TIDMGRIO
RNS Number : 6573S
Ground Rents Income Fund PLC
27 June 2018
27 June 2018
Ground Rents Income Fund plc
('GRIF', the 'Company' or the "Group")
HALF YEAR RESULTS
For the six months ended 31 March 2018
Ground Rents Income Fund plc (LSE: GRIO), a listed real estate
investment trust (REIT) investing in UK ground rents, announces its
unaudited half year results for the six months ended 31 March
2018.
Highlights
-- Portfolio value of GBP135.1 million (30 September 2017: GBP139.1 million)
-- Net assets of GBP120.5 million (30 September 2017: GBP127.4 million)
-- NAV per ordinary share of 124.58 pence (30 September 2017: 131.72 pence)
-- Revenue of GBP2.6 million (H1 2017: GBP2.5 million)
-- Loss before tax of GBP5.0 million (H1 2017 profit: GBP8.0
million), including GBP6.6 million revaluation loss (H1 2017 gain:
GBP6.3 million)
-- Basic losses per share of 5.18 pence (H1 2017 earnings: 8.52 pence)
-- Diluted losses per share of 5.14 pence (H1 2017 earnings: 8.27 pence)
-- Two interim dividends paid of 0.980 pence per share for
period to 31 December 2017 and 0.980 pence per share for the period
to 31 March 2018
-- GBP2.6 million invested during the period
James Agar, Investment Director of Brooks Macdonald Funds,
Investment Adviser to GRIF, said: "While the Group continues to
provide secure, upward-reviewing income from a large diversified
portfolio, we believe current trading in the Group's shares and the
subsequent price discount to Net Asset Value is largely based on
investor sentiment towards the ground rent sector, given the
Government's proposed leasehold reforms.
"We welcome the Government's aims to reform and simplify many
aspects of property legislation as we believe that a system is
needed that delivers a more equitable, transparent and better
service for homeowners.
"Ground rent reviews, as well as additional revenues generated
by our active asset management of the portfolio, has enabled the
Group to continue to deliver its target of at least maintaining the
annual dividend per Ordinary share, while working towards full
dividend coverage in the next four years."
Contacts:
Ground Rents Income Fund plc
Simon Wombwell (Director) 020 7499 6424
Brooks Macdonald Funds Limited
James Agar (Director) 020 7659 3454
N+1 Singer (Broker)
James Maxwell / Liz Yong 020 7496 3000
Tavistock (Media)
Jeremy Carey / James Whitmore 020 7920 3150
Appleby Securities (Channel Islands)
Limited
Andrew Harding / Danielle Machon 01481 755600
Chairman's Statement
I am pleased to present the interim results of Ground Rents
Income Fund plc ('GRIF') for the six months ended 31 March
2018.
Highlights
Revenue for the period was GBP2,625,379 (2017: GBP2,465,678) and
loss for the period was GBP5,010,740 (2017: profit GBP7,958,314).
The loss is stated after a net revaluation loss of GBP6,589,278
(2017: profit GBP6,328,143), which reflects the conditions in the
ground rents market during the period.
At 31 March 2018, the net asset value ('NAV') per ordinary share
was 124.58 pence (30 September 2017: 131.72 pence), a decrease of
5.4%. Total net assets fell by 5.4% to GBP120.5m (30 September
2017: GBP127.4m) driven by the revaluation loss at 31 March
2018.
The Group has completed purchases for a total cost of GBP2.6
million in the period, and the Directors continue to look for
suitable additions to add to the portfolio. Approximately GBP2.5
million of purchases have been agreed through either the exchange
of contracts or option agreements, of which GBP830,000 are expected
to complete in the current financial year. These acquisitions will
be financed from the Group's cash resources which were increased
during the last financial year by way of a newly secured five-year
GBP19.5 million loan facility. Further acquisitions amounting to
GBP3.2 million are being negotiated.
Dividends
The Company has paid two interim PID dividends to Ordinary
shareholders in the six months to 31 March 2018. 0.980p per share
(total: GBP947,779) was paid for the period to 31 December 2017 and
0.980p per share (total: GBP947,778) was paid for the period to 31
March 2018. We continue to meet our objective of at least
maintaining the annual dividend per Ordinary share. Further
information regarding our dividend policy can be found within note
10 Dividends.
Outlook and focus
The Board notes the recent attention in the media and elsewhere
concerning ground rents, which has been focused on both leasehold
houses and leaseholds with five and 10-year doubling rents.
