To:
RNS
Date:
22 March 2021
From:
BMO Real Estate Investments Limited
LEI:
231801XRCB89W6XTR23
Interim results in respect of the
six-month period ended 31 December
2020
- Net asset value total return* of 3.0
per cent
- Portfolio ungeared total return* of
3.4 per cent
- Annualised dividend yield* of 4.8 per
cent based on the period end share price
- Dividend cover* of 118.9 per cent for
the period
* See Alternative Performance Measures
The Chairman, Vikram Lall,
stated:
Since we issued our last Annual Report Brexit has happened with
Britain leaving the EU, and a
vaccination programme is underway to combat the Covid-19 pandemic.
However, much uncertainty remains in relation to the longer-term
effect of Brexit, and to the time it will take for the UK economy
and employment levels to recover from the severe downturn of 2020.
Retail and hospitality distress continues. There is also much
debate over the effects of working from home on future occupancy
levels of UK offices.
The Group’s performance reflects these challenging conditions in
the UK commercial property market with capital values decreasing by
1.1 per cent. The net asset value (‘NAV’) total return per share
for the period was 3.0 per cent and the NAV per share at the period
end was 98.1 pence.
The share price increased by 8.9 per cent over the six months to
61 pence per share, giving a share
price total
return of 11.6 per cent, with the discount to NAV narrowing to
37.8 per cent at the period end, compared to a discount of 42.0 per
cent as at 30 June 2020. The share
price has increased significantly since the period end and at the
date of writing is at 70p pence per share.
Rent Collection
It has been a difficult period for rent collection since the
Covid-19 outbreak. However, the Group’s rent collection for
Quarter’s 2 to 4 of 2020 is currently ahead of expectations at 94.5
per cent. The Group’s collection statistics for the first quarter
of 2021 are currently at 90 per cent and the expectation is that
the final collection statistics will be at a similar level to those
experienced in the previous three quarters.
Property Market
The UK commercial property market delivered a total return of
1.1 per cent in the six months to 31
December 2020 with capital falls of 1.1 per cent, as
measured by the MSCI UK Quarterly Property Index (‘MSCI’). The
market showed some signs of steadying following the initial shock
from the pandemic and related economic lockdowns, but sentiment
remained cautious.
The retail sector remained weak and delivered a total return of
-4.0 per cent, with both occupier and investor sentiment depressed.
Retail warehousing was less affected than town centre retailing.
Industrials delivered an 8.6 per cent total return, pulling well
ahead of other sectors, with the South-East out-performing,
supported by strong occupier take-up and investor demand. The
Office market faltered to record a -0.6 total return, as concerns
about a reduction in office demand, due to a permanent shift to
working from home, gained ground. Total returns for alternatives
were 0.7 per cent in the six-month period, led by residential
property.
The current cycle has affected rent collection rates, especially
in retail and leisure but with offices and industrial more
resilient. Investment activity staged some recovery, to move above
the long-term average by year-end, helped by overseas buying and
with transactions focused on Central
London offices and industrials. The annual income return was
stable at 4.5 per cent over the period.
Portfolio
The Group’s property portfolio delivered a total return of 3.4
per cent over the six-month period, compared with 1.1 per cent for
MSCI. Both capital and income returns were ahead of the Index. Over
the twelve months to December 2020
the Group’s property portfolio produced an ungeared total return of
1.4 per cent, 3.4 per cent of outperformance against MSCI which
returned -2.0 per cent.
At the All Property level valuations were again under pressure
though there was much variance in subsector performance. Favourable
portfolio composition led to capital growth of 0.9 per cent for the
Company’s assets over the period, alongside an income return of 2.6
per cent. The portfolio continues to deliver an above market income
yield and a below market vacancy rate of 5.3 per cent, much of
which is attributable to ongoing project work rather than
structural void. Rent collection remains the overriding focus in
the current environment with recovery over the period in excess of
94 per cent. Average unexpired lease length has remained steady at
six years.
The portfolio’s Industrial assets were unsurprisingly the main
driver for performance over the period, delivering 7.8 per cent as
a consequence of both yield hardening and rental growth. This is
reflective of their core South-East, and predominantly urban
locations, which continue to experience high levels of occupier
demand. The Industrial assets at Hemel
Hempstead, Banbury and Bracknell, and the multi-let estate
at Colnbrook, Heathrow were amongst the top performers over
the period. The investment in this segment of the market is now 45
per cent of assets by value.
Office assets delivered a positive return of 0.6 per cent over
the period, albeit with capital falls, and performance led by asset
management initiatives in the south east, particularly at County
House, Chelmsford.
