TIDMWHR
RNS Number : 9702G
Warehouse REIT PLC
12 November 2018
12 November 2018
Warehouse REIT plc
(the 'Company' or 'Warehouse REIT' together with its
subsidiaries the 'Group')
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHSED 30 SEPTEMBER
2018
Strong performance underpinned by wide-ranging asset management
initiatives drives further portfolio value
Warehouse REIT, the AIM-listed specialist warehouse investor,
today announces its first interim results for the six months ended
30 September 2018.
Highlights
Financial highlights
Six months
ended 30 September
2018
IFRS profit before tax GBP11.0m
--------------------
IFRS earnings per share 6.6p
--------------------
EPRA earnings per share 1.8p
--------------------
Adjusted earnings per share* 3.1p
--------------------
Dividends per share 3.0p
--------------------
Total return** 6.5%
--------------------
*Adjusted EPS based on IFRS earnings excluding unrealised fair
value gains on investment properties, profit on disposal of
investment properties and a one-off property and acquisition
provision.
** Total return based on increase in net asset value per share
of 3.6 pence plus dividend per share of 3.0 pence.
As at 30 September 31 March
2018 2018
Portfolio valuation GBP284.3m GBP291.0m
------------- ----------
IFRS net asset value per share 105.7p 102.1p
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EPRA net asset value per share 105.7p 102.1p
------------- ----------
EPRA net initial yield 6.2% 6.2%
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Loan to value ratio 37.1% 40.5%
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Weighted average unexpired lease 4.2 years 4.1 years
term
------------- ----------
Passing rent GBP19.6m GBP20.4m
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Contracted rent GBP20.4m GBP21.3m
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-- Portfolio valued at GBP284.3 million at 30 September 2018,
following GBP15.0 million of disposals during the period,
representing an increase of 6.5% on the aggregate purchase price
and a 1.6% like-for-like increase on the valuation at 31 March
2018, or a 2.9% increase taking into account the disposed
assets
-- Profit on disposal of investment properties totalled GBP3.7 million in the period
-- Bank debt lowered to GBP109.5 million, reducing the loan to
value ratio to 37.1% at 30 September 2018 (40.5% at 31 March
2018)
-- Paid or declared dividends totalling 3.0 pence per share for
the first half of the year, on track for target of 6.0 pence per
share for the full year***
*** This is a target not a forecast and there can be no
assurances that it will be met.
Operational highlights
-- Continued strong tenant demand, supported by the further
growth of ecommerce, is driving robust rental increases
-- Supply of new multi-let warehouse space remains constrained
across the UK, with capital values below replacement cost
-- Strong asset management performance in the period
o Completed 37 new lettings of vacant space, generating
additional annual rent of GBP1.2 million, 6.9% ahead of 31 March
2018 ERV
o Achieved 12 lease renewals, securing additional GBP0.5 million
of income and reflecting a 7.8% increase in headline rents
o Spent or committed capital expenditure of GBP1.4 million, in
line with target
o Portfolio occupancy of 92.1% at the period end (31 March 2018:
93.1%), with the reduction in the period primarily due to the
tenant at Deeside entering administration. Occupancy has since
risen to 93.0% as at 31 October 2018, following re-letting of the
Deeside asset (see below)
o WAULT of 4.2 years (31 March 2018: 4.1 years), with 2.8 years
to first break (31 March 2018: 2.8 years)
o Sold four assets for GBP19.0 million, reflecting an aggregate
net initial yield of 5.1% and a 27% premium to 31 March 2018 book
values
-- Acquired one asset, Burntbroom Court, Queenslie, Glasgow, for
GBP2.4 million reflecting a net initial yield of 8.0%. The asset is
adjacent to the Group's existing 55-acre site at Queenslie
Post period end highlights
-- Obtained planning permission for a major mixed-use
development at Queenslie Business Park, Glasgow for an additional
250,000 sq ft of warehouse and ancillary uses. The scheme has a
gross development value of GBP25 million
-- Acquired a 49,000 sq ft urban warehouse unit in Widnes,
Cheshire, let to a global internet retailer on a new five-year
lease with a tenant's break at year three, for GBP2.8 million
reflecting a net initial yield of 7.3%. This global internet
retailer is now the second largest tenant by portfolio rental
income
-- Let 60,000 sq ft at Deeside to A&D Transport (NW) Ltd on
a 15-year term, with a tenant only break at 10 years, at an average
rent over the first five years at 16% above the previous rent
following a programme of landlord works for the restoration of the
premises
Neil Kirton, Chairman of Warehouse REIT, commented:
"This was a strong period for the Group, as we maintained our
focus on both knowing our tenants and understanding their needs. We
continued to demonstrate our ability to extract value from the
portfolio. The Group has undertaken substantial asset management
activity in the period, including numerous renewals and re-lettings
at rental levels ahead of ERV. This in turn supports the Group's
robust and growing income stream, which allows us to pay attractive
and growing dividends to shareholders. There continues to be
significant reversionary potential in the portfolio and we look
forward to reporting further value creation in the second half of
the year. We remain ambitious to grow and continue to both source
and attract deal flow within the asset class."
Andrew Bird, Managing Director of the Investment Manager,
Tilstone Partners Limited, added:
"The market remains attractive and we continue to see
substantial tenant demand for good-quality, well-located urban
warehouse assets. Vacancy levels across the market are low and the
supply of new assets remains constrained, with replacement costs
being higher than capital values. Coupled with the continued growth
in ecommerce, these market conditions are feeding through into
rental growth. We therefore expect the Group to make further
progress over the remainder of the year."
Enquiries:
Warehouse REIT plc
via FTI Consulting
Tilstone Partners Limited
Andrew Bird +44 (0) 1244 470 090
G10 Capital Limited (part of the Lawson
Conner Group),
acting as AIFM
Agnese Soldane, Gerhard Grueter +44 (0) 20 3696 1302
Peel Hunt (Financial Adviser, Nominated
Adviser and Broker)
Capel Irwin, Harry Nicholas, Carl Gough +44 (0)20 7418 8900
FTI Consulting (Financial PR & IR Adviser
to the Company)
Dido Laurimore, Ellie Sweeney, Richard
Gotla +44 (0) 20 3727 1000
Further information on Warehouse REIT is available on its
website:
http://www.warehousereitplc.co.uk
Notes:
Warehouse REIT plc is a Real Estate Investment Trust focused on
UK urban warehouses. We have a high-quality portfolio of assets in
key locations around the UK, let to a wide range of customers
including distribution and logistics operators, pure ecommerce
businesses and traditional light industrial companies. Our tenants
range from local small and medium sized enterprises to well-known
large multinational corporations.
We believe the urban warehouse market is compelling, with high
demand from tenants and limited vacant space, leading to strong
rental increases. Our portfolio also presents opportunities to
create value through active asset management. We can therefore
offer attractive income returns to our shareholders, with the
prospect of both income and capital growth. As we continue to
expand, our vision is for Warehouse REIT to become the warehouse
provider of choice across the UK.
The Company's shares were admitted to trading on AIM in
September 2017.
Forward-looking Statements
Certain information contained in these interim results may
constitute forward looking information. This information relates to
future events or occurrences or the Company's future performance.