In September 2017, the Company announced its intention to
implement an asset management plan in response to the Ministry of
Housing, Communities and Local Government's ('MHCLG') launch of the
consultation on proposals to amend leasehold legislation. In
conjunction with the Investment Manager, the Board of Directors
agreed to contact all residential leaseholders with doubling ground
rents and offer them the opportunity to convert their existing
review mechanism to the lesser of inflation, as measured by the
Retail Prices Index ('RPI'), or doubling, while retaining their
existing review cycle. The process is ongoing and is expected to
conclude in early 2019.
The focus of the Directors remains on completion of all of the
acquisitions for which the Group has exchanged contracts or holds
options. Further information on the ground rents market and
performance of the fund is set out in the Investment Manager's
report.
Robert Malcolm Naish - Chairman
26 June 2018
Investment Manager's Report
Group and ground rent market update
Since IPO in 2012 the Group has carefully built up a
highly-diversified portfolio of freehold and long-leasehold
properties to provide secure, inflation-hedged income of GBP4.7
million. This income profile is scaled up from approximately 19,000
units across 400 addresses and a median per unit ground rent of
GBP250 per annum.
As measured by ground rent income, 69% of the portfolio is
inflation-linked and there is a geographical bias to the north of
England at 61%. The Group's ground rent reviews are upward only,
ranging from every year to every 50 years. Taking this into
account, 35% of the portfolio's ground rent income is due to review
within the next five years, or 62% within the next 10 years. If
inflation, as measured by RPI, were to be 3.0% over the next 10
years, we would expect like-for-like ground rent income to increase
2.6% per annum.
As has been announced previously (2 August 2017), the Group has
limited exposure to leasehold houses. Of the total number of units
in the portfolio 15% are houses, which generate only 11% of total
ground rent income since the median ground rent on the houses is
GBP110 per annum. None are subject to perpetual 10-year doubling
review patterns, which have attracted some recent focus in the
media. Furthermore, the Group has no exposure to perpetual doubling
ground rents and de minimis exposure to 10-year doubling assets,
which account for only 4% of total ground rent income. These three
assets double a maximum of three times before reverting to having
either no further review or an indexed-linked review cycle.
While the Group continues to provide secure, upward-reviewing
income from a large diversified portfolio, we believe current
trading in the Group's shares and the subsequent price discount to
NAV is largely based on investor sentiment towards the ground rent
sector, given the Government's proposed leasehold reforms.
At an accounting level, our portfolio valuation as at 31 March
2018 was undertaken independently and in accordance with the
relevant parts of the Royal Institution of Chartered Surveyors
Valuation - Professional Standards VPS 4 (1.5.1) (the 'Red Book')
by Savills Advisory Services Limited ('Savills'), taking into
account all prevailing market conditions.
Over the past 12 months transactional values have recalibrated
across the sector, including index-linked assets, with price
adjustments skewed more towards those assets with shorter review
cycles. This reflects both lower transactional volumes and prices
evidenced in the market. The valuation of flat and fixed ground
rent assets has remained stable compared to the previous valuation
as at 30 September 2017.
Furthermore, there has been no further dilution in the valuation
of the two 10-year doubling residential assets within the portfolio
compared to the previous valuation (30 September 2017).
Within the portfolio valuation as at 31 March 2018, Savills has
considered all prevailing market conditions, the Government's
recent response to its own consultation on 'Tackling Unfair
Practices in the Leasehold Market', and the subsequent ongoing
review of residential leasehold law by the Law Commission as part
of its Thirteenth Programme of Law Reform. Both the Government and
Law Commission have repeatedly emphasised that any potential reform
to legislation will be subject to both economic impact assessments
and a requirement that 'fair' or 'sufficient' compensation be paid
to landlords to reflect their legitimate property interests. This
provides comfort to the Company's Directors and Brooks Macdonald
Funds Limited ('BMF'), the Group's Alternative Investment Fund
Manager ('AIFM').
GRIF and BMF continue to interact with the MHCLG, the
department's new Secretary of State, James Brokenshire, the Law
Commission and other policymakers with regard to potential reform
of the sector. We have been engaged in this process since the
Government's above-mentioned consultation was announced in August
2017, and we have since taken part in roundtable meetings with
Government and submitted an industry response to the Law
Commission's call for evidence.
