.1 1,012.5 2,664.4
Contributions and
distributions
Share-based payments - - - 1.2 1.2
Transfer of share-based
payments to
liabilities to reflect
settlement - - - (1.2) (1.2)
Dividends paid 7 - - (55.9) - (55.9)
At 30 June 2020 17.1 446.7 1,132.2 1,012.5 2,608.5
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
Capital reduction
Six months ended 30 Share capital Share premium reserve Retained earnings Total
June 2019 (unaudited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
1 January 2019 14.8 153.6 1,304.4 768.1 2,240.9
Profit and total
comprehensive income - - - 67.6 67.6
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
14.8 153.6 1,304.4 835.7 2,308.5
Contributions and
distributions
Shares issued in
relation to equity
issue 1.9 248.1 - - 250.0
Shares issued in
relation to equity
consideration 0.4 51.9 - - 52.3
Share issue costs - (6.8) - - (6.8)
Share-based payments - - - 1.1 1.1
Transfer of share-based
payments to
liabilities to reflect
settlement - - - (1.1) (1.1)
Dividends paid 7 - - (57.8) - (57.8)
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 30 June 2019 17.1 446.8 1,246.6 835.7 2,546.2
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
Capital reduction
Year ended 31 December Share capital Share premium reserve Retained earnings Total
2019 (audited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
1 January 2019 14.8 153.6 1,304.4 768.1 2,240.9
Profit and total
comprehensive income - - - 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 1.9 248.1 - - 250.0
Shares issued in
relation to equity
consideration 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 7 - - (116.3) - (116.3)
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 31 December 2019 17.1 446.7 1,188.1 909.3 2,561.2
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
CONDENSED GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2020
Six months ended Six months ended Year ended
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Cash flows from operating activities
Profits for the period (attributable to the shareholders) 103.2 67.6 141.2
Add: tax charge - 0.2 -
Add: changes in fair value of contingent consideration
payable (0.2) 0.5 0.5
Add: finance expense 18.7 16.1 34.4
Add: changes in fair value of interest rate derivatives 2.1 4.4 5.2
Add: share-based payment charges 1.9 1.4 3.3
Add: impairment of intangible and other property assets 0.2 (0.5) 0.6
Less: changes in fair value of investment properties (55.3) (25.8) (54.5)
Less: gain on bargain purchase - (7.1) (7.8)
Less: finance income - (0.2) (0.4)
Accretion of tenant lease incentive (4.6) (3.1) (6.1)
(Increase)/decrease in rent and other receivables (4.1) 17.5 2.3
(Decrease)/increase in deferred income (1.9) (2.1) 5.1
Increase/(decrease) in trade and other payables 10.6 (0.5) (7.9)
Cash generated from operations 70.6 68.4 115.9
Taxation paid (16.8) (0.1) (22.6)
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Net cash flow generated from operating activities 53.8 68.3 93.3
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Investing activities
Additions to investment properties (95.1) (139.8) (286.6)
Additions to land options (5.7) (3.1) (10.9)
Additions to joint ventures (0.3) - (0.1)
Licence fees received 2.5 11.5 15.8
Interest received 0.1 0.3 0.5
Amount transferred out of restricted cash deposits - - 0.7
Acquisition of subsidiary, net of cash acquired - (189.6) (194.0)
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Net cash flow used in investing activities (98.5) (320.7) (474.6)
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Financing activities
Proceeds from issue of Ordinary Share Capital - 250.0 249.9
Cost of share issues - (6.8) (6.9)
Bank borrowings drawn 132.5 62.0 135.0
Bank and other borrowings repaid - (250.7) (273.7)
Amounts received on issue of loan notes - 400.0 400.0
Loan arrangement fees paid (0.3) (3.2) (4.1)
Bank interest paid (17.3) (11.4) (28.2)
Interest rate cap premium paid - (1.3) (1.3)
Dividends paid to equity holders (56.3) (57.1) (115.5)
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Net cash flow generated from financing activities 58.6 381.5 355.2
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Net increase/(decrease) in cash and cash equivalents for
the period 13.9 129.1 (26.1)
Cash and cash equivalents at start of period 12 21.2 47.4 47.3
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
Cash and cash equivalents at end of period 12 35.1 176.5 21.2
---------------------------------------------------------- ---- ---------------- ---------------- ----------------
NOTES TO THE CONSOLIDATED ACCOUNTS
1. Basis of preparation
These condensed consolidated financial statements for the six
months ended 30 June 2020 have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and with IAS 34, Interim Financial Reporting, as adopted
by the European Union.
