TIDMVIN
RNS Number : 2866S
Value and Indexed Prop Inc Tst PLC
15 November 2021
VALUE AND INDEXED PROPERTY INCOME TRUST PLC
Unaudited Half-Yearly Financial Report
For the Six Months Ended 30 September 2021
Value and Indexed Property Income Trust PLC (VIP) is an
investment trust company listed on the London Stock Exchange. It
now invests mainly in direct UK commercial property, with some UK
property-backed securities, to deliver secure, long-term
index-linked income. Its performance benchmark changed on 1 April
2021 from the FTSE All Share Index to the MSCI UK Quarterly
Property Index.
GBP1,000 invested in Value and Income Trust PLC, now VIP, when
OLIM took over as Managers in 1986 had grown, with dividends
reinvested, to GBP27,117 at end September 2021. The total return
was 10.7% p.a., against 5.7% p.a. for the FTSE All Share Index,
where GBP1,000 would have grown to GBP7,130.
VIP's dividend per share has risen every year and grown tenfold
over the 35 years, while the Retail Price Index has trebled. The
medium term dividend policy is for increases at least in line with
inflation, underpinned by VIP's index-related property income.
Summary
30 September 2021 31 March 2021 30 September 2020
GBPm % GBPm % GBPm %
------------ ----- ----- ------- ------ --------- --------
UK Property 110.1 59.2 81.1 45.7 77.1 44.9
------------ ----- ----- ------- ------ --------- --------
UK Equities 30.3 16.3 28.6 16.1 83.2 48.4
------------ ----- ----- ------- ------ --------- --------
Cash 45.7 24.5 67.9 38.2 11.5 6.7
------------ ----- ----- ------- ------ --------- --------
186.1 100.0 177.6 100.0 171.8 100.0
------------ ----- ----- ------- ------ --------- --------
Over the six months ended 30 September 2021, VIP's share price
rose by 1.8% while the net asset value per share, valuing debt at
its market value, rose by 8.6%. VIP's independent property
revaluation showed a 10.5% total return over the six months against
7.6% for the MSCI Quarterly Property Index.
VIP pays dividends quarterly, around the end of January, April,
July and October. For VIP's year ending 31 March 2022, each of the
three interim dividend payments has been increased from 2.9p to
3.0p (+3.4%), with the final dividend to be announced, before
payment in late July 2022.
The first quarterly dividend of 3.0p per Ordinary Share was paid
on 29 October 2021 to all Shareholders on the register on 1 October
2021. The second quarterly dividend of 3.0p per Ordinary Share will
be paid on 28 January 2022 to those Shareholders on the register on
31 December 2021. The ex-dividend date will be 30 December 2021.
The third quarterly dividend of 3.0p per Ordinary Share will be
paid on 29 April 2022 to those Shareholders on the register on 1
April 2022. The ex-dividend date will be 31 March 2022. The Board
will announce in due course the proposed fourth and final payment
for the year which, subject to Shareholders' approval, will be paid
on or around 29 July 2022.
30 September 2021 31 March 2021 30 September 2020
-------------------------- ----------------- ------------- -----------------
Net asset value per share
(valuing debt at market) 278.82p 256.67p 226.47p
========================== ================= ============= =================
Net asset value per share
(valuing debt at par) 290.52p 271.10p 243.50p
========================== ================= ============= =================
Ordinary Share price 222.00p 218.00p 173.50p
========================== ================= ============= =================
Dividend per share 6.00p 12.30p 5.80p
(first and second (total) (first and second
interim) interim)
========================== ================= ============= =================
ENQUIRIES:
Louise Cleary
OLIM Property Limited, Investment Manager, Property
Tel: 020 7846 3252
Patrick Harrington
OLIM Property Limited, Investment Manager, Equities
Tel: 020 7846 3252
Website:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
Investment Manager's Report
VIP's Property Portfolio
Savills' independent valuation at end September 2021 totalled
GBP110,050,000 with a running yield of 5.8% against GBP80,550,000
at end March 2021. Eight new properties were bought for
GBP22,480,000.
Capital values of the 31 properties held over the six months
rose in total by 8.1%. All sectors showed useful gains with
industrials up by 11.1%, supermarkets up by 8.0%, the two bowling
alleys by 9.9%, pubs by 3.8% and others by 8.1%, including the
caravan park by 11.2%.
Since the end of March, eight new freehold properties were
bought, totalling GBP22,480,000 at a net initial yield of 4.9%
after all costs. All have index-linked rent increases; three
industrials, two petrol filling stations, two hotels (one under
construction) and a supermarket. Their valuation at 30 September
totalled GBP23,000,000, which is 2.3% above their total purchase
costs including Stamp Duty Land Tax and agents' and legal fees.
This includes GBP1,000,000 for a site purchase for a new Premier
Inn development at Alnwick, where a further GBP6,000,000 will be
payable on expected completion due June 2022.
There have been nine rent increases over the half year and a
lease extension at Thirsk, plus 100% of the June to September rents
have been collected.
The total return on the portfolio, taking capital and income
together and deducting all costs, was 10.5% over the six months,
against 7.6% for the MSCI Quarterly Index.
We have been managing VIP's Property Portfolio since 1986 and
the performance record for full years is set out in the 2021
Interim Report.
Sale
Contracts were exchanged in September with completion fixed for
November 2021, for the sale of the pub at Thornton Cleveleys for
GBP950,000.
COVID-19 and Rent Collection
From end March to end September, 100% of all rents due were
collected.
Rent Reviews
There have been nine index-linked rent reviews since end March,
six with annual rent reviews delivering an average increase of 2.9%
and three with five yearly increases rising by 15.2% on
average.