All information other than information of historical fact is
forward looking information. The use of any of the words
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", "should", "believe", "predict" and "potential"
and similar expressions are intended to identify forward looking
information. This information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information. No assurance can be given that this
information will prove to be correct and such forward looking
information included in this announcement should not be relied
upon. Forward-looking information speaks only as of the date of
this announcement.
The forward-looking information included in this announcement is
expressly qualified by this cautionary statement and is made as of
the date of this announcement. The Company and its Group does not
undertake any obligation to publicly update or revise any
forward-looking information except as required by applicable
securities laws.
Chairman's statement
Dear fellow shareholder,
I am pleased to present the Group's results for the six months
to 30 September 2018.
Overview
In my first statement following the Company's IPO, I described a
period of 'considerable activity' as we rapidly assembled a
high-quality portfolio. We have continued to be active in the first
six months of this financial year, as we have continued the process
of intensively managing the assets which have been acquired to
date.
Our investment proposition is unchanged. We will use shareholder
funds to acquire urban or 'last-mile' industrial warehouses in
strategic locations at prices below replacement cost, and actively
manage those assets to create further value. This gives us a strong
and growing income stream, derived from a large and diverse tenant
base, which in turn underpins attractive and growing dividends for
shareholders.
We continue to search for accretive opportunities to invest in
our chosen asset class and have a robust pipeline of opportunities
under review. Asset pricing in the market is very diverse and this
means that stock selection is key. These market conditions also
give us the opportunity to take advantage of strong investor demand
for longer-dated income. Against this backdrop, we announced four
disposals during the period, of assets where we had either
completed our asset management programme or successfully lengthened
the income stream. The combined proceeds of GBP19.0 million reflect
a net initial yield of 5.1%, an aggregate premium to their 31 March
2018 book values of 27% and a capital value of GBP189 per sq
ft.
The Group continues to be highly successful at securing new
leases on vacant space and at retaining tenants whose leases have
expired or reached a break. We are consistently achieving rental
levels ahead of ERV for new leases, as occupier demand remains
robust whilst the supply of new space in the market is limited. The
growth in ecommerce continues to be a key driver of tenant demand,
contributing to rising rents for units which are suitable for these
companies, no matter what type of business actually occupies the
space.
After the period end we were pleased to announce that our
Investment Manager, Tilstone Partners Limited ("TPL"), had secured
planning permission for a further 250,000 sq ft of warehouse space
on 16 acres at the Queenslie Business Park in Glasgow. This
reflects TPL's efforts over two years to add value to the site,
which totals 55 acres and contains 350,000 sq ft of existing
warehouse space, generating rents of GBP1.4 million. The 16 acres
presents the opportunity for meaningful value creation, with the
project having an estimated gross development value of GBP25
million, and is a further example of how the management team
continues to extract value from the portfolio acquired at IPO. The
receipt of planning permission has triggered the payment of a
further GBP900,000 of consideration for the site, payable to the
founder shareholders, as outlined in the Company's prospectus at
IPO.
In July, we requested the suspension of dealings in your
Company's shares in response to a media report regarding a
significant potential transaction with Hansteen Holdings plc. After
many weeks of due diligence we were unable to agree terms and the
discussions terminated. The portfolio was a strong fit for the
Group and it was right that we considered it. However, we will
maintain a disciplined approach to acquisitions and will only
proceed when we consider the terms to be in shareholders' best
interests.
TPL continued to expand its asset management team during the
period, which will help us to maintain our rigorous approach to
managing the portfolio and understanding our tenants. This is
particularly important in the current environment. We have yet to
see any change in tenant behaviour and tenants continue to make
decisions to occupy space, but we remain vigilant.
Dividends
Our policy is to pay quarterly dividends. For the period under
review we have declared a first interim dividend of 1.5 pence per
share, which was paid as a property income distribution in
September 2018. The Board has also declared a second interim
dividend of 1.5 pence per share, which will be payable as a
property income distribution in December 2018. The total dividend
for the period is 1.0 times covered by adjusted EPS. We continue to
target a pay-out of 6.0 pence per share for the year to 31 March
2019.
Financial results
The NAV per share at 30 September 2018 was 105.7 pence, up 3.5%
from the 102.1 pence recorded at 31 March 2018. This represents
further good progress, after accounting for the dividends paid and
one-off costs incurred at Deeside and in relation to the terminated
transaction.
At the start of the period, the Group had GBP124.5 million of
debt and a loan to value ("LTV") ratio of 40.5%. Our asset
disposals have enabled us to repay GBP15.0 million of our revolving
credit facility. The Group's LTV at 30 September 2018 was therefore
reduced to 37.1%, within our longer-term target range of 30-40% and
well below the 50% limit in our investment policy.
Governance
During the period, your Board engaged a professional search firm
and conducted a thorough search for an additional Non-Executive
Director who would bring relevant commercial experience and take on
the considerable responsibility of chairing our Audit Committee, a
role hitherto undertaken by Martin Meech.
I am delighted to say that from a strong field, Lynette Lackey
emerged as the outstanding candidate. Lynette is a chartered
accountant and experienced Non-Executive Director with considerable
knowledge of the real estate sector. She is senior independent
Director and Chair of the group audit and risk committee of Places
for People Group. Lynette is also a Non-Executive Director and
chairs various group board committees at The London Chamber of
Commerce and Industry and at Land Aid Charitable Trust. She
previously spent 10 years as a partner of BDO LLP, where she was
responsible for a portfolio of real estate investor and developer
clients. Her experience also includes being a former partner in
Greenside Real Estate Solutions as well as chairman of the
Association of Women in Property. Lynette's background makes her an
ideal fit for the Board. Her appointment will be effective from 15
November and we look forward to Lynette joining the Board.
Conclusion
Warehouse REIT is still in the early stages of its journey. A
little more than a year from our IPO, market expectations for the
progression of both our dividends and net asset value have risen.
TPL has consistently demonstrated its ability to source deals and
manage assets with intensity and will continue to do so over the
coming months.
The Board remains totally aligned with our shareholders and my
fellow Non-Executive Director Aimée Pitman purchased a further
76,000 shares in September 2018, adding to the already significant
levels of shares owned by your Board and by the management team at
TPL.
The Group's priorities for the second half of the year are to
continue to let vacant space, to renew leases with tenants who are
holding over or whose leases expire within the year, and to seek
further attractive additions to the portfolio. We are optimistic
that our asset management capabilities will continue to produce
favourable returns and I look forward to reporting further at the
full year.
Neil Kirton
Chairman
12 November 2018
Investment manager's report
This was an active period for the Group, which saw it benefit
from a number of successful asset management initiatives and which
will support its sustainable and attractive income profile, whilst
further demonstrating the opportunities to drive value from the
portfolio.
Asset acquisition
Effective stock selection remains a key part of the overall
asset management strategy and the Group continues to seek
value-enhancing acquisitions.
On 31 July 2018, the Group acquired Burntbroom Court, Queenslie,
Glasgow, for a purchase price of GBP2.4 million or GBP51 per sq ft
and a net initial yield of 8.0%.