The condensed consolidated financial statements for the six
months ended 30 June 2020 have been reviewed by the Company's
Auditor, BDO LLP, in accordance with International Standard on
Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity and were
approved for issue on 5 August 2020. The condensed consolidated
financial statements are unaudited and do not constitute statutory
accounts for the purposes of the Companies Act 2006.
The comparative financial information presented herein for the
year to 31 December 2019 does not constitute full statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The Group's Annual Report and accounts for the year to 31
December 2019 have been delivered to the Registrar of Companies.
The Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
1.1. Going concern
Given the recent impact of Covid-19, the Board has paid
particular attention to the appropriateness of the going concern
basis in preparing these financial statements. Any going concern
assessment considers the Group's financial position, cash flows and
liquidity, including its continued access to its debt facilities
and its headroom under financial loan covenants.
The Directors have considered the cash flow forecasts for the
Group for a period of five years from 30 June 2020 of these
condensed consolidated financial statements. These forecasts
include the Directors' assessment of the impact of Covid-19 on the
Group, and plausible downside scenarios. The Directors have
reviewed the current and projected financial position of the Group,
making reasonable assumptions about its future trading performance
including the impact of Covid-19. Various forms of sensitivity
analysis have been performed having a particular regard to the
financial performance of its Customers, taking into account any
discussions held with the Customer surrounding their rental
obligations. The analysis also included sensitising the impact of
portfolio valuation movements through the market volatility, rent
collection and customers default.
To date, the impact on the Group from Covid-19 has been limited.
Whilst the Group has a greater level of arrears than it would
ordinarily expect with regards to rental income, the arrears are
not significant in the context of the portfolio as a whole. Whilst
a number of the Group's tenants have opted to move from quarterly
in advance rental payments to monthly in advance rental payments
for a short period, there have been no agreements to grant rent
free periods or rent holidays. The Group has agreed rent deferrals
over only a small number of leases and expects to recover these
rent arrears during 2020/21. Such requests are considered on a case
by case basis and based on the merits of such request and the
circumstances of the tenant. The Directors have also considered the
arrears position in light of IFRS 9, expected credit loss model,
see Note 11 for further details.
As at 30 June 2020, the Group had an aggregate GBP371 million of
undrawn commitments under its senior debt facilities, of which
GBP222 million was committed under various pre-let development
contracts.
At 30 June 2020 the Group's loan to value ratio stood at 31.8%,
with the debt portfolio having an average maturity term of
approximately 7.1 years. As at the date of approval of this report,
the Group has substantial headroom within its financial loan
covenants. As at 30 June 2020 property values would have to fall by
approximately 45% and there would need to be a loss of income of
approximately 60% before loan covenants are breached.
The Group's financial covenants have been complied with for all
loans throughout the period and up to the date of approval of these
financial statements.
The Directors are therefore satisfied that the Group is in a
position to continue in operation for at least twelve months from
the date of approval of these condensed consolidated financial
statements and consider it appropriate to adopt the going concern
basis of accounting in preparing them. There is no material
uncertainty relating to going concern.
2. Significant accounting judgements, estimates and assumptions
The condensed consolidated financial statements have been
prepared on the basis of the accounting policies, significant
judgements, estimates and key assumptions as set out in the notes
to the Group's annual financial statements for the year ended 31
December 2019, as amended where relevant to reflect the new
standards, amendments and interpretations which became effective in
the period.
2.1. 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 condensed
consolidated financial statements:
Land options
Classification
A number of land options were acquired as part of the Tritax
Symmetry acquisition in the prior year. These were bought for the
potential to exercise the option and develop the land into a
pipeline of future investment assets. The options do not represent
a current direct interest in land, they cannot be classified as
Investment property and therefore 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 in the prior year,
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
Group. 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 60% of Adjusted NAV. The Directors have
therefore concluded that the unconditional amount payable to the B
and C shareholders, being 60% 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.
2.2. Estimates
Fair valuation of Investment property
The market value of Investment property is determined by an
independent property valuation expert 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 8.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent
with those applied in the Group's consolidated financial statements
for the year ended 31 December 2019 and are expected to be applied
consistently during the year ending 31 December 2020.
3.1 New standard issued and effective from 1 January 2020
The following new accounting amendments have been applied in
preparing these condensed consolidated financial statements:
-- Amendments to IFRS 3 "Business Combinations", definition of a business
-- Amendments to IAS 1 "Presentation of Financial Statements"
and IAS 8 "Accounting Policies, Changes in Accounting Estimates and
Errors", definition of material
-- Revised Conceptual Framework for Financial Reporting
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
They are not expected to impact the Group significantly as they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
3.2. New standards issued but not yet effective
Amendment to IFRS 16 regarding Covid-19-related rent concessions
was issued in May 2020, for annual reporting periods beginning on
or after 1 June 2020 (earlier application is permitted). This
amendment has not been endorsed by the EU yet. It permits lessees,
as a practical expedient, not to assess whether particular rent
concessions occurring as a direct consequence of the Covid-19
pandemic are lease modifications and instead to account for those
rent concessions as if they are not lease modifications. The
amendment does not affect lessors. The impact of this amendment is
considered immaterial as the Group does not hold any material
operating or leasehold agreements as lessee.