We welcome the Government's aims to reform and simplify many
aspects of property legislation as we believe that a system is
needed that delivers a more equitable, transparent and better
service for homeowners. As was outlined in the Group's submission
in September 2017 to the Government's consultation, both GRIF and
BMF agree with many of the reforms that the Government has since
outlined, including:
-- The prohibition of long leases from being granted on houses
when there is no reason the house could not be sold as
'freehold';
-- For developers and/or landlords to support existing
leaseholders with onerous ground rents, and for such leaseholders
to be proactively contacted, as demonstrated by the Group through
the resumption of its Asset Management Plan, which is well
underway;
-- To ensure that landlords are signed up to redress schemes and
to provide leaseholders with comprehensive information on the
various routes to redress available to them, including where their
conveyancer has acted negligently;
-- An easier process for leaseholders to exercise their right to
buy their freehold, while also ensuring fair compensation to
landlords;
-- To professionalise and regulate residential managing agents,
and tackle unfair service charges; and
-- To modernise the home buying process, such as the use of
standardised leases in plain English and a requirement that
conveyancers must be fully independent.
As per the Group's submission to the Government's consultation,
we believe there is a continuing need for both the leasehold system
and ground rents because, where reasonable and transparent terms
are in place, homeowners genuinely benefit. Reasonable rents create
an incentive to attract engaged investors and landlords, like GRIF,
and we strongly believe our involvement in this service is to the
advantage of homeowners, as we continue to invest for the long term
and we take our fiduciary responsibilities seriously.
The institutionalisation of the leasehold sector has had a
profound impact on standards over the past five years. Institutions
have the expertise, resource and experience to provide the
all-important risk, governance and health and safety oversight
which this sector requires in order to protect consumers.
We have therefore asked the Government to explore the options,
specifically around residential apartment blocks, where landlords,
supported by a reasonable ground rent, play a critical role in both
delivering homes to the UK's undersupplied housing market and
ensuring the long-term safety, maintenance and viability of
people's homes.
Acquisitions
The Group completed three acquisitions in the six-month period
to 31 March 2018, which increased the ground rent roll by GBP99,700
at a cost of GBP2.3 million, giving a gross initial ground rent
yield of 4.31%. These transactions were executed despite the
prevailing uncertainty, due to the transactions being historically
negotiated at prices which have been accretive to the NAV and
income profile of the portfolio.
Beetham Tower Birmingham
In November, the residential head-lease interest of Beetham
Tower Birmingham was completed. The 39-floor mixed-use building,
designed by SimpsonHaugh, was built in 2006. The 152 apartments
generate GBP25,950 of total ground rent linked to 21-year RPI,
although a non-peppercorn rent linked to five-year RPI is payable
to the freeholder, which brings net ground rent to GBP13,288.
The Group paid GBP152,000 for the asset, giving a gross initial
ground rent yield of 8.74%, which should provide an excellent
income return on capital deployed, partly due to the unique ground
rent review pattern secured against one of Birmingham's most
recognisable buildings.
Lewisham Gateway
In December the Group purchased the first residential phase of
Muse Developments' Lewisham Gateway scheme after having exchanged
contracts in September 2015.
The acquisition of phase one consists of a 68-unit Private
Rented Sector ('PRS') block operated by Fizzy Living, as well as a
more usual block of private sale units consisting of 125
apartments. In total, the 193 units generate GBP64,000 of ground
rent linked to 20-year RPI at a cost of GBP1.5 million, giving a
gross initial ground rent yield of 4.30%.
Rathbone Market
Also in December, the third and final phase of Muse
Developments' Rathbone Market, Canning Town scheme was purchased
for GBP0.7 million. The acquisition consists of 75 ground
rent-paying private residential apartments, as well as an 87-unit
PRS block and 54 affordable units.
Total ground rent of GBP22,500 is linked to 20-year RPI, which
gives a gross initial ground rent yield of 3.33%. The Group has now
secured the entire long-leasehold interest in the site, having
previously purchased the first two phases. The acquisition should
therefore help protect the Group's interest in the wider scheme.
The high reversionary values of both Muse Developments' sites
should provide the Group with excellent secure, long-term,
inflation-hedged income.
Asset management
BMF continues to focus on additional income and capital value
opportunities both in terms of day-to-day management of the
portfolio and from opportunities within the planning regime, while
actively managing the estate.
The implementation in 2016 of a new Health and Safety
('H&S') monitoring system, called Meridian, has driven
oversight and governance of the managed estate. This live, online
system automatically uploads all documentation directly into the
insurance underwriting systems, creating an audit trail and a
robust due-diligence archive.