The running yield on valuation was 5.8% at the end of September
(MSCI: 4.4%) against 6.4% at the end of March. There were no empty
properties, against an MSCI void rate of 9.7%. All 39 properties
and 40 tenancies are let on full repairing and insuring leases with
upwards only rent reviews and a weighted average unexpired lease
length of 13.8 years (if the tenants' break options are exercised),
with 65% of the income having leases with over 10 years to expiry
(33 out of 40 tenancies).
The Market
A Polarised Recovery Post Pandemic
UK commercial property capital values have, on average,
recovered their pandemic losses, and are now pushing ahead as the
economy rebounds from the crisis. Underlying rental growth has also
turned positive after falling for over a year. Capital values, as
measured by the MSCI Quarterly Index rose by 5.3% over the six
months to end September, to give a total return of 7.6%.
Industrial/warehouse property accounts for most of this gain with
alternative investments also improving, retail patchy and office
values still flat.
These averages mask highly divergent trends across different
property sub-sectors, reflecting fundamental structural changes in
work and spending patterns across the UK, which COVID has
highlighted and speeded up. The table included in the 2021 Interim
Report of capital value changes in the MSCI Quarterly Index from
the beginning of the pandemic at end March 2020 to the latest
figures for end September 2021, shows that the pattern of winners
and losers is stark.
Total commercial property transaction volumes halved from normal
levels in the first six months of the pandemic, with Central London
office sales and lettings both near their nadir in 2009, along with
shopping centres and high street retail. But the strongest sectors,
industrials and supermarkets, were hardly affected and are now
running well above pre-pandemic averages. Turnover and valuations
are now rising rapidly in retail warehousing, alternatives, hotels
and leisure. Offices present a very mixed picture, with long-let
and super prime stock hot and much older secondary stock virtually
unsaleable. Meanwhile, property void rates have risen from 8.2% to
9.6% (and 13.1% to 17.8% on offices) since March 2020.
Rental income was under pressure during the pandemic, from a
combination of tenants unable or unwilling to pay, defaults and
insolvencies, and rising void levels as tenants exercise break
clauses or vacate at lease expiry, or sign new leases at lower
rents in weaker sectors.
As a result, rents actually received on the properties
comprising the MSCI Quarterly Index have fallen by over 9% since
the start of the pandemic in March 2020, as the table in the 2021
Interim Report shows.
The Government has repeatedly suspended landlords' traditional
tools for enforcing rent collection - eviction orders, use of
Commercial Rent Arrears Recovery (CRAR) bailiffs and statutory
demands for winding up. The latest extension is until end March
2022, with no clarity on what will follow. With almost all
properties now open again and able to trade normally, there is no
longer any excuse for tenants not to pay their rent promptly and in
full; rent collection rates should therefore now be back to normal
on professionally managed institutional property portfolios.
Sector Prospects
Warehouse/Industrials - A Virtuous Circle of Rental and Capital
Growth
Warehouse and Industrial property has delivered most of
commercial property's capital growth over the past year for the
right reason: voracious occupier demand, especially from food and
online retailers driving up rents across the country for both "big
box" warehouses near motorways and smaller units on estates nearer
city centres. Valuation yields have come down to reflect improving
rental growth prospects, and this virtuous circle is far from
over.
Investment demand from mainstream institutions, specialist
funds, private equity and overseas investors has driven transaction
volumes in the first half of 2021 to double the five year average
for the whole industrial/ warehouse sector, despite the reluctance
of most potential sellers.
Even if rising costs and supply chain problems put pressure on
some weaker occupiers as economic growth slows over the next year,
industrial property values will still be supported by the
conversion of older and lower value sites to residential and other
alternative uses. Well-located industrial and warehouse property in
all sizes should continue to outperform the property market as a
whole for at least another year.
Offices - At the Foot of the Performance Charts
Offices are now bottom of the performance charts, not retail
property. As the gradual return to the office continues, there is
no sign of office rents or capital values in general rising.
Occasional headline-grabbing investment or letting deals for the
very best space are just a sign of a flight from quantity to
quality, with tenants usually downsizing at the same time, leaving
property owners with obsolescent or obsolete space which will cost
a fortune to upgrade.
Mid and back-office work is now done much more from home or
partly at low cost non-city centre locations. Cost reduction is
tenants' top priority, with break clauses exercised in most cases
and tenants demanding considerable capital expenditure from
landlords to renew leases even in part. Many London office
buildings, in particular, will not be economic to upgrade to the
necessary A-C Energy Performance Certificate ratings, so will
become unlettable. Functional obsolescence and depreciation will
therefore need to be factored more specifically into most office
valuations, leading to rises in average office valuation yields and
falls in capital values to reflect lower effective net rents and
greater
re-letting risk.
Retail - Off the Bottom Overall - Out of Town Buoyant, In Town
Improving if Rents Realistic
Many retailers in high streets and shopping centres were already
on their last legs before COVID; online retail sales market share
reached 36% in 2020, up from 20% a year before and only 14% five
years ago. The pandemic hit them hard in two ways: mainly by
getting older shoppers, in particular, used to the range and
convenience of shopping online, but also by encouraging a switch
from public transport and parking in congested city centres to the
relative ease of car-borne shopping out of town, especially where
well-run retail warehouse operators like B&Q, trade counters,
B&M and Home Bargains trade alongside the leading supermarkets.
Retail warehouse rents were under downward pressure
pre-pandemic, but have now stabilised and capital values are
growing rapidly - partly because many institutional investors have
missed the market in industrial property, want no more offices, and
have money which they are struggling to invest.
On the high street, the steepest falls in property values have
happened in "prime" Central London and other prime highly valued
cities and towns which are now unaffordable for both multiple and
individual retailers. Unfair business rates had already crippled
urban high streets in less prosperous parts of the UK, with
fundamental reform rejected in the latest Budget. Suburbs and
market towns with more affordable rents and an attractive mix of
convenience and independent traders are outperforming as shops
re-open and new retailers take space. Transaction volumes are
rising again for high street shops and shopping centres, but only
at double figure yields unless they offer compelling residential or
other alternative use values.
