Source - LSE Regulatory
RNS Number : 8095P
Alternative Income REIT PLC
22 February 2021
 

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN THE UNITED STATES OF AMERICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.

 

22 February 2021

Alternative Income REIT plc

(the "Company" or the "Group")

Interim Report and Financial Statements for the half year ended 31 December 2020

The Board of Directors of Alternative Income REIT plc (ticker: AIRE), the owner of a diversified portfolio of UK commercial property assets predominantly let on long leases, is pleased to announce its interim report and financial statements for the half year ended 31 December 2020.

 

Financial Highlights

·   Unaudited Net Asset Value of £68.17 million and of 84.68 pence per share ('pps') as at 31 December 2020 (31 December 2019: £76.17 million and 94.63 pps) - further details in the NAV section of the Chairman's Statement below.

·     Operating profit of £3.48 million (including gain on sale of investment property but excluding fair value changes) for the half year (half year ended 31 December 2019: £3.03 million) - further details in the Financial Results section of the Chairman's Statement below.

·     Unadjusted profit before tax of £3.03 million and 3.77 pps for the half year (half year ended 31 December 2019: profit of £2.07 million and 2.57 pps).

·      EPRA Earnings per Share1 for the half year of 3.43 pence (half year ended 31 December 2019: 2.87 pps).

The EPRA EPS includes accruals to reflect the minimum contracted uplifts, the spreading of rent free periods, the amortisation of loan arrangement fees and the movement in the provision for impairment of trade receivables. Excluding these items from the Group's EPRA EPS, the unaudited adjusted cash earnings were 3.19 pence per share, reflecting 141.6% cash dividend cover for the half year (half year ended 31 December 2019: 2.22 pence per share; 80.7% cash dividend cover).

·      Total dividends of 2.25 pps have been declared for the half year (half year ended 31 December 2019: 2.75 pps).

As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been particularly adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.

The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share2, all else being equal, by September 2022.

·   The price of the Company's Ordinary Shares on the Main Market of the London Stock Exchange was 60.00 pps as at 31 December 2020 (31 December 2019: 74.68 pps).

·      As at 31 December 2020, the Group had a £41.00 million loan facility with Canada Life Investments and was geared to 36.6% of the Gross Asset Value ('GAV') (31 December 2019: 34.5%).

·     EPRA Cost Ratio3 of 12.6% as at 31 December 2020 (31 December 2019: 16.3%).

1 see Note 7 of the Consolidated Financial Statements, Glossary for definitions and abbreviations, and Key Performance Indicators section below for their definitions.

2 This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.

3 A definition of EPRA measures is set out in the EPRA Unaudited Performance Measures section further below.

 

Property Highlights

·     As at 31 December 2020, the Group's property portfolio had a fair value of £108.53 million, including £4.75m for the newly acquired property, Droitwich Spa Retail Park (31 December 2019: £112.99 million) - see Financial Results section within the Chairman's Statement below.

·     The weighted average unexpired lease term ('WAULT') as at 31 December 2020 was 18.3 years to the earlier of break and expiry (31 December 2019: 20.0 years) and 20.3 years to expiry (31 December 2019: 22.1 years).

·     The assets were fully let as at 31 December 2020 (31 December 2019: fully let).

·     Rent and other income recognised during the half year was £3.53 million (half year to 31 December 2019: £3.63 million). The number of tenants as at 31 December 2020 was 22 (31 December 2019: 21).

·    The portfolio had annualised gross passing rental income of £6.94 million as at 31 December 2020 (31 December 2019: £6.78 million).

·      EPRA Net Initial Yield3 ('NIY') of 5.49% as at 31 December 2020 (31 December 2019: 5.04%).

·      EPRA topped-up NIY3 of 7.04% as at 31 December 2020 (31 December 2019: 6.30%).

 

Post balance sheet highlights

·     By week commencing 15 February 2021, in respect of the March, June and September 2020 rent quarters, the Group had collected 91.5% of rents due and payment plans are in place in respect of the remaining 8.5%. By the same date, the Group had collected 86.6% of its December 2020 quarter's rent and agreed, or is the process of agreeing, rent concessions with the remaining 13.4%.

·    As previously announced, and in line with its commitment set out in the results of the Annual General Meeting announcement on 26 November 2020, the Board is continuing to engage in an open and transparent dialogue with shareholders and expects to provide an update shortly.

·     On 4 February 2021, the Board declared an interim dividend of 1.00 pps in respect of the period from 1 October 2020 to 31 December 2020. This will be paid on 26 February 2021 to shareholders on the register as at 12 February 2021. The ex-dividend date was 11 February 2021.

 

ENQUIRIES

Alternative Income REIT PLC

 

Steve Smith - Chairman

via Maitland/AMO below

 

 

M7 Real Estate Ltd

Richard Croft

+44 (0)20 3657 5500

 

 

Panmure Gordon (UK) Limited

+44 (0)20 7886 2500

Alex Collins

 

Tom Scrivens

 

Chloe Ponsonby

 

 

 

Maitland/AMO (Communications Adviser)

+44(0) 7747 113 930

James Benjamin

james.benjamin@maitland.co.uk

 

The Company's LEI is 213800MPBIJS12Q88F71.

 

Further information on Alternative Income REIT plc is available at www.alternativeincomereit.com4

 

NOTES

Alternative Income REIT PLC aims to generate a sustainable, secure and attractive income return for shareholders from a diversified portfolio of UK property investments, predominately in alternative and specialist sectors. The majority of the assets in the Group's portfolio are let on long leases which contain inflation linked rent review provisions.

 

The Company's investment adviser is M7 Real Estate Limited ("M7"). M7 is a leading specialist in the pan-European, regional, multi-tenanted real estate market. Majority owned by its senior managers, it has over 200 employees in 14 countries across Europe. The team manages over 835 properties with a value of circa €5.1 billion.

4 Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

 

 

 

Chairman's Statement

 

Overview

 

I am pleased to present the unaudited interim report and financial statements for the Group for the half year ended 31 December 2020.

 

The past year has seen unprecedented challenges as the COVID-19 pandemic continues to create global uncertainty. However, I am pleased to reflect that, at the start of the new year, the vaccination programme may be turning the tide and that we have cause to look forward with cautious optimism.

 

Whilst the full impact of the pandemic on the economy and, in particular, the property sector is still to be understood, in spite of considerable uncertainty, the Group has continued to make progress. We were particularly pleased to have completed the disposal of the Wet 'n' Wild Water Park, North Shields ("Wet 'n' Wild") at a significant premium to cost and book value, and subsequently to redeploy the proceeds through the acquisition of the Droitwich Spa Retail Park, at a yield which was materially higher than both the 6.0% exit yield on Wet 'n' Wild and the Group's 5.76% portfolio valuation yield at the time. This transaction was the first investment for the Company identified by its Investment Adviser, M7 Real Estate Limited, and the Board believes it to be an asset with good defensive qualities and the potential to deliver excellent long term returns for shareholders.