Burntbroom Court is located on the Queenslie Business Park
estate, adjacent to the Group's existing 55-acre site. The nine
purpose-built industrial units have a floor area of 47,430 sq ft
and produce income of GBP207,000 per annum, reflecting an average
rent of GBP4.36 per sq ft. The units' sizes and specifications
complement the Group's existing industrial units. The Group has
identified a number of near-term asset management initiatives,
which should deliver significant rental growth with a reversionary
yield rising to over 9%.
After the period end, the Group was pleased to announce the
acquisition of a warehouse in Widnes, Cheshire, let to a global
internet retailer. The purpose-built warehouse provides 49,000 sq
ft of space on a self-contained 2.5-acre site, with a fenced yard
and secure parking. The asset is let for a further 4.7 years with a
tenant only break on the third anniversary. The purchase price of
only GBP56 per sq ft is less than the cost of rebuilding the
premises.
Asset management
The Group has continued to undertake successfully a range of
asset management activities across the portfolio, demonstrating its
market-leading ability to generate very favourable returns on
behalf of shareholders, and the continued appetite from a range of
occupiers for well-located, good-quality industrial units.
Disposals
The Group's active asset management strategy includes selling
more mature, lower yielding or non-core assets and redeploying
capital into opportunities that will generate additional
longer-term income and higher total returns. During the period, the
Group disposed of four assets for a total consideration of GBP19.0
million, and has used the proceeds to reduce debt and fund the
purchase of new assets. In aggregate, the disposals reflected a
blended net initial yield of 5.1% and a 27% premium to 31 March
2018 book values, while delivering an ungeared internal rate of
return in excess of 50%. The assets sold had contracted rent of
GBP1.0 million per annum. Further details on the disposals are set
out below:
-- Connaught Business Centre, Mitcham sold for GBP3.9 million,
reflecting a net initial yield of 3.6% and a 36% premium to the 31
March 2018 book value. Since acquiring the property in March 2018,
the Group had reduced vacancy and increased rents from less than
GBP14 per sq ft to set a new rental tone of GBP20 per sq ft per
annum.
-- Quantum Park, Manchester sold for GBP9.0 million, reflecting
a net initial yield of 4.9% and a 33% premium to the 31 March 2018
book value. The warehouse is let to Travis Perkins (with five years
remaining before a tenant only break) and a specialist car repair
centre. The property was acquired in December 2017 as part of a
portfolio of seven assets. During its ownership, the Group further
explored occupier intentions and clarified the potential to enhance
the asset and increase value, thereby maximising sale proceeds.
-- Warwick House, Solihull sold for GBP2.9 million, reflecting a
12% premium to the 31 March 2018 book value. Warwick House is a
15,500 sq ft purpose-built 1970s office building, which had only a
two-year WAULT on disposal and was a non-core asset for the Group.
Since purchase, the Group had worked with its planning partners to
demonstrate the suitability of the asset for both residential and
office redevelopment, widening the area of appeal and depth of
demand and thereby maximising proceeds of sale.
-- Stukeley Meadows, Huntington sold for GBP3.3 million,
reflecting a net initial yield of 5.4% and 16% premium to the 31
March 2018 book value. Stukeley Meadows is a 30,000 sq ft multi-let
industrial estate. Since purchase earlier in the year, the Group
had increased the level and longevity of income by securing a new
10-year lease from Howdens, thereby maximising returns from a
sale.
Capital expenditure
The Group has a target of investing 0.75% of its gross asset
value in capital expenditure each year. During the six months to 30
September 2018, the Group either spent or committed a total of
GBP1.4 million of capital expenditure, in line with its target.
A number of tenants have asked the Group to support their
business growth plans by either improving or extending the units
they occupy, in exchange for higher rent and/or extended leases.
These opportunities will be value enhancing for the Group and will
increase the WAULT for those assets.
Leasing activity
The capital expenditure of GBP1.4 million during the period
supported the Group's letting activity, with 37 new leases signed
on previously vacant space. Significant new lettings included:
-- a new 15-year lease, with a break at year 10, to existing
tenant DFS at South Gyle Industrial Estate, Edinburgh. This more
than doubled the tenant's occupancy on the site to 48,000 sq ft, at
a favourable rent of GBP7 per sq ft, and increased the length of
the lease on the occupier's entire holding;
-- a new 10-year lease, with a break at year five, on two units
at Peartree Lane, Dudley. The rental level is 6.5% ahead of the 31
March 2018 ERV;
-- a new five-year lease, with a break at year three, at
Farthing Road, Ipswich. The annual rent of GBP38,565 per annum is
11% ahead of the 31 March 2018 ERV;
-- a new 10-year lease at Oldbury Point, West Bromwich. The rent
for the recently refurbished 20,000 sq ft unit of GBP4.75 per sq ft
compares with the ERV of GBP3.60 per sq ft when the Group acquired
the unit at IPO; and
-- a new five-year lease at Nexus, Knowsley. The headline rent
of GBP4.17 per sq ft is 18% ahead of the 31 March 2018 ERV.
In total, the new leases signed in the period will generate
annual rent of GBP1.2 million, which is 6.9% ahead of the ERV at 31
March 2018. Since the period end, the Group has completed a further
two new lettings, at annual rents 38.2% ahead of the 31 March 2018
ERV.
The Group continues to maintain a high retention rate at lease
expiry or break. Occupiers who choose not to renew have typically
outgrown their units, with the Group being unable to accommodate
their increased space requirements on the same site. Leases which
expired in the period had a total passing rent of GBP1.8 million
and the Group successfully retained 70% of these tenants. Of the
tenants retained, 13% signed new leases and 87% continued to hold
over. The new leases secured an average rental increase of 2.2%
above previous passing rent or 1.3% above ERV. Of the 39 leases
with a break arising in the period, only 15% vacated. Of all the
units vacated in the period, the Group managed to re-let 26% within
the same period. The new leases secured an average rental increase
of 13.7% above previous passing rent or 9.8% above ERV.
Notable renewals in the period included:
-- A 10-year lease, with a break at year five, to Asda Stores at
Vantage Point, Leeds. The new lease reflects a passing rent of
GBP209,100 per annum (GBP4.34 per sq ft), in line with the previous
rent, with a rent review currently under way; and
-- A 10-year lease, with a break at year five, at Queenslie
Business Park, Glasgow. The new rental level is in line with the
ERV at 31 March 2018 and reflected a 16.8% increase over the
previous passing rent.
Since the period end, the Group has completed a further three
renewals at average rental increases of 15.2% above previous
passing rent or 12.1% above ERV.
A key driver of this positive leasing activity is the Group's
constant objective to further understand occupier requirements and
strengthen key occupier relationships; a unique selling point for
this Group. As part of this exercise, the Group has been successful
in maximising income by being flexible and responsive to tenants'
needs. This includes agreeing some short-term lettings for tenants
who need overflow space or who are responding to seasonal demand,
while continuing to market the space for longer-term lets. The
Group considers this flexible approach to occupancy as an important
part of the asset management strategy, as it strengthens key
occupier relationships.