Supermarkets
Supermarkets and convenience stores (including petrol filling
stations) had a good crisis, often with increases of 20%-30% in
their turnover, part of which they have retained with more people
working on average nearer home. The market leaders are much better
at combining physical and online shopping than most non-food
retailers.
The bidding war for Morrisons, with their mainly freehold
portfolio, shows how highly private equity investors value UK
supermarkets' stable and sustainable cash flows. On-line
penetration remains far lower than in non-food retail, and many
consumers still prefer the choice and convenience of a nearby food
shop in a small or medium-sized store, where the Co-op is
particularly well placed, along with Aldi, Lidl, Sainsburys, Tesco
and M&S Food.
Non-Traditional Alternatives - Well-Funded Strong Survivors
Thrive
Property in the "Alternatives" sector - i.e., everything except
office, industrial or retail - has been growing rapidly in
importance for institutional investors in recent years and now
accounts for one-sixth of the MSCI Quarterly Property Index. It
covers a wide range of property types and tenants, often with long,
index-linked leases, so tenants' covenant strengths and ability to
pay are crucial.
COVID with its ever-changing lockdowns posed a once in a
lifetime challenge to alternative sector operators and investors.
Tenants with strong long-term business models and short-term crisis
management, working with investors who knew how and when to give
help and improve leases, have usually come out of COVID stronger
than before it struck. But their weaker multiple competitors, and
many private operators, have been savagely squeezed or forced out
of business altogether.
Alternatives - Leisure and Hotels - Record Non-City Centre
Trade
The leading pubcos, like Greene King and Wetherspoons, as well
as most traditional regional brewers, have strong balance sheets
with plenty of freehold assets and borrowing capacity. Profitable,
spacious pubs with outside space, have been trading well above
pre-pandemic levels outside Central London, and should, therefore,
be able to manage rising cost pressures. Pubs of this type in
suburban, smaller town and rural locations will be both short and
long-term winners, with more of their customers working nearer home
for part of the week for the foreseeable future.
Hotel values have also bottomed out. Modern hotels in prosperous
smaller towns and rural areas, serving British holidaymakers,
workers and businesses, are very well placed to grow their profits
and outperform large city centre and airport hotels dependent on
international business and travel. Zoom and ESG will kill first
class corporate frequent flying. Covenant strength will remain
crucial for investment value - for example, a Premier Inn is valued
well above a similar Travelodge, because long-term investors hate
CVA's (Company "Voluntary" Arrangements). Caravan parks have also
been outstanding COVID beneficiaries and will continue to
outperform.
Other Alternatives
Health and Fitness clubs are steadily rebuilding their
memberships. The leading brands on large out of town sites, with
good car parking and customers often able to work from home, offer
the best long-term investments. The two main ten pin bowling
companies are both also trading exceptionally well and offer a
sensibly priced family treat which cannot be replicated online.
Direct-let student accommodation investments on long leases to
well-established universities will continue to perform well, but
indirect student housing investments with nomination agreements or
third-party providers may not benefit from yield hardening for safe
long-let property.
COVID has hit care homes hard with costs rising and severe,
partly Brexit-related staff shortages. High quality homes with
self- funded residents will continue to outperform those dependent
on squeezed local authority budgets. Medical centres and private
hospitals will stay in demand as the NHS faces years of non-COVID
catch up and outsources more profitable work.
The Economy
The UK, like most developed Western economies, is on track to
recover to its pre- COVID level of national output by the end of
2021, but inflationary pressures and severe sectoral labour
shortages are generally worse here. It is now clear that the
pandemic struck at a particularly awkward time for Britain
post-Brexit, as our exporters and importers were still struggling
to adjust to new trading rules and restrictions, while many workers
from the EU left the country, with only a small fraction of them
now willing or able to return.
As furlough has just ended, it looks likely that a substantial
number of older workers, in particular, have dropped out of the
labour market permanently. Furloughed workers were heavily
concentrated at the end in the aviation, travel and live
entertainment industries, so there is a fundamental sectoral and
geographical mismatch with the jobs employers are desperate to
fill.
Shortages and sharply rising prices of energy, timber, car
components, commodities in general and other internationally traded
goods are to be expected in a rapidly recovering world economy, and
these markets should gradually return towards more normal levels
next year. But the danger for the UK is that employers aggressively
bidding up labour costs (with active encouragement from Government)
across a wide variety of stressed sectors, from lorry driving to
food picking and processing and from hospitality to care homes to
the NHS, will set off a wage-price spiral which may prove hard to
bring under control. Sharply rising food and fuel prices in the
short term may also hurt lower-paid employees who have not been
able to work from home as easily as people in better paid and white
collar jobs.
UK GDP has bounced back strongly in 2021, with the estimated
growth rate just revised up by the Office for Budget Responsibility
(OBR) and a strong boost from re-opening retail and leisure outlets
as Britons holidayed in this country. But business tax rises (N.I.
and Corporation Tax) and labour, energy and materials shortages are
clouding the outlook for profits. The employers' National Insurance
increase will cost businesses an extra GBP8bn a year, overtaking
corporation tax - and, unlike corporation tax, it has to be paid
whether a business is profitable or not. The recovery is clearly
slowing and UK GDP may be growing at less than 3% again by late
2022, and under 2% in 2023.