This system proved extremely useful in the wake of the Grenfell
Tower tragedy, ensuring the Group had all of the required H&S
documentation to hand. Meridian helped facilitate the
Government-mandated process of auditing all relevant sites within
the portfolio (where height is in excess of 18 metres) for
Aluminium Composite Material ('ACM') cladding.
To date we are only aware of one development within the
portfolio that has ACM cladding. This site has a
formally-constituted Residents Management Company ('RMC') within
the lease structure, which holds all of the insuring, repairing and
maintenance obligations. On that basis, the Group and BMF continue
to support the stakeholders in meeting their obligations.
Outlook
The rate of inflation has fallen back from December's recent
high to 3.3% in the 12 months to May 2018, despite surging oil
prices due to tensions in the Middle East following US President
Donald Trump's extrication from the Iran nuclear deal. RPI is still
well ahead of the five-year rolling average of 2.4% and will help
contribute to the Group's ground rent income. The Group therefore
remains able to generate secure, index-linked revenues, which
continue to be collected in line with expectation.
Even though inflation remains above the Bank of England's
target, the Monetary Policy Committee ('MPC') decided against an
interest rate rise in May following disappointing economic data in
the first quarter of 2018. Consumers remain under pressure as real
wage growth is currently only marginally positive, savers' returns
on cash is negligible and London house prices have softened. The
poor data is, however, widely being seen as a blip due to the
recent bad weather, and, if the economy were to bounce back, then
the MPC may consider a rate rise as soon as August.
It is also worth remembering that the price and dividend yield
of the Company's shares are determined in part by competing
financial instruments that seek to provide a secure stream of
income, such as Government and investment-grade corporate bonds. As
an example, tightening financial conditions and the above-mentioned
consideration of a rise in the Bank of England base interest rate
has seen the redemption yield on two and 10-year gilts increase
respectively by 66 and 43 basis points to 0.7% and 1.4% over the
last six months. As can be seen from the two changes, the spread
between the yields has also flattened, meaning investors are being
compensated less for the risk of investing in longer-dated
income.
GRIF continues to meet the requirements of the REIT regime in
distributing at least 90% of its property profits, although this
has led in recent years to an uncovered dividend position in terms
of total profits generated. We expect the portfolio to generate
profits to fully cover dividends within the next four years and
until then, utilise existing distributable reserves and continue to
implement income and capital enhancing asset management activities,
which have enabled the Company to deliver its target of at least
maintaining the annual dividend per Ordinary share. While the
dividend could be viewed as lower than other REITs, it is important
to highlight that the security of ground rent income is higher,
given its priority position in the capital stack.
While the MPC may be considering a rate rise before the autumn,
we still believe interest rates look set to stay low over the long
term, with gilt and bond yields following a similar trend.
The income premium for ground rents over these
comparably-defensive instruments continues to look attractive,
given ground rents' secure, upward-only-reviewing income
streams.
James Agar
On Behalf of Brooks Macdonald Funds Limited (AIFM Investment
Manager)
26 June 2018
Condensed Consolidated Income Statement for the six months ended
31 March 2018
unaudited unaudited audited
6 months 6 months
to to 31 Year ended
31 March March 30 September
Note 2018 2017 2017
GBP GBP GBP
Continuing Operations
Revenue 3 2,625,379 2,465,678 5,137,103
Administrative expenses (679,369) (600,057) (1,232,615)
Profit on sale of ground
rent assets 4,350 - 3,375
Net revaluation (loss)/gain on
investment properties (6,589,278) 6,328,143 1,347,518
Operating (loss)/profit (4,638,918) 8,193,764 5,255,381
Finance income 5,549 1,670 18,110
Finance expenses 4 (377,371) (237,120) (615,248)
Net finance expense (371,822) (235,450) (597,138)
(Loss)/profit before tax (5,010,740) 7,958,314 4,658,243
Taxation - - -
(Loss)/profit after tax and total
comprehensive income (5,010,740) 7,958,314 4,658,243
------------ ---------- --------------
(Losses)/earnings per
share
Basic 7 (5.18p) 8.52p 4.98p
Diluted 7 (5.14p) 8.27p 4.90p
There is no other comprehensive income for the period.
The accompanying notes from pages 11 to 15 form an integral part
of the interim consolidated financial statements.