Development activity
After the period end, the Group announced that it had received
outline planning permission for up to 250,000 sq ft of
employment-led space on a 16-acre site at the Queenslie Business
Park in Glasgow. The units are expected to appeal to a wide variety
of occupiers and will include distribution and logistics,
industrial, commercial, storage, retail and hospitality space. The
16 acres form part of the Group's wider 55-acre holding at
Queenslie Business Park, which contains approximately 350,000 sq ft
of existing floorspace. In the 12 months following the IPO, the
Group reduced vacancy levels at Queenslie Business Park from 11.5%
to 6.7% and increased average rents by 11.5%.
The next steps at Queenslie Business Park are to conduct a
targeted marketing campaign for each occupier type and to look to
agree pre-lets for key units. Whilst the development may take part
in phases, in line with the Group's investment policy, work will
only commence when the majority of units being built are pre-let.
With the benefit of having obtained planning permission, the Group
may also look to further expand its holdings at Queenslie.
Portfolio analysis
As a result of the acquisition, disposals and other asset
management activity described above, the Group's portfolio was
valued at GBP284.3 million at 30 September 2018 offering 4.4
million sq ft of space.
Warehouse Occupancy Valuation Net initial Reversionary Lease Lease Average Average
sector GBPm yield yield length length rent capital
to expiry to break GBP per value
Years Years sq ft GBP per
sq ft
Warehouse
storage
and distribution 90.2% 184.7 6.6% 7.6% 3.8 2.5 4.84 61
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
Light manufacture
and assembly 93.5% 46.6 7.1% 8.0% 4.3 2.5 4.40 55
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
Retail warehouses 100.0% 18.4 6.9% 8.1% 5.4 5.0 10.88 148
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
Trade warehouses 100.0% 17.7 5.8% 6.7% 7.0 5.4 5.79 91
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
Workspace/office 90.5% 14.8 7.9% 8.6% 3.2 1.9 10.20 105
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
Other 100.0% 2.1 7.0% 7.1% 8.2 5.6 5.94 79
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
TOTAL 92.1% 284.3 6.7% 7.7% 4.2 2.8 5.16 65
---------- ---------- ------------ ------------- ----------- ---------- --------- ---------
At the period end, the contracted rent roll was GBP20.4 million,
resulting in a net initial yield of 6.7%. This compared with an ERV
of GBP23.3 million and a reversionary yield of 7.7%, reflecting the
strong reversionary potential in the portfolio, which the Group's
asset management activity is progressively unlocking. The ERV
generally assumes that a unit is re-let in its current condition
and does not take account of the potential to increase rents
through refurbishment, repositioning or change in permitted
planning use.
The Group's successful lettings and renewals contributed to
occupancy of 92.1% at 30 September 2018, compared with 93.1% at 31
March 2018. This performance was better than expected, given the
number of lease expiries falling in the period. The occupancy rate
was also disproportionally influenced by the default of a tenant at
the Group's warehouse in Deeside, Chester, entering into
administration during the period. This reduced occupancy by 0.9% of
ERV at the period end. Subsequently, the Group has re-let the whole
60,000 sq ft of space together with the three-acre yard at Deeside
to A&D Transport (NW) Ltd on a 15-year term, with a tenant only
break on the tenth anniversary of the term, with an average rent
over the first five years at 16% above the previous passing rent.
This contributed to occupancy at 31 October 2018 of 93.0%. The
Group has further vacant space under offer, which would increase
overall occupancy to 93.6%. Whilst all the associated costs of the
Deeside tenant's default have been provided for in the period, the
revaluation uplift arising from the re-letting will only be
reflected in the full year valuation at 31 March 2019.
Financial review
Comparative figures
The Company was incorporated on 24 July 2017 and admitted to AIM
on 20 September 2017, at which point it acquired the seed portfolio
and began trading. The comparator period therefore includes only 10
days of business operations. As a result, it is not meaningful to
draw comparisons between trading in the six months to 30 September
2018 and the prior period. The following discussion therefore
considers the Group's financial performance in the current period
on a standalone basis. The comparatives included in the financial
statements are for the period 1 August 2017 to 31 March 2018, which
represents 6.5 months of trading.
Performance
Revenue for the period was GBP10.7 million. The Group's
operating costs include its running costs (primarily the
management, audit, company secretarial, other professional and
Directors' fees), and property related costs, including legal
expenses, void costs and repairs. Total operating costs were GBP5.7
million. This includes the costs associated with a terminated
acquisition and one-off costs associated with the default of the
tenant at Deeside who entered into administration, which together
are expected to total GBP2.2 million. Excluding these one-off
costs, operating costs were GBP3.5 million, as the Group continued
to benefit from its low-cost outsourcing model.
The profit on the sale of the four investment properties
disposed of in the period was GBP3.7 million. The Group recognised
a gain of GBP4.4 million on the revaluation of its investment
properties at the period end.
Net financing costs, which are the interest costs associated
with the Group's revolving credit facility ("RCF") and term loan
(see debt financing and hedging below) amounted to GBP2.1 million
in the six months.
This resulted in a statutory profit before tax of GBP11.0
million.
As a REIT, the Group's profits and gains from its property
investment business are exempt from corporation tax. The
corporation tax charge for the period was therefore GBPnil.
Earnings per share ("EPS") under IFRS was 6.6 pence. EPRA EPS
was 1.8 pence. Adjusted EPS, defined as EPRA EPS excluding the
one-off costs to cover the default of the tenant at Deeside and the
one-off termination costs in respect of the terminated transaction
with Hansteen Holdings plc, was 3.1 pence.
Dividends
The Company has declared the following interim dividends in
relation to the period:
-- a first interim dividend of 1.5 pence per share in relation
to the three months to 30 June 2018 was paid in full as a property
income distribution ("PID") on 28 September 2018; and
-- the Board has also declared a second interim dividend of 1.5
pence per share in relation to the three months to 30 September
2018. The dividend will be paid in full as a PID on 28 December
2018 to shareholders on the register on 30 November 2018. The
ex-dividend date will be 29 November 2018.
Total dividends in respect of the period were therefore 3.0
pence per share, in line with the target for the year of 6.0 pence
per share, as set out in the 2018 Annual Report. These dividends
were covered 1.0 times by adjusted EPS, which the Board considers
is the most appropriate measure of earnings for calculating
dividend cover.
The cash cost of the total dividends paid during the period is
GBP5.0 million.
Valuation and net asset value
The portfolio was independently valued by CBRE and Gerald Eve as
at 30 September 2018, in accordance with the RICS Valuation Global
Standards (the "Red Book").
The portfolio is valued at GBP284.3 million following GBP15.0
million of disposals during the period (31 March 2018: GBP291.0
million), representing an increase of 6.5% on the aggregate
purchase price and a 1.6% like-for-like increase on the valuation
at 31 March 2018, or a 2.9% increase taking into account the
disposed assets. The valuation increase was driven by both income
growth, represented by a 1.3% like-for-like increase in ERV and
yield compression. The EPRA net initial yield was 6.2% (31 March
2018: 6.2% including the disposed assets).
The valuation resulted in a NAV at 30 September 2018 of 105.7
pence per share, an increase of 3.5% from the NAV at 31 March 2018
of 102.1 pence per share.
