Guernsey: 29 September
2023
LEI:
549300HHFBWZRKC7RW84
abrdn
Property Income Trust Limited
(“API” or
the “Company”)
INTERIM
RESULTS FOR THE PERIOD ENDED 30 JUNE
2023
FINANCIAL
REVIEW AS AT 30 JUNE
2023
-
NAV TOTAL
RETURN of 1.2% (H1 2022: 11.7%)
for the half year.
-
SHARE PRICE TOTAL
RETURN of -20.8% (H1 2022:
-4.2%%) for the half year.
-
FINANCIAL
RESOURCES of £28.1m as at
30 June 2023 (2022: £39.0m) available
for investment in the form of the Company’s revolving credit
facility, net of cash and capital commitments.
-
LOAN-TO-VALUE
Moderate
Loan-to-value of 28.1% (30 June 2022: 19.8%) at the period
end.
-
DIVIDENDS
PAID of 2.0p per share in the
first half of the year to 30 June
2023 (H1 2022: 2.0p).
-
DIVIDEND
YIELD of 8.4% compared to the
Dividend yield of the FTSE All-Share Index (3.7%) and FTSE
All-Share REIT Index (5.1%).
PORTFOLIO
REVIEW AS AT 30 JUNE
2023
-
PORTFOLIO TOTAL
RETURN of 1.7% (H1 2022: 9.5%) which
compares favourably to the MSCI benchmark return of
0.3%.
-
RENT
COLLECTION for first half of 2023 of
95.9% of rent due (H1 2022: 97.0%).
-
OCCUPANCY
RATE of 91.8% (2022: 89.8%),
with committed lettings signed but not completed adding a further
4% to occupancy rate, compared to the MSCI rate of 91.8% (2022:
90.4%).
-
POSITIVE ASSET
MANAGEMENT: A total of 3 lease
renewals and restructurings were undertaken, securing £873,820 p.a.
in rent, and a total of 8 lettings including agreements for lease
securing £1,822,101 p.a.
-
POSITIVE ASSET
MANAGEMENT: 3 rent reviews were
settled with uplifts in rent, securing an additional £178,549 p.a.
(an average increase of 30% on previous rent)
-
PORTFOLIO WELL
POSITIONED – with a 54.1% weighting
in Industrial, 19.1% weighting in Office, 16.5% weighting in Retail
and 10.3% weighting in Other.
-
PV
SCHEMES – The company has 11
operational PV schemes totalling 2.3 MWp and is actively engaged in
20 additional schemes that would add a further 15.1
MWp.
The
portfolio sector exposure reflects thematic trends. The Company has
retained a high weighting to industrial / logistics assets with a
focus on mid box units that are affordable and meet tenant needs.
We have continued to reduce the exposure to offices through
disposals of assets, with a period end weighting of
19.1%.
The
Company's Interim Report and Accounts for the period ended
30 June 2023 will shortly be
available to view on the Company's corporate website at
https://www.abrdnpit.co.uk/en-gb/literature.
Hard
copies will be posted to shareholders shortly.
PERFORMANCE
SUMMARY
Earnings,
Dividends & Costs
|
|
|
30
June
2023
|
30
June
2022
|
IFRS
Earnings per share (p)
|
|
|
0.8
|
10.9
|
EPRA
earnings per share (p) (excl capital items & derivative
movements) *
|
1.60
|
2.00
|
Dividends
paid per ordinary share (p)
|
|
|
2.00
|
2.00
|
Dividend
Cover (%)
|
|
|
80.6
|
98.4
|
Dividend
Yield (%) **
|
|
|
8.4
|
5.0
|
FTSE
All-Share Real Estate Investment Trusts Index Yield (%)
|
5.1
|
3.6
|
FTSE
All-Share Index Yield (%)
|
|
|
3.7
|
3.5
|
Ongoing
Charges ***
|
|
|
|
|
As a % of
average net assets including direct property costs
|
2.6
|
2.2
|
As a % of
average net assets excluding direct property costs
|
1.2
|
1.1
|
|
|
|
|
|
Capital
Values & Gearing
|
|
30
June
2023
|
31
December
2022
|
Change
%
|
Total
assets (£million)
|
|
467.5
|
444.9
|
5.1
|
Net asset
value per share (p)
|
|
83.8
|
84.8
|
(1.2)
|
Ordinary
Share Price (p)
|
|
47.7
|
62.4
|
(23.6)
|
(Discount)/Premium
to NAV (%)
|
|
(43.1)
|
(26.4)
|
|
Loan-to-value
(%) ^
|
|
28.1
|
22.6
|
|
|
|
|
|
|
Total
Return
|
6
months
%
return
|
1
year
%
return
|
3
year
%
return
|
5
year
%
return
|
NAV
#
|
1.2
|
(21.0)
|
19.0
|
16.8
|
Share
Price #
|
(20.8)
|
(33.1)
|
(6.6)
|
(31.7)
|
FTSE
All-Share Real Estate Investment Trusts Index
|
(7.6)
|
(22.1)
|
(9.1)
|
(22.5)
|
FTSE
All-Share Index
|
2.6
|
7.9
|
33.2
|
16.5
|
|
|
|
|
|
Property
Returns & Statistics (%)
|
|
|
30
June
2023
|
30
June
2022
|
Portfolio
income return
|
|
|
2.5
|
2.1
|
MSCI
Benchmark income return
|
|
|
2.3
|
2.0
|
Portfolio
total return
|
|
|
1.7
|
9.5
|
MSCI
Benchmark total return
|
|
|
0.3
|
9.1
|
Void
rate
|
|
|
8.6
|
10.6
|
*
Calculated as profit for the period before tax (excluding capital
items & swaps costs) divided by weighted average number of
shares in issue in the period. EPRA stands for European Public Real
Estate Association.
** Based
on annual dividend paid of 4.0p and the share price at 30 June 2023 of 47.7p.
*** A
measure, expressed as a percentage of NAV, of the regular,
recurring costs of running an investment company, calculated in
line with AIC ongoing charge methodology.
^
Calculated as bank borrowings less all cash as a percentage of the
open market value of the property portfolio as at 30 June 2023.
# Assumes
re-investment of dividends excluding transaction costs.
Sources:
abrdn, MSCI
CHAIR’S
STATEMENT
Background
Whilst
during the first half of 2023 we did not see any major global
events such as those experienced in recent years, we have still had
plenty to contend with. Stubbornly high inflation along with Global
Central Banks efforts to curb it through interest rate rises, has
been by far the greatest challenge. With the Bank of England base rate currently at 5.25%, and
inflation easing in June, July and August, the general belief is
that the peak of base rates is perhaps 25 or 50 bps
away.
Although
this could be a positive for the real estate market, reducing the
pressure on the margin between property yields and gilts, the
longer-term impact on the economy is yet to be seen. The sharp
increase in domestic mortgage rates is likely to have a material
impact on already squeezed household income. Whether this will
result in recession is unclear, with UK GDP demonstrating a
surprisingly positive 0.5% growth in June, compared with the
consensus expectation of 0.2%, whereas July saw a fall of
0.5%.
Real
Estate Market
Following
the rapid repricing of Real Estate assets during the fourth quarter
of 2022, the first half of 2023 saw a return to positive total
returns according to the MSCI UK Quarterly Index. The 0.1% and 0.4%
total returns for the first and second quarters respectively still
reflected negative capital growth, albeit the trajectory has been
of slowing declines.
The best
performing sector in the first half of the year has been
Industrial, where there has been a return to capital growth led by
the continuing robust occupational market fuelling investment
appetite. Whilst Retail values on the whole have continued to fall,
Retail Warehousing has been resilient and has demonstrated the
highest total returns of any sub-sector. In contrast to Retail and
Industrial, the Office sector has seen an acceleration in capital
declines. Similar to the Industrial sector, this has been led by
the occupational market, albeit in a polar opposite manner. The
uncertainty around occupational demand due to changes in working
practices is having a negative impact on investor confidence. With
limited investor interest, we are seeing values fall as buyers are
able to take advantage of the lack of competition.
Portfolio
and Corporate Performance
The
Company’s property portfolio produced a total return of 1.7% over
the six months to 30 June 2023, which
was ahead of the MSCI benchmark return of 0.3%. The Company’s
property portfolio has also outperformed the MSCI benchmark over 3,
5 and 10 years.
Whilst the
NAV total return over the six-month period was 1.2%, the total
return to shareholders was -20.8% due to a further widening of the
discount of the share price to NAV per share. On 30 June 2023, the Company’s share price was at a
43.1% discount to the NAV. The Company’s peer group are all
currently trading at varying levels of wide discount, reflecting
the negative sentiment towards the UK real estate market. The level
of discount is of great concern to the Board and we continue to
explore ways that will reduce it in the longer term.
Dividends
The
Company’s dividend has been maintained at an annualised rate of 4p
per share since December 2021.
Dividend cover for the first half of 2023 was 80.6% which is lower
than in the past due largely to the increase in finance costs; the
Company is looking at ways to mitigate this increase. In the
meantime, the Board is cognisant that many of the Company’s
shareholders retain their holdings due to the attractive income it
generates and intend to maintain the current dividend level for
2023 and 2024.
Financial
Resources & Portfolio Activity
The
Company has maintained a favourable financial position throughout
the first half of 2023, with unutilised financial resources of
approximately £28.1m available for investment, in the form of the
company’s revolving credit facility (RCF), net of existing cash and
capital commitments.
The
Company had a loan-to-value (LTV) ratio of 28.1% at 30 June 2023 and all banking covenants are
comfortably met on a quarterly basis.
During the
six months to 30 June 2023, the
Company completed the purchase of a supermarket let on a long lease
with CPI-linked rent reviews. The purchase price was £18.3m,
reflecting a yield of 6.35%. In addition, the Company completed the
purchase of a piece of land at Knowsley for £3.8m with the aim of
developing an industrial site throughout 2023.
The
manager is exploring targeted sales of assets in order to pay down
the RCF.
Outlook
With a
marginally positive total return during the six-months to
30 June 2023 we have seen the
beginnings of a stabilisation in the UK property market. This
remains a relatively fragile position, with inflation still running
well ahead of UK Government targets, and therefore the threat of
further interest rate increases continues to linger.
Whilst we
have seen a recovery in some sectors of the UK Real Estate market
during the first half of 2023, there has been a significant
divergence in returns between the sectors. The Manager’s market
outlook expects this to widen and continue for at least the next 12
months, with the Office sector in particular faring the
worst.
Overall
office demand is anticipated to continue to decrease, leading to a
further weakening of investor sentiment towards the sector. The
impact is likely to be most acutely felt on secondary assets as
occupiers and investors alike favour “best in class” buildings.
Ensuring that assets offer good levels of amenity that appeal to
occupiers will be key, and the Company’s strong letting activity in
2023 to date is a positive indicator that its portfolio is well
positioned.