Condensed Consolidated Statement of Financial Position as at 31
March 2018
unaudited unaudited audited
31 March 31 March 30 September
Note 2018 2017 2017
GBP GBP GBP
Assets
Non current assets
Investment properties - ground
rents 5 135,100,900 142,969,000 139,088,000
135,100,900 142,969,000 139,088,000
Current assets
Trade and other receivables 2,662,875 6,843,209 2,571,888
Cash and cash equivalents 5,426,099 1,839,268 7,228,645
8,088,974 8,682,477 9,800,533
Total assets 143,189,874 151,651,477 148,888,533
Liabilities
Non-current liabilities
Financial liabilities measured
at amortised cost 6 (19,165,075) (19,223,146) (19,117,641)
(19,165,075) (19,223,146) (19,117,641)
Current liabilities
Trade and other payables (3,541,618) (3,206,426) (2,381,414)
(3,541,618) (3,206,426) (2,381,414)
Total liabilities (22,706,693) (22,429,572) (21,499,055)
Net assets 120,483,181 129,221,905 127,389,478
------------- ------------- -------------
Financed by:
Equity
Share capital 9 48,356,050 46,701,006 48,356,050
Share premium account 45,747,161 44,103,882 45,747,161
Retained earnings 31,390,710 30,458,703 28,628,024
Current period (loss)/profit (5,010,740) 7,958,314 4,658,243
Total equity 120,483,181 129,221,905 127,389,478
------------- ------------- -------------
Net asset value per ordinary
share
Basic 8 124.58p 138.35p 131.72p
Diluted 8 123.44p 135.31p 130.24p
The accompanying notes from pages 11 to 15 form an integral part
of the interim consolidated financial statements.
The condensed consolidated financial statements on pages 7 to 15
were approved and authorised for issue by the Board of Directors on
26 June 2018 and signed on its behalf by:
Robert Malcolm Naish
Director and Chairman
26 June 2018
Consolidated Statement of Cash Flows for the six months ended 31
March 2018
unaudited unaudited audited
6 months 6 months
to 31 to 31 Year ended
March March 30 September
Note 2018 2017 2017
GBP GBP GBP
Cash flows from operating
activities
Cash generated from operations 11 3,015,227 2,857,674 3,751,965
Interest paid on bank loan
and bank charges (329,795) (216,417) (455,921)
Net cash generated from operating
activities 2,685,432 2,641,257 3,296,044
------------ ------------- --------------
Cash flow from investing
activities
Interest received 5,549 1,670 18,110
Receipts from the sale of
ground rent assets 32,215 - 15,000
Purchase of ground rent assets (2,630,043) (10,941,757) (12,053,007)
Net cash used in investing
activities (2,592,279) (10,940,087) (12,019,897)
------------ ------------- --------------
Cash flows from financing
activities
Net proceeds of issuance
of shares - - 3,298,323
Bank loan net proceeds (142) 6,702,443 11,049,199
Dividends paid to shareholders (1,895,557) (1,871,777) (3,702,456)
Net cash (used in)/generated from
financing activities (1,895,699) 4,830,666 10,645,066
------------ ------------- --------------
Net (decrease)/increase in cash
and cash equivalents (1,802,546) (3,468,164) 1,921,213
------------ ------------- --------------
Net cash and cash equivalents
at 1 October 7,228,645 5,307,432 5,307,432
Net cash and cash equivalents
at 31 March 5,426,099 1,839,268 7,228,645
------------ ------------- --------------
The accompanying notes from pages 11 to 15 form an integral part
of the interim consolidated financial statements.
Consolidated Statement of Changes in Equity for the period from
1 October 2016 to 31 March 2018
Share
Share premium Distributable
capital account reserve Total
GBP GBP GBP GBP
At 1 October 2016 46,701,006 44,103,882 32,330,480 123,135,368
Comprehensive income
Profit for the period - - 7,958,314 7,958,314
Total comprehensive income - - 7,958,314 7,958,314
Transactions with owners
Dividends paid (note 10) - - (1,871,777) (1,871,777)
At 31 March 2017 46,701,006 44,103,882 38,417,017 129,221,905
----------- ----------- -------------- ------------
Comprehensive income
Loss for the period - - (3,300,071) (3,300,071)
Total comprehensive income - - (3,300,071) (3,300,071)
Transactions with owners
Issue of share capital 1,655,044 1,655,045 - 3,310,089
Share issue costs - (11,766) - (11,766)
Dividends paid (note 10) - - (1,830,679) (1,830,679)
At 30 September 2017 48,356,050 45,747,161 33,286,267 127,389,478
----------- ----------- -------------- ------------
Comprehensive income
Loss for the period - - (5,010,740) (5,010,740)
Total comprehensive income - - (5,010,740) (5,010,740)
Transactions with owners
Dividends paid (note 10) - - (1,895,557) (1,895,557)
At 31 March 2018 48,356,050 45,747,161 26,379,970 120,483,181
----------- ----------- -------------- ------------
The accompanying notes from pages 11 to 15 form an integral part
of the interim consolidated financial statements.