Debt financing and hedging
The Group has a GBP30.0 million term loan facility and a
GBP105.0 million RCF, both with HSBC. The five-year facilities run
to November 2022 and have a margin of 225 basis points above LIBOR
and are secured on all properties within the Group.
At the period end, the term loan was fully drawn. The Group paid
down GBP15.0 million of the RCF following the asset disposals in
the period. As a result, it had GBP79.5 million drawn against the
RCF at 30 September 2018, resulting in total debt at that date of
GBP109.5 million and headroom within the facilities of GBP25.5
million. The Group's LTV ratio at 30 September 2018 was 37.1% (31
March 2018: 40.5%).
Enhancing the Investment Manager's capabilities
During the period, TPL appointed two asset managers,
strengthening its capabilities in the Midlands and South East
regions, where approximately 60% of the portfolio is located. These
appointments allow the Group to maintain personal relationships
with tenants as the portfolio has grown. TPL also strengthened its
financial management team, with the appointment of a new financial
controller.
Alternative Investment Fund Manager ("AIFM")
G10 Capital Limited ("G10"), part of the Lawson Conner Group, is
the Company's AIFM, with TPL providing advisory services to both
G10 and the Company. TPL continues to review the optimal structure
for providing AIFM services to the Company.
Tilstone Partners Limited
Investment Manager
12 November 2018
Condensed consolidated statement of comprehensive income
(unaudited)
For the six months ended 30 September 2018
1 April to 30 1 August 2017
September to 31 March
2018 2018
Continuing operations Notes GBP'000 GBP'000
-------------------------------------------- ----- -------------- -------------
Rental income 3 10,736 6,566
Property operating expenses 4 (1,815) (841)
-------------------------------------------- ----- -------------- -------------
Gross profit 8,921 5,725
Administration expenses 4 (1,670) (1,569)
Property and acquisition provision 4 (2,204) -
-------------------------------------------- ----- -------------- -------------
Operating profit before gains on investment
properties 5,047 4,156
Profit on disposal of investment properties 3,679 -
Fair value gains on investment properties 11 4,364 5,173
Operating profit 13,090 9,329
Finance income 5 11 41
Finance expenses - ongoing 6 (2,143) (838)
Finance expenses - loan break fees 6 - (167)
-------------------------------------------- ----- -------------- -------------
Profit before tax 10,958 8,365
Taxation 7 - -
-------------------------------------------- ----- -------------- -------------
Total comprehensive income for the period 10,958 8,365
-------------------------------------------- ----- -------------- -------------
EPS (basic and diluted) (pps) 10 6.60 5.04
-------------------------------------------- ----- -------------- -------------
The accompanying notes form an integral part of these financial
statements.
The comparatives presented are for the period 1 August 2017 to
31 March 2018, which represents 6.5 months of activity following
the commencement of trading on 20 September 2017.
Condensed consolidated statement of financial position
(unaudited)
As at 30 September 2018
30 September 31 March
2018 2018
Notes GBP'000 GBP'000
-------------------------------------- ----- ------------ -----------
Assets
Non-current assets
Investment property 11 288,436 295,068
-------------------------------------- ----- ------------ -----------
288,436 295,068
-------------------------------------- ----- ------------ -----------
Current assets
Cash and cash equivalents 3,884 6,572
Trade and other receivables 12 5,686 4,452
-------------------------------------- ----- ------------ -----------
9,570 11,024
-------------------------------------- ----- ------------ -----------
Total assets 298,006 306,092
-------------------------------------- ----- ------------ -----------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 13 (107,741) (123,052)
Finance lease obligations 14 (3,889) (3,800)
-------------------------------------- ----- ------------ -----------
(111,630) (126,852)
-------------------------------------- ----- ------------ -----------
Current liabilities
Finance lease obligations 14 (276) (268)
Other payables and accrued expenses 15 (7,124) (6,078)
Deferred income 15 (3,484) (3,380)
-------------------------------------- ----- ------------ -----------
(10,884) (9,726)
-------------------------------------- ----- ------------ -----------
Total liabilities (122,514) (136,578)
-------------------------------------- ----- ------------ -----------
Net assets 175,492 169,514
-------------------------------------- ----- ------------ -----------
Equity
Share capital 16 1,660 1,660
Capital reduction reserve 161,149 161,149
Retained earnings 12,683 6,705
-------------------------------------- ----- ------------ -----------
Total equity 175,492 169,514
-------------------------------------- ----- ------------ -----------
Number of shares in issue 166,000,000 166,000,000
NAV per share (pps) 17 105.72 102.12
-------------------------------------- ----- ------------ -----------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of changes in equity
(unaudited)
For the six months ended 30 September 2018
Capital
Share Share Retained reduction
capital premium earnings reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----- ------- --------- -------- --------- -------
Balance at 31 July 2017 50 - - - 50
Total comprehensive income - - 8,365 - 8,365
Ordinary shares issued 1,660 164,340 - - 166,000
Redemption of redeemable
ordinary shares (50) - - - (50)
Share issue costs - (3,191) - - (3,191)
Cancellation of share premium - (161,149) - 161,149 -
Dividends paid in respect
of the prior period 9 - - (1,660) - (1,660)
------------------------------ ----- ------- --------- -------- --------- -------
Balance at 31 March 2018 1,660 - 6,705 161,149 169,514
Total comprehensive income - - 10,958 - 10,958
Dividends paid in respect
of the current period 9 - - (4,980) - (4,980)
------------------------------ ----- ------- --------- -------- --------- -------
Balance at 30 September
2018 1,660 - 12,683 161,149 175,492
------------------------------ ----- ------- --------- -------- --------- -------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended 30 September 2018
1 April 1 August
to 30 2017
September to 31 March
2018 2018
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- -----------
Cash flows from operating activities
Operating profit 13,090 9,329
Adjustments to reconcile profit for the period
to net cash flows:
Gains from change in fair value of investment
properties 11 (4,364) (5,173)
Profit on disposal of investment properties (3,679) -
Property and acquisition provision 2,204 -
------------------------------------------------------ ----- --------- -----------
Operating cash flows before movements in working
capital 7,251 4,156
Increase in other receivables and prepayments (1,211) (4,407)
(Decrease)/increase in other payables and
accrued expenses (1,537) 8,455
------------------------------------------------------ ----- --------- -----------
Net cash flows generated from operating activities 4,503 8,204
------------------------------------------------------ ----- --------- -----------
Cash flows from investing activities
Acquisition of investment properties (3,940) (285,576)
Disposal of investment properties 18,689 -
------------------------------------------------------ ----- --------- -----------
Net cash generated from/(used in) investing
activities 14,749 (285,576)
------------------------------------------------------ ----- --------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary shares - 165,950
Share issuance costs paid - (3,191)
Bank loans drawn down 13 - 124,450
Bank loans repaid 13 (15,000) -
Interest received 5 11 41
Loan break fees - (167)
Interest and other finance expenses paid (2,253) (1,727)
Dividends paid in the period (4,698) (1,424)
------------------------------------------------------ ----- --------- -----------
Net cash flows (used in)/generated from financing
activities (21,940) 283,932
------------------------------------------------------ ----- --------- -----------
Net (decrease)/increase in cash and cash equivalents (2,688) 6,560
Cash and cash equivalents at start of the
period 6,572 12
------------------------------------------------------ ----- --------- -----------
Cash and cash equivalents at end of the period 3,884 6,572
------------------------------------------------------ ----- --------- -----------
The accompanying notes form an integral part of these financial
statements.