Price inflation is rising rapidly, with the annual rates of CPI
(+3.1%) and RPI (+4.9%) near ten-year highs and heading higher,
probably to over 6% for the R.P.I. this winter. The annual rate of
output price (factory gate) inflation has risen from -0.2% in
December to +6.7% in September, while input price (raw material)
inflation shot up from 0.9% to 11.4%, and the oil price has risen
by over 60%. The Bank of England, clearly, should now stop their
asset purchase programme, which has led to the Bank now owning
almost half of all gilts, reducing the effective maturity of UK
Government debt from 11 to 4 years. This is a very risky position
for a country whose government debt is now around 85% of GDP, and a
public sector annual deficit of 6.5% of GDP, with rising interest
payments on index-linked gilts putting further pressure on the
public finances.
UK domestic spending has been the main driver of economic
recovery in 2021, with savings exceptionally high in total
post-pandemic and housing market transactions and prices at record
levels. But real earnings are now under pressure at the lower end
of the income scale, from the GBP20 a week cut in Universal Credit
and rising energy and food bills, with higher National Insurance
payments to come in April. Even modest rises in mortgage interest
payments could seriously stretch some household budgets from late
2022.
Unless there are serious further outbreaks of COVID or
especially dangerous new variants, the world economy should
continue its strong recovery over the next year, under the lead of
the United States and China. Inflation is rising but generally
manageable across most of the developed world. International
interest rates have been kept artificially low by massive
Government bond buying programmes, but these are now tapering off
and both short and long term interest rates will rise. Commercial
property markets are benefitting as recovering world economies and
trade support tenant demand and rental growth. The risk will be if
Central Banks lose control and interest rates have to be raised too
far and too fast - but commercial property yields are generally so
far above interest rates, particularly in the UK, that property has
a healthy margin of safety before that should become a serious
concern.
Conclusion - Index-Linked Income as the Holy Grail
UK commercial property values stabilised in late 2020 and have
been rising with the recovering economy in 2021. Industrials will
be the star performer, and the office sector will struggle. Retail
values have now bottomed out, with gains for supermarkets,
convenience stores and retail warehouses outweighing slowing rates
of decline in shopping centres and high street shops. The
alternative sectors are also on the up, with pubs, hotels, bowling,
health and fitness and caravan parks benefitting strongly outside
London from "staycations" and working from home. Healthcare and
nursing home investments will stay in demand despite their staffing
problems. The commercial property market in 2022, with slowing
growth and rising interest rates, looks likely to deliver lower but
still satisfactory average real returns with industrials and
alternatives still leading the way and offices bringing up the
rear.
The last year and a half has taught UK property investors a
stark lesson: stick to properties let at affordable rents to strong
tenants on long, preferably index-linked, leases. Safe, long-term
indexed income is now being valued ever more highly in a yield-
hungry world of slashed equity dividends, negative real interest
rates and rising costs and prices. Avoid offices and in-town retail
and stay safely on the right side of structural change. The
direction of travel for UK interest rates and price and wage
inflation is clearly upwards, with no destination yet in sight.
UK Equities
Portfolio
The first six months of VIP's financial year saw sales of
non-property backed equities of GBP22.7m and purchases of GBP22.8m,
completing the reorganisation of the equity portfolio. The direct
equity portfolio is now valued at just over GBP30m in 10
investments.
New investment has been focused on industrial property with new
holdings in Tritax Big Box REIT, Urban Logistics REIT and Warehouse
REIT, plus a new holding in Tesco and an increased holding in Wm
Morrison Supermarkets, prior to the initial bid approach.
Elsewhere, new holdings have been made in Real Estate Credit
Investments, which advances loans secured on property, Residential
Secure Income REIT, which operates in the retirement housing and
the shared ownership sector, and PRS REIT, which has a portfolio of
over 5,000 private rented homes. The holding in Legal & General
is being retained as it is a significant property investor with a
high and growing yield.
Performance
VIP's remaining equity portfolio outperformed the FTSE All Share
Index during the reporting period. Adjusted for the sizeable
disposals and reinvestments made over the period, the portfolio
recorded a total return of 9.2% compared to the 8.0% achieved by
the FTSE All Share Index. The performance was helped by the
portfolio orientation towards industrial property, which has been
the strongest part of the commercial property market. However, the
largest single contributor to performance was Wm Morrison
Supermarkets which rose 61% over the six months after it became the
subject of a takeover battle between two US private equity houses.
Civitas Social Housing was a disappointing performer when directors
were shown to have undisclosed shareholdings in the company's
tenants. The shares have, therefore, been sold because of poor
governance.
The Market
The first six months of VIP's financial year has seen world
stock markets continue their recovery as economies have bounced
back from their lockdown-inspired recessions. The UK stock market,
as measured by the FTSE All Share Index rose by 5.9% and delivered
a total return of 8.0%, although the UK market continued to lag the
stronger returns seen elsewhere in the world, particularly in the
US. Nonetheless, the relative value in the UK stock market has been
demonstrated by a number of high-profile takeover bids.
Property backed equities have generally performed well,
especially REITs and investment companies focused on industrial
property, where strong occupational and investment demand is
driving rents and capital values higher.
Investment Manager
OLIM Property Limited
12 November 2021
Interim Board Report
Management and Administration of VIP
Value and Indexed Property Income Services Limited (VIS), a
wholly owned subsidiary of the Company, is the Company's
Alternative Investment Fund Manager (AIFM). As AIFM, VIS has
responsibility for the overall portfolio management and risk
management of the assets of the Company. VIS has delegated its
portfolio management responsibilities for the property and equity
portfolios to OLIM Property Limited (OLIMP) (the Investment
Manager). The delegation by VIS of its portfolio management
responsibilities is in accordance with the delegation requirements
of the Alternative Investment Fund Managers Directive (AIFMD). The
Investment Manager remains subject to the supervision and direction
of VIS. The Investment Manager is responsible to VIS and ultimately
to the Company in regard to the management of the investment of the
assets of the Company in accordance with the Company's investment
objective and policy. VIS has a risk committee which reviews the
effectiveness of the Company's internal controls and risk
management systems and procedures and identifies, measures, manages
and monitors the risks identified as affecting the Company's
business.