The
Industrial sector is forecast to continue its recovery after the
turbulence of 2022. Whilst supply levels have started to increase,
with Savills reporting a June 2023
vacancy rate only marginally below the pre-Covid average, they
remain at manageable levels given robust demand levels. The
expectation is that this dynamic will result in more muted rental
growth than has been seen over recent years.
With
expectations that the squeeze on household incomes will continue,
this will result in further pressure on the retail sector.
Discretionary spending is anticipated to be most impacted, with
food and discount retailers proving more resilient. These are the
two areas where the Company has focused its retail assets, which
should be a positive going forward.
Environmental,
Social and Governance (ESG) factors continue to increase in
importance during occupiers and investors decision-making process.
The Manager’s long-standing focus on this area will be important
for future performance and should provide resilience within the
portfolio.
28 September 2023
James Clifton-Brown
INVESTMENT
MANAGER’S REPORT
Share
prices in real asset companies have remained under pressure
throughout the first half of 2023. Discounts remain wide in several
sectors, including real estate, as investors benefit from returns
not achievable in recent years from fixed income. Pricing of the
underlying real estate assets has stabilised in the first half of
2023, with gains in valuation in the Industrial and Retail
Warehouse sectors accompanied by continued declines in the Office
sector, which is under structural pressure. The wide discounts to
NAV are expected to narrow once there is sufficient confidence that
interest rates have peaked, and the cost of debt is
falling.
Commercial
Property
The UK
real estate market recorded a period of relative stability in the
first half of 2023 following the significant repricing the sector
experienced in late 2022. This repricing was principally driven by
increased debt costs and rising gilt yields, which served to dent
investor conviction on asset pricing. Whilst economic volatility
during the first six months of 2023 declined, headwinds continue to
weigh on the sector and investor sentiment has remained weak as a
result.
Over the
first half of the year, UK real estate performance was muted. All
property recorded a total return of 0.5% according to the MSCI
Quarterly Index, with the industrial and residential sectors
leading the way at 2.9% and 2.2% respectively. All sectors, with
the exception of offices which saw total return remain negative at
-4.3%, recorded positive total return during the first half of the
year, recovering from the poor performance seen in the last quarter
of 2022. Capital value growth, while remaining negative for all
property, has also stabilised somewhat in those sectors which saw
the largest value decline towards the end of 2022, and which
benefit from structural growth drivers. The industrial sector
recorded capital growth of 0.7% in the first six months of the
year, compared to a further decline for offices of
-6.4%.
Transaction
volumes have also remained constrained during the first half of
2023 as investors have taken a risk off approach towards the sector
amid elevated financing costs. As a result, approximately £18.3bn
transacted across the UK to June 2023
according to RCA data. To put this into perspective, transaction
volumes to the end of June 2023 were
lower than that recorded in the same period in 2020 (during the
onset of the Covid-19 pandemic), and 37% below the 10-year first
half average. Transactions involving UK offices accounted for 26%
of activity in the first half of 2023, followed by the industrial
and retail sectors at 22% and 20% respectively. Investor demand for
residential assets continues to rise, with the sector accounting
for 19% of transaction volumes. Transaction volumes are anticipated
to remain subdued over the remainder of the year in response to the
weak macroeconomic and higher interest rate environment, with
holders of good quality real estate likely to remain unwilling
sellers. Improved investment activity is likely to be prompted by
greater confidence around the path of the Bank of England’s
monetary policy, with an end to the current policy tightening cycle
likely to improve investor sentiment.
More
positivity returned to the industrial and logistics sector during
the first six months of the year, as pricing and performance
demonstrated signs of improvement. Occupier and investor demand
remains focused on the best-quality assets, with investors
targeting those assets with strong rental growth potential. This is
anticipated to result in polarisation in performance between
good-quality and secondary accommodation, with best-in-class assets
outperforming the wider market. Looking forward, we expect
continued positive performance, principally driven by robust rental
growth, albeit at more normalised levels. While vacancy rates have
increased since the start of the year, they remain near historic
lows and any new supply is unlikely to satisfy current occupational
demand, helping to sustain positive rental growth.
The office
sector remains under structural pressure as evolving working habits
and economic uncertainty weigh on the sector. Rising supply levels
and weakening demand are forcing vacancy rates higher, with the
Central London vacancy rate now in
excess of 9% according to CoStar data. This scenario is expected to
dampen rental growth prospects and expedite the bifurcation in
sector performance. In response, investor demand for UK offices
remains weak amid a poor outlook for the sector. Headline
investment volumes hide a lack of real liquidity in the office
market and anecdotal evidence suggests that secondary office assets
are coming to market at material discounts to previous valuations.
Further capital value declines, particularly for secondary assets,
are expected across the sector, while best-in-class accommodation,
in locations that benefit from a robust supply/demand dynamic, will
likely prove more resilient, but won’t be immune to the pressures
the sector is facing.
UK retail
has proven more resilient than first envisioned over the start of
2023 in spite of a cost-of-living crisis and weaker economic
environment. However, it is clear that consumers are now cutting
back on non-essential spending and, according to ONS data, retail
volumes are now 0.8% lower than pre-covid levels. In this
environment, discount led retailers have proven more resilient - as
demonstrated by the rising market share enjoyed by discounters such
as Aldi and Lidl during 2023. As a result, investors remain focused
on convenience and discount led retail assets which have seen more
stable performance during the first half of the year. Sentiment
towards high street retail and shopping centres continues to be
weak.
Investment
Outlook
While more
positivity returned to the market in the first half of 2023, the
outlook for UK real estate is clouded by a weaker macroeconomic
climate. Upside surprises in UK inflation data during the first
seven months of the year led to a more aggressive monetary policy
stance from the Bank of England,
spooking financial markets as a result. That said, a reduction in
inflation rates during June, July and August prompted the Bank of
England to hold interest rates
during their meeting in September.
Gilt
yields have continued to rise in the third quarter of 2023 reducing
the margin between UK real estate and gilt yields. That said, the
previous repricing of UK real estate has softened the impact of
higher gilt yields. Rising interest rates will also maintain
pressure on real estate pricing as debt costs become increasingly
dilutive to performance. More positively, debt financing remains
available and lender appetite remains for good-quality
accommodation.
In the
face of these headwinds, investors are likely to remain cautious
and focus on good-quality accommodation. These assets should prove
more resilient in the face of weaker economic conditions and
benefit from more robust supply/demand dynamics. Polarisation
within sectors is expected to intensify, with secondary rental and
capital values under further pressure, especially in the office
sector. While prime pricing may not be immune, the performance gap
between prime and secondary assets is expected to widen.
Occupational performance is expected to be the predominant driver
of real estate returns in the near term. As a result, occupier
covenant strength and the resilience of income will be
paramount.
Any
substantive improvement in real estate performance is now expected
in early 2024, when the path of UK monetary policy is forecast to
become more accommodative. The risks to the timing of this recovery
remain high, however, given the strength of underlying inflation
and the associated risk of interest rates having to remain higher
for longer.
Performance
The
Company uses a variety of measures of performance, comparing the
portfolio level returns to direct real estate indices, NAV level
performance to its peer group, and also share price returns to its
peer group.
Portfolio
Level Performance:
The
Company uses the MSCI Quarterly index to measure the relative
performance of its portfolio. Performance over the first half of
the year was good relative to the benchmark (with slight under
performance in the first quarter from the impact of purchases, but
strong out performance in the second quarter driven by asset
management and sector allocation). The Company has slightly under
performed over 12 months, but has seen strong out performance over
3, 5 and 10 years as shown in the chart below. As noted in the
market commentary, the first half of the year saw a general
stabilisation in valuations after the significant falls in the
second half of last year, but overall capital values continued to
decline in the first half of 2023 (portfolio capital decline -0.79%
against market -1.98%). The overall positive total return was
driven by the income yield from the assets (portfolio 2.54% against
market 2.28%).
Source
abrdn, MSCI
|
Portfolio
total return
|
Benchmark
total return
|
NAV
total return
|
6
months
|
1.7%
|
0.3%
|
1.2%
|
1
Year
|
(15.3%)
|
(15.0%)
|
(21.0%)
|
3
Year
|
18.4%
|
7.8%
|
19.0%
|
5
Year
|
21.3%
|
8.4%
|
16.8%
|
10
Year
|
120.2%
|
84.2%
|
144.9%
|
NAV
Performance:
The NAV
total return takes into account the impact of debt and other costs
of the Company not included in the property level returns. As the
MSCI quarterly index does not provide a like for like comparison we
use the AIC peer group instead. The Company’s NAV performance
compared to peers has been mixed over recent times, with short term
under performance but out performance over 3 and 10 years. Over the
last year the costs associated with the new debt facilities have
been the main negative impact on the NAV relative to
peers.
NAV
Total Returns to 30 June
2023
Source
AIC, abrdn
|
1
year
%
|
3
years
%
|
5
years
%
|
10
years
%
|
abrdn
Property Income Trust Limited
|
(21.0)
|
19.0
|
16.8
|
144.9
|
AIC
Property UK Commercial (weighted average)
|
(15.3)
|
12.5
|
21.7
|
34.3
|
Investment
Association Open Ended Commercial Property Funds sector
|
(11.9)
|
1.5
|
(0.7)
|
35.7
|
Share
Price Performance:
This is
the element that the manager has least influence over, however it
is the one most linked to investor experience. The Company has seen
a continued de-rating of shares over the first half of 2023, which
has negatively impacted the share price return. Despite the
significant rebasing of the NAV, stabilisation of real estate
valuations, and attractive yield the discount remains
wide.
Share
Price Total Returns to 30 June
2023
Source
AIC, abrdn
|
1
year
%
|
3
years
%
|
5
years
%
|
10
years
%
|
abrdn
Property Income Trust Limited
|
(33.1)
|
(6.6)
|
(31.7)
|
39.7
|
FTSE
All-Share Index
|
7.9
|
33.2
|
16.5
|
78.0
|
FTSE
All-Share REIT Index
|
(22.1)
|
(9.1)
|
(22.5)
|
26.0
|
AIC
Property Direct – UK Sector (weighted Average)
|
(29.2)
|
1.8
|
(11.9)
|
6.1
|
Dividends:
The
Company has a clearly stated objective to provide shareholders with
an attractive level of income. Given the period of transition we
are in as we adapt to the challenges of climate change the focus of
the Company has been to invest in assets that will provide a
sustainable income that has the prospect of growth. The portfolio
is based around affordable property that tenants want to occupy.
This has led to the disposal of higher yielding assets that do not
meet the criteria, but we believe that the future income will be
more reliable from the quality of assets the company owns. The
current annual dividend level of 4p per share is paid quarterly,
and although cover in the first half of 2023 was 80.6% the board
believes the current dividend level to be maintainable.