The Company’s retail assets delivered a marginally negative
total return of -0.5 per cent over the six months, outperforming
the MSCI Index of -4.0 per cent by some margin. This relative
outperformance was entirely on account of the strong showing of,
and the relative weighting to low rented, essential, non-fashion
and convenience led retail warehousing. Relative performance was
improved further by the absence of shopping centres and department
stores and underweight exposure to hospitality and leisure.
The Company has reduced its exposure to retail in recent years
with eleven sales since 2015, bringing the weighting to the High
Street down to 9 per cent. No purchases or sales were completed
over the period, with the focus very much on protection of the
balance sheet, given the uncertainty surrounding the outcomes from
the pandemic. Notwithstanding this, and despite the fact that the
Company’s retail property is fully let, this element of the
portfolio remains under continual review, evidenced by the fact
that the two high street units at Winchester have recently been
sold for £2.9 million. While the Board remains wary of illiquidity
in parts of the high street market, we have continued to see
interest in the Company’s assets which tend to be in the smaller
lot sizes. There is the potential for continued opportunistic
disposals from the sector over the coming months. In terms of
acquisitions the existing cash balance is healthy with further cash
availability in the form of an undrawn credit facility. With some
comfort from rent collection trends, the Company is well placed to
explore potential acquisitions to add to revenue.
Borrowings and Cash
The Group currently has borrowings of £90 million from a
non-amortising term loan facility agreement with Canada Life
Investments which expires in November
2026. There is also a £20 million 5-year revolving credit
facility agreement with Barclays Bank plc which is currently
undrawn and is available until March
2025. The covenants on both facilities are comfortably met.
Net gearing represented 25.8 per cent of the investment properties
of the Group as at 31 December 2020.
The weighted average interest rate (including amortisation of
refinancing costs) on the Group's total current borrowings is 3.1
per cent. The Company continues to maintain a prudent attitude to
gearing.
The Group had £14.1 million of cash available at 31 December 2020 and the £20 million revolving
credit facility also available if required.
Dividends and Dividend Cover
Given the significant economic risks and continuing uncertainty
regarding the path of Covid-19, the Board made the decision to cut
the quarterly dividend by 50 per cent in June 2020 to 0.625
pence per share. The Board was also mindful that the level
of dividend paid in the previous financial year was 84.3 per cent
covered by profits.
As mentioned above, rent collection rates have been
comparatively strong and the first quarterly interim dividend for
the year ended 30 June 2021, paid in
December 2020, was increased by 36
per cent to 0.85 pence per share. A
second interim dividend of 0.85 pence
per share will be paid on 31 March
2021 to shareholders on the register on 12 March 2021. The Board will continue to monitor
rental receipts and earnings closely and keep the future level of
dividends under review.
Given the reduced level of dividends being paid out in the six
months, the dividend cover was at 118.9 per cent, compared with a
dividend cover of 69.6 per cent for the equivalent period last
year.
Board Changes
As indicated in our last Annual Report, Andrew Gulliford decided to retire as a
director, and he did so on 10 March
2021. The board thanks Andrew for the significant
contribution he has made to the group since its inception in 2004.
We will miss his extensive experience of the UK commercial property
market, his detailed knowledge of the group’s portfolio and his
sage advice.
On 10 March 2021, Rebecca Gates was appointed to the Board.
Rebecca is an experienced property professional who has spent the
last 23 years of her career in a variety of roles within the real
estate investment
management business and is currently Head of UK Property Asset
Management for LaSalle Investment
Management.
Environmental, Social and Governance
(‘ESG’)
The unprecedented conditions caused by the coronavirus pandemic
has impacted everyone in how we go about our daily lives and
collectively in the way we interact with each other.
The Company has strived to make its contribution by engaging
with its occupiers, and looking to support and be flexible with
them as they strive to keep their businesses intact through the
pandemic, to liaising with them in the development of Covid
assessments and measures so they can remain operational whilst
complying with government guidelines. These events have sharpened
our awareness of occupiers as an important stakeholder group.
Whilst the Company’s focus on the social element of ESG has been
strong during the period, this has not been at the expense of
environmental aspirations. The Company has been actively
progressing its approach to environmental risk and opportunity
during recent months and has been working hard in preparation for
setting and publishing its net zero carbon ambition in 2021
ESG remains a key aspect of the Company’s forward strategy. The
unprecedented events of 2020 have given great insight and
understanding of both the power of nature and of the human need,
and the extent to which our communities are intrinsically woven
into our activities. A short update on our progress is provided
below and we will provide a further summary of progress in our
Annual Report later this year, with a more detailed insight of our
performance in our 2021 ESG Report.