Notes to the condensed consolidated financial statements
(unaudited)
For the six months ended 30 September 2018
1. General information
Warehouse REIT plc (the 'Company') is a closed-ended Real Estate
Investment Trust ("REIT") incorporated in England and Wales on 24
July 2017. The Company began trading on 20 September 2017. The
registered office of the Company is Beaufort House, 51 New North
Road, Exeter EX4 4EP. The Company is admitted to trading on AIM, a
market operated by the London Stock Exchange.
2. Basis of preparation
These interim condensed unaudited financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting,
with the following exception. IAS 34 requires that comparative
figures are presented for the comparable interim period in the
preceding year, being the period to 30 September 2017. Whilst the
Company was incorporated on 24 July 2017, trading did not commence
until 20 September 2017. The Directors feel that the presentation
of comparative information for the 10-day period to 30 September
2017, would not provide the reader with a relevant comparative. The
presentation of comparative information for the 6.5-month trading
period to 31 March 2018 provides a more representative
comparative.
These interim condensed unaudited financial statements should be
read in conjunction with the Company's last financial statements
for the eight-month period ended 31 March 2018. These condensed
unaudited financial statements do not include all information
required for a complete set of annual financial statements proposed
in accordance with IFRS as adopted by the EU, however, they have
been prepared using the accounting policies adopted in the audited
financial statements for the period ended 31 March 2018 and
selected explanatory notes have been included to explain events and
transactions that are significant in understanding changes in the
Company's financial position and performance since the last
financial statements.
The financial statements have been prepared under the historical
cost convention, except for investment property, which has been
measured at fair value. The interim financial statements are
presented in Pound Sterling and all values are rounded to the
nearest thousand pounds (GBP'000), except when otherwise
indicated.
The financial information contained within these interim results
does not constitute full statutory accounts as defined in section
434 of the Companies Act 2006. The financial statements for the six
months ended 30 September 2018 have not been either audited or
reviewed by the Company's Auditor. The information for the period
ended 31 March 2018 has been extracted from the latest published
annual report and financial statements, which has been filed with
the Registrar of Companies. The Auditor reported on those accounts;
its report was unqualified, and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future,
for a period of not less than 12 months from the date of this
report. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. Therefore, the financial
statements have been prepared on the going concern basis.
2.1 Changes to accounting standards and interpretations
There were a number of new standards and amendments to existing
standards which are required for the Group's accounting periods
beginning after 1 April 2018, which have been considered and
applied as follows:
-- IFRS 9 Financial Instruments. This standard has replaced IAS
39 Financial Instruments and contains two primary measurement
categories for financial assets. The effect on the Group's current
accounting policies covering the measurement of financial
instruments and the estimation of impairment is immaterial; and
-- IFRS 15 Revenue from Contracts with Customers. The Group's
revenue primarily relates to property rental income which is
outside the scope of IFRS 15 and as such the new standard will have
no impact.
There are a number of new standards and amendments to existing
standards which have been published and are mandatory for the
Group's accounting periods beginning 1 April 2019 or later. The
following are the most relevant to the Group and their impact on
the financial statements is as follows:
-- IFRS 16 Leases was issued in January 2016 and is effective
for annual periods beginning on or after 1 April 2019. There will
be no change required to the Group's accounting policies.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of an asset or
liability in the future.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimate which has the most
significant effect on the amounts recognised in the consolidated
financial statements:
Valuation of property
The valuations of the Group's investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation - Professional Standards January 2017 (incorporating the
International Valuation Standards) and in accordance with IFRS 13.
See notes 11 and 18 for further details.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are consistent with those applied within
the Company's Annual Report and Financial Statements for the period
ended 31 March 2018.
Functional and presentation currency
The overall objective of the Group is to generate returns in
Pound Sterling and the Group's performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have
therefore adopted it as the functional and presentation
currency.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and provision of
UK urban warehouses.
3. Revenue
1 August
1 April to 2017 to
30 September 31 March
2018 2018
GBP'000 GBP'000
-------------------- ------------- ---------
Rental income 9,927 6,324
Insurance recharged 394 172
Dilapidation income 390 70
Other income 25 -
-------------------- ------------- ---------
Total 10,736 6,566
-------------------- ------------- ---------
4. Property operating and administration expenses
1 August
1 April 2017 to
to 30 September 31 March
2018 2018
GBP'000 GBP'000
----------------------------------- ---------------- ---------
Head rent 146 44
Utilities 43 56
Insurance 281 86
Rates 67 158
Premises expenses 1,030 497
Bad debt provision 248 -
----------------------------------- ---------------- ---------
Property operating expenses 1,815 841
Investment management fees 919 792
Directors' fees 42 54
Other administration expenses 709 723
----------------------------------- ---------------- ---------
Administration expenses 1,670 1,569
----------------------------------- ---------------- ---------
Property and acquisition provision 2,204 -
Total 5,689 2,410
----------------------------------- ---------------- ---------
The property and acquisition provision comprises an estimated
cost associated with the default of the tenant at Deeside, Chester,
who entered administration, and in relation to the terminated
transaction with Hansteen Holdings plc.
5. Finance income
1 April 1 August 2017
to 30 September to 31 March
2018 2018
GBP'000 GBP'000
----------------------------------------- ---------------- -------------
Income from cash and short-term deposits 11 41
----------------------------------------- ---------------- -------------
Total 11 41
----------------------------------------- ---------------- -------------
6. Finance expenses
1 April to 1 August 2017
30 September to 31 March
2018 2018
Ongoing charges GBP'000 GBP'000
-------------------------------- ------------- -------------
Loan interest 1,882 712
Loan arrangement fees amortised 253 121
Bank charges 8 5
-------------------------------- ------------- -------------
Total 2,143 838
-------------------------------- ------------- -------------
1 April 1 August 2017
to 30 September to 31 March
2018 2018
Loan break fees GBP'000 GBP'000
---------------- ---------------- -------------
Break fees - 167
---------------- ---------------- -------------
Total - 167
---------------- ---------------- -------------
7. Taxation
Corporation tax has arisen as follows:
1 April 1 August 2017
to 30 to 31 March
September
2018 2018
GBP'000 GBP'000
---------------------------------------------- ---------- -------------
Corporation tax on residual income for current -
period -
---------------------------------------------- ---------- -------------
Total - -
---------------------------------------------- ---------- -------------
Reconciliation of tax charge to profit before tax:
1 April 1 August 2017
to 30 September to 31 March
2019 2018
GBP'000 GBP'000
----------------------------------------- ---------------- -------------
Profit before tax 10,958 8,365
Corporation tax at 19.0% 2,082 1,589
Change in value of investment properties (829) (982)
Tax exempt property rental business (1,253) (607)
----------------------------------------- ---------------- -------------
Total - -
----------------------------------------- ---------------- -------------
8. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its
investment property portfolio. These non-cancellable leases have a
remaining term of up to 39 years.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 September 2018 are as follows:
30 September 2018 31 March
2018
GBP'000 GBP'000
--------------------------- ----------------- --------
Within one year 17,560 17,778
Between one and five years 46,903 44,678
More than five years 23,736 22,117
--------------------------- ----------------- --------
Total 88,199 84,573
--------------------------- ----------------- --------
9. Dividends
For the six
months ended
30 September
Pence 2018
per share GBP'000
------------------------------------------------------------------------------- --------- -------------
Interim dividend for period ended 31 March 2018 paid on 6 July 2018 1.50 2,490
First interim dividend for year ending 31 March 2019 paid on 28 September 2018 1.50 2,490
------------------------------------------------------------------------------- --------- -------------
Total dividends paid during the period 3.00 4,980
------------------------------------------------------------------------------- --------- -------------
Paid as:
Property income distributions 2.65 4,399
Ordinary dividends 0.35 581
------------------------------------------------------------------------------- --------- -------------
Total 3.00 4,980
------------------------------------------------------------------------------- --------- -------------
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
The Board has declared a second interim dividend of 1.5 pence
per ordinary share, payable on 28 December 2018 to shareholders
registered at the close of business on 30 November 2018. The
ex-dividend date will be 29 November 2018. The dividend will be
paid in full as a property income distribution.