 

Over the period, the Board's focus has been the health, safety and wellbeing of its stakeholders, coupled with proportionate support for its tenants, to ensure that as far as possible the financial position of both landlord and its lessees remains healthy and sustainable, cognisant of the duty to act in the best interests of the Company's shareholders as a whole. By week commencing 15 February 2021, in respect of the March, June and September 2020 rent quarters, the Group had collected 91.5% of rents due and payment plans are in place in respect of the remaining 8.5%. By the same date, the Group had collected 86.6% of its December 2020 quarter's rent and agreed, or is the process of agreeing, rent concessions with the remaining 13.4%.

 

The Board believes that the Group is well positioned given its diversified, 100% let portfolio, generally strong rent collection, a robust balance sheet and modest overhead. The focus remains on generating a progressive cash covered dividend from the Group's now fully invested portfolio.

 

Financial Results

Half year ended 31 December 2020 (unaudited)

 

Half year ended 31 December 2019 (unaudited)

 

.

 

Year ended 30 June 2020 (audited)

 

 

 

 

 

 

 

Operating profit before fair value changes and gain [£'000]

3,050

 

3,027

 

5,803

Increase / (decrease) in fair values [£'000]

270

 

(245)

 

(9,411)

Capital gain on sale of Wet 'n' Wild Water Park [£'000]

425

 

-

 

-

Operating profit/(loss) [£'000]

3,745

 

2,782

 

(3,608)

Profit/(loss) before tax [£'000]

3,033

 

2,067

 

(5,050)

Profit/(loss) per share - basic and diluted [pence]

3.77

 

2.57

 

(6.27)

 EPRA Earnings per Share (EPS) - basic and diluted [pence]

3.43

 

2.87

 

5.42

 Adjusted EPS* - basic and diluted [pence]

3.19

 

2.22

 

4.25

Net Asset Value (NAV) & EPRA NAV per share [pence]

84.68

 

94.63

 

83.58

EPRA Cost Ratio [%]

12.6

 

16.3

 

21.1

Annualised charges [%]

1.14

 

1.60

 

2.22

Gearing ratio [%]

36.6

 

34.5

 

37.0

 

* The EPRA EPS includes accruals to reflect the minimum contracted uplifts, the spreading of rent-free periods, the amortisation of loan arrangement fees and the movement in the provision for impairment of trade receivables. Excluding these items from the Group's EPRA EPS, the unaudited adjusted cash earnings were 3.19 pence per share, reflecting 141.6% cash dividend cover for the half year (half year ended 31 December 2019: 2.22 pence per share; 80.7% cash dividend cover).  As shown in the above table, the gain on the disposal of Wet 'n' Wild was £425,202 which after taking account of the corresponding reversal of rent smoothing for minimum uplifts of £115,568 was equivalent to 0.39 pence per share. 

 

NAV

 

At 31 December 2020, the independent fair valuation undertaken by Knight Frank of the Company's property portfolio was £108.53 million, including £4.75 million for the property at Droitwich Spa Retail Park acquired in early December 2020 (31 December 2019: £112.99 million).

 

As described in the latest Annual Report, the fair value of the Group's property portfolio (including the Wet 'n' Wild held for sale) declined from £112.99 million (31 December 2019) to £104.76 million (30 June 2020). £6.15 million (74%) of this movement was driven by the leisure, gym and hotel properties, and a further £1.30 million (16%) was due to the automotive dealerships. These property sectors, both occupational and investment markets, were amongst the most adversely affected by the COVID-19 related lockdown in effect from 23 March 2020.

 

During the half year ended 31 December 2020, property values within the portfolio have stabilised. The exception is an uplift (£1.70 million) during Q4 for the hotel property in Swindon where the 31 December 2020 valuation reflects the completion of remedial work and agreement reached with Travelodge. 

 

Dividends & Earnings

 

The Company declared interim dividends of 2.25 pps in respect of the half year ended 31 December 2020 (half year ended 31 December 2019: 2.75 pps).  As set out in Note 8 to the Consolidated Financial Statements, these dividends were covered by EPRA earnings of 3.43 pps (31 December 2019: 2.87 pps), and the Group's adjusted earnings (representing cash) were 3.19 pps (31 December 2019: 2.22 pps).

 

As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been particularly adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.

 

The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share2, all else being equal, by September 2022.

 

Shareholder Engagement

 

Whilst the Board was disappointed by the rejection of the revised Investment Policy at the Annual General Meeting on 26 November 2020 ("AGM"), it recognises that in the current febrile atmosphere our major investors voted for a cautious approach, at least in the short term, and the Board understands and is fully supportive of their decision. The Board felt confident that the proposed amendments would have enabled the Company to take advantage of current market opportunities and deliver significant added value for shareholders, but given the lack of appetite amongst investors, the Board recognises the need for caution. One disappointing aspect of the AGM was the level of voting participation, particularly amongst smaller investors.  

 

Following discussions with Glenstone Property PLC ("Glenstone"), which holds 14.73% of the Company's issued share capital following its Tender Offer, the Board and its adviser have been in regular communication with Glenstone in relation to its request for representation on the Board.

 

As announced on 4 February 2021, the Board is engaging in an open and transparent dialogue with shareholders and will provide an update shortly. 

 

Future Growth and Outlook

Despite the potential impact of Brexit and, latterly, the major disruption caused by the COVID-19 pandemic, the appetite for well let UK commercial property with secure income remains relatively strong.  We therefore remain confident that the Group's diversified robust portfolio is well positioned to absorb potential market dislocation.

 

The Board believes that it has taken a disciplined and timely approach, particularly in relation to cost management and the appointment of a talented, proficient team of service providers and advisers.  The Group has a strong foundation from which to deliver attractive total returns including a potentially progressive dividend and believes the portfolio to be well positioned for the better times that we expect to lie ahead.

 

Finally, I would like to thank our service providers, our advisers and my fellow Directors for their input, effort and support during very challenging times. Thank you also to our shareholders for their continued patience and support during what have been trying circumstances.

 

Steve Smith

Chairman

   22 February 2021

 

 

 

 Unaudited Key Performance Indicators ('KPIs')

 

KPI AND DEFINITION

RELEVANCE TO STRATEGY

PERFORMANCE

 

1.  Net Initial Yield ('NIY')

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased by purchasers' costs estimated by the Group's External Valuers.

 

 

 

The NIY is an indicator of the ability of the Company to meet its target dividend.

 

 

5.53%

at 31 December 2020

(30 June 2020: 5.77%; 31 December 2019: 5.04%)

 

 

2.  WAULT to break and expiry

The average lease term remaining to expiry across the portfolio, weighted by contracted rent.

 

 

 

The WAULT is a key measure of the quality of the portfolio. Long leases underpin the security of the Group's future income.

 

18.3 years to break and 20.3 years to expiry

at 31 December 2020

(30 June 2020: 19.5 years to break and 21.6 years to expiry; 31 December 2019: 20.0 years to break and 22.1 years to expiry)

 

 

3.  Net Asset Value ('NAV')

NAV is the value of an entity's assets minus the value of its liabilities.