Outlook
In these uncertain times the diversification of the Company’s
asset and tenant base should provide relative resilience. This has
been demonstrated in the encouraging rent collection and vacancy
statistics achieved over the course of the pandemic thus far. We
continue to expect disruption to revenues as lockdown and
associated support eases, with the impact most meaningful for the
retail and leisure markets, although offices will not be entirely
immune. Against this background and despite the prolonged
uncertainty, the Company has sufficient cash resources and a
portfolio of buildings that continue to experience good levels of
occupier demand.
Environmental, Social and Governance
(“ESG”)
Highlights for the half year period to
31 December 2020
The Company has continued to advance the implementation of its
ESG Strategy over the period with progress being made in a number
of areas. The coronavirus pandemic has significantly impacted
occupational use of some assets and as such made key indicators
around absolute energy use and carbon emissions difficult to
interpret. However, on a like-for-like basis, comparing landlord
procured energy in the first half of the current reporting year
with the first half of the previous reporting year, a 15 per cent
reduction in energy use can be determined, equating to some 19 per
cent in terms of carbon emissions. This can almost certainly be
attributed to the lower occupation rates seen in multi-occupied
assets on account of covid related restrictions. The impact a new
normal return to work might have on these indicators will be
interesting to
observe.
The distribution profile of Energy Performance Certificate (EPC)
ratings remains broadly unchanged across the portfolio. The overall
number of certificates held has increased by four on account of
demise changes but exposure to lower F & G rated areas remains
unchanged at 11 representing 5 per cent in terms of estimated
rental value.
The Company engaged WSP UK Limited to provide advice and
technical expertise on the assessment and evaluation of physical
climate risks and opportunities through detailed scenario modelling
and analysis. Outputs from the modelling have now been delivered in
the form of detailed property level dashboards for practical
incorporation into individual asset business plans and to support
disclosures under the Taskforce for Climate-related Financial
Disclosures (TCFD) initiative.
We are pleased to report that the Company submitted to the 2020
Global Real Estate Sustainability Benchmark (GRESB) survey and
maintained its year on year improvement trajectory by achieving a
score of 64, representing a 6.6 per cent increase in the previous
year’s result of 60. The Fund also improved its rating in GRESB’s
public disclosure analysis, achieving an A grade indicating the
highest level of reporting and transparency.
The Company is also delighted to report the achievement of a
Gold Award from the European Public Real estate Association (EPRA)
for the standard of its disclosures in its 2020 Annual ESG
Report.
These indicators confirm that good progress is being made and
that the Company has a solid platform from which to continue making
further incremental improvements.
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Comprehensive Income
|
|
Six
months to
31 December
2020
(unaudited) |
Six months to
31 December
2019
(unaudited) |
Year to
30 June
2020
(audited) |
|
Notes |
£’000 |
£’000 |
£’000 |
Revenue |
|
|
|
|
Rental income |
|
8,283 |
8,305 |
17,011 |
Total
revenue |
|
8,283 |
8,305 |
17,011 |
Gains/(Losses)on investment properties |
|
|
|
|
Losses on
sale of investment
properties realised
Unrealised gains/(losses) on revaluation of investment
properties |
6
6 |
-
2,795 |
(987)
(2,473) |
(991)
(17,031) |
Total
income |
|
11,078 |
4,845 |
(1,011) |
|
|
|
|
|
Expenditure |
|
|
|
|
Investment management
fee |
2 |
(974) |
(1,318) |
(2,261) |
Other expenses |
3 |
(1,323) |
(884) |
(2,146) |
Total
expenditure |
|
(2,297) |
(2,202) |
(4,407) |
|
|
|
|
|
Net operating
profit/(loss) before finance costs and taxation |
|
8,781 |
2,643 |
(5,418) |
|
|
|
|
|
Net finance
costs |
|
|
|
|
Interest receivable |
|
2 |
14 |
34 |
Finance costs |
|
(1,680) |
(1,781) |
(3,507) |
|
|
(1,678) |
(1,767) |
(3,473) |
|
|
|
|
|
Net
profit/(loss) from ordinary activities before taxation |
|
7,103 |
876 |
(8,891) |
Taxation on profit on
ordinary activities |
|
(87) |
(147) |
(258) |
Profit/(loss) for the period |
|
7,016 |
729 |
(9,149) |
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share |
5 |
2.9p |
0.3p |
(3.8p) |
|
|
|
|
|
|
|
|
BMO Real Estate Investments Limited
Condensed Consolidated Balance Sheet
|
Notes |
31 December
2020
(unaudited)
£’000 |
31 December
2019
(unaudited)
£’000 |
30 June
2020
(audited)
£’000 |
Non-current assets |
|
|
|
|
Investment properties |
6 |
314,368 |
322,405 |
308,734 |
Trade and other receivables |
|
3,726 |
3,398 |
3,788 |
|
|
318,094 |
325,803 |
312,522 |
Current assets |
|
|
|
|
Trade and other receivables |
|
3,113 |
1,714 |
3,437 |
Cash and cash equivalents |
|
14,093 |
16,618 |
13,726 |
|
|
17,206 |