Notes to the condensed Consolidated Financial Statements for the
six months ended 31 March 2018
1 General information
Ground Rents Income Fund plc ('the Company') is the parent
company of a group of companies ('the Group') which operates a
property investment and rental business. The Group's primary
activities are set out in its annual report and financial
statements for the financial year to 30 September 2017. A copy of
the statutory annual report and financial statements has been
delivered to the Registrar of Companies.
The Company is a closed-ended real estate investment trust
('REIT') incorporated in England and Wales and is listed on the
International Stock Exchange ('TISE') and whose shares are admitted
to trading on the SETSqx platform of the London Stock Exchange.
2 Accounting policies
Basis of preparation
These unaudited consolidated results are for the six months
ended 31 March 2018. They have not been prepared in accordance with
IAS 34 Interim Financial Reporting. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group for the year ended 30 September 2017.
The information in this announcement does not comprise statutory
financial statements within the meaning of section 434 of the
Companies Act 2006. The Group's financial statements for the
financial year ended 30 September 2017 have been reported on by the
auditors and delivered to the Registrar of Companies. The report of
the auditors was unqualified and did not draw attention to any
matters by way of emphasis. They also did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
The Group continues to adopt the going concern basis in
preparing its consolidated interim financial statements. This
financial information for the half year ended 31 March 2018 has
neither been audited nor reviewed. The financial information was
approved by the Board on 26 June 2018.
Adoption of new and revised standards
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest annual audited
financial statements for the year ended 30 September 2017.
3 Segmental information
The Company is mainly concerned with the collection of ground
rents. The Company receives some ancillary income to which it is
entitled as a result of its position as property freeholder.
unaudited unaudited audited
6 months 6 months
to to Year ended
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
By activity:
Ground rent income accrued
in the period 2,318,102 2,184,671 4,519,624
Other income falling due
within the period 307,277 281,007 617,479
2,625,379 2,465,678 5,137,103
All income of the Group is derived from activities carried out
within the United Kingdom. The Group is not reliant on any one
property or group of connected properties for the generation of its
revenues. The board is the chief operating decision maker and runs
the business as one segment.
4 Finance costs
unaudited unaudited audited
6 months 6 months
to to Year ended
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
Loan interest costs 329,795 216,417 546,806
Amortisation of loan arrangement
fees 47,576 20,703 68,442
377,371 237,120 615,248
---------- ---------- --------------
Loan set-up costs of GBP334,925 have been capitalised and
deducted from the total loan amount outstanding. These costs are
being amortised over 44 months to November 2021.
5 Investment Properties - Ground rents
Ground
rent assets
Market value GBP
At 1 October 2016 125,699,100
Additions 10,941,757
Net surplus on revaluation 6,328,143
At 31 March 2017 142,969,000
-------------
Additions 1,111,250
Disposals (11,625)
Net deficit on revaluation (4,980,625)
At 30 September 2017 139,088,000
-------------
Additions 2,630,043
Disposals (27,865)
Net deficit on revaluation (6,589,278)
At 31 March 2018 135,100,900
-------------
Net book value
At 31 March 2018 135,100,900
-------------
At 30 September 2017 139,088,000
-------------
At 31 March 2017 142,969,000
-------------
The Group's investment in ground rents was revalued at 31 March
2018 by Savills Advisory Services Limited ('Savills'). The valuer
has confirmed to the Directors that the fair value as set out in
the valuation report has been primarily derived using comparable
recent market transactions on an arm's length basis.
The valuer within Savills is a RICS Registered Valuer. Most of
the properties have previously been valued by Savills when they
were acquired and from time to time as requested by the Directors.
The valuation of ground rents takes into account external factors
such as interest rates and the availability of other fixed rate
investments in the market.