BNP Paribas Securities Services is the Company's Depositary and
oversees the Company's custody and cash arrangements.
Principal and Emerging Risks and Uncertainties
The Board carries out a regular review and robust assessment of
the principal and emerging risks facing the Group, including those
that would threaten its business model, future performance,
solvency or liquidity. These principal and emerging risks and
uncertainties are set out in full in the Strategic Report within
the 2021 Annual Report, and are considered equally applicable to
the second half of the financial year as for the period under
review.
Climate Change and Social Responsibility Risk
The Board recognises that climate change is an important
emerging risk that all companies should take into consideration
within their strategic planning. However, the Company has little
direct impact on environmental issues. As an investment trust
company, the Company has no direct employee or environmental
responsibilities. The Board is aware that the Manager continues to
take into account environmental, social and governance matters when
considering investment proposals.
Other Risks
The Directors are cognisant of the continuing impact of the
coronavirus (COVID-19) pandemic and the implications for the
activities of the Manager and on the performance of investee
companies and assets.
While VIP's property portfolio is sufficiently robust to
withstand the current market impacts of the pandemic, there is a
risk that property values may fall and tenants may struggle to pay
rent. If this happens, there is a risk that loan to value and
interest cover covenants could be breached. If this were to occur,
VIP has sufficient cash and liquid equity investments to cover any
loan repayments triggered by covenant breaches.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed set of Financial Statements within the
Half-Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting';
and
-- the Interim Report includes a true and fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure,
Guidance and Transparency Rules.
For and on behalf of the Board of Value and Indexed Property
Income Trust PLC
James Ferguson
Chairman
12 November 2021
Group Statement of Comprehensive Income
For the 6 months ended 30 September 2021
6 months ended 6 months ended Year ended
30 September 2021 30 September 2020 31 March 2021
(Unaudited) (Unaudited) (Audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
INCOME
Rental income 2 3,133 - 3,133 2,239 - 2,239 5,359 - 5,359
Investment income 2 1,096 - 1,096 2,376 - 2,376 3,414 - 3,414
Other income 2 - - - 107 - 107 159 - 159
=========== ---------- -------------------- ------- --------- -------- ------- ------- -------
4,229 - 4,229 4,722 - 4,722 8,932 - 8,932
GAINS AND LOSSES
ON INVESTMENTS
Realised
gains/(losses)
on held-
at-fair-value
investments and
investment )
properties - 7,280 7,280 - (3,008 (3,008 ) - 8,588 8,588
Unrealised gains
on held-at-fair-
value investments
and investment
properties - 1,465 1,465 - 272 272 - 1,185 1,185
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
TOTAL INCOME 4,229 8,745 12,974 4,722 (2,736 1,986 8,932 9,773 18,705
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
EXPENSES
Investment
management
fees (529) - (529) (148) (345) (493) (301) (702) (1,003)
Other operating
expenses (526) - (526) (394) - (394) (771) - (771)
FINANCE COSTS (1,513) - (1,513) (2,537) - (2,537) (5,084) - (5,084)
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
TOTAL EXPENSES (2,568) - (2,568) (3,079) (345) (3,424) (6,156) (702) (6,858)
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
PROFIT/(LOSS)
BEFORE
TAXATION 1,661 8,745 10,406 1,643 (3,081) (1,438 ) 2,776 9,071 11,847
TAXATION (200) 1,083 883 (153) 66 (87) (359) 1,132 773
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
PROFIT/(LOSS)
ATTRIBUTABLE TO )
EQUITY
SHAREHOLDERS
OF PARENT COMPANY 1,461 9,828 11,289 1,490 (3,015 (1,525 ) 2,417 10,203 12,620
----------- ---------- -------------------- ------- --------- -------- ------- ------- -------
EARNINGS PER
ORDINARY
SHARE )
(Pence) 3 3.35 22.57 25.92 3.27 (6.61 (3.34 ) 5.35 22.56 27.91
The total column of this statement represents the Statement of
Comprehensive Income of the Group, prepared in accordance with
IFRS. The revenue return and capital return columns are
supplementary to this and are prepared under guidance issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations.
All income is attributable to the equity holders of Value and
Indexed Property Income Trust PLC, the parent company. There are no
minority interests.
The Board has declared a first quarterly dividend of 3.00p per
share (2021 - 2.90p), which was paid on 29 October 2021 to all
Shareholders on the register on 1 October 2021 (ex-dividend date 30
September 2021). A second quarterly dividend of 3.00p per share
(2021 - 2.90p) will be paid on 28 January 2022 to those
Shareholders on the register on 31 December 2021, with an
ex-dividend date of 30 December 2021. The third quarterly dividend
of 3.00p (2021 - 2.90p) will be paid on 29 April 2022 to those
Shareholders on the register on 1 April 2022. The ex-dividend date
will be 31 March 2022.
The Notes form part of these Financial Statements.