18,332 |
17,163 |
|
|
|
|
|
Total assets |
|
335,300 |
344,135 |
329,685 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(8,462) |
(6,552) |
(6,319) |
Tax payable |
|
(87) |
(147) |
(258) |
|
|
(8,549) |
(6,699) |
(6,577) |
|
|
|
|
|
Total assets less current
liabilities |
|
326,751 |
337,436 |
323,108 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Interest-bearing bank loans |
7 |
(89,640) |
(89,666) |
(89,542) |
Trade and other payables |
|
(1,039) |
(773) |
(960) |
|
|
(90,679) |
(90,439) |
(90,502) |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
236,072 |
246,997 |
232,606 |
|
|
|
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
Share capital |
9 |
2,407 |
2,407 |
2,407 |
Special distributable reserve |
|
177,161 |
177,161 |
177,161 |
Capital reserve |
|
54,917 |
66,684 |
52,122 |
Revenue reserve |
|
1,587 |
745 |
916 |
Equity shareholders’
funds |
|
236,072 |
246,997 |
232,606 |
|
|
|
|
|
|
|
|
|
|
Net asset value per
share |
10 |
98.1p |
102.6p |
96.6p |
|
|
|
|
|
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 December 2020 (unaudited)
|
Share Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2020 |
2,407 |
177,161 |
52,122 |
916 |
232,606 |
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
7,016 |
7,016 |
Dividends paid |
- |
- |
- |
(3,550) |
(3,550) |
Transfer in respect of gains on
investment properties |
- |
- |
2,795 |
(2,795) |
- |
|
|
|
|
|
|
At 31 December 2020 |
2,407 |
177,161 |
54,917 |
1,587 |
236,072 |
For the period ended 31 December 2019 (unaudited)
|
|
Share Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2019 |
|
2,407 |
177,161 |
70,144 |
2,574 |
252,286 |
|
|
|
|
|
|
|
Profit for the period |
|
- |
- |
- |
729 |
729 |
Dividends paid |
4 |
- |
- |
- |
(6,018) |
(6,018) |
Transfer in respect of losses on
investment properties |
|
- |
- |
(3,460) |
3,460 |
- |
|
|
|
|
|
|
|
At 31 December 2019 |
|
2,407 |
177,161 |
66,684 |
745 |
246,997 |
For the year ended 30 June 2020 (audited)
|
|
Share Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2019 |
|
2,407 |
177,161 |
70,144 |
2,574 |
252,286 |
|
|
|
|
|
|
|
Loss for the year |
|
- |
- |
- |
(9,149) |
(9,149) |
Dividends paid |
4 |
- |
- |
- |
(10,531) |
(10,531) |
Transfer in respect of losses on
investment properties |
|
- |
- |
(18,022) |
18,022 |
- |
|
|
|
|
|
|
|
At 30 June 2020 |
|
2,407 |
177,161 |
52,122 |
916 |
232,606 |
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Cash Flows
|
Notes |
Six months
to
31 December 2020
(unaudited) |
Six months to 31
December 2019
(unaudited) |
Year
to
30 June
2020
(audited) |
|
|
|
|
|
|
|
£’000 |
£’000 |
£’000 |
|
|
|
|
|
Cash flows from operating
activities |
|
|
|
|
Net profit/(loss) for the period
before taxation |
|
7,103 |
876 |
(8,891) |
Adjustments for: |
|
|
|
|
Losses on sale of investment
properties
realised
Unrealised (gains)/losses on revaluation
of
investment properties |
6
6 |
-
(2,795) |
987
2,473 |
991
17,031 |
Realised
capital contribution |
6 |
- |
(12) |
(12) |
Decrease/(increase) in operating trade and
other
receivables |
|
386 |
1,699 |
(494) |
Increase in
operating trade and other payables |
|
2,221 |
455 |
423 |
Interest
received |
|
(2) |
(14) |
(34) |
Finance
costs |
|
1,680 |
1,781 |
3,507 |
|
|
8,593 |
8,245 |
12,521 |
|
|
|
|
|
Taxation
paid |
|
(258) |
(295) |
(295) |
Net cash inflow
from operating activities |
|
8,335 |
7,950 |
12,226 |
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
Capital expenditure |
6 |
(2,839) |
(1,184) |
(2,070) |
Purchase of investment
properties |
6 |
- |
(718) |
(723) |
Sale of investment
properties |
6 |
- |
15,402 |
15,402 |
Interest received |
|
2 |
14 |
34 |
|
|
|
|
|
Net cash (outflow)/inflow from
investing activities |
|
(2,837) |
13,514 |
12,643 |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Dividends paid |
|
(3,550) |
(6,018) |
(10,531) |
Bank loan interest paid |
|
(1,581) |
(1,686) |
(3,470) |
Bank loan repaid, net of costs –
Barclays |
|
- |
(7,000) |
(7,000) |
|
|
|
|
|
Net cash outflow from financing
activities |
|
(5,131) |
(14,704) |
(21,001) |
|
|
|
|
|
Net increase in cash and cash
equivalents |
|
367 |
6,760 |
3,868 |
Opening cash and cash
equivalents |
|
13,726 |
9,858 |
9,858 |
Closing cash and cash
equivalents |
|
14,093 |
16,618 |
13,726 |
BMO Real Estate Investments Limited
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December
2020
1. General information
The condensed consolidated financial statements have been
prepared in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom Financial Conduct
Authority and IAS 34 ‘Interim Financial Reporting’. The condensed
consolidated financial statements do not include all of the
information required for a complete set of IFRS financial
statements and should be read in conjunction with the consolidated
financial statements for the Group for the year ended 30 June 2020 which were prepared under full IFRS
requirements. The accounting policies used in preparation of the
condensed consolidated financial statements are consistent with
those of the consolidated financial statements of the Group for the
year ended 30 June 2020.