 

 

Provides stakeholders with the most relevant information on the fair value of the assets and liabilities of the Group.

 

£68.17 million/84.68 pps

at 31 December 2020

(30 June 2020: £67.29 million, 83.58 pps and 31 December 2019: £76.17 million, 94.63 pps)

 

 

 

4.  Dividend

Dividends declared in relation to the period.

 

 

The Company seeks to deliver a sustainable income stream from its portfolio, which it distributes as dividends.

 

2.25 pps

for the half year ended 31 December 2020

(year ended 30 June 2020: 5.00pps; half year ended 31 December 2019: 2.75pps)

 

5.  Adjusted EPS

Adjusted EPS from core operational activities, as adjusted for non-cash items. A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by cash earnings. See note 7 to the Consolidated Financial Statements.

 

 

This reflects the Company's generation of cash earnings from the portfolio which underpins dividends.

 

3.19 pps

for the half year ended 31 December 2020

(year ended 30 June 2020: 4.25 pps; half year to 31 December 2019: 2.22 pps)

 

6.  Leverage (Loan-to-GAV)

The proportion of the Group's property that is funded by borrowings.

 

 

The Group utilises borrowings to enhance returns over the medium term. Borrowings will not exceed 40% of GAV (measured at drawdown).

 

36.6%

at 31 December 2020

(30 June 2020: 37.0% and 31 December 2019: 34.5%)

EPRA Unaudited Performance Measures

 

Detailed below is a summary table showing the EPRA performance measures of the Group5

 

MEASURE AND DEFINITION

PURPOSE

PERFORMANCE

 

EPRA NIY

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased by (estimated) purchasers' costs.

 

 

 

A comparable measure for portfolio valuations. This measure should make it easier for investors to judge  how the valuation of two portfolios compare.

 

 

5.49 %

at 31 December  2020

(30 June 2020: 5.72 % and 31 December 2019: 5.04%)

 

EPRA 'Topped-Up' NIY

This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent periods and stepped rents).

 

 

A comparable measure for portfolio valuations. This measure should make it easier for investors to judge  how the valuation of two portfolios compare.

 

7.04 %

at 31 December 2020

(30 June 2020: 6.97% and 31 December 2019: 6.30%)

 

EPRA NAV

NAV adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long term investment property business.

 

 

Makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a real estate investment company with a long term investment strategy.

 

£68.17 million/84.68 pps

at 31 December 2020

(30 June 2020: £67.29 million, 83.58 pps and 31 December 2019: £76.17 million, 94.63 pps)

EPRA Earnings/EPS

Earnings from operational activities.

 

A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.

 

£2.76 million/3.43 pps

EPRA earnings for the half year ended 31 December 2020

(30 June 2020: £4.36 million/5.42 pps and 31 December 2019: £2.31 million/2.87 pps)

 

EPRA Vacancy

Estimated Market Rental Value ('ERV') of vacant space divided by ERV of the whole portfolio.

 

 

A "pure" percentage measure of investment property space that is vacant, based on ERV.

0%

EPRA vacancy as at 31 December 2020

(30 June 2020: 0% and 31 December 2019: 0%)

 

EPRA Cost Ratio

Administrative and operating costs (including and excluding costs of direct vacancy) divided by gross rental income.

 

 

A key measure to enable meaningful measurement of the changes in a company's operating costs.

 

12.6%

EPRA Cost Ratio as at 31 December 2020. The ratio is the same both including and excluding the vacancy costs.

(30 June 2020: 21.1% and 31 December 2019: 16.3%)

 

EPRA NNNAV is equal to EPRA NAV as there are no adjusting items. As such, this measure has not been presented.

 

5 The full calculations of these measures are set out in the EPRA Unaudited Performance Measures Calculations section following the financial statements

 

 
Investment Adviser's Report
Market Outlook

 

UK Economic Outlook

Lockdown measures introduced in early 2020 had a significant impact on the UK economy, with GDP falling over 20% between Q4 2019 and Q2 20206. However, the gradual easing of these restrictions resulted in a stronger recovery than expected and GDP rose 15% between April and September, to be just 8% below pre pandemic levels6. The economic impact of lockdown measures implemented at the end of 2020 is likely to be less severe than the first lockdown. Now, more sectors have continued to operate and firms have generally been more prepared, having adapted their business models during the first lockdown. The extension of the Job Retention Scheme should also mitigate the upward pressure on unemployment whilst recently reported Government grants may help to protect some small to medium sized businesses.

 

Despite the impact of the pandemic, inflation is expected to rise close to the Bank of England's 2% target by the end of 2021, but to remain below target thereafter. Rising unemployment and weak inflationary pressure suggest that the Bank of England will not raise short term rates for the foreseeable future. The Bank of England announced a further expansion of its asset purchase programme (QE) that will ensure the government can increase gilt issuance without facing any substantial rise in borrowing costs.

 

Forecasts suggest that it is likely to be several years before the UK economy fully recovers to pre-pandemic levels. Whilst a steady recovery can be expected throughout 2021, the risk of sustained damage to some economic sectors (including retail, hotels, hospitality, aviation and tourism) means that there is a high level of uncertainty in the outlook, however, greater clarity over the timing of COVID-19 vaccine distribution will undoubtedly help the mapping of the route to recovery.

 

6 UK Real Estate Market Outlook, December 2020, CBRE.

 

UK Real Estate Outlook

Despite economic uncertainty, the UK property market continues to deliver healthy spreads over government bond yields, both in absolute terms and relative to other markets. A global pandemic, Brexit transition and ongoing economic slowdown, has seen central banks keep interest rates low, with the chance of negative rates in the UK now becoming a possibility. As a result, we expect to see yield stability for many property sectors as investors seek a safe haven offering attractive risk adjusted returns. Coupled with the weight of frustrated capital which has been unable to invest over the past year due to lockdown measures preventing in-person inspections, investment demand is likely to be bolstered as the UK enters its recovery phase with the potential to compress yields further in certain markets.

 

Sectoral change stimulated by the COVID-19 pandemic had a significant impact on specific markets during 2020, with high street retail, shopping centres and leisure assets being impacted most heavily by lockdown restrictions, whilst the extent of the impact to offices is yet to be fully understood. Conversely, the industrial and logistics sectors thrived during the year with the ongoing trend to e-retailing only being accelerated.

 

The property industry continues to benefit from strong competition amongst investors seeking long, inflation linked income. Those markets that offer bond like income streams or are linked to social infrastructure, such as distribution, last mile logistics, supermarkets and certain alternative income will continue to attract significant demand.

 

Financial Results

 

Rent and other income earned from the portfolio for the half year ended 31 December 2020 was £3.53 million (half year to 31 December 2019: £3.63 million; year to 30 June 2020: £7.81 million), contributing to an operating profit before fair value changes of £3.48 million (including the gain on sale of Wet 'n' Wild) (half year to 2019: £3.03 million; year to 30 June 2020: £5.80 million).