Portfolio
Valuation:
The
investment portfolio is valued on a quarterly basis by Knight Frank
LLP. As at 30 June 2023 the Company
had 47 assets valued at £445.0m and held cash of £10.0m. This
compares to 45 assets valued at £416.2m with £15.9m cash as at
31 December 2022.
Portfolio
Strategy and Allocation:
In
constructing the portfolio to meet the Company’s objectives the
Investment Manager takes a medium-term view and pays particular
attention to structural changes in markets and ESG, as these are
the main drivers of return over the longer term. We invest in
assets that tenants want to occupy and that are
affordable.
Most
investors will be aware that the retail sector has had a very
difficult 10 years due to structural changes in the way we shop.
Having had only a small exposure to retail for a long time we have
slowly increased our holdings to 16.5% of the portfolio with
exposure focused on affordable retail warehousing and most recently
a food store. These assets provide resilient income however we
remain cautious of the High Street and Shopping Centres.
On the
other side of the structural change facing retailers has been
logistics. The Company has long held a large exposure to this
sector - despite the sale of several multi let estates a couple of
years ago to realise profit and reduce exposure to smaller tenants.
A continued belief in the sector, especially after the repricing in
2022, has led us to refurbish and develop logistics units to ensure
we have high quality assets. During the first half of this year we
completed the development of a unit in St
Helens, which on practical completion was let to St Helen’s
County Council for a 15-year term. The unit is sublet to a
not-for-profit organisation to be used for research and development
into improved ways of producing glass. The unit has very strong ESG
credentials. The Company has also commenced the development of a
110,000 sq ft logistics unit in Knowsley (scheduled to complete at
the end of 2023), and we are already in discussions with two
interested parties to lease the unit. Again, the unit will meet
very high ESG standards. We are also on site with a major
refurbishment at Rainhill Road, Washington, repurposing an old manufacturing
unit into a high-quality parcel distribution unit. That
refurbishment is due to complete in October, and should provide
another operational net zero building.
The Office
sector is of course going through its own period of structural
change. Return to the office is not a consistent feature, and it is
still not clear where office demand will end up, but it is clear
that overall demand will be lower than experienced pre pandemic.
Furthermore, demand will be focused on assets that meet tenants
needs and where people want to come in to work - location (ease of
access), amenity, and environmental performance are all key
factors. During the first half of 2023 we have let office
accommodation at 4 of the 5 office buildings where we had
availability.
We aim to
provide a diversified portfolio investing not just across sectors,
but also throughout the UK. We do not target a specific
geographical weighing, but aim to own the right asset for a
location, understanding the demand and drivers of each market we
invest in.
Portfolio
Allocation by region
Region
|
Weighting
|
South
East
|
23.9%
|
West
Midlands
|
19.5%
|
North
West
|
13.7%
|
East
Midlands
|
12.8%
|
Scotland
|
11.6%
|
North
East
|
10.8%
|
South
West
|
3.1%
|
London
City
|
2.5%
|
London
West End
|
2.1%
|
Environmental,
Social and Governance (ESG):
ESG is
covered in great detail in our annual report and accounts. We have
fully integrated ESG into our investment and decision-making
processes because we believe it impacts value. Although that impact
has been relatively muted to date, we expect it to become a greater
factor going forward. Environmental performance of assets is of
course important - it impacts the cost of running a building as
well as the carbon footprint. When reviewing our current portfolio,
we assess the requirements for each asset and work out the best
time for intervention to upgrade the asset. The aim of which is to
ensure that we do not waste money or materials in replacing
functional plant before it is right to do so. One measure of the
upgrading of assets is the improvement in EPC ratings over time, as
shown in the table on the right.
%
Estimated Rental Value (ERV)
EPC
Rating
|
Jun
23
|
Dec
22
|
Dec
21
|
A
|
10%
|
4%
|
2%
|
B
|
33%
|
27%
|
21%
|
C
|
41%
|
42%
|
33%
|
D
|
9%
|
19%
|
35%
|
E
|
9%
|
19%
|
35%
|
F
|
0%
|
0%
|
0%
|
G
|
1%
|
1%
|
1%
|
One area
of focus for us has been to install on-site renewable energy where
we can in the form of Photo Voltaic (PV) cells. During the first
half of 2023 we completed 5 new systems so that on 30 June we had
11 operational systems with an estimated annual output of c3.6m kWh
of power. We hope to complete another 5 schemes during the
remainder of 2023.
Case
Study – Rainhill Road, Washington
Engaging
innovative solutions
-
Pre-let refurbishment
project, due to complete in October
2023.
-
Landlord works will make
significant ESG improvements to the building including an EPC
improvement from C to A and a PV installation which should offset
100% of the operational carbon from the tenant.
-
Due to building structural
constraints, we have employed an innovative PV system which
combines a roof covering and solar panel to reduce
weight.
-
The completed installation
not only maximises what was achievable on the
building,
API
Existing Portfolio
|
|
System
Size
(kWp)
|
System
Output
(Annual)
|
Panels
|
No.
of
Tennis
Courts
|
Kettles
Boiled
|
Households
Powered
|
Electric
Cars
Charged
|
Street
Lights
Powered
|
CO2
Emissions
Reduced
|
Trees
Planted
|
Flamingo
Flowers Ltd, Great North Road, Sandy (22 Jun 20)
|
|
918
|
1,952,299
|
2,295
|
22.5
|
8,345.5
|
519.2
|
862.3
|
13,605
|
451
|
21,486
|
Unit 4
Easter Park, Bolton (System 1: 18 May 12) & (System 2: 01
23)
|
New Q1
23
|
310
|
239,788
|
775
|
7.6
|
2,818.2
|
63.8
|
105.9
|
1,671
|
55
|
2,639
|
Mount
Farm, Milton Keynes
|
New Q1
23
|
258
|
193,500
|
645
|
6.3
|
2,345.5
|
51.5
|
85.5
|
1,348
|
45
|
2,130
|
Swift
House, Rugby
|
New Q1
23
|
240
|
205,000
|
600
|
5.9
|
2,182
|
55
|
91
|
1,429
|
47
|
2,256
|
Unit 1–4
Opus 9, Warrington
|
New Q1
23
|
232
|
185,600
|
580
|
5.7
|
2,109
|
49.4
|
82
|
1,293
|
43
|
2,043
|
Causewayside
House, 160 Causewayside, Edinburgh (27 Nov 20)
|
|
90
|
108,874
|
225
|
2.2
|
818.2
|
29
|
48.1
|
759
|
25
|
1,198
|
Interlink
Park, Bardon
|
New Q1
23
|
60
|
51,000
|
150
|
1.5
|
545.5
|
13.6
|
22.5
|
355
|
12
|
561
|
Unit 14
Interlink Park, Bardon (29 Mar 19)
|
|
50
|
181,518
|
125
|
1.2
|
454.5
|
48.3
|
80.2
|
1,265
|
42
|
1,998
|
Tetron 141
, William Nadin Way, Swadlincote (11 Dec 18)
|
|
50
|
182,020
|
125
|
1.2
|
454.5
|
48.4
|
80.4
|
1,268
|
42
|
2,003
|
Unit 2,
Brunel Way, Segensworth East, Fareham (20 Mar 19)
|
|
50
|
146.674
|
125
|
1.2
|
454.5
|
39
|
64.8
|
1,022
|
34
|
1,614
|
Pinnacle,
20 Tudor Road, Reading (27 Mar 17)
|
|
42
|
150,938
|
105
|
1
|
381.8
|
40.1
|
66.7
|
1,052
|
35
|
1,661
|
Total
|
|
2,300
|
3,597,211
|
5,750
|
56
|
20,909
|
957
|
1,589
|
25,068
|
831
|
39,590
|
In
addition to PV we are also installing EV chargers across the
portfolio where it is viable to do so. We are varying the type of
charger and whether we fund the installation or lease out the
opportunity depending on the asset type and expected demand. To
date we have installed or committed to install EV at every office
we own with parking and are progressing with an install across a
package of 4 of our retail warehouse parks.
Case
Study – 85 Fullarton Drive, Cambuslang
85
Fullarton Drive in Cambuslang (Glasgow) is a logistics unit of 61,000 sq ft
which has been let to Speedy Hire since 2013. The unit acts as the
tenant’s
Scottish hub, providing both plant and machinery hire services, and
serving as the company’s
main service and repair centre for the region.
From early
discussions with the tenant we were aware that they wanted to
remain in the unit on a long term basis and had wider company level
ESG targets they wanted to achieve. Agreement was reached on a new
10 year lease from June 2023 at a
rent 30% higher than the passing rent, and 19% higher than ERV, due
to the prominence and desirability of the location. Terms to
improve the unit’s ESG credentials were agreed as part of the
transaction which aligned the tenant’s aspirations with API’s focus
on improving EPCs and rolling out PV across the estate.
The 10
year term means that Speedy is going to invest in the building,
with the tenant planning a programme of ESG related works such as
LED lighting replacement. As part of the renewal, terms were agreed
for API to install a PV system on the roof, following roof repairs
to be carried out at the tenant’s cost. These roof works will start
shortly, with the PV installation due to be completed by the end of
2023. The rate per kWh for the electricity generated onsite, plus
all repairing obligations, were documented up front to avoid any
delays with further negotiation post completion of the new
lease.
Land
at Far Ralia:
The
Company acquired land at Far Ralia (Scottish Highlands) to
undertake reforestation and peatland restoration in the belief it
offered a high-quality and cost effective way to offset future
carbon emissions. We have been progressing with planning and
subsequent approvals and will commence planting in September. This
is one of the largest reforestation projects in Scotland currently underway and we believe
will deliver valuation benefits to the Company over the next
year.
Asset
management:
Whilst the
investment market and general economic environment has been
challenging this year so far, there have been some significant
successes with asset management across the portfolio. The headline
vacancy rate as at 30 June 2023 is
8.2% (31 Dec 2022: 9.8%), although at
the time the effective vacancy rate (which takes account of the
contractual agreements for lease) was only 4.5%. The scale of
lettings, especially in the challenged office sector, is testament
to the appeal of the assets held by the Company. Key highlights
are:
-
8 lettings securing £1.8m
pa in rent have been completed (including agreements for lease), as
well as an agreement for lease completed after the reporting period
securing a further £132,250 pa rent.
-
3 lease renewals / regears
completed, securing £873,820 pa.
-
3 rent reviews agreed with
an increase in rent of £178,549 pa (and a further rent review
agreed post reporting period with a £33,556 pa
uplift).
Sales:
While no
sales were undertaken during the reporting period, targeted sales
are being explored.
Purchases:
The
Company acquired a food store in Welwyn Garden City let to
Morrisons for £18.3m, which reflected a yield of 6.35%. The store
is a strong trader for Morrisons and was acquired off market by way
of a sale and leaseback with a new 25 year lease subject to CPI
linked rental increases (annually for the first five years). The
unit and location would hold great appeal to other operators should
it become available. In addition, the Company completed the
purchase of a piece of land at Knowsley for £3.8m with the aim of
developing an industrial site throughout 2023.