Group Statement of Financial Position
For the 6 months ended 30 September 2021
As at As at As at
30 September
2021 31 March 2021 30 September 2020
(Unaudited) (Audited) (Unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS Notes
NON CURRENT ASSETS
Investment properties 110,085 81,132 77,076
Investments held at
fair value through
profit or loss 30,304 28,581 83,239
8 140,389 109,713 160,315
Deferred tax asset 2,141 1,258 398
Receivables 2,695 2,017 -
145,225 112,988 160,713
CURRENT ASSETS
Cash and cash equivalents 42,665 65,965 26,928
Receivables 1,140 972 744
--------- ---------- ------------
43,805 66,937 27,672
TOTAL ASSETS 189,030 179,925 188,385
CURRENT LIABILITIES
Debenture stock - - (15,000)
Payables (2,898) (2,318) (1,590)
------------
(2,898) (2,318) (16,590)
TOTAL ASSETS LESS CURRENT
LIABILITIES 186,132 177,607 171,795
NON-CURRENT LIABILITIES
Payables (2,890) (2,862) (4,234)
Borrowings (56,701) (56,662) (56,649)
(59,591) (59,524) (60,883)
--------- --------- --------------
NET ASSETS 126,541 118,083 110,912
--------- --------- --------------
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital 4,555 4,555 4,555
Share premium 18,446 18,446 18,446
Retained earnings 6 103,540 95,082 87,911
--------- --------- --------------
TOTAL EQUITY 126,541 118,083 110,912
--------- --------- --------------
NET ASSET VALUE PER ORDINARY
SHARE (Pence) 290.52p 271.10p 243.50p
These Financial Statements were approved by the Board on 12
November 2021 and signed on its behalf by James Ferguson,
Chairman.
The Notes form part of these Financial Statements.
Group Statement of Changes in Equity
For the 6 months ended 30 September 2021
6 months ended 30 September 2021
(Unaudited)
Share Retained
Share capital premium earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2021 4,555 18,446 95,082 118,083
Profit for the period - - 11,289 11,289
Dividends paid 4 - - (2,831) (2,831)
------------------------ -------------------- --------------------- -------------
Net assets at 30
September
2021 4,555 18,446 103,540 126,541
------------------------ -------------------- --------------------- -------------
Year ended 31 March 2021 (Audited)
Net assets at 31 March
2020 4,555 18,446 92,306 115,307
Profit for the period - - 12,620 12,620
Dividends paid 4 - - (5,512) (5,512)
Buyback of Ordinary
Shares
for Treasury - - (4,332) (4,332)
------------------------ -------------------- --------------------- -------------
Net assets at 31 March
2021 4,555 18,446 95,082 118,083
------------------------ -------------------- --------------------- -------------
6 months ended 30 September 2020 (Unaudited)
Net assets at 31 March
2020 4,555 18,446 92,306 115,307
Loss for the period - - (1,525) (1,525)
Dividends paid 4 - - (2,870) (2,870)
------------------------ -------------------- --------------------- -------------
Net assets at 30
September
2020 4,555 18,446 87,911 110,912
------------------------ -------------------- --------------------- -------------
The Notes part of these Financial Statements.
Group Statement of Cash Flows
For the 6 months ended 30 September 2021
6 months ended 6 months ended Year ended
30 September
2021 30 September 2020 31 March 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Rental income received 2,089 2,219 5,218
Dividend income received 1,320 2,420 3,486
Interest received 2 43 244
Operating expenses
paid (1,182) (843) (1,673)
NET CASH INFLOW FROM
OPERATING ACTIVITIES 2,229 3,839 7,275
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of investments
held at fair value
through profit or loss (21,224) (4,500) (4,500)
Purchase of investment
properties (22,492) (6,209) (17,553)
Sale of investments
held at fair value
through profit or loss 22,681 12,874 79,584
Sale of investment
properties - - 4,725
------------- ----------- ----------
NET CASH (OUTFLOW)/INFLOW
FROM INVESTING
ACTIVITIES (21,035) 2,165 62,256
CASH FLOW FROM FINANCING
ACTIVITIES
Repayment of debenture
stock - - (15,000)
Fees paid relating
to loans (18) (4) (4)
Interest paid on loans (1,602) (2,527) (4,938)
Finance cost of leases (39) (95) (191)
Payments of lease
liabilities (4) (8) (17)
Dividends paid (2,831) (2,870) (5,512)
Buyback of Ordinary
Shares for Treasury - - (4,332)
NET CASH OUTFLOW FROM
FINANCING ACTIVITIES (4,494) (5,504) (29,994)
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS (23,300) 500 39,537
Cash and cash equivalents
at the start of the
period 65,965 26,428 26,428
----------- ----------------- ---------
CASH AND CASH
EQUIVALENTS
AT THE OF THE
PERIOD 42,665 26,928 65,965
----------- ----------------- ---------
The Notes form part of these Financial Statements.
Notes to the Financial Statements
1 Accounting policies
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) which comprise
standards and interpretations approved by the International
Accounting Standards Board (IASB) together with interpretations of
the International Accounting Standards and Standing Interpretations
Committee approved by the International Accounting Standards
Committee (IASC) that remain in effect, and to the extent that they
have been adopted by the European Union.
The functional and presentational currency of the Group is
pounds sterling because that is the currency of the primary
economic environment in which the Group operates. The Financial
Statements and the accompanying notes are presented in pounds
sterling and rounded to the nearest thousand pounds except where
otherwise indicated.
(a) Basis of preparation
The Financial Statements have been prepared on a going concern
basis and on the historical cost basis, except for the revaluation
of certain financial assets. Where presentational guidance set out
in the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the SORP)
issued by the Association of Investment Companies (AIC) in April
2021 is consistent with the requirements of IFRSs, the Directors
have sought to prepare the Financial Statements on a basis
compliant with the recommendations of the SORP.
The Board has considered the requirements of IFRS 8, 'Operating
Segments'. The Board is charged with setting the Group's investment
strategy. The Board has delegated the day to day implementation of
this strategy to the Investment Manager but the Board retains
responsibility to ensure that adequate resources of the Group are
directed in accordance with its decisions. The Board is of the view
that the Group is engaged in a single segment of business, being
investments in UK commercial properties and UK quoted equities. The
view that the Group is engaged in a single segment of business is
based on the fact that one of the key financial indicators received
and reviewed by the Board is the total return from the investment
portfolio taken as a whole. A review of the investment portfolio is
included in the Investment Manager's Report.