 

The portfolio has seen a gain of £0.277 million in fair value of investment property over the period (half year to 31 December 2019: loss of £0.24 million; year to 30 June 2020: loss of £9.41 million).

 

Administrative and property operations expenses, which include the Investment Adviser's fee from 1 October 2020 and other costs attributable to the running of the Group, were £0.44 million for the period excluding service and direct recharges (half year to 31 December 2019: £0.61 million; year to 30 June 2020: £1.55 million).  Annualised ongoing charges as a percentage of net asset value for the period were 1.14% (half year to 31 December 2019: 1.60%; year to 30 June 2020: 2.22%).

 

The Group incurred finance costs of £0.71 million during the period (half year to 31 December 2019: £0.72 million; year to 30 June 2020: £1.44 million).

 

The total profit before tax for the half year of £3.03 million (half year to 31 December 2019: profit before tax of £2.07 million; year to 30 June 2020: loss before tax of £5.05 million) equates to a basic earnings per share of 3.77 pence (half year to 31 December 2019: earnings of 2.57 pps; year to 30 June 2020: loss of 6.27 pps).

 

EPRA EPS for the half year was 3.43 pence which, based on dividends declared of 2.25 pence, reflects a dividend cover of 152.6 % (half year to 31 December 2019: EPRA earnings of 2.87 pence, dividends declared of 2.75 pence and dividend cover of 104.4%; year to 30 June 2020: EPRA earnings of 5.42 pence, dividends declared of 5.00 pence and dividend cover of 108.4%).

 

Adjusted EPRA EPS for the period which equates to cash generated from operations (and therefore excludes movements in accrued rent debtors, reversal/impairment of trade receivables and the amortisation of loan arrangement fees) were 3.19 pence which, based on dividends declared of 2.25 pence, reflect a dividend cover of 141.6% (half year to 31 December 2019: Adjusted earnings per share of 2.22 pence, dividends declared of 2.75 pence and dividend cover of 80.7%; year to 30 June 2020: Adjusted earnings per share of 4.25 pence, dividends declared of 5.00 pence and dividend cover of 85.0%).

 

The Group's NAV as at 31 December 2020 was £68.17 million or 84.68 pps (31 December 2019: £76.17 million or 94.63 pps; 30 June 2020: £67.29 million or 83.58 pps). This is an increase of 1.09 pps or 1.31% over the half year ended 31 December 2020, and a decrease of 9.95 pps of 11.75% over the year to 31 December 2020, with the underlying movement in NAV set out in the table below:

 

 

Half year ended 31 December 2020

Half year ended 31 December 2019

Year ended 30 June 2020

 

 

 

 

 

 

 

 

 

Pence per 

      share 

£ million 

Pence per 

share 

£ million 

Pence per 

share 

£ million 

 

NAV as at beginning of year/period

83.586

67.27

94.810

76.32

94.810

76.32

 

Portfolio acquisition costs

-

-

(0.027)

(0.02)

-

-

 

Change in fair value of investment property

0.336

0.27

(0.277)

 

(0.22)

 

(11.691)

 

(9.41)

 

 

Income earned for the year

4.380

3.53

4.514

3.63

9.702

7.81

 

Gain on sale of property8

0.528

0.43

-

-

-

-

 

Finance costs for the year

(0.884)

(0.71)

(0.755)

(0.71)

(1.791)

(1.44)

 

Other expenses for the year

(0.591)

(0.47)

(0.888)

(0.61)

(2.494)

(2.01)

 

Dividends paid during the year

(2.675)

(2.15)

(2.750)

(2.22)

(4.950)

(3.98)

 

 

 

 

 

 

 

 

 

NAV as at the end of the year

84.680

68.17

94.627

76.17

83.586

67.29

 

 

7  the fair value increase includes accounting adjustments relating to rent smoothing of (£0.36m) and movement in finance lease obligation of (£0.02m).

8  the gain on the disposal of Wet 'n' Wild was £425,202 which after taking account of the corresponding reversal of rent smoothing for minimum uplifts of £115,568 is equivalent to 0.39 pence per share. 

 

Valuation

 

The fair value of the Group's property portfolio (including the Wet 'n' Wild Water Park held for sale) reduced from £112.99 million (31 December 2019) to £104.76 million (30 June 2020). £6.15 million (74%) of this movement was driven by the leisure, gym and hotel properties, and a further £1.30 million (16%) was due to the automotive dealerships. These property sectors, both occupational and investment markets, were amongst the most adversely affected by the COVID-19 related lockdown in effect from 23 March 2020.

 

The property portfolio has seen a 3.60% increase in fair value to £108.53 million since the 30 June 2020 valuation. When account is taken for the disposal of Wet 'n' Wild and the acquisition of Droitwich Spa Retail Park the core portfolio has seen an increase of 1.83% in the half year ended 31 December 2020. The property portfolio outperformed the MSCI All Property index, which showed a 1.25% decrease in capital value growth for half year ended 31 December 2020.

 

Dividends

 

Total dividends of 2.25 pps have been declared for the half year (half year ended 31 December 2019: 2.75 pps). As announced on 4 February 2021, a quarter of the Group's rent is derived from the hotel and leisure industry, which has been adversely affected by the COVID-19 related lockdown measures enforced during 2020 and, indeed, most remain closed. As a result, the Group currently has arrears from this sector equal to c.8% of its 2020 rents, which, when combined with the remedial work that the Group completed in December 2020 to ensure that its property in Swindon conforms with current Building Regulations, has impacted the Group's cash position, resulting in a lower dividend declared on 4 February 2021 in respect of the final quarter of 2020.

 

The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share2, all else being equal, by September 2022.

 

Refer to Note 8 of the Consolidated Financial Statements for details.

 

Financing

 

As at 31 December 2020, the Group had fully utilised its £41 million loan facility with Canada Life Investments (31 December 2019 and 30 June 2020: £41 million facility utilised). This term facility, which is repayable on 20 October 2025, allows up to 40% loan to property value at drawdown and is provided on a portfolio basis and has a loan to value covenant of 60%.

 

The weighted average interest cost of the Group's £41 million facility is 3.19% (31 December and 30 June 2020: 3.19%).