Debt:
During the
reporting period the Company’s debt facility expired and was
replaced with a new facility which commenced in April 2023 as agreed with the lender (RBSI) in
October last year; RBSI have continued to provide debt to the
Company since its launch. The new facility is comprised of two
components, a term loan for £85m (which is fully drawn) and a
Revolving Credit Facility (RCF) of £80m; as at 30 June 2023, £50m was drawn on the RCF. The
margin on both components is an attractive 150bps (over Sonia). In
addition the Company has entered into an interest rate cap of 3.96%
on the Sonia rate applied to the term loan component. All
facilities are due to expire in April
2026. The debt cost is a considerable increase on the
previous low levels of the expired facility and will impact the
Company’s performance until Sonia rates decline. The LTV as at 30
June was 28.1%.
Outlook:
In what is
undoubtedly a difficult time for real estate we will continue to
focus on asset management and affecting income and dividend cover
through actively managing the assets in the portfolio. Although the
economic outlook is for slow growth, with a potential recession,
the portfolio is based around the principles of affordable assets
that appeal to tenants, and we believe that will help maintain high
levels of occupancy. As and when interest rates are thought to have
peaked we expect to see the start of a re-rating in real asset
share prices based on previous cycles.
PROPERTY
INVETMENTS
Top
Ten Properties
Property
|
Value
(range)
|
Sector
|
%
of total portfolio
|
B&Q,
Halesowen
|
£24m -
£26m
|
Retail
|
5.4%
|
54 Hagley
Road, Birmingham
|
£22m -
£24m
|
Office
|
5.0%
|
Ickles
Way, Rotherham
|
£20m -
£22m
|
Industrial
|
4.8%
|
Morrisons,
Welwyn Garden City
|
£18m -
£20m
|
Retail
|
4.1%
|
White
Horse Business Park, Shellingford
|
£14m -
£16m
|
Industrial
|
3.5%
|
Building
3000, Birmingham
|
£14m -
£16m
|
Other
|
3.4%
|
Hollywood
Green, London
|
£12m -
£14m
|
Other
|
3.1%
|
Tetron
141, Swadlincote
|
£12m -
£14m
|
Industrial
|
3.1%
|
3
Earstrees Road, Corby
|
£12m -
£14m
|
Industrial
|
3.0%
|
Walton
Summit, Preston
|
£12m -
£14m
|
Industrial
|
2.8%
|
Top
Ten Tenants
Tenant
|
Passing
Rent
|
%
of total contracted rent
|
B&Q
Plc
|
£1,560,000
|
5.8%
|
Public
Sector
|
£1,364,226
|
5.1%
|
WM
Morrisons Supermarkets Ltd
|
£1,252,162
|
4.7%
|
The
Symphony Group Plc
|
£1,225,000
|
4.6%
|
Schlumberger
Oilfield UK Plc
|
£1,138,402
|
4.2%
|
Timbmet
Limited
|
£904,768
|
3.4%
|
Atos IT
Services Limited
|
£872,466
|
3.3%
|
CEVA
Logistics Limited
|
£840,000
|
3.1%
|
Jenkins
Shipping Co Ltd
|
£816,390
|
3.0%
|
Thyssenkrupp
Materials (UK) Ltd
|
£643,565
|
2.4%
|
PRINCIPAL
RISKS AND UNCERTAINTIES
The Company’s assets consist of direct investments in UK commercial
property. Its principal risks are therefore related to the
commercial property market in general, but also the particular
circumstances of the properties in which it is invested, and their
tenants. The main risk to the Company
currently is the likelihood of a UK recession, as a result of
persistent inflation which is continuing to have a negative impact
on the economy. The Russia/Ukraine war, along with other geopolitical
tensions are also affecting the current climate and the effects of
the pandemic that resulted in a weakened supply chain and changes
in working patterns are also still being seen. The Board and
Investment Manager seek to mitigate risks through a strong initial
due diligence process, continual review of the portfolio and active
asset management initiatives. All of the properties in the
portfolio are insured, providing protection against risks to the
properties and also protection in case of injury to third parties
in relation to the properties.
The Board have carried out an assessment of the risk profile of the
Company which concluded that the risks as at 30 June 2023, were not materially different from
those detailed in the statutory accounts for the Company for the
year ended 31 December 2022.
Additional risks which have been considered by the Board are the
impact of our debt renewal on dividend cover as a result of the
recent rise in borrowing rates and the impact of the likelihood of
the UK recession on void rates within our property
portfolio.
Having reviewed the principal risks, the Directors believe that the
Company has adequate resources to continue in operational existence
for the foreseeable future, and therefore believes it appropriate
to adopt the going concern basis in preparing the financial
statements.
The Company has not identified any new principal risks or emerging
risks that will impact the remaining six months of the
year.
STATEMENT
OF DIRECTORS’ RESPONSIBILITIES CONDENSED
The Directors are responsible for preparing the Interim Report in
accordance with applicable law and regulations. The Directors
confirm that to the best of their knowledge:
-
The Unaudited Condensed
Consolidated Financial Statements have been prepared in accordance
with IAS 34; and
-
The Interim Report
includes a fair review of the information required by 4.2.7R and
4.2.8R of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules; and
-
In accordance with 4.2.9R
of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, it is confirmed that this publication has not
been audited or reviewed by the Company’s
auditors.
The Interim Report, for the six months ended 30 June 2023, comprises an Interim Report in the
form of the Chair’s Statement, the Investment Manager’s Report, the
Directors’ Responsibility Statement and Unaudited Consolidated
Condensed Financial Statements. The Directors each confirm to the
best of their knowledge that:
-
the Unaudited Condensed
Consolidated Financial Statements are prepared in accordance with
IFRSs as adopted by the European Union, and give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Group; and
-
the Interim Report
includes a fair review of the development and performance of the
business and the position of the Group, together with a description
of the principal risks and uncertainties faced.
For and on behalf of the Directors of abrdn Property Income Trust
Limited.
Approved by the Board on
28 September 2023
James Clifton-Brown
Chair
UNAUDITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June
2023
|
Notes
|
01
Jan 23
to
30 Jun 23
£
|
01
Jan 22
to
30 Jun 22
£
|
01
Jan 22
to
31 Dec 2022
£
|
Rental
income
|
|
13,158,202
|
13,566,429
|
26,697,931
|
Service
charge income
|
3
|
2,634,895
|
2,334,220
|
4,411,821
|
Service
charge expenditure
|
3
|
(3,548,933)
|
(2,971,262)
|
(5,576,812)
|
Net
Rental Income
|
|
12,244,164
|
12,929,387
|
25,532,940
|
|
|
|
|
|
Administrative
and other expenses
|
|
|
|
|
Investment
management fees
|
3
|
(1,319,824)
|
(1,817,616)
|
(3,480,963)
|
Other
direct property expenses
|
3
|
(1,366,537)
|
(1,501,925)
|
(3,089,960)
|
Impairment
(loss)/gain on trade receivables
|
3
|
(52,273)
|
526,890
|
852,062
|
Other
administration expenses
|
3
|
(544,932)
|
(549,333)
|
(1,134,919)
|
Total
Administrative and other expenses
|
|
(3,283,566)
|
(3,341,984)
|
(6,853,780)
|
Operating
profit before changes in fair value of investment
properties
|
|
8,960,598
|
9,587,403
|
18,679,160
|
|
|
|
|
|
Valuation
(loss)/gain from investment properties
|
4
|
(2,796,932)
|
35,560,346
|
(62,257,782)
|
Valuation
loss from land
|
6
|
(475,619)
|
(60,322)
|
(60,322)
|
Loss on
disposal of investment properties
|
4
|
(5,465)
|
-
|
(207,153)
|
Operating
profit/(loss)
|
|
5,682,582
|
45,087,427
|
(43,846,097)
|
|
|
|
|
|
Finance
income
|
|
51,405
|
3,650
|
27,543
|
Finance
costs
|
|
(2,870,136)
|
(1,778,691)
|
(3,672,685)
|
Loss on
termination of interest rate swaps
|
|
-
|
-
|
(3,562,248)
|
Profit
for the period before taxation
|
|
2,863,851
|
43,312,386
|
(51,053,487)
|
|
|
|
|
|
Taxation
|
|
|
|
|
Tax
charge
|
|
-
|
-
|
-
|
Profit
for the period, net of tax
|
|
2,863,851
|
43,312,386
|
(51,053,487)
|
Other
comprehensive income
|
|
|
|
|
Movement
in fair value of existing swap
|
|
(902,534)
|
1,515,008
|
1,470,570
|
Movement
in fair value of interest rate cap
|
|
1,837,334
|
-
|
43,292
|
Total
other comprehensive gain
|
|
934,800
|
1,515,008
|
1,513,862
|
|
|
|
|
|
Total
comprehensive gain/(loss) for the period, net of
tax
|
|
3,798,651
|
44,827,394
|
(49,539,625)
|
|
|
|
|
|
Earnings
per share
|
|
Pence
|
Pence
|
Pence
|
Basic and
diluted earnings per share
|
7
|
0.8
|
10.9
|
(13.1)
|
All items
in the above Unaudited Consolidated Statement of Comprehensive
Income derive from continuing operations.
The notes
below are an integral part of these Unaudited Consolidated
Financial Statements.