There are other new standards and amendments to standards and
interpretations which have been issued that are effective in future
accounting periods, and which the Group has decided not to adopt
early. None of these are expected to have a material impact on the
condensed consolidated financial statements of the Group.
4. Finance expense
Year ended
Six months ended Six months ended 31 December
30 June 2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ---------------- ---------------- ------------
Interest payable on bank borrowings 3.8 3.2 6.1
Interest payable on loan notes 12.9 11.1 24.1
Commitment fees payable on bank borrowings 0.9 0.7 1.8
Amortisation of loan arrangement fees 1.1 1.1 2.4
------------------------------------------- ---------------- ---------------- ------------
18.7 16.1 34.4
------------------------------------------- ---------------- ---------------- ------------
None of the interest payable on financial liabilities and
amortisation of loan arrangement fees were capitalised in the
current and preceding period.
5. Taxation
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 30 June 2020.
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.
6. 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 six months ended 30 Ordinary Shareholders Ordinary Shares(1) Earnings per share
June 2020 (unaudited) GBPm '000 pence
------------------------------- ------------------------------ ------------------------------ ------------------
Basic EPS 103.2 1,706,975 6.04
Adjustment for dilutive shares:
Changes in fair value of
contingent consideration
payable (0.2)
Dilutive shares in respect of B
and C Shareholders(3) 12,724
-------------------------------- ------------------------------ ------------------------------ ------------------
Diluted EPS(2) 103.0 1,719,699 5.99
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to remove:
Changes in fair value of
contingent consideration
payable 0.2
Changes in fair value of
Investment property (55.3)
Changes in fair value of
interest rate derivatives 2.1
Gain on bargain purchase and
impairment of intangible
contract 0.2
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA EPS 50.2 1,706,975 2.94
-------------------------------- ------------------------------ ------------------------------ ------------------
Add back: Changes in fair value
of contingent consideration
payable (0.2)
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA diluted EPS(2) 50.0 1,716,999 2.91
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to include:
Licence fee receivable on
Forward Funded Developments 5.2
Fixed rental uplift adjustments (2.6)
Share-based payments charges 1.9
Amortisation of loan arrangement
fees and intangibles (see note
4) 1.1
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted EPS 55.6 1,706,975 3.26
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted diluted EPS 55.6 1,716,999 3.23
-------------------------------- ------------------------------ ------------------------------ ------------------
1. Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the period, 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 dilutive at period end.
Net profit attributable to Weighted average number of
For the six months ended 30 Ordinary Shareholders Ordinary Shares(1) Earnings per share
June 2019 (unaudited) GBPm '000 pence
------------------------------- ------------------------------ ------------------------------ ------------------
Basic EPS 67.6 1,655,654 4.08
Adjustment for dilutive shares:
Changes in fair value of
contingent consideration
payable -
Dilutive shares in respect of
management fee 704
Dilutive shares in respect of B
and C Shareholders(3) 10,039
-------------------------------- ------------------------------ ------------------------------ ------------------
Diluted EPS(2) 67.6 1,666,397 4.06
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to remove:
Changes in fair value of
contingent consideration
payable -
Changes in fair value of
Investment property (25.8)
Changes in fair value of
interest rate derivatives 4.4
Costs associated with a business
combination 4.1
Gain on bargain purchase and
impairment of intangible
contract (6.6)
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA EPS 43.7 1,655,654 2.62
-------------------------------- ------------------------------ ------------------------------ ------------------
Add back: Changes in fair value
of contingent consideration
payable (0.5)
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA diluted EPS(2) 43.2 1,666,397 2.60
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to include:
Licence fee receivable on
Forward Funded Developments 12.9
Fixed rental uplift adjustments (2.2)
Share-based payments charges 1.4
Amortisation of loan arrangement
fees and intangibles (see note
4) 1.1
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted EPS 56.4 1,655,654 3.41
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted diluted EPS 56.4 1,656,358 3.41
-------------------------------- ------------------------------ ------------------------------ ------------------
1. Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the period, 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 period end.
Net profit attributable to Weighted average number of
For the year ended 31 December Ordinary Shareholders Ordinary Shares(1) Earnings per share
2019 (audited) 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 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
4) 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 dilutive at year end.
Adjusted earnings is a performance measure used by the Board to
assess the Group's financial performance and dividend payments. The
metric adjusts 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 EPRA 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 period, 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.