10. Earnings per share
Basic EPS is calculated by dividing profit for the period
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the period. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical.
30 September
2018 31 March 2018
GBP'000 GBP'000
-------------------------------------------- ------------ -------------
IFRS earnings 10,958 8,365
-------------------------------------------- ------------ -------------
EPRA earnings adjustments:
Profit on disposal of investment properties (3,679) -
Fair value gains on investment properties (4,364) (5,173)
EPRA earnings 2,915 3,192
-------------------------------------------- ------------ -------------
Group-specific earnings adjustments:
Property and acquisition provision 2,204 -
Loan break fees - 167
-------------------------------------------- ------------ -------------
Adjusted earnings 5,119 3,359
-------------------------------------------- ------------ -------------
30 September 31 March
2018 2018
Pence per Pence per
share share
----------------- ------------ ---------
Basic IFRS EPS 6.60 5.04
----------------- ------------ ---------
Diluted IFRS EPS 6.60 5.04
----------------- ------------ ---------
EPRA EPS 1.76 1.92
----------------- ------------ ---------
Adjusted EPS 3.08 2.02
----------------- ------------ ---------
30 September 31 March
2018 2018
Number Number
of shares of shares
------------------------------------------- ------------ -----------
Weighted average number of shares in issue 166,000,000 166,000,000
------------------------------------------- ------------ -----------
11. UK investment property
30 September 2018 31 March
2018
GBP'000 GBP'000
------------------------------------------------------- ----------------- --------
Investment property at the start of the period 291,000 -
Acquisition of properties 2,546 285,827
Capital expenditure 1,371 -
Disposal of properties (15,010) -
Fair value gains on revaluation of investment property 4,364 5,173
------------------------------------------------------- ----------------- --------
284,271 291,000
Adjustment for finance lease obligations 4,165 4,068
------------------------------------------------------- ----------------- --------
As at 30 September 2018 288,436 295,068
------------------------------------------------------- ----------------- --------
12. Trade and other receivables
30 September 2018 31 March
2018
GBP'000 GBP'000
------------------ ----------------- --------
Rent receivable 4,488 3,397
Prepayments 146 93
Other receivables 1,052 962
------------------ ----------------- --------
Total 5,686 4,452
------------------ ----------------- --------
13. Interest-bearing loans and borrowings
30 September 2018 31 March
2018
GBP'000 GBP'000
----------------------------------------------------------- ----------------- --------
Loans at the start of the period 124,450 -
Loans drawn down - 124,450
Loans repaid (15,000) -
----------------------------------------------------------- ----------------- --------
Total loans drawn down at the end of the period 109,450 124,450
----------------------------------------------------------- ----------------- --------
Unamortised loan arrangement fees at the start of period (1,398) -
Loan arrangement fees capitalised in the period (563) (1,476)
Amortised to date 252 78
----------------------------------------------------------- ----------------- --------
Unamortised loan arrangement fees at the end of the period (1,709) (1,398)
----------------------------------------------------------- ----------------- --------
Loan balance less unamortised loan arrangement fees 107,741 123,052
----------------------------------------------------------- ----------------- --------
As at 30 September 2018, GBP25.55 million of the RCF remained
available to be drawn. The term loan was fully drawn. Credit
facilities are secured on all properties within the portfolio and
expire on 30 November 2022.
The debt facilities include loan-to-value and interest cover
covenants that are measured at Group level. The Group has
maintained significant headroom against all measures throughout the
financial period and is in full compliance with all loan covenants
at 30 September 2018.
14. Finance lease obligations
The following table analyses the minimum lease payments under
non-cancellable finance leases using discount rates of between 6.5%
and 10.8%:
30 September 2018 31 March
2018
GBP'000 GBP'000
-------------------------------------------- ----------------- --------
Current liabilities
Within one year 276 268
Non-current liabilities
After one year but not more than five years 918 890
Later than five years 2,971 2,910
-------------------------------------------- ----------------- --------
Total 4,165 4,068
-------------------------------------------- ----------------- --------
15. Other payables and accrued expenses
30 September 2018 31 March
2018
GBP'000 GBP'000
-------------------------------------------- ----------------- --------
Property operating expenses payable 3,533 1,107
Finance and administration expenses payable 2,069 1,528
Capital expenses payable 268 2,136
Other expenses payable 1,254 1,307
-------------------------------------------- ----------------- --------
Other payables and accrued expenses 7,124 6,078
-------------------------------------------- ----------------- --------
Deferred income 3,484 3,380
-------------------------------------------- ----------------- --------
Total 10,608 9,458
-------------------------------------------- ----------------- --------
16. Share capital
Share capital is the nominal amount of the Company's ordinary
shares in issue.
30 September 31 March
2018 2018
Ordinary shares of GBP0.01 each Number GBP'000 GBP'000
--------------------------------- ----------- ------------ --------
Issued and fully paid:
At the start of the period 166,000,000 1,660 -
Shares issued - - 1,660
--------------------------------- ----------- ------------ --------
Balance at the end of the period 166,000,000 1,660 1,660
--------------------------------- ----------- ------------ --------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll, to one vote for every
share held. There are no restrictions on the size of a shareholding
or the transfer of shares, except for the UK REIT restrictions.
17. Net asset value per share
Basic NAV per share is calculated by dividing net assets
attributable to ordinary equity holders of the Company in the
statement of financial position by the number of ordinary shares
outstanding at the end of the period. As there are no dilutive
instruments in issue, basic and diluted NAV per share are
identical. The following reflects the net asset and share data used
in the basic and diluted NAV per share computations:
30 September
2018
Pence per
share
---------- ------------
NAV (pps) 105.72
---------- ------------
The NAV is calculated as:
30 September
2018
GBP'000
------------------------------------------------- ------------
Net assets attributable to ordinary shareholders 175,492
Net assets for calculation of NAV 175,492
------------------------------------------------- ------------
Number of shares in issue 166,000,000
------------------------------------------------- ------------
18. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying value of the loans and borrowings approximate
their fair value due to the contractual terms and conditions of the
loan. The loans are at a variable interest rate of 2.25% above
LIBOR.