       Summary by Sector as at 31 December 2020

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

 

Passing

 

 

 

 

 

Market

Occupancy

WAULT to

Rental

 

 

 

Number of

Valuation

Value

by ERV

break

Income

ERV

ERV

Sector

Properties

(£m)

(%)

(%)

(years)

(£m)

(£m)

(%)

 

 

 

 

 

 

 

 

 

Industrial

 4

 21.55

 19.9

100

 24.8

 1.49

 1.44

 20.8

Hotel

 3

 20.85

 19.2

100

 15.0

 1.36

 1.43

 20.6

Healthcare

 3

 18.28

 16.8

100

 28.0

 1.10

 1.09

 15.7

Automotive & Petroleum

 3

 17.80

 16.4

100

 11.5

 1.13

 1.11

 16.0

Student Accommodation

 1

 12.30

 11.3

100

 20.6

 0.66

 0.65

 9.4

Leisure

 2

 5.75

 5.3

100

 8.8

 0.37

 0.40

 5.8

Power Station

 1

 5.15

 4.8

100

 11.2

 0.30

 0.30

 4.3

Retail

 1

 4.75

 4.4

100

 6.5

 0.40

 0.38

 5.5

Education

1

2.10

1.9

100

23.1

0.13

0.13

1.9

 

 

 

 

 

 

 

 

 

Total/Average

19

108.53

100.0

100

18.3

6.94

6.93

100.0

 

 

Summary by Geographical Area as at 31 December 2020

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

 

Passing

 

 

 

 

 

Market

Occupancy

WAULT to

Rental

 

 

Geographical

Number of

Valuation

Value

by ERV

break

Income

ERV

ERV

Area

Properties

(£m)

(%)

(%)

(years)

(£m)

(£m)

(%)

 

 

 

 

 

 

 

 

 

West Midlands

 4

 26.50

 24.4

100

 13.8

 1.84

 1.80

 25.9

The North West & Merseyside

 2

 21.65

 19.9

100

 36.3

 1.22

 1.18

 17.0

Rest of South East

 4

 18.25

 16.8

100

 12.1

 1.07

 1.05

 15.3

South West

 2

 12.60

 11.6

100

 24.8

 0.68

 0.81

 11.7

Yorkshire and the Humber

 2

 11.68

 10.8

100

 13.0

 0.81

 0.80

 11.5

Scotland

 1

 6.95

 6.4

100

 15.7

 0.65

 0.59

 8.5

London

 1

 5.75

 5.3

100

 8.8

 0.37

 0.40

 5.8

Eastern

 3

 5.15

 4.8

100

 11.2

 0.30

 0.30

 4.3

 

 

 

 

 

 

 

 

 

Total/Average

19

108.53

100.0

100

18.3

6.94

6.93

100

                   

 

The weighting of the Group's contracted rental income, based on the type of rent review associated with each lease is as follows: RPI inflation linked: 64.9%; CPI inflation linked: 22.1% and Open Market Value Reviews: 13.0%. 

 

Top Ten Tenants

 

Tenant

 

 

 

Property

 

Annual Passing Rental Income (£'000)

 

% of Portfolio Total Passing

Rental Income

 

Prime Life Limited

 

 

Lyndon Croft Care Centre, Solihull and Westerlands Care Village, Brough

 

 

680

 

 

9.8

Meridian Metal Trading Limited

 

Grazebrook Industrial Estate, Dudley and Provincial Park, Sheffield

 

669

 

9.6

Mears Group Plc

 

Bramall Court, Salford

 

655

 

9.4

Jupiter Hotels Limited

 

Mercure City Hotel, Glasgow

 

650

 

9.4

Motorpoint Limited

 

Motorpoint, Birmingham

 

500

 

7.2

Premier Inn Hotels Limited

 

Premier Inn, Camberley

 

449

 

6.5

Handsale Limited

 

Silver Trees, Bristol

 

417

 

5.7

Volkswagen Group UK Limited

 

Audi, Huddersfield

 

396

 

5.8

Hoddesdon Energy Limited

 

Hoddesdon Energy, Hoddesdon

 

300

 

4.3

B&M Bargains

 

Droitwich Spa Retail Park, Droitwich

 

272

 

3.9

 

                                                                                              

 The Group's top ten tenants, listed above, represent 71.9% of the total passing rental income of the portfolio.

 

Lease Expiry Portfolio

 

Year

Expiring passing rent pa (£'000)

Cumulative (£'000)

2021

-

-

2022

123

123

2023

286

409

2024

-

409

2025

396

805

2026

-

805

2027

905

1,709

2028

282

1,991

2029

272

2,263

2030

-

2,263

2031

-

2,263

2032

771

3,034

2033

364

3,398

2034

-

3,398

2035

-

3,398

2036+

3,544

6,942

 

 

M7 Real Estate Limited

22 February 2021

 

Interim Management Report and    Directors' Responsibility Statement

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining half year of the financial year are set out in the Chairman's Statement and the Investment Adviser's Report above.

 

The principal risks facing the Company are unchanged since the date of the Annual Report and Financial Statements for the year ended 30 June 2020 as set out in that report on pages 21 to 25 and in Note 19 to the Financial Statements on pages 78 & 79.

 

Risks faced by the Company include, but are not limited to, tenant default, portfolio concentration, property defects, rate of inflation, property market, property valuation, illiquid investments, breach of borrowing covenants, use of service providers, dependence on the Investment Adviser, ability to meet objectives, Group REIT status, political/economic risks and Brexit.

 

Responsibility Statement

We confirm that to the best of our knowledge:

·     the consolidated condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·     the interim management report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first half of the financial year and their impact on the consolidated condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining half of the year; and

b)   DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first half of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

A list of the Directors is maintained on the Company's website at www.alternativeincomereit.com

 

Steve Smith

Chairman

22 February 2021

 

 

 

Consolidated Condensed Statement of Comprehensive Income

For the half year ended 31 December 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended           30 June 2020 (audited)

 

 

 

Notes

 

£'000

 

£'000

 

£'000

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other income

 

 

3

 

3,526

 

3,634

 

7,810

Property operating expense

 

 

4

 

(88)

 

(68)

 

(515)

Net rental and other income

 

 

 

 

3,438

 

3,566

 

7,295

 

 

 

 

 

 

 

 

 

 

Other operating expenses

 

 

4

 

(388)

 

(539)

 

(1,492)

Operating profit before fair value changes

 

 

 

 

3,050

 

3,027

 

5,803

 

 

 

 

 

 

 

 

 

 

Gain on sale of investment property

 

15

 

                  425

 

                    -  

 

                    -  

Change in fair value of investment properties

 

9

 

270

 

(245)

 

(9,411)

Operating profit/ (loss)

 

 

 

 

3,745

 

2,782

 

(3,608)

 

 

 

 

 

 

 

 

 

 

Finance expense

 

 

5

 

(712)

 

(715)

 

(1,442)

Profit/ (loss) before tax

 

 

 

 

3,033

 

2,067

 

(5,050)

 

 

 

 

 

 

 

 

 

 

Taxation

 

 

6

 

                      -

 

                    -  

 

                    -  

Profit/ (loss) after tax

 

 

 

 

3,033

 

2,067

 

(5,050)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

                      -

 

                    -  

 

                    -  

Total comprehensive profit/ (loss) for the year

 

 

 

 

3,033

 

2,067

 

(5,050)

 

 

 

 

 

 

 

 

 

 

Earnings/ (loss) per share (pence per share) (basic and diluted)

 

7

 

3.77

 

2.57

 

(6.27)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notes further below form an integral part of these Consolidated Financial Statements.