6 Financial liabilities measured at amortised cost
unaudited unaudited audited
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
Bank loan repayable
over one year 19,500,000 19,500,000 19,500,000
Capitalised loan arrangement fees
net of amortisation (334,925) (276,854) (382,359)
19,165,075 19,223,146 19,117,641
----------- ----------- -------------
The current loan facility is with Santander UK plc and has a
termination date of 15 November 2021. The rate of interest payable
on the loan is set in advance at 1.097% for the first tranche of
GBP15m and 0.986% for the second tranche of GBP4.5m. Both of these
rates are to subject to an additional 2.3% margin, giving the
GBP19.5m loan a composite rate of 3.371%.
The loan facility is secured over assets held in group
companies, namely Admiral Ground Rents Limited, Clapham One Ground
Rents Limited, GRIF040 Limited, GRIF041 Limited, GRIF044 Limited,
GRIF048 Limited, Masshouse Block HI Limited, Masshouse Residential
Block HI Limited, North West Ground Rents Limited, OPW Ground Rents
Limited, The Manchester Ground Rent Company Limited and Wiltshire
Ground Rents Limited.
No security or guarantee exists in relation to the facility over
any other group assets or assets within the parent company.
The loan facility includes loan-to-loan value of and interest
cover covenants that are measured at a Group level and the Group
has maintained significant headroom against all measures throughout
the financial year. The Group is in full compliance with all loan
covenants at 31 March 2018.
7 Earnings per share
Basic earnings
per share
Earnings used to calculate earnings per share
in the financial statements were:
unaudited unaudited audited
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
(Losses)/profits attributable to equity
shareholders of the Company (5,010,740) 7,958,314 4,658,243
------------ -------------
Basic earnings per share have been calculated by dividing earnings
by the weighted average number of shares in issue throughout the
period.
Weighted average number
of shares - basic 96,712,100 93,402,011 93,565,248
Basic (losses)/earnings
per share (5.18p) 8.52p 4.98p
Diluted earnings
per share
Diluted earnings per share is the basic earnings per share, adjusted
for the effect of contingently issuable warrants in issue in the
period, weighted for the relevant periods.
unaudited unaudited audited
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
(Losses)/profits attributable to equity
shareholders of the Company (5,010,740) 7,958,314 4,658,243
------------ ----------- -------------
Number Number Number
Weighted average number of shares
- basic 96,712,100 93,402,011 93,565,248
Potential dilutive effect
of warrants 854,711 2,839,239 1,565,659
Diluted total shares 97,566,811 96,241,250 95,130,907
Diluted (losses)/earnings per share (5.14p) 8.27p 4.90p
8 Net asset value per ordinary share
The NAV represents the net asset value per share of the Company.
The diluted NAV per ordinary share is calculated after assuming the
exercise of all outstanding warrants.
unaudited unaudited audited
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
Net assets 120,483,181 129,221,905 127,389,478
------------ ------------ -------------
Number Number Number
Number of ordinary shares
in issue 96,712,100 93,402,011 96,712,100
Outstanding warrants in
issue 4,718,273 8,028,362 4,718,273
Diluted number of shares
in issue 101,430,373 101,430,373 101,430,373
------------ ------------ -------------
NAV per ordinary share
- basic 124.58p 138.35p 131.72p
NAV per ordinary share
- dilutive 123.44p 135.31p 130.24p
9 Share capital
unaudited unaudited audited
31 March 31 March 30 September
2018 2017 2017
Allotted, called up and
fully paid:
Ordinary shares
of GBP0.50 each Number 96,712,100 93,402,011 96,712,100
Amount
GBP 48,356,050 46,701,006 48,356,050
----------- ----------- -------------
Shares issued during the
period:
Ordinary shares
of GBP0.50 each Number - - 3,310,089
Amount
GBP - - 1,655,044
----------- ----------- -------------
Resolutions were passed at an annual general meeting on 24 July
2012 to authorise the directors to allot shares up to an aggregate
nominal amount of GBP65,000,000. In January 2015, the Company
raised an additional GBP8,451,428 by way of a placing of ordinary
shares at GBP1.07 per share.
Warrants were issued for GBPnil consideration on the basis of
one warrant for every five subscription shares. Warrant-holders
have the right to subscribe GBP1 per share for the number of
ordinary shares to which they are entitled on 31 August each year
up to and including 31 August 2022. At 31 March 2018 there were
4,718,273 warrants in issue.