UNAUDITED
CONSOLIDATED BALANCE SHEET
For
the period ended 30 June
2023
Assets
|
Notes
|
30
Jun 23
£
|
30
Jun 22
£
|
31
Dec 22
£
|
Non-current
assets
|
|
|
|
|
Investment
properties
|
4
|
431,171,992
|
497,822,284
|
401,217,536
|
Lease
incentives
|
4
|
8,162,006
|
9,903,316
|
8,357,036
|
Land
|
6
|
7,500,000
|
7,500,000
|
7,500,000
|
Interest
rate cap
|
11
|
2,900,969
|
-
|
2,211,007
|
Rental
deposits held on behalf of tenants
|
|
703,209
|
984,381
|
751,782
|
|
|
450,438,176
|
516,209,981
|
420,037,361
|
Current
assets
|
|
|
|
|
Investment
properties held for sale
|
4,
5
|
-
|
29,250,000
|
-
|
Trade and
other receivables
|
|
5,737,177
|
12,211,707
|
7,457,083
|
Cash and
cash equivalents
|
|
9,958,675
|
8,281,368
|
15,871,053
|
Interest
rate swap
|
11
|
-
|
946,972
|
1,238,197
|
Interest
rate cap
|
11
|
1,406,290
|
-
|
339,462
|
|
|
17,102,142
|
50,690,047
|
24,905,795
|
Total
assets
|
|
467,540,318
|
566,900,028
|
444,943,156
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Trade and
other payables
|
|
11,320,946
|
15,952,009
|
10,880,310
|
|
|
11,320,946
|
15,952,009
|
10,880,310
|
Non-current
liabilities
|
|
|
|
|
Bank
borrowings
|
12
|
134,242,626
|
115,816,328
|
109,123,937
|
Obligations
under finance leases
|
|
1,811,711
|
900,350
|
899,572
|
Rent
deposits due to tenants
|
|
703,209
|
984,381
|
751,782
|
|
|
136,757,546
|
117,701,059
|
110,775,291
|
Total
liabilities
|
|
148,078,492
|
133,653,068
|
121,655,601
|
|
|
|
|
|
Net
assets
|
|
319,461,826
|
433,246,960
|
323,287,555
|
Equity
|
|
|
|
|
Capital
and reserves attributable to Company’s equity
holders
|
|
|
|
|
Share
capital
|
9
|
228,383,857
|
228,383,857
|
228,383,857
|
Treasury
share reserve
|
9
|
(18,400,876)
|
(10,480,869)
|
(18,400,876)
|
Retained
earnings
|
|
2,899,511
|
8,394,995
|
4,382,024
|
Capital
reserves
|
|
8,740,962
|
109,110,605
|
11,084,178
|
Other
distributable reserves
|
|
97,838,372
|
97,838,372
|
97,838,372
|
Total
equity
|
|
319,461,826
|
433,246,960
|
323,287,555
|
|
|
|
|
|
|
|
Pence
|
Pence
|
Pence
|
NAV
per share
|
|
83.8
|
110.7
|
84.8
|
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the
period ended 30 June
2023
|
Notes |
Share Capital
£ |
Treasury Shares
£ |
Retained Earnings
£ |
Capital Reserves
£ |
Other Distributable
Reserves £ |
Total Equity
£ |
Opening balance 01 Jan
2023 |
|
228,383,857 |
(18,400,876) |
4,382,024 |
11,084,178 |
97,838,372 |
323,287,555 |
Profit
for the period |
|
- |
- |
2,863,851 |
- |
- |
2,863,851 |
Other
comprehensive income |
|
- |
- |
- |
934,800 |
- |
934,800 |
Total
comprehensive gain for the period |
|
- |
- |
2,863,851 |
934,800 |
- |
3,798,651 |
Dividends
paid |
10 |
- |
- |
(7,624,380) |
- |
- |
(7,624,380) |
Valuation
loss from investment properties |
4 |
- |
- |
2,796,932 |
(2,796,932) |
- |
- |
Valuation
loss from land |
6 |
- |
- |
475,619 |
(475,619) |
- |
- |
Loss
on disposal of investment properties |
4 |
- |
- |
5,465 |
(5,465) |
- |
- |
Balance at 30 Jun
2023 |
|
228,383,857 |
(18,400,876) |
2,899,511 |
8,740,962 |
97,838,372 |
319,461,826 |
Opening balance 01 Jan
2022 |
|
228,383,857 |
(5,991,417) |
8,521,081 |
72,095,573 |
97,838,372 |
400,847,466 |
Profit
for the period |
|
- |
- |
43,312,386 |
- |
- |
43,312,386 |
Other
comprehensive income |
|
- |
- |
- |
1,515,008 |
- |
1,515,008 |
Total
comprehensive gain for the period |
|
- |
- |
43,312,386 |
1,515,008 |
- |
44,827,394 |
Ordinary
shares paced into treasury net of issue costs |
|
|
(4,489,452) |
- |
- |
- |
(4,489,452) |
Dividends
paid |
10 |
- |
- |
(7,938,448) |
- |
- |
(7,938,448) |
Valuation
gain from investment properties |
4 |
- |
- |
(35,560,346) |
35,560,346 |
- |
- |
Valuation
loss from land |
6 |
- |
- |
60,322 |
(60,322) |
- |
- |
Balance at 30 Jun
2022 |
|
228,383,857 |
(10,480,869) |
8,394,995 |
109,110,605 |
97,838,372 |
433,246,960 |
Opening balance 01 Jan
2022 |
|
228,383,857 |
(5,991,417) |
8,521,081 |
72,095,573 |
97,838,372 |
400,847,466 |
Loss
for the year |
|
- |
- |
(51,053,487) |
- |
- |
(51,053,487) |
Other
comprehensive income |
|
- |
- |
- |
1,513,862 |
- |
1,513,862 |
Total
comprehensive loss for the period |
|
- |
- |
(51,053,487) |
1,513,862 |
- |
(49,539,625) |
Ordinary
shares paced into treasury net of issue costs |
|
- |
(12,409,459) |
- |
- |
- |
(12,409,459) |
Dividends
paid |
10 |
- |
- |
(15,610,827) |
- |
- |
(15,610,827) |
Valuation
loss from investment properties |
4 |
- |
- |
62,257,782 |
(62,257,782) |
- |
- |
Valuation
loss from land |
6 |
- |
- |
60,322 |
(60,322) |
- |
- |
Loss
on disposal of investment properties |
4 |
- |
- |
207,153 |
(207,153) |
- |
- |
Balance at 31 Dec
2022 |
|
228,383,857 |
(18,400,876) |
4,382,024 |
11,084,178 |
97,838,372 |
323,287,555 |
UNAUDITED
CONSOLIDATED CASH FLOW STATEMENT
For the period ended 30 June
2023
|
|
|
|
|
|
|
01
Jan 23
|
01
Jan 22
|
01
Jan 22
|
Cash
flows from operating activities
|
Notes
|
to
30 Jun 23
£
|
to
30 Jun 22
£
|
to
31 Dec 22
£
|
Profit for
the period before taxation
|
|
2,863,851
|
43,312,386
|
(51,053,487)
|
Movement
in lease incentives
|
|
195,030
|
(1,101,023)
|
(841,398)
|
Movement
in trade and other receivables
|
|
1,768,479
|
(1,267,799)
|
3,719,424
|
Movement
in trade and other payables
|
|
(50,187)
|
2,413,157
|
(3,237,151)
|
Loss on
termination of interest rate swap
|
|
-
|
-
|
3,562,248
|
Finance
costs
|
|
2,870,136
|
1,778,691
|
3,672,685
|
Finance
income
|
|
(51,405)
|
(3,650)
|
(27,543)
|
Valuation
gain from investment properties
|
4
|
2,796,932
|
(35,560,346)
|
62,257,782
|
Valuation
loss from land
|
6
|
475,619
|
60,322
|
60,322
|
Loss on
disposal of investment properties
|
4
|
5,465
|
-
|
207,153
|
Net
cash inflow from operating activities
|
|
10,873,920
|
9,631,738
|
18,320,035
|
Cash
flows from investing activities
|
|
|
|
|
Interest
received
|
|
51,405
|
3,650
|
27,543
|
Purchase
of investment properties
|
4
|
(23,984,360)
|
(5,408,910)
|
(5,501,321)
|
Purchase
of land
|
6
|
(475,619)
|
(60,322)
|
(60,322)
|
Capital
expenditure on investment properties
|
4
|
(7,854,889)
|
(1,589,721)
|
(13,524,813)
|
Net
proceeds from disposal of investment properties
|
4
|
(5,456)
|
-
|
41,142,847
|
Net
cash (outflow)/inflow from investing activities
|
|
(32,268,928)
|
(7,055,303)
|
22,083,934
|
Cash
flows from financing activities
|
|
|
|
|
Shares
bought back during the period
|
|
-
|
(4,489,452)
|
(12,409,459)
|
Borrowing
on RCF
|
12
|
50,000,000
|
6,000,000
|
17,000,000
|
Repayment
of RCF
|
12
|
-
|
-
|
(17,000,000)
|
Repayment
on expired facility
|
12
|
(110,000,000)
|
-
|
-
|
New term
facility
|
12
|
85,000,000
|
-
|
-
|
Bank
borrowing arrangement costs
|
|
-
|
-
|
(804,297)
|
Interest
paid on bank borrowings
|
|
(3,098,005)
|
(1,148,416)
|
(2,959,023)
|
Payments
on interest rate swaps
|
|
1,254,217
|
(524,525)
|
(473,425)
|
Swap
breakage costs
|
|
-
|
-
|
(3,562,248)
|
Cap
arrangement fees
|
|
-
|
-
|
(2,507,177)
|
Finance
lease interest
|
|
(49,202)
|
(12,234)
|
(24,468)
|
Dividends
paid to the Company’s shareholders
|
10
|
(7,624,380)
|
(7,938,448)
|
(15,610,827)
|
Net
cash inflow/(outflow) from financing activities
|
|
15,482,630
|
(8,113,075)
|
(38,350,924)
|
Net
(decrease)/increase in cash and cash equivalents
|
|
(5,912,378)
|
(5,536,640)
|
2,053,045
|
Cash and
cash equivalents at beginning of period
|
|
15,871,053
|
13,818,008
|
13,818,008
|
Cash
and cash equivalents at end of period
|
|
9,958,675
|
8,281,368
|
15,871,053
|
Notes TO the UNAUDITED CONDENSED consolidated financial
statements
1.
Accounting Policies
The
Unaudited Consolidated Financial Statements have been prepared in
accordance with International Financial Reporting Standard (“IFRS”)
IAS 34 ‘Interim Financial Reporting’ and, except as described
below, the accounting policies set out in the statutory accounts of
the Group for the year ended 31 December
2022. The condensed Unaudited 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 of the Group
for the year ended 31 December 2022,
which were prepared under full IFRS requirements.
Going
Concern
The
directors assess the Group’s ability to continue as a going concern
by reviewing forecasts of cashflows and profitability in the
context of the Group’s borrowing facilities up to and beyond the
going concern horizon of 12 months from the approval of these
financial statements. The review includes assessing severe but
plausible downside scenarios.
2.
Related Party Disclosures
Parties
are considered to be related if one party has the ability to
control the other party or exercise significant influence over the
other party in making financial or operational
decisions.
Directors’
remuneration
The
Directors of the Company are deemed as key management personnel and
received fees for their services. Total fees for the period ended
30 June 2023 were £114,057 (period
ended 30 June 2022: £126,489) none of
which remained payable at the end of June.
Investment
manager
abrdn Fund
Managers Limited (formerly known as Aberdeen Standard Fund Managers
Limited), as the Manager of the Group from 10 December 2018, received fees for their
services as investment managers. Further details are provided in
note 3.
3.
Administrative and Other Expenses
Investment management fees
From
1 July 2019, under the terms of the
IMA the Investment Manager was entitled to 0.70% of total assets up
to £500 million; and 0.60% of total assets in excess of £500
million. The Group has agreed a 10bps reduction in the fee payable
to the Investment Manager, effective from 1
January 2023. The fee has reduced to 0.60% of total assets
up to £500m, and 0.50% of total assets in excess of £500 million.