 

 

Consolidated Condensed Statement of Financial Position

As at 31 December 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 As at 31 December 2020       (unaudited)

 

 As at 31 December 2019       (unaudited)

 

 As at 30 June 2020 (audited)

 

 

 

Notes

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

 

Non-current Assets

 

 

 

 

 

 

 

 

 

Investment property

 

 

9

 

106,551

 

111,966

 

100,273

 

 

 

 

 

106,551

 

111,966

 

100,273

Current Assets

 

 

 

 

 

 

 

 

 

Receivables and prepayments

 

 

10

 

3,740

 

1,980

 

5,417

Cash and cash equivalents

 

 

 

 

1,670

 

4,758

 

2,288

 

 

 

 

 

5,410

 

6,738

 

7,705

 

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

 

15

 

                      -

 

                    -  

 

               2,734

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

 

 

111,961

 

118,704

 

110,712

 

 

 

 

 

 

 

 

 

 

Non-current Liabilities:

 

 

 

 

 

 

 

 

 

Interest bearing loans and borrowings

 

 

12

 

(40,464)

 

(40,349)

 

(40,417)

Lease obligations

 

 

13

 

(353)

 

(450)

 

(373)

 

 

 

 

 

(40,817)

 

(40,799)

 

(40,790)

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

Payables and accrued expenses

 

 

11

 

(2,939)

 

(1,683)

 

(2,595)

Lease obligations

 

 

13

 

(39)

 

(48)

 

(41)

 

 

 

 

 

(2,978)

 

1,731

 

(2,636)

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 

 

(43,795)

 

(42,530)

 

(43,426)

 

 

 

 

 

 

 

 

 

 

Net Assets

 

 

 

 

68,166

 

76,174

 

67,286

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Share capital

 

 

17

 

                  805

 

                  805

 

                  805

Capital reserve and retained earnings

 

 

 

 

             67,361

 

             75,369

 

             66,481

Total capital and reserves attributable to equity holders of the Group

 

 

 

68,166

 

76,174

 

67,286

 

 

 

 

 

 

 

 

 

 

Net Asset Value per share (pence per share)

 

7

 

               84.68

 

               94.63

 

               83.58

 

 

 

 

 

 

 

 

 

 

The notes further below form an integral part of these Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

 

The financial statements were approved by the Board of Directors on 22 February 2021 and were signed on its behalf by:

 

 

 

 

 

 

 

 

 

 

Steve Smith

 

 

 

 

 

 

 

 

 

Chairman

 

 

 

 

 

 

 

 

 

Company number: 10727886

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statement of Changes in Equity

For the half year ended 31 December 2020

 

 

 

 

 

 

Capital

 

Total capital and reserves

 

 

 

 

 

Share

 

reserve and

 

attributable to equity

 

 

 

Share

 

premium

 

retained

 

holders of

 

 

 

capital

 

account

 

earnings

 

the Group

 

 

Notes

£'000

 

£'000

 

£'000

 

£'000

 

For the half year ended 31 December 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 1 July 2020

 

              805

 

                 -  

 

          66,481

 

67,286

 

Total comprehensive income

 

                 -  

 

                 -  

 

            3,033

 

3,033

 

Dividends paid

8

                 -  

 

                 -  

 

(2,153)

 

(2,153)

 

Balance as at 31 December 2020

 

              805

 

                 -  

 

          67,361

 

             68,166

 

 

 

 

 

 

 

 

 

 

 

For the half year ended 31 December 2019 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 1 July 2019

 

              805

 

                 -  

 

          75,516

 

76,321

 

Total comprehensive income

 

                 -  

 

                 -  

 

            2,067

 

              2,067

 

Share issue costs

 

                 -  

 

                 -  

 

-  

 

-  

 

Dividends paid

8

                 -  

 

                 -  

 

(2,214)

 

(2,214)

 

Balance as at 31 December 2019

 

              805

 

                 -  

 

          75,369

 

             76,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended 30 June 2020 (audited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 1 July 2019

 

              805

 

                 -  

 

          75,516

 

76,321

 

Total comprehensive loss

 

                 -  

 

                 -  

 

(5,050)

 

(5,050)

 

Dividends paid

8

                 -  

 

                 -  

 

(3,985)

 

(3,985)

 

Balance as at 30 June 2020

 

              805

 

                 -  

 

          66,481

 

             67,286

 

 

 

 

 

 

 

 

 

 

 

The notes further below form an integral part of these Consolidated Financial Statements.

 

 

 

Consolidated Condensed Statement of Cash Flows

For the half year ended 31 December 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended           30 June 2020 (audited)

 

 

 

 

 

£ '000

 

£ '000

 

£ '000

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Profit/ (loss) after tax

 

 

 

 

3,033

 

2,067

 

(5,050)

 

 

 

 

 

 

 

 

 

 

Adjustment for

 

 

 

 

 

 

 

Finance expenses

 

 

 

 

712

 

715

 

1,442

Gain on sale of investment property

 

 

 

(425)

 

                    -  

 

                 -  

Change in fair value of investment property

 

 

 

 

(270)

 

245

 

9,411

Increase in other receivables and prepayments

 

 

 

 

1,677

 

(828)

 

(4,262)

Increase/(decrease) in other payables and accrued expenses

 

 

 

 

342

 

(39)

 

694

 

 

 

 

 

 

 

 

 

 

Net cash flow generated from operating activities

 

 

 

 

               5,069

 

2,160

 

2,235

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Purchase of investment property

 

 

 

 

(5,007)

 

(27)

 

                 -  

Additions to investment property

 

 

 

 

(1,101)

 

 

 

 

Disposal of investment properties

 

 

 

 

      3,159

 

                   -  

 

               -  

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

 

(2,849)

 

(27)

 

                 -  

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Finance costs paid

 

 

 

 

(709)

 

(673)

 

(1,435)

Dividends paid

 

 

 

 

(2,129)

 

(2,221)

 

(4,031)

 

 

 

 

 

 

 

 

 

 

Net cash used in from financing activities

 

 

 

 

(2,838)

 

(2,894)

 

(5,466)

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

 

 

(618)

 

(761)

 

(3,231)

Cash and cash equivalents at start of period

 

 

 

 

2,288

 

               5,519

 

            5,519

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

 

 

 

1,670

 

4,758

 

2,288

 

 

 

 

 

 

 

 

 

 

The notes further below form an integral part of these Consolidated Financial Statements.

 

Notes to the Consolidated Condensed Financial Statements

for the half year ended 31 December 2020

 

1.    Corporate information

The Company is a public limited company and a closed-ended Real Estate Investment Trust ('REIT') incorporated on 18 April 2017 and domiciled in the UK and registered in England and Wales. The registered office of the Company is located at 1 King William Street, London, EC4N 7AF.

 

The consolidated financial statements for the period ended 31 December 2020 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 30 June 2020 has been delivered to 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 financial statements for the period ended 31 December 2020 have not been audited or reviewed by the Company's Auditors.