10 Dividends
Subject to market conditions and the Group's performance,
financial position and financial outlook, it is the Board's
intention to continue to deliver its target of at least maintaining
the annual dividend per Ordinary Share. Until the portfolio
generates profits to fully cover dividends and in order to ensure
that the Company continues to pay the required level of
distribution to maintain Group REIT status, the Board may call on
the Company's existing distributable reserves to allow consistent
dividends to be paid on a regular quarterly basis.
unaudited unaudited audited
6 months 6 months
to to Year ended
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
Dividends declared by the Company
during the period:
Dividends paid 1,895,557 1,871,777 3,702,456
---------- ---------- --------------
Analysis of dividends
by type:
Interim PID dividend of
1.024p per share - 956,437 956,437
Interim PID dividend of
0.980p per share - 915,340 915,340
Interim PID dividend of
0.980p per share - - 915,339
Interim PID dividend of
0.980p per share - - 915,340
Interim PID dividend of
0.980p per share 947,779 - -
Interim PID dividend of
0.980p per share 947,778 - -
1,895,557 1,871,777 3,702,456
Since the period ended 31 March 2018, the Company has announced
an Interim PID dividend of 0.980p per share (GBP947,779).
11 Gross cash flows
unaudited unaudited audited
6 months 6 months
to to Year ended
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
Reconciliation of profit before income tax to net cash
inflow from operating activities
(Loss)/profit before
income tax (5,010,740) 7,958,314 4,658,243
Adjustments for:
Non-cash revaluation deficit/(gain) 6,589,278 (6,328,143) (1,347,518)
Profit on sale
of ground rents (4,350) - (3,375)
Net finance cost 371,822 235,450 597,138
Operating cash flows before movements
in working capital 1,946,010 1,865,621 3,904,488
------------ ------------ -------------
Movements in working
capital:
Increase in trade
receivables (90,987) (51,397) (280,076)
Increase in trade
payables 1,160,204 1,043,450 127,553
Net cash generated from
operations 3,015,227 2,857,674 3,751,965
------------ ------------ -------------
12 Related party transactions
Transactions between the Company and its subsidiaries which are
related parties, have been eliminated on consolidation. The
captions in the primary statements of the Company include the
amounts attributable to subsidiaries. All amounts due to or from
subsidiary companies are interest free and repayable on demand.
Simon Wombwell is also a director of Brooks Macdonald Funds
Limited ('BMF') which provided services to Ground Rents Income Fund
plc during the financial period.
BMF provides investment management and administration services
to the Company as the Alternative Investment Fund Manager ('AIFM'),
the fees for which are 0.55% per annum of the market capitalisation
of the Company. In addition, BMF is entitled to an agency fee of 2%
of the purchase price of any property acquired by the Group, where
no other agency fee is payable. Where a third party agency fee is
less than 2% of the purchase price, BMF is entitled to an agency
fee of 50% of the difference between 2% of the purchase price and
the third party agency fee.
Transactions between Brooks Macdonald Funds Limited and Ground
Rents Income Fund plc during the financial period were as
follows:
unaudited Unaudited audited
6 months 6 months
to to Year ended
31 March 31 March 30 September
2018 2017 2017
GBP GBP GBP
AIFM fee payable to Brooks Macdonald
Funds Limited 249,307 283,951 515,316
Acquisition fees payable to Brooks
Macdonald Funds Limited 28,759 49,500 49,500
Directors fees payable to Brooks
Macdonald Funds Limited 12,000 12,000 24,000
Other amounts payable to Brooks Macdonald
Funds Limited 24,053 26,936 123,171
----------
314,119 372,387 711,987
---------- ---------- -------------
Amounts owing of GBP67,063 were due to Brooks Macdonald Funds
Limited in respect of invoices issued in the period 1 October 2017
- 31 March 2018 at 31 March 2018.
13 Other financial commitments
The Group has a number of Ground Rent acquisitions in the
pipeline. There are a number of acquisitions to which the Group is
committed by way of option payments it has made. The Group has also
paid deposits of GBP83,000 for buildings under construction for
which the Group expects to complete on during the next twelve
months.
A claim for damages was lodged during the period by a
leaseholder of an investment property held by a subsidiary of the
Group. The subsidiary has disclaimed liability and will defend the
action. Legal advice obtained indicates that it is unlikely that
any significant liability will arise. The Directors are therefore
of the view that no material losses will arise in respect of the
legal claim at the date of these financial statements.
14 Events after the date of the accounts
The Group has transferred a number of ground rent investments
between associated Group companies. This was completed during May
2018 with the aim of reducing administration costs.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EALKKASPPEFF
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June 27, 2018 02:00 ET (06:00 GMT)
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