7. Dividends paid
Six months ended Six months ended Year ended
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------------- ----------------- ----------------- ------------------
Fourth interim dividend for the period ended 31
December 2018 - 1.675 pence per Ordinary Share - 28.6 28.6
First interim dividend for the period ended 31 December
2019 - 1.7125 pence per Ordinary Share - 29.2 29.2
Second interim dividend for the period ended 31
December 2019 - 1.7125 pence per Ordinary
Share - - 29.2
Third interim dividend for the period ended 31 December
2019 - 1.7125 pence per Ordinary Share - - 29.3
Fourth interim dividend for the period ended 31
December 2019 - 1.7125 pence per Ordinary
Share 29.2 - -
First interim dividend for the period ended 31 December
2020 - 1.5625 pence per Ordinary Share 26.7 - -
-------------------------------------------------------- ----------------- ----------------- ------------------
Total dividends paid 55.9 57.8 116.3
-------------------------------------------------------- ----------------- ----------------- ------------------
Total dividends paid in respect of the period/year 1.563p 1.713p 5.138p
-------------------------------------------------------- ----------------- ----------------- ------------------
Total dividends unpaid but declared in respect of the
period/year 1.563p 1.713p 1.713p
-------------------------------------------------------- ----------------- ----------------- ------------------
Total dividends declared - per share 3.13p 3.43p 6.85p
-------------------------------------------------------- ----------------- ----------------- ------------------
On 6 August 2020, the Company announced the declaration of the
second interim dividend in respect of the year ended 31 December
2020 of 1.5625 pence per share payable in August 2020. In relation
to the total dividends declared for the period of 3.125 pence,
3.125 pence is a property income distribution (PID).
8. 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 outbreak of the Novel Coronavirus (Covid-19), declared by
the World Health Organization as a "Global Pandemic" in March 2020
has impacted global financial markets and global economy. It is
difficult to predict the impact Covid-19 might have on the real
estate market in the future, therefore, we will continue to monitor
the performance of the portfolio closely through ongoing
discussions with the Company's external valuers and pay a
particular regard to comparable market evidence over the coming
months. Despite the onset of Covid-19 in Q1 2020, the demand from
the investment market for logistics assets has remained robust. The
Company's external valuers decided that the valuations as at 30
June 2020 should not include a material uncertainty clause . The
valuations are ultimately the 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
(unaudited) GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ------------------- ---------------------------- -------
As at 1 January 2020 2,578.0 640.8 322.4 3,541.2
Property additions(1) 2.6 - 75.1 77.7
Fixed rental uplift and tenant lease
incentives(2) 3.7 0.9 - 4.6
Transfer of completed property to Investment
property 18.0 - (18.0) -
Change in fair value during the period (6.1) (3.5) 64.9 55.3
-------------------------------------------- ---------- ------------------- ---------------------------- -------
As at 30 June 2020 2,596.2 638.2 444.4 3,678.8
-------------------------------------------- ---------- ------------------- ---------------------------- -------
Investment
Property Investment property Investment
freehold long leasehold property under construction Total
(unaudited) GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ------------------- ---------------------------- -------
As at 1 January 2019 2,053.7 635.6 349.0 3,038.3
Property additions(1) 3.8 0.6 141.7 146.1
Property acquired through business
combination - - 128.4 128.4
Fixed rental uplift and tenant lease
incentives(2) 2.1 0.9 - 3.0
Transfer of completed property to Investment
property 122.7 - (122.7) -
Change in fair value during the period (0.6) 0.2 26.2 25.8
-------------------------------------------- ---------- ------------------- ---------------------------- -------
As at 30 June 2019 2,181.7 637.3 522.6 3,341.6
-------------------------------------------- ---------- ------------------- ---------------------------- -------
Investment
Property Investment property Investment
freehold long leasehold property under construction Total
(audited) 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 - - 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
-------------------------------------------- ---------- ------------------- ---------------------------- -------
1. Licence fees deducted from the cost of Investment property
under construction totalled GBP13.7 million in the period (31
December 2019: GBP0.6 million).
2. Included within the carrying value of Investment property is
GBP47.3 million (31 December 2019: GBP43.0 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.
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBPm GBPm GBPm
========================================================================= ============ ============ ===============
Investment property at fair value per Group Statement of Financial
Position 3,678.8 3,341.6 3,541.2
License fee receivable - 6.9 2.5
Capital commitments 222.0 234.3 128.1
Additional capital work accrued - (3.5) -
Acquisitions since last valuation - 1.7 -
------------------------------------------------------------------------- ------------ ------------ ---------------
Total Investment property valuation* 3,900.8 3,581.0 3,671.8
------------------------------------------------------------------------- ------------ ------------ ---------------
* 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 18).