2.
Investment management fee
|
Six months to
31 December
2020
£’000 |
Six months to
31 December 2019
£’000 |
Year to
30 June 2020
£’000 |
|
|
|
|
Investment management fee – basic
fee |
974 |
1,044 |
1,995 |
Investment management fee –
performance fee |
- |
274 |
266 |
|
|
|
|
|
974 |
1,318 |
2,261 |
3. Other
expenses
|
Six months to
31 December
2020
£’000 |
Six months to
31 December 2019
£’000 |
Year to
30 June 2020 £’000 |
|
|
|
|
Direct operating expenses of let
rental property |
358 |
358 |
647 |
Direct operating expenses of vacant
property |
272 |
14 |
205 |
Provision for bad debts |
209 |
69 |
413 |
Valuation and other professional
fees |
132 |
126 |
249 |
Directors’ fees |
80 |
80 |
159 |
Administrative fee |
55 |
55 |
110 |
Other expenses |
217 |
182 |
363 |
|
|
|
|
|
1.323 |
884 |
2,146 |
|
|
|
|
4. Dividends
|
Six
months to
31 December 2020 |
Six
months to
31 December 2019 |
Year
ended 30 June 2020 |
|
£’000 |
Rate
(pence) |
£’000 |
Rate
(pence) |
£’000 |
Rate
(pence) |
Property Income
Distributions: |
|
|
|
|
|
|
Fourth interim for the prior
year |
1,504 |
0.625 |
3,009 |
1.25 |
3,009 |
1.25 |
First interim |
2,046 |
0.850 |
3,009 |
1.25 |
3,009 |
1.25 |
Second interim |
- |
- |
- |
- |
3,009 |
1.25 |
Third interim |
- |
- |
- |
- |
1,504 |
0.625 |
|
3,550 |
1.475 |
6,018 |
2.50 |
10,531 |
4.375 |
A second interim dividend for the year to 30 June 2021, of 0.85
pence per share, will be paid on 31
March 2021 to shareholders on the register at close of
business on 12 March 2021.
5.
Earnings per share
|
Six months to
31 December 2020 |
Six months
to
31 December 2019 |
Year to
30 June
2020 |
|
|
|
|
Net profit/(loss) attributable to
ordinary shareholders (£’000) |
7,016 |
729 |
(9,149) |
Weighted average of ordinary shares
in issue during period |
240,705,539 |
240,705,539 |
240,705,539 |
Return per share |
2.9p |
0.3p |
(3.8p) |
Earnings for the six months to 31
December 2020 should not be taken as a guide to the results
for the year to 30 June 2021.