All expenses and finance costs are accounted for on an accruals
basis. Expenses are presented as capital where a connection with
the maintenance or enhancement of the value of investments can be
demonstrated. In this respect and in accordance with the SORP, the
investment management fees are allocated 100% to income, in line
with the general practice of property companies.
The Group's Financial Statements have been prepared using the
same accounting policies as those applied for the Financial
Statements for the year ended 31 March 2021 which received an
unqualified audit report.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, are set
out in the Interim Report. The financial position of the Group as
at 30 September 2021 is shown in the Statement of Financial
Position. The cash flows of the Group for the half year to 30
September 2021, which are not untypical, are set out in the
Statement of Cash Flows. The Group had fixed debt totalling
GBP56,701,000 as at 30 September 2021; none of the borrowings is
repayable before 2026. As at 30 September 2021, the Group's total
assets less current liabilities exceeded its total non current
liabilities by a factor of over 3.
The assets of the Group consist mainly of investment properties
and securities that are held in accordance with the Group's
investment policy, as set out in the Interim Report. Most of these
securities are readily realisable, even in volatile markets. The
Directors, who have reviewed carefully the Group's forecasts for
the coming year and having taken into account the liquidity of the
Group's investment portfolio and the Group's financial position in
respect of cash flows, borrowing facilities and investment
commitments (of which there is none of significance, apart from a
GBP6 million payment due on completion of the Alnwick hotel
development), are not aware of any material uncertainties that may
cast significant doubt upon the Group's ability to continue as a
going concern. Accordingly, the Directors believe that it is
appropriate to continue to adopt the going concern basis in
preparing the Group's Financial Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and the entity controlled by the Company
(its subsidiary). An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and has ability to affect those returns through
its power over the investee. The Company consolidates the investee
that it controls. All intra-group transactions, balances, income
and expenses are eliminated on consolidation.
Value and Indexed Property Income Services Limited is a private
limited company incorporated in Scotland under company number
SC467598. It is a wholly owned subsidiary of the Company and has
been appointed to act as the Alternative Investment Fund Manager of
the Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
In accordance with the Company's Articles, net capital returns may
be distributed by way of dividend.
(e) Dividends payable
Interim dividends are recognised as a liability in the period in
which they are paid as no further approval is required in respect
of such dividends. Final dividends are recognised as a liability
only after they have been approved by Shareholders in general
meeting.
(f) Investments
Equity investments
All equity investments are classified on the basis of their
contractual cash flow characteristics and the Group's business
model for managing its assets. The business model, which is the
determining feature, is such that the portfolio of equity
investments is managed, and performance is evaluated, on the basis
of fair value. Consequently, all equity investments are measured at
fair value through profit or loss.
For listed investments, fair value through profit or loss is
deemed to be bid market prices or closing prices for SETS stocks
sourced from the London Stock Exchange. SETS is the London Stock
Exchange electronic trading service covering most of the market
including all FTSE 100 constituents and most liquid FTSE 250
constituents along with some other securities. Gains and losses
arising from changes in fair value are included in net profit or
loss for the period as a capital item in the Statement of
Comprehensive Income and are ultimately recognised in the retained
earnings.
Investment properties
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Any subsequent capital
expenditure incurred in improving investment properties is
capitalised in the period incurred and included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value. Gains and losses arising from changes in fair value are
included in net profit or loss for the period as a capital item in
the Statement of Comprehensive Income and are ultimately recognised
in retained earnings.
The Group leases out all of its properties on operating leases.
A property held under an operating lease is classified and
accounted for as an investment property where the Group holds it to
earn rental, capital appreciation or both. Any such property leased
under an operating lease is carried at fair value. Fair value is
established by half-yearly professional valuation on an open market
basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and
in accordance with the RICS Valuation - Global Standards January
2020 (the 'RICS Red Book'). The determination of fair value by
Savills is supported by market evidence.
Leases
The Group leases properties that meet the definition of
investment property. These right-of-use assets are presented as
part of Investment Properties in the Statement of Financial
Position and held at fair value.
2 Income
6 months ended 6 months ended
30 September 30 September Year ended
2021 2020 31 March 2021
GBP'000 GBP'000 GBP'000
Investment income
Dividends from listed investments
in UK 1,096 2,376 3,414
Other operating income
Rental income 3,133 2,239 5,359
Interest receivable on short term
deposits - 107 159
-------------- -------------- --------------
Total income 4,229 4,722 8,932
-------------- -------------- --------------
3 Return per Ordinary Share
6 months ended 6 months ended
30 September 30 September Year ended
2021 2020 31 March 2021
GBP'000 GBP'000 GBP'000
The return per Ordinary Share is based on
the following figures:
Revenue return 1,461 1,490 2,417
Capital return 9,828 (3,015) 10,203
Weighted average Ordinary Shares
in issue 43,557,464 45,549,975 45,216,413
Return per share - revenue 3.35p 3.27p 5.35p
Return per share - capital 22.57p (6.61p) 22.56p
-------------- -------------- --------------
Total return per share 25.92p (3.34p) 27.91p
-------------- -------------- --------------
4 Dividends paid
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
Dividends on Ordinary Shares:
Third quarterly dividend of 2.90p
per share
(2021 - 2.90p) paid 30 April 2021 1,263 1,321 1,321
Final dividend of 3.60p per share
(2021 - Fourth quarterly 3.40p)
paid 30 July 2021 1,568 1,549 1,549
First quarterly dividend of 2.90p
per share paid
30 October 2020 * - - 1,321
Second quarterly dividend of 2.90p
per share paid
29 January 2021 * - - 1,321
-------------- -------------- ----------
Dividends paid in the period 2,831 2,870 5,512
-------------- -------------- ----------
* First and second quarterly dividends for the year to 31 March
2022 have been declared with pay dates falling after 30 September
2021. These have not been included as liabilities in these
Financial Statements. See Note 5.