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 GBP2.1 million (31 December
2019: GBP3.7 million) have been capitalised in the period being
directly attributable to the ongoing development projects.
Valuation risk
There is risk to the fair value of real estate assets that are
part of the portfolio of the Group, comprising variation in the
yields that the market attributes to the real estate investments
and the market income that may be earned.
Real estate investments can be impacted adversely by external
factors such as the general economic climate, supply and demand
dynamics in the market, competition and increase in operating
costs.
Besides asset specific characteristics, general market
circumstances affect the value and income from investment
properties such as the cost of regulatory requirements related to
investment properties, interest rate levels and the availability of
financing.
The Manager of the Group has implemented a portfolio strategy
with the aim to mitigate the above stated real estate risk. By
diversifying in regions, risk categories and tenants, it is
expected to lower the risk profile of the portfolio.
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."
MV 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:
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, December 2019: GBP3.80 - GBP10.75 per
annum, June 2019: 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% - 6.25%, December
2019: 3.67%- 6.22%, June 2019: 3.67% - 6.18%).
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:
-0.50% -0.25% +0.25% +0.50%
net initial net initial net initial net initial -5.0% in +5.0% in
yield yield yield yield passing rent passing rent
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------------ ------------ ------------ ------------- -------------
(Decrease)/increase in the fair
value
of investment properties as at
30 June
2020 (unaudited) 484.9 228.0 (203.6) (386.5) (190.3) 190.3
-------------------------------- ------------ ------------ ------------ ------------ ------------- -------------
(Decrease)/increase in the fair
value
of investment properties as at
30 June
2019 (unaudited) 438.7 206.4 (184.5) (350.5) (174.5) 174.5
-------------------------------- ------------ ------------ ------------ ------------ ------------- -------------
(Decrease)/increase in the fair
value
of investment properties as at
31 December
2019 (audited) 445.4 209.4 (187.1) (355.3) (175.6) 175.6
-------------------------------- ------------ ------------ ------------ ------------ ------------- -------------
9. Investment in land options
Six months ended Six months ended Year ended
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------- ---------------- ---------------- ------------
Opening balance 226.0 - -
Land options acquired in business combination - 217.4 217.4
Acquisitions in the period 4.4 2.0 -
Costs capitalised in the period 1.6 1.4 16.8
Transferred to Investment property - - (2.7)
Disposals - - (5.5)
---------------------------------------------- ---------------- ---------------- ------------
Closing balance 232.0 220.8 226.0
---------------------------------------------- ---------------- ---------------- ------------
10. 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. 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.
11. Rent and other receivables
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
-------------------------------------------------- ----------------- ----------------- ---------------
Rent receivables 19.6 3.0 7.8
Licence fee receivable - 6.9 2.5
Prepayments, accrued income and other receivables 6.4 2.9 3.3
VAT 1.2 2.4 12.1
-------------------------------------------------- ----------------- ----------------- ---------------
27.2 15.2 25.7
-------------------------------------------------- ----------------- ----------------- ---------------
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. The expected credit loss provision
for June 2020 was GBP0.2 million (June 2019 and December 2019:
GBPnil). 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.
12. Cash held at bank
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- ------------- ------------ -----------
Cash and cash equivalents to agree with cash flow 35.1 176.5 21.2
Restricted cash 0.2 1.0 0.2
-------------------------------------------------- ------------- ------------ -----------
35.3 177.5 21.4
-------------------------------------------------- ------------- ------------ -----------
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.
13. Borrowings
The Group has a 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. In June 2020, the termination date in respect of
GBP190 million of the GBP200 million RCF was extended from 14 June
2024 to 14 June 2025.
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, Sumitomo Mitsui
Banking Corporation, The Royal Bank of Scotland plc, Santander UK
plc and Wells Fargo Bank N.A. London Branch. The termination date
of GBP300 million of the GBP350 million RCF is 10 December 2024,
and the remaining GBP50 million is 10 December 2023.
As at 30 June 2020, December 2019 and June 2019: 64% of the
Group's debt facility commitments are fixed term, with 36% floating
term. When including interest rate hedging the Group has fixed term
or hedged facilities totaling more than 100% of drawn debt for 30
June 2020, December 2019 and June 2019 (see note 10).
As at 30 June 2020, the weighted average running cost of debt
was 2.43% (December 2019: 2.52% and June 2019: 2.47%) and the
Group's average capped cost of debt was 2.68% as at 30 June 2020,
December 2019 and June 2019. As at 30 June 2020, the Group had
undrawn debt commitments of GBP367.5 million (30 June 2019:
GBP550.0 million and 31 December 2019: 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 period covered by these financial statements.