6. Investment
properties
|
|
Six months to
31 December
2020
£’000 |
Six months to
31 December
2019
£’000 |
Year to
30 June
2020
£’000 |
Freehold and
leasehold properties
Opening market value |
|
312,285 |
343,550 |
343,550 |
Capital expenditure |
|
2,839 |
1,184 |
2,070 |
Purchase |
|
- |
718 |
723 |
Sales -
net proceeds
- losses on sales |
|
-
- |
(15,402)
(9,367) |
(15,402)
(9,372) |
Unrealised losses realised during
the period |
|
- |
8,380 |
8,381 |
Unrealised gains on
investment properties
Unrealised losses on investment properties |
|
10,609
(7,814) |
4,048
(6,521) |
3,951
(20,982) |
Realised capital
contribution
Accrued selling costs |
|
-
- |
12
- |
12
- |
Movement in lease incentive
receivable |
|
(94) |
(877) |
(646) |
Closing market value |
|
317,825 |
325,725 |
312,285 |
Adjustment for lease incentives |
|
(3,457) |
(3,320) |
(3,551) |
Balance sheet carrying
value |
|
314,368 |
322,405 |
308,734 |
|
|
|
|
|
|
Six months to 31
December 2020
£’000 |
Six months to 31
December 2019
£’000 |
Year to
30 June 2020
£’000 |
|
|
|
|
Losses on sale |
- |
(9,367) |
(9,372) |
Unrealised losses realised during
the year |
- |
8,380 |
8,381 |
Losses on sale of investment
properties realised |
- |
(987) |
(991) |
|
Six months to 31
December 2020
£’000 |
Six months to 31
December 2019
£’000 |
Year to
30 June 2020
£’000 |
|
|
|
|
Unrealised gains on investment
properties |
10,609 |
4,048 |
3,951 |
Unrealised losses on investment
properties |
(7,814) |
(6,521) |
(20,982) |
|
|
|
|
Unrealised gains/(losses) on
revaluation of investment properties |
2,795 |
(2,473) |
(17,031) |
|
|
|
|
All the Group’s investment properties were valued as at
31 December 2020 by qualified
professional valuers working in the company of Cushman &
Wakefield. All such valuers are chartered surveyors, being
members of the Royal Institution of Chartered Surveyors
(‘RICS’). There were no significant changes to the valuation
techniques used during the period and these valuation techniques
are detailed in the consolidated financial statements as at and for
the year ended 30 June 2020. The market value of these
investment properties amounted to £317,825,000 (31 December 2019: £325,725,000; 30 June 2020: £312,285,000), however an
adjustment has been made for lease incentives of £3,457,000 that
are already accounted for as an asset (31
December 2019: £3,320,000; 30 June
2020: £3,551,000).
7. Interest-bearing bank
loans
As part of the restructuring of the Group’s long-term financing,
IRP Holdings Limited (“IRPH”) entered into a £90 million eleven
year non-amortising term loan facility agreement with Canada
Life.
Canada Life provided committed funds on 9
November 2015 and IRPH drew down the loan in full on
13 November 2015. Interest is payable
on this loan from the first utilisation date, quarterly in arrears,
at a fixed rate of 3.36 per cent per annum. The loan is secured by
means of a fixed charge over specific properties. The loan has a
maturity date of 9 November 2026.
On 27 March 2020, IPT Property
Holdings Limited (“IPTH”) entered into a £20 million five year
revolving credit facility (“RCF”) agreement with Barclays. The loan
facility expires on 27 March 2025 and
can be drawn down or repaid at anytime. Interest accrues on the
bank loan at a variable rate, based on 3 month LIBOR plus margin
and mandatory lending costs, and is payable quarterly. The margin
is 1.7 per cent per annum for the duration of the loan. As at
31 December 2020 none of the RCF was
drawn down (at 30 June 2020 and
31 December 2019, none of the RCF was
drawn down).
At 31 December 2020
borrowings of £90 million were drawn down. The balance sheet
value is stated at an amortised cost of £89,640,000 (31 December 2019: £89,666,000 and 30 June 2020: £89,542,000). Amortised cost
is calculated by deducting loan arrangement costs, which are
amortised back over the life of the loan. The fair value of
the Canada Life loan is shown in note 8.
8. Fair value
measurements
The fair value measurements for financial assets and financial
liabilities are categorised into different levels in the fair value
hierarchy based on the inputs to valuation techniques
used.
The different levels are defined as follows:
· Level 1 – Unadjusted, fully
accessible and current quoted prices in active markets for
identical assets or liabilities. Examples of such instruments
would be investments listed or quoted on any recognised stock
exchange.
· Level 2 – Quoted prices for
similar assets or liabilities, or other directly or indirectly
observable inputs which exist for the duration of the period of
investment. Examples of such instruments would be those for
which the quoted price has been suspended, forward exchange rate
contracts and certain other derivative instruments.
· Level 3 – External inputs are
unobservable. Fair value is the Directors’ best estimate,
based on advice from relevant knowledgeable experts, use of
recognised valuation techniques and on assumptions as to what
inputs other market participants would apply in pricing the same or
similar instruments.
All of the Group’s investments in direct property are included
in Level 3 as it involves the use of significant inputs. There were
no transfers between levels of the fair value hierarchy during the
six-month period ended 31 December
2020.
Other than the fair values stated in the table below, the fair
value of all other financial assets and liabilities is not
materially different from their carrying value in the financial
statements.
|
31 December 2020
£’000 |
31 December 2019
£’000 |
30 June
2020
£’000 |
£90 million Canada Life Loan
2026* |
92,584 |
95,676 |
95,913 |
*The fair value of the interest-bearing Canada Life Loan is
based on the yield on the Treasury 2% 2025 which would be used as
the basis for calculating the early repayment of such loan plus the
appropriate margin. The Canada Life loan is classified as Level 2
under the hierarchy of fair value measurement.