The total fees charged for the period ended 30 June 2023 amounted to £1,319,824 (period ended
30 June 2022: £1,817,616). The total
amount due and payable at the period end amounted to £1,319,824
(period ended 30 June 2021:
£1,817,616).
|
|
6
months to
30
Jun 23
£
|
6
months to
30
Jun 22
£
|
Year
to
31
Dec 22
£
|
Investment
management fees
|
|
1,319,824
|
1,817,616
|
3,480,963
|
Other
direct property expenses
|
|
|
|
|
Vacant
Costs (excluding void service charge)
|
|
693,261
|
310,583
|
600,561
|
Repairs
and maintenance
|
|
255,958
|
841,792
|
1,740,937
|
Letting
fees
|
|
200,102
|
220,770
|
431,534
|
Amounts
written off in the period
|
|
10,052
|
-
|
79,115
|
Other
costs
|
|
207,164
|
128,780
|
237,813
|
Total
other direct property expenses
|
|
1,366,537
|
1,501,925
|
3,089,960
|
|
|
|
|
|
Impairment
loss/(gain) on trade receivables
|
|
52,273
|
(526,890)
|
(852,062)
|
Other
administration expenses
|
|
|
|
|
Directors’
fees and subsistence
|
|
114,057
|
126,489
|
247,603
|
Valuers
fees
|
|
37,615
|
54,405
|
94,256
|
Auditor’s
fees
|
|
65,640
|
55,770
|
131,280
|
Marketing
|
|
112,402
|
112,403
|
226,782
|
Other
administration costs
|
|
215,218
|
200,266
|
434,998
|
Total
Other administration expenses
|
|
544,932
|
549,333
|
1,134,919
|
Total
Administrative and other expenses
|
|
3,283,566
|
3,341,984
|
6,853,780
|
|
|
|
|
|
|
|
|
|
Total service charge billed to tenants
|
2,593,408
|
2,177,750
|
4,492,780
|
Service charge due (to)/from tenants
|
41,487
|
156,470
|
(80,959)
|
Service charge income
|
2,634,895
|
2,334,220
|
4,411,821
|
|
|
|
|
Total service charge expenditure incurred
|
2,634,895
|
2,334,220
|
4,411,821
|
Service charge billed to the Group in respect of void
units
|
914,038
|
637,042
|
1,164,991
|
Service charge expenditure
|
3,548,933
|
2,971,262
|
5,576,812
|
4.
Investment Properties
|
UK
Industrial
30
Jun 23
|
UK
Office
30
Jun 23
|
UK
Retail
30
Jun 23
|
UK
Other
30
Jun 23
|
Total
30
Jun 23
|
Market
value as at 01 January 2023
|
227,525,000
|
88,450,000
|
53,550,000
|
39,150,000
|
408,675,0000
|
Purchase
of investment property
|
4,367,140
|
-
|
19,617,220
|
-
|
23,984,360
|
Capital
expenditure on investment properties
|
5,028,808
|
2,395,086
|
430,995
|
-
|
7,854,889
|
Opening
market value of disposed investment properties
|
-
|
-
|
-
|
-
|
-
|
Valuation
gain/(loss) from investment properties
|
3,848,480
|
(5,595,930)
|
(182,833)
|
(866,649)
|
(2,796,932)
|
Movement
in lease incentives receivable
|
12,859
|
(174,156)
|
(382)
|
(33,351)
|
(195,030)
|
Market
value at 30 June 2023
|
240,782,287
|
85,075,000
|
73,415,000
|
38,250,000
|
437,522,287
|
Investment
property recognised as held for sale
|
-
|
-
|
-
|
-
|
-
|
Market
value net of held for sale at 30 June 2023
|
240,782,287
|
85,075,000
|
73,415,000
|
38,250,000
|
437,522,287
|
Right of
use asset recognised on leasehold properties
|
-
|
1,811,711
|
-
|
-
|
1,811,711
|
Adjustment
for lease incentives
|
(4,884,078)
|
(1,812,422)
|
(884,399)
|
(577,107)
|
(8,162,006)
|
Carrying
value at 30 June 2023
|
235,898,209
|
85,074,289
|
72,526,601
|
37,672,893
|
431,171,992
|
The
valuations of investment properties were performed by Knight Frank
LLP, accredited external valuers with recognised and relevant
professional qualifications and recent experience of the location
and category of the investment properties being valued. The
valuation models used by Knight Frank are in accordance with the
Royal Institution of Chartered Surveyors (‘RICS’) requirements on
disclosure for Regulated Purpose Valuations (RICS Valuation -
Professional Standards January 2014
published by the Royal Institution of Chartered Surveyors) and are
consistent with the principles in IFRS 13.
The market
value provided by Knight Frank LLP at the period ended 30 June 2023 was £437,522,288 (30 June 2022: £536,075,250) however an adjustment
has been made for lease incentives of £8,162,007 (30 June 2022: £9,903,316) that are already
accounted for as an asset. In addition, as required under IFRS 16,
a right of use asset of £1,811,711 (30 June
2022: £900,350) has been recognised in respect of the
present value of future ground rents and an amount of £1,811,711
(30 June 2022: £900,350) has also
been recognised as an obligation under finance leases in the
balance sheet.
In the
unaudited consolidated cash flow statement, proceeds from disposal
of investment properties comprise:
|
30 Jun 23
|
30 Jun 22
|
31 Dec 22
|
Opening market value of disposed investment properties
|
-
|
-
|
41,350,000
|
Loss on disposal of investment properties
|
(5,465)
|
-
|
(207,153)
|
Net
proceeds from disposal of investment properties
|
(5,465)
|
-
|
41,142,847
|
The loss
recognised above was representative of sales costs for a property
sold in 2022 – the costs were ultimately found to be marginally
higher than initially accrued.
Valuation
methodology.
The fair
values of completed investment properties are determined using the
income capitalisation method.
The income
capitalisation method is based on capitalising the net income
stream at an appropriate yield. In establishing the net income
stream the valuers have reflected the current rent (the gross rent)
payable to lease expiry, at which point the valuer has assumed that
each unit will be re-let at their opinion of ERV. The valuers have
made allowances for voids where appropriate, as well as deducting
non recoverable costs where applicable. The appropriate yield is
selected on the basis of the location of the building, its quality,
tenant credit quality and lease terms amongst other
factors.
No
properties have changed valuation technique during the year. At the
Balance Sheet date the income capitalisation method is appropriate
for valuing all investment properties.
The
Investment Manager meets with the valuers on a quarterly basis to
ensure the valuers are aware of all relevant information for the
valuation and any change in the investment over the quarter. The
Investment Manager then reviews and discusses the draft valuations
with the valuers to ensure correct factual assumptions are
made.
The
management group that determines the Company’s valuation policies
and procedures for property valuations is the Property Valuation
Committee as detailed in the annual accounts. The Committee reviews
the quarterly property valuation reports produced by the valuers
before they are submitted to the Board, focusing in particular
on:
-
Significant adjustments
from the previous property valuation report;
-
Reviewing the individual
valuations of each property;
-
Compliance with applicable
standards and guidelines including those issued by RICS and the
UKLA Listing Rules;
-
Reviewing the findings and
any recommendations or statements made by the
valuer;
-
Considering any further
matters relating to the valuation of the
properties.
The Chair
of the Committee makes a brief report of the findings and
recommendations of the Committee to the Board after each Committee
meeting. The minutes of the Committee meetings are circulated to
the Board. The Chair submits an annual report to the Board
summarising the Committee’s activities during the year and the
related significant results and findings.
The table
below outlines the valuation techniques and inputs used to derive
Level 3 fair values for each class of investment properties. The
table includes:
-
The fair value
measurements at the end of the reporting period.
-
The level of the fair
value hierarchy (e.g. Level 3) within which the fair value
measurements are categorised in their entirety.
-
A description of the
valuation techniques applied.
-
Fair value measurements,
quantitative information about the significant unobservable inputs
used in the fair value measurement.
-
The inputs used in the
fair value measurement, including the ranges of rent charged to
different units within the same building.
As noted
above, all investment properties listed in the table below are
categorised Level 3 and are all valued using the Income
Capitalisation method.
Country
& Class 30 Jun 23
|
UK
Industrial Level 3
|
UK
Office Level 3
|
UK
Retail Level 3
|
UK
Other Level 3
|
Fair
Value £
|
240,782,287
|
85,075,000
|
73,415,001
|
38,250,000
|
Key
Unobservable Input (Range)
|
|
|
|
|
Initial
Yield
|
0.00% to
8.78%
|
2.67% to
7.90%
|
6.03% to
9.50%
|
4.32% to
9.29%
|
Reversionary
Yield
|
4.90% to
8.65% (*)
|
6.49% to
10.70%
|
5.41% to
7.99%
|
5.02% to
9.40%
|
Equivalent
Yield
|
4.96% to
8.20%
|
6.22% to
9.37%
|
5.66% to
9.74%
|
5.01% to
9.07%
|
Estimated
rental
value per
sq ft
|
£4.60 to
£9.50
|
£17.29 to
£45.94
|
£8.74 to
£30.61
|
£6.50 to
£20.00
|
Key
Unobservable Input (Weighted average) (*)
|
|
|
|
|
Initial
Yield
|
4.90%
|
6.59%
|
6.75%
|
5.73%
|
Reversionary
Yield
|
6.33%
|
9.14%
|
6.13%
|
6.12%
|
Equivalent
Yield
|
6.23%
|
8.22%
|
6.91%
|
6.23%
|
Estimated
rental
value per
sq ft
|
£6.56
|
£27.12
|
£16.55
|
£14.83
|
*
Excluding properties under development.
Country
& Class 31 Dec 22
|
UK
Industrial Level 3
|
UK
Office Level 3
|
UK
Retail Level 3
|
UK
Other Level 3
|
Fair
Value £
|
240,782,287
|
85,075,000
|
73,415,001
|
38,250,000
|
Key
Unobservable Input (Range)
|
|
|
|
|
Initial
Yield
|
0.00% to
8.78%
|
2.67% to
7.90%
|
6.03% to
9.50%
|
4.32% to
9.29%
|
Reversionary
Yield
|
4.90% to
8.65%
|
6.49% to
10.70%
|
5.41% to
7.99%
|
5.02% to
9.40%
|
Equivalent
Yield
|
4.96% to
8.20%
|
6.22% to
9.37%
|
5.66% to
9.74%
|
5.01% to
9.07%
|
Estimated
rental
value per
sq ft
|
£4.60 to
£9.50
|
£17.29 to
£45.94
|
£8.74 to
£30.61
|
£6.50 to
£20.00
|
Key
Unobservable Input (Weighted average)
|
|
|
|
|
Initial
Yield
|
4.90%
|
6.59%
|
6.75%
|
5.73%
|
Reversionary
Yield
|
6.33%
|
9.14%
|
6.13%
|
6.12%
|
Equivalent
Yield
|
6.23%
|
8.22%
|
6.91%
|
6.23%
|
Estimated
rental
value per
sq ft
|
£6.56
|
£27.12
|
£16.55
|
£14.83
|
Descriptions
and definitions.
The table
above includes the following descriptions and definitions relating
to valuation techniques and key observable inputs made in
determining the fair values.
Estimated
rental value (ERV).
The rent
at which space could be let in the market conditions prevailing at
the date of valuation.
Equivalent
yield.