A large part of the Group's borrowings are unsecured financing
arrangements. A summary of the drawn and undrawn bank borrowings in
the period is shown below:
Bank borrowings drawn
31 December
2019
30 June 30 June
2020 (unaudited) 2019 (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ----------------- ----------------- -----------
At the beginning of the period 262.9 333.9 333.9
Bank borrowings drawn in the period under
existing facilities 132.5 62.0 135.0
Bank borrowings repaid in the period under
existing facilities - (183.0) (206.0)
------------------------------------------- ----------------- ----------------- -----------
Total bank borrowings drawn 395.4 212.9 262.9
------------------------------------------- ----------------- ----------------- -----------
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
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
================================================= ============= ============= ================
Bank borrowings drawn: due in more than one year 395.4 212.9 262.9
Less: unamortised costs on bank borrowings (6.2) (7.1) (6.7)
================================================= ============= ============= ================
389.2 205.8 256.2
================================================= ============= ============= ================
Loan notes
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
Bonds GBPm GBPm GBPm
====================================== ============= ============= ================
2.625% Bonds 2026 249.3 249.2 249.2
3.125% Bonds 2031 247.2 246.9 247.1
2.860% USPP 2028 250.0 250.0 250.0
2.980% USPP 2030 150.0 150.0 150.0
Less: unamortised costs on loan notes (4.6) (5.0) (4.8)
====================================== ============= ============= ================
891.9 891.1 891.5
====================================== ============= ============= ================
The weighted average term to maturity of the Group's debt as at
the year end is 7.1 years (June 2019: 7.8 years and December 2019:
7.5 years).
Maturity of borrowings
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
======================================= ============= ============ ================
Repayable between one and two years - - -
Repayable between two and three years - - -
Repayable between three and four years - - -
Repayable between four and five years 182.5 - 50.0
Repayable in over five years 1,109.4 1,109.0 1,109.2
======================================= ============= ============ ================
1,291.9 1,109.0 1,159.2
======================================= ============= ============ ================
14. 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:
Contingent consideration Share-based payment Fair value
30 June 2020 (unaudited) GBPm GBPm GBPm
--------------------------------------------------- ------------------------ ------------------- ----------
Opening balance 19.6 3.3 22.9
Fair value movement recognised (0.2) - (0.2)
Cash settled share-based payment charge - 1.9 1.9
--------------------------------------------------- ------------------------ ------------------- ----------
Closing balance 19.4 5.2 24.6
--------------------------------------------------- ------------------------ ------------------- ----------
Contingent consideration Share-based payment Fair value
30 June 2019 (unaudited) GBPm GBPm GBPm
--------------------------------------------------- ------------------------ ------------------- ------------
Contingent consideration recognised on acquisition 19.1 - 19.1
Fair value movement recognised (0.5) - (0.5)
Cash settled share-based payment charge - 1.4 1.4
--------------------------------------------------- ------------------------ ------------------- ------------
Closing balance 18.6 1.4 20.0
--------------------------------------------------- ------------------------ ------------------- ------------
Contingent consideration Share-based payment Fair value
31 December 2019 (audited) GBPm GBPm 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 60% 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.
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.
15. Equity reserves
Share capital
The share capital relates to amounts subscribed for share
capital at its nominal value. The Company had 1,706,974,948 shares
of nominal value of 1 pence each in issue at the end of the period
30 June 2020, 30 June 2019 and 31 December 2019.
30 June 31 December
30 June 2020 (unaudited) 2019 (unaudited) 2019 (audited)
Issued and fully paid at 1 pence each GBPm GBPm GBPm
===================================================== ======================== ================= ===============
Balance at beginning of period - GBP0.01 Ordinary
Shares 17.1 14.8 14.8
Shares issued in relation to further Equity issuance - 1.9 1.9
Shares issued in relation to the consideration for a
corporate acquisition - 0.4 0.4
Balance at end of period 17.1 17.1 17.1
====================================================== ======================== ================= ===============
Share premium
The share premium relates to amounts subscribed for share
capital in excess of its nominal value.
Capital reduction reserve
The capital reduction reserve account is classed as a
distributable reserve. Movements in the current period relate to
dividends paid.
Retained earnings
Retained earnings relates to all net gains and losses not
recognised elsewhere.
16. 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 period. As there are dilutive
instruments outstanding, both basic and diluted NAV per share are
shown below.