 

2.     Accounting policies

2.1   Basis of preparation

These interim consolidated condensed unaudited financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and should be read in conjunction with the Group's last financial statements for the year ended 30 June 2020. These consolidated condensed unaudited financial statements do not include all information required for a complete set of financial statements proposed in accordance with IFRS as adopted by the EU ('EU IFRS'). However, selected explanatory notes have been included to explain events and transactions that are significant in understanding changes in the Group's financial position and performance since the last financial statements.

 

The comparative figures disclosed in the consolidated condensed unaudited financial statements and related notes have been presented for both the six-month period ended 31 December 2019 and year ended 30 June 2020.

 

Although not required by IAS 34, the comparative figures as at 31 December 2019 for the Consolidated Condensed Statement of Financial Position and for the year ended 30 June 2020 for the Consolidated Condensed Statement of Comprehensive Income, Consolidated Condensed Statement of Changes in Equity and Consolidated Condensed Statement of Cash Flows and related notes have been included on a voluntary basis.

 

These consolidated condensed unaudited financial statements have been prepared under the historical- cost convention, except for investment property that has been measured at fair value. The consolidated condensed unaudited financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated.

Basis of consolidation

The consolidated condensed unaudited financial statements for the half year ended 31 December 2020 incorporate the financial statements of the Company and its subsidiaries (the 'Group'). Subsidiaries are entities controlled by the Company, being Alternative Income Limited and Alternative Income REIT Holdco Limited. IFRS 10 outlines the requirements for the preparation of consolidated financial statements, requiring an entity to consolidate the results of all investees it is considered to control. Control exists where an entity is exposed to variable returns and has the ability to affect those returns through its power over the investee.

 

New standards, amendments and interpretations

There are a number of new standards or amendments which are effective for the Group for the first time for the financial year beginning 1 January 2020.

 

Standards issued but not yet effective

A number of new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted however the Group has not early adopted the new or amended standards in preparing these financial statements.

 

The following amended standards and interpretations are not expected to have a significant impact on the Group's financial statements:

•    Amendments to References to Conceptual Framework in IFRS Standards.

•    Definition of a Business (Amendments to IFRS 3).

•    Definition of Material (Amendments to IAS 1 and IAS 8).

•    Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).

•    IFRS 17: Insurance Contracts.

•    Classification of Liabilities as Current or Non-current (Amendment to IAS 1)

•  Sale or Contribution of Assets between an Investor and its Associated or Joint Venture (Amendments to IFRS 10 and IAS 28)

 

New/Revised International Financial Reporting Standards

 

Effectivity

Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28)  

Deferred indefinitely

 

 

IFRS 17: Insurance Contracts

1 January 2021

 

2.2  Significant accounting judgements and estimates

The preparation of financial statements in accordance with EU IFRS requires the Directors of the Group 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 the asset or liability in the future.

 

There are not considered to be any judgements which have a significant effect on the amounts recognised in the consolidated financial information.

 

Estimates

In the process of applying the Group's accounting policies, management has made the following estimates, which have a significant effect on the amounts recognised in the consolidated financial information:

 

Valuation of investment property

The fair value of investment property is determined, by external property valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques, applying the principles of both IAS 40 and IFRS13.

 

The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors ('RICS') Valuation - Global Standard January 2020. Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in note 9.

 

2.3  Segmental information

Each property held by the group is reported to the chief operating decision maker individually. In the case of the group, the chief operating decision maker is considered to be the three Directors. The review process for segmental information includes the monitoring of key performance indicators applicable across all properties. These key performance indicators include Gross Passing Rental Income, WAULT to break in years and valuation of properties. All asset cost and rental allocations are reported by property too. The internal financial reports received by the Directors cover the group and all its properties and do not differ from amounts reported in the financial statements. The Directors have considered that each property has similar economic characteristics and have therefore aggregated the portfolio into one reportable segment under the provisions of IFRS 8.  

 

2.4  Going concern

In assessing the Group's going concern assumptions, the Directors have particularly considered the impact of the COVID-19 pandemic on the performance of the business.

 

The Directors have therefore projected the Group's cash flows for the period up to 31 December 2021, challenging and sensitising inputs and assumptions to ensure that the cash forecast reflects a realistic outcome given the uncertainties associated with the current economic environment.

 

The Directors note that the Group's main financing of £41m does not mature until 2025 and the Group has reported full compliance with its loan covenants to date. Based on the current cash flow projections, the directors expect to continue to remain compliant with the covenants.

 

The Directors also note that the headroom of the loan to value covenant is significant and any fall in property values that caused a breach would be significantly more than any currently envisaged.

 

A 'severe, but plausible, downside' scenario has also been projected. While rent collections have been strong, this scenario anticipates further rent deferrals and write-offs where tenants would have difficulty paying rents.

 

·    The Directors have assumed a rent collection of 80% for Q1 2021 and Q2 2021, decreasing to 70% in Q3 2021 and 60% in Q4 2021, and recovering to 70% in Q1 2022 and then to 80% in Q2 2022 and 90% in Q3 2022 and back to 100% by Q4 2022.

·   In such a scenario, the assumption is that 50% of these rent deferrals would be written off, with the remainder repaid over the course of 5 years from Q2 2023. This is in addition to any existing agreements already made with tenants.

 

In this scenario the Group still has adequate headroom against the interest cover covenant and positive cash balances.

 

Having assessed the heightened risks as well as mitigating factors and management strategies available to reduce such risks, the Directors have determined that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

2.5     Summary of significant accounting policies
 

The accounting policies and methods of computation and presentation adopted in the preparation of the interim financial statements are consistent with those applied in the Audited Financial Statements.

 

The Audited Financial Statements are available at www.alternativeincomereit.com.

 

3.    Rental and other income

 

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Gross rental income

 

 

 

 

3,245

 

               3,056

 

               6,073

Service charges and direct recharges* (see note 4)

 

 

 

 

38

 

                    -  

 

                  459

Spreading of rent indexation

 

 

 

 

284

 

                  286

 

                  720

Spreading of tenant incentives - rent free periods

 

 

 

 

(41)

 

                  292

 

                  558

Other property income

 

 

 

 

                    -  

 

                    -  

 

                    -  

Total rental and other income

 

 

 

 

3,526

 

3,634

 

7,810

 

All rental, service charges and direct recharges and other income are derived from the United Kingdom.

 

*During the audit of the annual accounts of the Group, the directors have reviewed the underlying agreements and determined that the Company is a principal under IFRS 15. As a result, the relevant income and expenses generated/incurred relating to service charges and direct recharges have been recognised and presented as gross in the financial statements. Please refer to note 4 for the relevant expense incurred during the period ended 31 December 2020 and year ended 30 June 2020. For the half year ended 31 December 2019, service charges and direct recharges were presented net, however these figures have not been restated as they were not material.