The
equivalent yield is defined as the internal rate of return of the
cash flow from the property, assuming a rise or fall to ERV at the
next review or lease termination, but with no further rental
change.
Initial
yield.
Initial
yield is the annualised rents of a property expressed as a
percentage of the property value.
Reversionary
yield.
Reversionary
yield is the anticipated yield to which the initial yield will rise
(or fall) once the rent reaches the ERV.
The table
below shows the overall ERV per annum, area per square foot,
average ERV per square foot, initial yield and reversionary yield
as at the Balance Sheet date.
|
30 Jun 23
|
31 Dec 22
|
ERV p.a.
|
£33,858,142
|
£31,048,945
|
Area sq ft
|
3,585,128
|
3,416,291
|
Average ERV per sq ft
|
£9.44
|
£9.09
|
Initial Yield
|
5.7%
|
5.7%
|
Reversionary Yield
|
7.2%
|
7.1%
|
The table
below presents the sensitivity of the valuation to changes in the
most significant assumptions underlying the valuation of completed
investment property. The Board believes these are reasonable
sensitivities given historic movements in valuations.
|
30 Jun 23
£
|
31 Dec 22
£
|
Increase in equivalent yield of 50 bps
|
(33,598,162)
|
(31,086,535)
|
Decrease of 5% in ERV
|
(16,650,621)
|
(15,879,151)
|
Below is a
list of how the interrelationships in the sensitivity analysis
above can be explained.
In both
cases outlined in the sensitivity table the estimated fair value
would increase (decrease) if:
-
The ERV is higher
(lower)
-
Void periods were shorter
(longer)
-
The occupancy rate was
higher (lower)
-
Rent free periods were
shorter (longer)
-
The capitalisation rates
were lower (higher)
5.
Investment Properties Held for Sale
As at
30 June 2023, the Group was not
actively seeking a buyer for any of the Investment Properties. As
at 30 June 2022, the Group was
actively seeking a buyer for Marsh Way, Rainham and Endeavour
House, Kiddlington. The Group exchanged contracts on the sale of
Endeavour House, Kiddlington on 26 July
2022 for a price of £8,033,000. On 27
September 2022 the Group exchanged contracts on the sale of
Marsh Way, Rainham for a price of £21,650,000.
6.
Land Valuation methodology.
The Land
is held at fair value.
The Group
appoints suitable valuers (such appointment is reviewed on a
periodic basis) to undertake a valuation of the land on a quarterly
basis. The valuation is undertaken in accordance with the then
current RICS guidelines by Knight Frank LLP whose credentials are
set out in note 3.
Reconciliation of carrying amount
|
6 months
to 30 Jun 23
|
6 months
to 30 Jun 22
|
Year
to 31 Dec 22
|
|
|
|
|
Cost
|
|
|
|
Balance at the beginning of the period
|
8,061,872
|
8,001,550
|
8,001,550
|
Additions
|
475,619
|
60,322
|
60,322
|
Balance at the end of the period
|
8,537,491
|
8,061,872
|
8,061,872
|
|
|
|
|
Accumulated depreciation and amortisation
|
|
|
|
Balance at the beginning of the period
|
(561,872)
|
(501,550)
|
(501,550)
|
Valuation loss from land
|
(475,619)
|
(60,322)
|
(60,322)
|
Balance at the end of the period
|
(1,037,491)
|
(561,872)
|
(561,872)
|
|
|
|
|
Carrying amount at end of period
|
7,500,000
|
7,500,000
|
7,500,000
|
The Group
has successfully applied for grant income in relation to the
reforestation and peatland restoration.
7.
Earnings per Share
Basic
earnings per share amounts are calculated by dividing profit for
the period net of tax attributable to ordinary equity holders by
the weighted average number of ordinary shares outstanding during
the period. As there are no dilutive instruments outstanding, basic
and diluted earnings per share are identical.
The
earnings per share for the year is set out in the table.
Earnings
for the period to 30 June 2023 should
not be taken as a guide to the results for the year to 31 December 2023.
|
6 months to
30 Jun 23
£
|
6 months to
30 Jun 22
£
|
Year to
31 Dec 22
£
|
Profit for the period net of tax
|
2,863,851
|
43,312,386
|
(51,053,487)
|
|
|
|
|
Weighted average number of ordinary shares outstanding during the
year
|
381,218,977
|
396,268,050
|
389,565,276
|
Earnings per ordinary share (pence)
|
0.8
|
10.9
|
(13.1)
|
Profit for the period excluding capital
items
|
6,141,867
|
7,812,362
|
11,471,770
|
EPRA earnings per share (p)
|
1.6
|
2.0
|
2.9
|
8.
Investments in Subsidiary Undertakings
The Company owns 100 per cent of the issued ordinary share capital
of abrdn Property Holdings Limited (formerly known as Standard Life
Investments Property Holdings Limited), a company with limited
liability incorporated and domiciled in Guernsey, Channel
Islands, whose principal business is property
investment.
The Group undertakings consist of the following 100% owned
subsidiaries at the Balance Sheet date:
-
abrdn Property Holdings
Limited (formerly known as Standard Life Investments Property
Holdings Limited), a property investment company with limited
liability incorporated in Guernsey, Channel
Islands.
-
abrdn (APIT) Limited
Partnership (formerly known as Standard Life Investments (SLIPIT)
Limited Partnership), a property investment limited partnership
established in England.
-
abrdn APIT (General
Partner) Limited (formerly known as Standard Life Investments
SLIPIT (General Partner) Limited), a company with limited liability
incorporated in England. This
Company is the GP for the Limited Partnership.
-
abrdn (APIT Nominee)
Limited (formerly known as Standard Life Investments SLIPIT
(Nominee) Limited), a company with limited liability incorporated
and domiciled in England.
9.
Share Capital
Under the Company’s Articles of Incorporation, the Company may
issue an unlimited number of ordinary shares of 1 pence each, subject to issuance limits set at
the AGM each year. As at 30 June 2023
there were 381,218,977 ordinary shares of 1p each in issue
(31 December 2022: 381,218,977). All
ordinary shares rank equally for dividends and distributions and
carry one vote each. There are no restrictions concerning the
transfer of ordinary shares in the Company, no special rights with
regard to control attached to the ordinary shares, no agreements
between holders of ordinary shares regarding their transfer known
to the Company and no agreement which the Company is party to that
affects its control following a takeover bid.
|
30 Jun 23
£
|
31 Dec 22
£
|
30 Jun 22
£
|
Allotted, called up and fully paid
|
228,383,857
|
228,383,857
|
228,383,857
|
Treasury Shares.
From May 2022, the Company undertook
a share buyback programme at various levels of discount to the
prevailing NAV. In the period to 30 June
2023 no shares had been bought back (30 June 2022: 5,620,234) for £nil after costs
(30 June 2022: £4,489,452) and are
included in the treasury share reserve.
|
30 Jun 23
£
|
31 Dec 22
£
|
30 Jun 22
£
|
Opening balance as at 1 January
|
18,400,876
|
5,991,417
|
5,991,417
|
Bought back during the period
|
-
|
12,409,459
|
4,489,452
|
Closing balance
|
18,400,876
|
18,400,876
|
10,480,869
|
The number of shares in issue on 30 June
2023 and 2022 are as follows:
|
30 Jun 23
Number of shares
|
31 Dec 22
Number of shares
|
30 Jun 22
Number of shares
|
Opening balance as at 1 January
|
381,218,977
|
396,922,386
|
396,922,386
|
Issued during the period
|
-
|
-
|
-
|
Bought back during the period and put into Treasury
|
-
|
(15,703,409)
|
(5,620,234)
|
Closing balance
|
381,218,977
|
381,218,977
|
391,302,152
|
10.
Dividends and Property Income Distributions Gross of Income
Tax
|
6
months to 30 Jun 23
|
12
months to Dec 22
|
|
|
|
Dividends
|
PID
pence
|
Non-PID
pence
|
Total
Pence
|
PID
£
|
Non-PID
£
|
PID
pence
|
Non-PID
pence
|
Total
Pence
|
PID
£
|
Non-PID
£
|
Quarter to
31 December of prior year (paid in February)
|
-
|
1.0000
|
1.0000
|
-
|
3,812,190
|
0.7910
|
0.2090
|
1.0000
|
3,139,656
|
829,568
|
Quarter to
31 March (paid in May)
|
1.0000
|
-
|
1.0000
|
3,969,224
|
-
|
1.0000
|
-
|
1.0000
|
3,969,224
|
-
|
Total
dividends paid
|
1.0000
|
1.0000
|
2.0000
|
3,812,190
|
3,812,190
|
1.7910
|
0.2090
|
2.0000
|
7,108,880
|
829,568
|
|
|
|
|
|
|
|
|
|
|
|
Quarter to
30 June (paid in August)
|
-
|
-
|
-
|
-
|
-
|
1.0000
|
-
|
1.0000
|
3,860,190
|
-
|
Quarter to
30 September (paid in November)
|
-
|
-
|
-
|
-
|
-
|
0.1806
|
0.8194
|
1.0000
|
688,481
|
3,123,708
|
Total
dividends paid
|
1.0000
|
1.0000
|
2.0000
|
3,812,190
|
3,812,190
|
2.9716
|
1.0284
|
4.0000
|
11,657,551
|
3,953,276
|
|
|
|
|
|
|
|
|
|
|
|
Quarter to
30 June of current period (paid after period end)
|
1.0000
|
-
|
1.0000
|
3,812,190
|
-
|
-
|
-
|
-
|
-
|
-
|
Quarter to
31 December of current year (paid after year end)
|
-
|
-
|
-
|
-
|
-
|
-
|
1.0000
|
1.0000
|
-
|
3,812,190
|
Prior year
dividends (per above)
|
-
|
(1.0000)
|
(1.0000)
|
-
|
(3,812,190)
|
(0.7910)
|
(0.2090)
|
(1.0000)
|
(3,130,656)
|
(829,568)
|
Total
dividends paid for the year
|
2.0000
|
-
|
2.0000
|
7,624,380
|
-
|
2.1806
|
1.8194
|
4.0000
|
8,517,895
|
6,935,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A property income dividend of 1.00p per share was declared on
9 August 2023 in respect of the
quarter to 30 June 2023 - a total
payment of £3,812,190. This was paid on 31
August 2023.
11.
Financial Instruments
Fair
values.
Set out
below is a comparison by class of the carrying amounts and fair
value of the Group’s financial instruments that are carried in the
financial statements at an amortised cost.
|
Carrying
Amount
|
Fair
Value
|
Financial
Assets
|
30
Jun 23
£
|
31
Dec 22
£
|
30
Jun 23
£
|
31
Dec 22
£
|
Cash and
cash equivalents
|
9,958,675
|
15,871,053
|
9,958,675
|
15,871,053
|
Trade and
other receivables
|
5,737,177
|
7,457,083
|
5,737,177
|
7,457,083
|
Financial
Liabilities
|
|
|
|
|
Bank
borrowings
|
134,242,626
|
109,123,937
|
134,823,660
|
109,580,566
|
Trade and
other payables
|
5,024,549
|
6,564,852
|
5,024,549
|
8,359,405
|
Interest rate cap. These have not been included in the disclosure
above as these are already held at fair value.