The Group’s financial risk management objectives and policies
are consistent with those disclosed in the consolidated financial
statements as at and for the year ended 30
June 2020.
9. Share capital
|
31 December
2020
£’000 |
31 December
2019
£’000 |
30 June
2020
£’000 |
Allotted, called-up and fully
paid |
|
|
|
240,705,539 Ordinary Shares of 1
pence each in issue |
2,407 |
2,407 |
2,407 |
The Company issued no Ordinary Shares during the period.
10. Net asset value per share
|
Six months
to
31 December 2020 |
Six months
to
31 December 2019 |
Year ended
30 June
2020 |
Net asset value per ordinary share |
98.1p |
102.6p |
96.6p |
Net assets attributable
at the period end (£’000) |
236,072 |
246,997 |
232,606 |
Number of ordinary
shares in issue at the period end |
240,705,539 |
240,705,539 |
240,705,539 |
11. Going concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council.They have considered the current cash position of the
Group, the availability of the loans and compliance with their
covenants, forecast rental income and other forecast cash flows.The
Group has agreements relating to its borrowing facilities with
which it has complied during the period.Based on this information
the Directors believe that the Group has the ability to meet its
financial obligations as they fall due for a period of at least
twelve months from the date of the approval of the accounts.For
this reason, they continue to adopt the going concern basis in
preparing the accounts.
12. Related party transactions
The Directors of the Company, who are considered to be the
Group’s key management personnel, received fees for their services
and dividends from their shareholdings in the Company. No
fees remained payable at the period end.
13. Operating segments
The Board has considered the requirements of IFRS 8 ‘Operating
Segments’. The Board is of the view that the Group is engaged
in a single segment of business, being property investment, and in
one geographical area, the United
Kingdom, and that therefore the Group has only a single
operating segment. The Board of Directors, as a whole, has been
identified as constituting the chief operating decision maker of
the Group. The key measure of performance used by the Board to
assess the Group’s performance is the total return of the Group’s
net asset value, as calculated under IFRS, and therefore no
reconciliation is required between the measure of profit or loss
used by the Board and that contained in the condensed consolidated
financial statements.
14. Investment in subsidiary
undertakings
The Group results consolidate those of IRP Holdings Limited
(‘IRPH’) and IPT Property Holdings Limited (‘IPTH’). IRPH and IPTH
are companies incorporated in Guernsey whose principal business is
that of a property investment company. These companies are
100 per cent owned by the Group’s ultimate parent company, which is
BMO Real Estate Investments Limited.
15. The report and accounts for the half-year ended
31 December 2020 is available on the
website www.bmorealestateinvestments.com
Statement of Principal Risks and
Uncertainties
Covid-19 has had a significant effect on the commercial real
estate market, and the duration and consequences of the situation
are uncertain, which has resulted in a number of the residual risks
increasing. The areas of increased risk relate to the potential for
tenant defaults, the volatility of the share price and availability
of cash resources. These areas are discussed in detail in the
Chairman’s Statement. Since the outbreak, the Board have been
meeting on a significantly more frequent basis.
The Group’s assets consist of direct investments in UK
commercial property. Its principal risks are therefore related to
the UK commercial property market in general but also the
particular circumstances of the properties in which it is invested
and their tenants. Other risks faced by the Group include
geopolitical, market, investment and strategic, regulatory, tax
structuring and compliance, financial, reporting, credit,
operational and environmental risks. The Group is also exposed to
risks in relation to its financial instruments. These risks, and
the way in which they are mitigated and managed, are described in
more detail under the heading ‘Principal Risks and Future
Prospects’ within the Business Model and Strategy in the Group’s
Annual Report for the year ended 30 June
2020. The Group’s principal risks and uncertainties have not
changed materially since the date of that report and are not
expected to change for the remainder of the Company’s financial
year.
Statement of Directors’
Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
· the condensed set of
consolidated financial statements has been prepared in accordance
with IAS 34 ‘Interim Financial Reporting’ as adopted by the
European Union;
· the Chairman’s Statement
constituting the Interim Management Report together with the
Statement of Principal Risks and Uncertainties include a fair
review of the information required by the Disclosure and
Transparency Rules (‘DTR’) 4.2.7R, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed set of
consolidated financial statements; and
· the Chairman’s Statement
together with the consolidated financial statements include a fair
review of the information required by DTR 4.2.8R, being related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the
financial position or performance of the Group during that period,
and any changes in the related party transactions described in the
last Annual Report that could do so.