5 Interim dividend
The Directors have declared a first quarterly dividend of 3.00p
per Ordinary Share, paid on 29 October 2021 to Shareholders
registered on 1 October 2021, with an ex dividend date of 30
September 2021 (2021 - 2.90p). A second interim dividend of 3.00p
per share will be paid on 28 January 2022 to Shareholders
registered on 31 December 2021, with an ex dividend date of 30
December 2021 (2021 - 2.90p).
The third quarterly dividend of 3.00p (2021 - 2.90p) will be
paid on 29 April 2022 to those Shareholders on the register on 1
April 2022. The ex-dividend date will be 31 March 2022.
6 Retained earnings
Revenue Capital Total
GBP'000 GBP'000 GBP'000
The table below shows the movement in retained
earnings analysed between revenue and capital items.
At 31 March 2021 96 94,986 95,082
Movement during the period:-
Profit for the period 1,461 9,828 11,289
Dividends paid (see Note 4) (2,831) - (2,831 )
-------- --------- --------
At 30 September 2021 (1,274 ) 104,814 103,540
-------- --------- --------
7 Transaction costs
During the period, expenses were incurred in acquiring and
disposing of investments classified as fair value through profit or
loss. These have been expensed through capital and are included
within gains and losses on investments in the Statement of
Comprehensive Income.
The total costs are as follows:-
6 months ended
6 months ended 30 September Year ended
30 September 2021 2020 31 March 2021
GBP'000 GBP'000 GBP'000
Purchases 84 27 27
Sales 23 13 75
------------------ -------------- --------------
107 40 10
------------------ -------------- --------------
8 Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS
13 Fair Value hierarchy:-
At 30 September 2021 (unaudited) Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 30,304 - - 30,304
Investment properties - - 110,085 110,085
--------- --------- --------- ---------
30,304 - 110,085 140,389
Borrowings - (61,795) - (61,795)
--------- --------- --------- ---------
30,304 (61,795) 110,085 78,594
--------- --------- --------- ---------
At 31 March 2021 (audited) Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 28,581 - - 28,581
Investment properties - - 81,132 81,132
--------- --------- --------- ---------
28,581 - 81,132 109,713
Borrowings - (62,652) - (62,652)
--------- --------- --------- ---------
28,581 (62,652) 81,132 47,061
--------- --------- --------- ---------
At 30 September 2020 (unaudited) Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 83,239 - - 83,239
Investment properties - - 77,076 77,076
--------- --------- --------- ---------
83,239 - 77,076 160,315
Borrowings - (79,757) - (79,757)
--------- --------- --------- ---------
83,239 (79,757) 77,076 80,558
--------- --------- --------- ---------
Fair value categorisation within the hierarchy has been
determined on the basis of the degree to which the inputs to the
fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety as
follows:-
Level 1 - inputs are unadjusted quoted prices in an active
market for identical assets
Level 2 - inputs, not being quoted prices, are observable,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices)
Level 3 - inputs are not observable
The fair value of the debenture is determined by comparison with
the fair values of equivalent gilt edged securities, discounted to
reflect the differing levels of credit worthiness of the borrowers.
The fair values of the loans are determined by a discounted cash
flow calculation based on the appropriate inter-bank rate plus the
margin per the loan agreement. These instruments are therefore
considered to be Level 2 as defined above. There were no transfers
between Levels during the period. All other assets and liabilities
of the Group are included in the Balance Sheet at fair value.
9 Relationship with the Investment Manager and other Related Parties
Matthew Oakeshott is a Director of OLIM Property Limited which
has an agreement with the Group to provide investment management
services.
OLIM Property Limited receive an investment management fee of
0.60% of the capital assets that it manages.
The investment management agreement with OLIM Limited ceased
with effect from 28 February 2021 and responsibility of the equity
portfolio moved to OLIM Property Limited. OLIM Limited received an
investment management fee of GBPnil (half year to 30 September
2020: GBP292,000 and year to 31 March 2021: GBP524,000).
OLIM Property Limited received an investment management fee of
GBP529,000 (half year to 30 September 2020: GBP201,000 and year to
31 March 2021: GBP479,000). At the period end, the balance owed by
the Group to OLIM Property Limited was GBP97,000 (31 March 2021:
GBP84,000) comprising management fees for the month of September
2021, subsequently paid in October 2021.
Value and Indexed Property Income Services Limited is a wholly
owned subsidiary of Value and Indexed Property Income Trust PLC and
all costs and expenses are borne by Value and Indexed Property
Income Trust PLC. Value and Indexed Property Income Services
Limited has not traded during the period.
10 Half Yearly Report
The financial information contained in this Half Yearly
Financial Report does not constitute statutory accounts as defined
in sections 434 - 436 of the Companies Act 2006. The financial
information for the six months ended 30 September 2021 and 30
September 2020 has not been audited.
The information for the year ended 31 March 2021 has been
extracted and abridged from the latest published audited Financial
Statements and do not constitute the statutory accounts for that
year. Those Financial Statements have been filed with the Registrar
of Companies and included the Report of the Independent Auditor,
which contained no qualification or statement under section 498 of
the Companies Act 2006.
This Half-Yearly Report was approved by the Board on 12 November
2021.
Other information
A full copy of the 2021 Interim Report and Financial Statements
will be printed and issued to Shareholders. In due course, a copy
will be available on the Company's website at:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
.
Neither the content of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
The 2021 Interim Report and Financial Statements will be
submitted to the National Storage Mechanism and will be available
for inspection at:
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
By order of the Board
Maven Capital Partners UK LLP
Company Secretary
0141 306 7400
12 November 2021
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END
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