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------------------- ------------- ------------- ----------------
Net assets per Condensed Group Statement of Financial Position 2,608.5 2,546.2 2,561.2
Ordinary Shares:
Issued share capital (number) 1,706,974,948 1,706,974,948 1,706,974,948
--------------------------------------------------------------- ------------- ------------- ----------------
Basic net asset value per share 152.81p 149.17p 150.04p
Dilutive shares in issue (number) 1,706,974,948 1,707,678,831 1,706,974,948
--------------------------------------------------------------- ------------- ------------- ----------------
Diluted NAV per share 152.81p 149.10p 150.04p
--------------------------------------------------------------- ------------- ------------- ----------------
In October 2019, EPRA introduced three new measures of net asset
value: EPRA Net Tangible Assets (NTA), EPRA Net Reinvestment Value
(NRV) and EPRA Net Disposal Value (NDV). These are applicable for
accounting periods starting on or after 1 January 2020. The Group
considers EPRA NTA to be the most relevant NAV measure for the
Group and we are now reporting this as our primary NAV measure,
replacing our previously reported EPRA NAV and EPRA NAV per share
metrics. The prior year comparative figures have also been restated
in line with the new EPRA methodology. Also refer to EPRA
disclosures section for the bridge between the new and the previous
set of EPRA NAVs metrics.
30 June 2020 (unaudited) 30 June 2019 (unaudited) 31 December 2019 (audited)
------------------ ----------------------------- ----------------------------- -------------------------------
EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NTA NRV NDV NTA NRV NDV
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
NAV attributable
to shareholders 2,608.5 2,608.5 2,608.5 2,546.2 2,546.2 2,546.2 2,561.2 2,561.2 2,561.2
Revaluation
of land options 17.5 17.5 17.5 18.4 18.4 18.4 14.7 14.7 14.7
Mark-to-market
adjustments
of derivatives 19.5 19.5 - 16.7 16.7 - 17.4 17.4 -
Intangibles (2.2) - - (2.5) - - (2.3) - -
Fair value
of debt - - (87.9) - - (39.4) - - (53.0)
Real estate
transfer
tax (1) - 277.2 - - 255.0 - - 256.6 -
------------------ --------- -------- -------- --------- -------- -------- --------- --------- ---------
EPRA NAV 2,643.3 2,922.7 2,538.1 2,578.8 2,836.3 2,525.2 2,591.0 2,849.9 2,522.9
------------------ --------- -------- -------- --------- -------- -------- --------- --------- ---------
EPRA NAV
per share 154.85p 171.22p 148.69p 151.07p 166.15p 147.93p 151.79p 166.96p 147.80p
Dilutive
EPRA NAV
per share 154.85p 171.22p 148.69p 151.07p 166.15p 147.93p 151.79p 166.96p 147.80p
------------------ --------- -------- -------- --------- -------- -------- --------- --------- ---------
1EPRA NTA and EPRA NDV reflect IFRS values which are net of RETT
(real estate transfer tax). RETT are added back when calculating
EPRA NTA .
At 31 December 2019, the EPRA NAV and the EPRA triple NAV as
previously reported were GBP2,578.6 million and GBP2,508.2 million
respectively (Dilutive EPRA NAV per share and dilutive EPRA NNNAV
per share were 151.06p and 146.94p respectively). At 30 June 2019,
the EPRA NAV and the EPRA triple NAV as previously reported were
GBP2,562.9 million and GBP2,506.8 million respectively (Dilutive
EPRA NAV per share and dilutive EPRA NNNAV per share were 150.08p
and 146.79p respectively). See Notes to EPRA NAV calculations for
further details.
17. Transactions with related parties
For the half year 30 June 2020, all Directors and the Members of
the Manager are considered key management personnel. The Members of
the Manager are Mark Shaw, Colin Godfrey, James Dunlop, Henry
Franklin, Petrina Austin and Bjorn Hobart. The terms and conditions
of the Investment Management Agreement are described in the
Management Engagement Committee Report within the 2019 Annual
Report.
The total amount outstanding at the period end relating to the
Investment Management Agreement was GBP4.4 million (30 June 2019:
GBP4.4 million and 31 December 2019: GBP4.5 million).
The amounts paid to Directors for their services for the period
to 30 June 2020 was GBP0.2 million (30 June 3019: GBP0.2 million
and 31 December 2019: GBP0.4 million).
The total expense recognised in the Group profit or loss
relating to share-based payments under the Investment Management
Agreement was GBP1.2 million (30 June 2019: GBP1.1 million and 31
December 2019: GBP2.3 million), of which GBP1.2 million (31
December 2019: GBP1.2 million) was outstanding at the period
end.