On behalf of the Board
Vikram Lall
Chairman
19 March 2021
Alternative Performance Measures
The Company uses the following Alternative Performance Measures
(‘APMs’). APMs do not have a standard meaning prescribed by GAAP
and therefore may not be comparable to similar measures presented
by other entities.
Discount or Premium – The share price of an Investment Company
is derived from buyers and sellers trading their shares on the
stock market. If the share price is lower than the NAV per share,
the shares are trading at a discount. This usually indicates that
there are more sellers than buyers. Shares trading at a price above
the NAV per share, are said to be at a premium.
|
Six months to 31
December
2020
Pence |
Six months to 31
December
2019
Pence |
Year to
30 June
2020
Pence |
Net Asset Value per
share |
98.1 |
102.6 |
96.6 |
Share price per share |
61.0 |
84.0 |
56.0 |
Discount |
37.8% |
18.1% |
42.0% |
Dividend Cover – The percentage by which profits for the year
(less gains/losses on investment properties) cover the dividend
paid.
A reconciliation of dividend cover is shown below:
|
Six months to 31
December
2020
£’000 |
Six months to 31
December
2019
£’000 |
Year to
30 June
2020
£’000 |
|
|
|
|
Profit/(loss) for the
period |
7,016 |
729 |
(9,149) |
Add back: Realised
losses/(gains)
Unrealised (gains)/losses |
-
(2,795) |
987
2,473 |
991
17,031 |
Profit before investment gains
and losses |
4,221 |
4,189 |
8,873 |
Dividends |
3,550 |
6,018 |
10,531 |
Dividend Cover
percentage |
118.9% |
69.6% |
84.3% |
.
Dividend Yield – The annualised dividend divided by the share
price at the period end. An analysis of dividends is contained in
note 4.
Net Gearing – Borrowings less net current assets divided by
value of investment properties.
|
Six months to 31
December
2020
£’000 |
Six months to 31
December
2019
£’000 |
Year to
30 June
2020
£’000 |
|
|
|
|
Loans |
89,640 |
89,666 |
89,542 |
Less net current assets |
(8,657) |
(11,633) |
(10,586) |
Total |
80,983 |
78,033 |
78,956 |
Value of investment
properties |
314,368 |
322,405 |
308,734 |
Net Gearing |
25.8% |
24.2% |
25.6% |
Portfolio (Property) Capital Return – The change in property
value during the period after taking account of property purchases
and sales and capital expenditure, calculated on a quarterly
time-weighted basis.
Portfolio (Property) Income Return – The income derived from a
property during the period as a percentage of the property value,
taking account of direct property expenditure, calculated on a
quarterly time-weighted basis.
Portfolio (Property) Total Return – Combining the Portfolio
Capital Return and Portfolio Income Return over the period,
calculated on a quarterly time-weighted basis.
Total Return – The return to shareholders calculated on a per
share basis by adding dividends paid in the period to the increase
or decrease in the Share Price or NAV. The dividends are assumed to
have been reinvested in the form of Ordinary Shares or Net Assets,
respectively, on the date on which they were quoted
ex-dividend.
|
Six months to 31 December
2020 |
Six months to 31 December
2019 |
Year to
30 June
2020 |
|
|
|
|
NAV per share at the start of the
period |
96.6p |
104.8p |
104.8p |
NAV per share at the end of the
period |
98.1p |
102.6p |
96.6p |
Change in the period |
+1.6% |
-2.1% |
-7.8% |
Impact of dividend
reinvestments |
+1.5% |
+2.4% |
+4.1% |
|
|
|
|
NAV total return for the
period |
+3.0% |
+0.3% |
-3.7% |
|
|
|
|
|
Six months to 31
December
2020 |
Six months to 31
December
2019 |
Year to
30 June
2020 |
|
|
|
|
Share price per share at the
start of the period |
56.0p |
80.0p |
80.0p |
Share price per share at the end
of the period |
61.0p |
84.0p |
56.0p |
Change in the period |
+8.9% |
+5.0% |
-30.0% |
Impact of dividend
reinvestments |
+2.6% |
+3.2% |
+5.1% |
|
|
|
|
Share price total return for the period |
+11.6% |
+8.2% |
-24.9% |
|
|
|
|
Enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
Trafalgar Court,
Les Banques,
St Peter Port
Guernsey GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
P Lowe, S Macrae
BMO Investment Business Limited
Tel: 0207 628 8000
Fax: 0131 225 2375
The full interim report for the period to 31 December 2020 will be sent to shareholders and
will be available for inspection at Trafalgar Court, Les Banques,
St Peter Port, Guernsey GY1 3QL, the registered office of the
Company, and from the Company’s website:
www.bmorealestateinvestments.com