Six-monthly valuations of investment properties are performed by
Gerald Eve and CBRE, both being accredited external valuers with
recognised and relevant professional qualifications and recent
experience of the location and category of the investment property
being valued. The valuations are the ultimate responsibility of the
Directors, however, who appraise these six monthly.
The valuation of the Group's investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation -
Professional Standards January 2017 (incorporating the
International Valuation Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams), the
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property and discount rates applicable to those assets.
The following tables show an analysis of the fair values of
investment properties recognised in the statement of financial
position by level of the fair value hierarchy(1) :
30 September 2018
----------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ------- ------- -------
Investment properties - - 284,271 284,271
---------------------------------------------- ------- ------- ------- -------
Total - - 284,271 284,271
---------------------------------------------- ------- ------- ------- -------
1. Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
The following table analyses:
-- the fair value measurements at the end of the reporting period;
-- a description of the valuation techniques applied;
-- the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-- for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Fair value Valuation technique Key unobservable inputs Range
GBP'000
---------- --------------------- ----------------------- -------------------
284,271 Income capitalisation ERV 21 - 1,505 (GBP'000
per annum)
Equivalent yield 6.0% - 12.9%
---------- --------------------- ----------------------- -------------------
Significant increases/decreases in the ERV (per sq ft per annum)
and rental growth per annum in isolation would result in a
significantly higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft per annum) is accompanied by:
-- a similar change in the rent growth per annum and discount rate (and exit yield); and
-- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to GBP4,364,000 and are presented in the condensed
consolidated statement of comprehensive income in line item 'fair
value gains on investment properties'.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Group's assets and liabilities is
considered to be the same as their fair value.
19. Related party transactions
Directors
The Directors (all Non-Executive) of the Company and its
subsidiaries are considered to be the key management personnel of
the Group. Directors' remuneration for the period totalled
GBP42,031 and at 30 September 2018, a balance of GBPnil was
outstanding.
Investment Manager
The Company is party to an Investment Management Agreement with
the Investment Manager, pursuant to which the Company has appointed
the Investment Manager to provide investment management services on
a day-to-day basis in accordance with their respective investment
objectives and policies, subject to the overall supervision and
direction by the Board of Directors.
For its services to the Group, the Investment Manager receives
an annual fee at a rate of 1.1% of the NAV of the Group.
During the period, the Group incurred GBP919,000 in respect of
investment management fees. GBP460,161 was outstanding as at the
period end date.
Subsidiaries
At 30 September 2018, the Company owns a 100% controlling stake
in Tilstone Holdings Limited, Tilstone Warehouse Holdco Limited,
Tilstone Industrial Warehouse Limited, Tilstone Retail Warehouse
Limited, Tilstone Industrial Limited, Tilstone Retail Limited,
Tilstone Trade Limited, Tilstone Basingstoke Limited, Tilstone
Glasgow Limited, Quantum North Limited, CHIP (One) Ltd, CHIP (Two)
Ltd, CHIP (Three) Ltd, CHIP (Four) Ltd, CHIP (Five) Ltd, CHIP
(Ipswich) One Ltd and CHIP (Ipswich) Two Ltd. Quantum North Limited
was incorporated on 27 November 2017 and is a dormant company.
20. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
21. Post balance sheet events
On 5 October 2018, planning permission was secured for a further
250,000 sq ft of warehouse space on 16 acres at the Queenslie
Business Park in Glasgow. The receipt of planning permission has
triggered the payment of a further GBP900,000 of consideration for
the site, as outlined in the Company's prospectus at IPO, as
planning permission was granted within five years of the Company's
admission to trading and the valuer has determined that it has
increased the value of the land by more than GBP900,000.
Glossary
Adjusted EPRA earnings per share ("EPRA EPS")
EPRA EPS adjusted to exclude non-cash and non-recurring costs,
calculated on the basis of the time-weighted number of shares in
issue
Admission
The admission of Warehouse REIT plc onto the London Stock
Exchange on 20 September 2017
AGM
Annual General Meeting
AIC
Association of Investment Companies
AIFMD
Alternative Investment Fund Managers Directive
Contracted rent
Annualised rents generated by the portfolio plus rent contracted
from expiry of rent-free periods and uplifts agreed at the balance
sheet date
Earnings per share ("EPS")
Profit for the period after tax attributable to members of the
parent company divided by the weighted average number of shares in
issue in the period
EPRA
European Public Real Estate Association, the industry body for
European REITs
EPRA earnings
IFRS profit after taxation excluding movements relating to
changes in values of investment properties and the related tax
effects
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying
earnings from core operating activities based on the average number
of shares in issue during the year
EPRA guidelines
The EPRA Best Practices Recommendations Guidelines November
2016
EPRA NAV
A measure of NAV designed by EPRA to present the fair value of a
company on a long-term basis, by excluding items such as deferred
tax on property valuations
EPRA NAV per share
The diluted NAV per share figure based on EPRA NAV and divided
by the number of shares in issue at the balance sheet date
EPRA net initial yield ("EPRA NIY")
Annualised rental income on investment properties at the balance
sheet date, less non--recoverable property operating expenses,
expressed as a percentage of the investment property valuation,
plus purchaser's costs
Equivalent yield
The weighted average income return expressed as a percentage of
the market value of the property, after inclusion of estimated
purchaser's costs
ERV
The estimated annual market rental value of lettable space as
assessed by the external valuer
Group
Warehouse REIT plc and its subsidiaries
IFRS
International Financial Reporting Standards adopted for use in
the European Union
Loan to value ("LTV")
Outstanding amount of gross loan balances less cash as a
percentage of property value
NAV
Net asset value
NAV per share
Net asset value divided by the number of shares outstanding
Net initial yield ("NIY")
Contracted rental income on investment properties at the balance
sheet date, expressed as a percentage of the investment property
valuation, plus purchaser's costs
Net rental income
Gross rental income receivable after deduction for ground rents
and other net property outgoings including void costs and net
service charge expenses
Occupancy
Total open market rental value of the units leased divided by
total open market rental value of the portfolio
Passing rent
Gross annual rental income currently receivable on a property as
at the balance sheet date less any ground rents payable under head
leases
Property income distribution ("PID")
Profits distributed to shareholders which are subject to tax in
the hands of the shareholders as property income. PIDs are usually
paid net of withholding tax (except for certain types of tax-exempt
shareholder). REITs also pay out normal dividends called
non-PIDs
Real Estate Investment Trust ("REIT")
A listed property company which qualifies for, and has elected
into, a tax regime which is exempt from corporation tax on profits
from property rental income and UK capital gains on the sale of
investment properties
RCF
Revolving credit facility
Total return
The movement in EPRA NAV over a period plus dividends paid in
the period, expressed as a percentage of the EPRA NAV at the start
of the period
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry across the
investment portfolio weighted by contracted rent
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 LLFVDLFLAIIT
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November 12, 2018 02:00 ET (07:00 GMT)
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