The fair value of trade receivables and payables are materially
equivalent to their amortised cost.
The fair value of the financial assets and liabilities are included
at an estimate of the price that would be received to sell a
financial asset or paid to transfer a financial liability in an
orderly transaction between market participants at the measurement
date. The following methods and assumptions were used to estimate
the fair value:
-
Cash and cash equivalents,
trade and other receivables and trade and other payables are the
same as fair value due to the short-term maturities of these
instruments.
-
The fair value of bank
borrowings is estimated by discounting future cash flows using
rates currently available for debt on similar terms and remaining
maturities. The fair value approximates their carrying values gross
of unamortised transaction costs.
The table below shows an analysis of the fair values of financial
assets and liabilities recognised in the Balance Sheet by the level
of the fair value hierarchy:
Period
ended 30 June 23
|
Level
1
|
Level
2
|
Level
3
|
Total
fair value
|
Financial
assets
|
|
|
|
|
Trade and
other receivables
|
-
|
5,737,177
|
-
|
5,737,177
|
Cash and
cash equivalents
|
9,958,675
|
-
|
-
|
9,958,675
|
Interest
rate cap
|
-
|
4,307,258
|
-
|
4,307,258
|
Rental
deposits held on behalf of tenants
|
703,209
|
-
|
-
|
703,209
|
Right of
use asset
|
-
|
1,811,711
|
-
|
1,811,711
|
|
10,661,884
|
11,856,147
|
-
|
22,518,031
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
Trade and
other payables
|
-
|
5,024,549
|
-
|
5,024,549
|
Bank
borrowings
|
-
|
134,823,660
|
-
|
134,823,660
|
Obligations
under finance leases
|
-
|
1,811,711
|
-
|
1,811,711
|
Rental
deposits due to tenants
|
703,209
|
-
|
-
|
703,209
|
|
703,209
|
141,659,922
|
-
|
142,363,131
|
|
|
|
|
|
Year
ended 31 December 2022
|
Level
1
|
Level
2
|
Level
3
|
Total
fair value
|
Financial
assets
|
|
|
|
|
Trade and
other receivables
|
-
|
7,457,083
|
-
|
7,457,083
|
Cash and
cash equivalents
|
15,871,053
|
-
|
-
|
15,871,053
|
Interest
rate swap
|
-
|
1,238,197
|
-
|
1,238,197
|
Interest
rate cap
|
-
|
2,550,469
|
-
|
2,550,469
|
Rental
deposits held on behalf of tenants
|
751,782
|
-
|
-
|
751,782
|
Right of
use asset
|
-
|
899,572
|
-
|
899,572
|
|
16,622,835
|
12,145,321
|
-
|
28,768,156
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
Trade and
other payables
|
-
|
6,564,852
|
-
|
6,564,852
|
Bank
borrowings
|
-
|
109,580,566
|
-
|
109,580,566
|
Obligations
under finance leases
|
-
|
899,572
|
-
|
899,572
|
Rental
deposits due to tenants
|
751,782
|
-
|
-
|
751,782
|
|
751,782
|
117,044,990
|
-
|
117,796,772
|
Explanation
of the fair value hierarchy
Level 1
Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2
Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3
Valuation techniques for which the lowest level input that is
significant to the fair value measurement is
unobservable.
12.
Bank Borrowings
On 12 October 2022 the Group entered
into an agreement to extend its existing £165 million debt facility
with Royal Bank of Scotland International (“RBSI”). The facility
(which was due to expire on 27 April
2023) consisted of a £110 million term loan payable at
1.375% plus SONIA and two Revolving Credit Facilities (“RCF”) of
£35 million payable at 1.45% plus SONIA and £20 million payable at
1.60% plus SONIA. As at 30 June 2022,
£6m was drawn on this expired facility.
|
30 Jun 23
£
|
31 Dec 22
£
|
30 Jun 22
£
|
Loan facility and drawn down outstanding
balance
|
135,000,000
|
110,000,000
|
116,000,000
|
|
|
|
|
Opening carrying value of expired facility as at 1
January
|
109,928,234
|
109,723,399
|
109,723,399
|
Borrowings during the period on expired RCF
|
25,000,000
|
17,000,000
|
6,000,000
|
Repayment of expired RCF
|
(25,000,000
|
(17,000,000
|
-
|
Repayment of expired facility
|
(110,000,000)
|
-
|
-
|
Amortisation arrangement costs
|
71,766
|
204,835
|
92,929
|
Closing carrying value of expired
facility
|
-
|
109,928,234
|
115,816,328
|
The amended and restated agreement was for a three year term loan
of £85 million and a single RCF of £80 million; both payable at
1.5% plus SONIA. The new facility commenced on 27 April 2023. As at 30
June 2023 £50m of the RCF was drawn; £25m was drawn down on
commencement of the new facilities.
Opening carrying value of new facility as at 1
January
|
(804,297)
|
-
|
-
|
Borrowings during the period on new RCF
|
50,000,000
|
-
|
-
|
New term loan facility
|
85,000,000
|
-
|
-
|
Arrangement costs of additional facility
|
-
|
(804,297)
|
-
|
Amortisation arrangement costs
|
46,923
|
-
|
-
|
Closing carrying value
|
134,242,626
|
(804,297)
|
-
|
Opening carrying value of facilities combined as at 1
January
|
109,123,937
|
109,723,399
|
109,723,399
|
Closing carrying value of facilities
combined
|
134,242,626
|
109,123,937
|
115,816,328
|
Under the terms of the loan facility there are certain events which
would entitle RBSI to terminate the loan facility and demand
repayment of all sums due. Included in these events of default is
the financial undertaking relating to the LTV percentage. The loan
agreement notes that the LTV percentage is calculated as the loan
amount less the amount of any sterling cash deposited within the
security of RBSI divided by the gross secured property value, and
that this percentage should not exceed 55% to maturity.
13.
Events After the Balance Sheet Date
Dividend
On
31 August 2023 a dividend in respect
of the quarter to 30 June 2023 of
1.0 pence per share was paid
comprising a Property Income Distribution
ALTERNATIVE PERFORMANCE MEASURES
The
Company uses the following Alternative Performance Measures (APMs).
APM do not have a standard meaning prescribed by GAAP and therefore
may not be comparable to similar measures presented by other
entities.
Dividend Cover
|
30 Jun 23
|
30 Jun 22
|
Earnings per IFRS Income Statement
|
3,798,651
|
44,827,394
|
Add back:
|
|
|
Unrealised losses/(gains) on investment properties
|
2,796,932
|
(35,560,346)
|
Realised losses on investment properties
|
5,465
|
-
|
Unrealised loss on land
|
475,619
|
60,322
|
Gains on cash flow hedge
|
(934,800)
|
(1,515,008)
|
Profit for dividend cover
|
6,141,867
|
7,812,362
|
Dividends paid in the period
|
7,624,380
|
7,938,448
|
Dividend cover
|
80.6%
|
98.4%
|
NAT Total Return
|
30 Jun 23
|
30 Jun 22
|
Opening NAV
|
84.8
|
101.0
|
Closing NAV
|
83.8
|
110.7
|
Movement in NAV
|
(1.0)
|
9.7
|
% Movement in NAV
|
(1.2%)
|
9.6%
|
Impact on reinvested dividends
|
2.4%
|
2.1%
|
NAV total return
|
1.2%
|
11.7%
|
Share Price Total Return
|
30 Jun 23
|
30 Jun 22
|
Opening share price
|
62.4
|
81.5
|
Closing share price
|
47.7
|
76.2
|
Movement in share price
|
(14.7)
|
(5.3)
|
% Movement in share price
|
(23.6%)
|
(6.5%)
|
Impact on reinvested dividends
|
2.8%
|
2.3%
|
Share price total return
|
(20.8%)
|
(4.2%)
|
Gearing
|
30 Jun 23
|
31 Dec 22
|
Loan amount
|
135,000,000
|
110,000,000
|
Total Assets
|
467,540,318
|
444,943,156
|
Less Derivative Swap
|
-
|
(1,238,197)
|
Less Derivative Cap
|
(4,307,259)
|
(2,550,469)
|
|
463,233,059
|
441,154,490
|
Gearing Ratio
|
29.1%
|
24.9%
|
Loan to Value
|
30 Jun 23
|
31 Dec 22
|
Loan amount
|
135,000,000
|
110,000,000
|
Cash
|
(9,958,675)
|
(15,871,053)
|
|
125,051,325
|
94,128,947
|
Portfolio Valuation
|
445,022,288
|
416,175,000
|
LTV percentage
|
28.1%
|
22.6%
|
Ongoing Charges
|
30 Jun 23
|
30 Jun 22
|
Average NAV over the first 6 months
|
318,912,693
|
419,038,543
|
|
|
|
Investment management fees
|
1,319,824
|
1,817,616
|
Other administration expenses
|
544,932
|
549,333
|
Other direct property expenses
|
1,366,537
|
1,501,925
|
Less: Amounts written off in the period
|
(10,052)
|
-
|
Service charge billed to the Group
|
914,038
|
637,042
|
Finance lease interest
|
49,202
|
12,234
|
Total ongoing charges
|
4,184,482
|
4,518,150
|
|
|
|
As a % of NAV (annualised)
|
2.6%
|
2.2%
|
|
|
|
Total ongoing charges (as above)
|
4,184,482
|
4,518,150
|
Less: Other direct property expenses
|
(1,366,537)
|
(1,501,925)
|
Add: Amounts written off in the period
|
10,052
|
-
|
Less: Finance lease interest
|
(49,202)
|
(12,234)
|
Less: Service charge billed to the Group
|
(914,039)
|
(637,042)
|
Total ongoing charges less direct property
expenses
|
1,864,756
|
2,366,949
|
|
|
|
As a % of NAV (annualised)
|
1.2%
|
1.1%
|
Please
note that past performance is not necessarily a guide to the future
and that the value of investments and the income from them may fall
as well as rise. Investors may not get back the amount they
originally invested.
The
Board is not aware of any other significant events or transactions
which have occurred between 30 June
2023 and the date of publication of this statement which
would have a material impact on the financial position of the
Company.
The
information contained within this announcement is deemed by the
Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014. Upon the publication of
this announcement via Regulatory Information Service this inside
information is now considered to be in the public
domain.
All
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
Jason Baggaley – Real Estate Fund Manager, abrdn
Tel:
07801039463
or
jason.baggaley@abrdn.com
Mark Blyth – Real Estate Deputy Fund Manager,
abrdn
Tel:
07703695490 or
mark.blyth@abrdn.com
Craig Gregor - Fund Controller, abrdn
Tel:
07789676852 or
craig.gregor@abrdn.com