During the period the Directors who served during the period
received the following dividends: Richard Jewson: GBP2,857 (June
2019: GBP2,956 and December 2019: GBP5,944), Aubrey Adams: GBP5,694
(June 2019: GBP3,829 and December 2019: GBP8,334), Susanne Given:
GBPnil (December 2019: GBPnil), Alastair Hughes: GBP1,146 (June
2019: GBP1,186 and December 2019: GBP2,384), Richard Laing:
GBP1,501 (June 2019: GBP1,552 and December 2019: GBP3,122), Karen
Whitworth: GBP250 (June 2019: GBPnil, December 2019: GBPnil) and
Mark Shaw: GBPnil (June 2019: GBP43,329 and December 2019:
GBP90,225).
During the period the six Members of the Manager received the
following dividends: Mark Shaw: GBP57,208 (June 2019: GBP43,329 and
December 2019: GBP90,225)., Colin Godfrey: GBP56,090 (June 2019:
GBP42,173 and December 2019: GBP90,650), James Dunlop: GBP54,048
(June 2019: GBP40,060 and December 2019: GBP86,402), Henry
Franklin: GBP40,524 (June 2019: GBP29,937 and December 2019:
GBP64,415), Petrina Austin: GBP6,082 (June 2019: GBP4,285 and
December 2019: GBP9,123) and Bjorn Hobart: GBP6,740 (June 2019:
GBP4,976 and December 2019: GBP10,946).
18. Capital commitments
The Group had capital commitments of GBP222.0 million in
relation to its forward funded pre -- let development assets, asset
management initiatives and commitments under development land,
outstanding as at 30 June 2020 (31 December 2019: GBP129.9
million). All commitments fall due within two years from the date
of this report.
19. Contingent liabilities
At 30 June 2020, the Group has committed to a development
contract of GBP10.8 million for one of its tenants to construct a
logistic asset on a pre-let basis. As at this date the contract was
contingent on the planning consent becoming unconditional. The
contract has subsequently become unconditional.
20. Subsequent events
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
NOTES TO EPRA NAV CALCULATIONS
In October 2019, EPRA issued new best practice recommendations
(BPR) for financial guidelines on its definitions of NAV measures:
EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV)
and EPRA net disposal value (NDV). The Group has adopted these new
guidelines and applies them in the 2020 Interim Report. The group
considered EPRA Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Group and we are now reporting this as our
primary NAV measure, replacing our previously reported EPRA NAV and
EPRA NAV per share metrics. EPRA NTA excludes the intangible assets
and the cumulative fair value adjustments for debt-related
derivatives which are unlikely to be realised.
30 June 2020 Current measures Previously reported measures
--------------------------------- -------------------------------------- ---------------------------------
EPRA NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
Note GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----- --------- --------- --------- -------------- -----------------
NAV attributable to shareholders 2,608.5 2,608.5 2,608.5 2,608.5 2,608.5
Revaluation of land options 17.5 17.5 17.5 - -
Mark-to-market adjustments of
derivatives 19.5 19.5 - 19.5 -
Intangibles (2.2) - - - -
Fair value of debt - - (87.9) - (87.9)
Real estate transfer tax (1) - 277.2 - - -
At 30 June 2020 16 2,643.3 2,922.7 2,538.1 2,628.0 2,520.6
--------------------------------- ----- --------- --------- --------- -------------- -----------------
30 June 2019 Current measures Previously reported measures
--------------------------------- -------------------------------------- ---------------------------------
EPRA NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
Note GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----- --------- --------- --------- -------------- -----------------
NAV attributable to shareholders 2,546.2 2,546.2 2,546.2 2,546.2 2,546.2
Revaluation of land options 18.4 18.4 18.4 - -
Mark-to-market adjustments of
derivatives 16.7 16.7 - 16.7 -
Intangibles (2.5) - - - -
Fair value of debt - - (39.4) - (39.4)
Real estate transfer tax (1) - 255.0 - - -
At 30 June 2019 16 2,578.8 2,836.3 2,525.2 2,562.9 2,506.8
--------------------------------- ----- --------- --------- --------- -------------- -----------------
31 December 2019 Current measures Previously reported measures
--------------------------------- -------------------------------------- -------------------------------
EPRA
NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
Note GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----- --------- --------- --------- -------------- ---------------
NAV attributable to shareholders 2,561.2 2,561.2 2,561.2 2,561.2 2,561.2
Revaluation of land options 14.7 14.7 14.7 - -
Mark-to-market adjustments of
derivatives 17.4 17.4 - 17.4 -
Intangibles (2.3) - - - -
Fair value of debt - - (53.0) - (53.0)
Real estate transfer tax (1) - 256.6 - - -
At 31 December 2019 16 2,591.0 2,849.9 2,522.9 2,578.6 2,508.2
--------------------------------- ----- --------- --------- --------- -------------- ---------------
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of
RETT. RETT are added back when calculating EPRA NRV.
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 2019. 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 2019 have been delivered to the Registrar of Companies
and those for the year ended 31 December 2020 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
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