 

4.    Expenses

 

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

 

 

53

 

                    68

 

                    56

Service charges and direct recharges (see note 3)

 

 

 

 

                    35

 

                    -  

 

                  459

 

 

 

 

 

                    88

 

                    68

 

                  515

 

 

 

 

 

 

 

 

 

 

Other operating expenses

 

 

 

 

 

 

 

 

 

Investment management fee

 

 

 

 

89

 

                  270

 

                  408

Auditor remuneration

 

 

 

 

58

 

                    42

 

                  120

(Reversal)/ provision for impairment of trade receivables

 

 

 

 

(3)

 

                    -  

 

                  213

Operating costs

 

 

 

 

221

 

                  189

 

                  550

Directors' remuneration

 

 

 

 

38

 

                    38

 

                    94

(Reversal of write off)/ write off of unreconciled difference

 

 

 

 

(15)

 

                    -  

 

                  107

Total other operating expenses

 

 

 

 

                  388

 

                  539

 

               1,492

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

 

 

476

 

607

 

2,007

 

 

5.    Finance expenses

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Interest payable on loan

 

 

 

 

656

 

                  658

 

               1,315

Amortisation of loan arrangement fee (note 12)

 

 

 

 

47

 

                    56

 

                  124

Other finance costs

 

 

 

 

9

 

                      1

 

                      3

Total

 

 

 

 

                  712

 

                  715

 

               1,442

 

6.    Taxation

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

Tax charge comprises:

 

 

 

 

 

 

 

 

 

Analysis of tax charge in the period

 

 

 

 

 

 

 

 

 

Profit/ (loss) before tax

 

 

 

 

3,033

 

2,067

 

(5,050)

 

 

 

 

 

 

 

 

 

 

Theoretical (tax credit)/tax at UK corporation tax standard rate of 19.00%
(2019: 19.00%)

 

576

 

 

 

393

 

 

 

(960)

 

 

 

 

 

 

 

 

 

 

Adjusted for tax exempt items under the REIT regime:

 

 

 

 

 

 

 

 

 

Change in fair value of investment properties

 

 

 

(51)

 

                      -

 

1,788

Exempt REIT net profit

 

 

 

 

(525)

 

(393)

 

(828)

Total

 

 

 

 

                    -  

 

                    -  

 

                    -  

 

The Group obtained REIT status on 13 October 2017, at which point any gains or losses arising from property business have been extinguished. As such, no deferred tax asset or liability has been recognised in the current period.

 

Factors that may affect future tax charges

Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

 

7.    Earnings/ (loss) per share and NAV per share

 

 

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

 

 

 

 

 

Earnings/ (loss) per share:

 

 

 

 

 

 

 

 

 

Total comprehensive profit/ (loss) (£'000)

 

 

 

3,033

 

2,067

 

(5,050)

Weighted average number of shares (million)

 

 

 

80.5

 

80.5

 

80.5

Earnings/ (loss) per share (basic and diluted) (pence)

 

3.77

 

2.57

 

(6.27)

 

 

 

 

 

 

 

 

 

 

EPRA EPS:

 

 

 

 

 

 

 

 

 

Total comprehensive profit/ (loss) (£'000)

 

 

 

3,033

 

2,067

 

(5,050)

Adjustment to total comprehensive profit/ (loss):

 

 

 

 

 

 

 

 

Change in fair value of investment properties (£'000)

 

 

(270)

 

245

 

9,411

EPRA earnings (basic and diluted) (£'000)

 

 

 

2,763

 

2,312

 

4,361

EPRA EPS (basic and diluted) (pence)

 

 

 

 

3.43

 

2.87

 

5.42

 

 

 

 

 

 

 

 

 

 

Adjusted EPS:

 

 

 

 

 

 

 

 

 

EPRA earnings (basic and diluted) (£'000)

 

 

 

2,763

 

2,312

 

4,361

Adjustments:

 

 

 

 

 

 

 

 

 

Rental income recognised in respect of guaranteed fixed rental uplifts (£'000)

 

(284)

 

(286)

 

(720)

Rental income recognised in respect of rent-free periods (£'000)

41

 

(292)

 

(558)

Amortisation of loan arrangement fee (£'000)

 

 

 

47

 

56

 

124

(Reversal)/ provision for impairment of trade receivables (£'000)

(3)

 

                      -

 

213

Adjusted earnings (basic and diluted) (£'000)

 

 

 

2,564

 

1,790

 

3,420

Adjusted EPS (basic and diluted) (pence)*

 

 

 

3.19

 

2.22

 

4.25

 

 

 

 

 

 

 

 

 

 

NAV per share:

 

 

 

 

 

 

 

 

 

Net assets (£'000)

 

 

 

 

68,166

 

76,174

 

67,286

Ordinary Shares (million)

 

 

 

 

80.5

 

80.5

 

80.5

NAV per share (pence)

 

 

 

 

84.68

 

94.63

 

83.58

 

 

*Adjusted EPS is a measure used to assess the level of the Group's dividend payments. This metric adjusts EPRA earnings for non-cash items in arriving at an adjusted EPS as supported by cash flows.

 

Earnings per share are calculated by dividing (loss)/profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. EPRA NAV and EPRA NNNAV (refer to Glossary) are equal to the NAV presented in the Consolidated Statement of Financial Position under IFRS and there are no adjusting items. Accordingly, a reconciliation between these measures has not been presented.

 

8.    Dividends paid

 

 

 

 

 

 

 Half year ended 31 December 2020       (unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Fourth interim dividend declared and paid in respect of the quarter ended 30 June 2020 at 1.425p per Ordinary Share (2019: quarter ended 30 June 2019 at 1.375p per Ordinary Shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,147

 

1,107

 

1,107

 

 

 

 

 

 

 

 

 

 

First interim dividend declared and paid in respect of the quarter ended 30 September 2020 at 1.25p per Ordinary Share (2019: quarter ended 30 September 2019 at 1.375p per Ordinary Share)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,006

 

1,107

 

1,107

 

 

 

 

 

 

 

 

 

 

Second interim dividend declared and paid in respect of the quarter ended 31 December 2019 at 1.375p per Ordinary Share

 

 

 

 

 

 

 

                      -

 

                      -

 

1,107

 

 

 

 

 

 

 

 

 

 

Third interim dividend declared and paid in respect of the quarter ended 31 March 2020 at 0.825p per Ordinary Share

 

 

 

 

 

 

 

                      -

 

                      -

 

664

 

 

 

 

 

 

 

 

 

 

Total dividends declared and paid during the period/year**

 

2,153

 

          2,214

 

3,985

 

 

 

 

 

 

 

 

 

 

Fourth interim dividend declared in respect of the quarter ended 30 June 2019 at 1.375p per Ordinary Shares

 

 

 

 

 

 

 

                      -

 

(1,107)

 

(1,107)

 

 

 

 

 

 

 

 

 

 

Second interim dividend declared and paid in respect of the quarter ended 31 December 2020 at 1.00p per Ordinary Share* (2019: quarter ended 31 December 2019 at 1.375p per Ordinary Share

 

 

 

 

 

 

 

 

 

 

 

 

 

805

 

1,107

 

                      -

 

 

 

 

 

 

 

 

 

 

Fourth interim dividend declared in respect of the quarter ended 30 June 2020 at 1.425p per Ordinary Share*

 

 

 

 

 

 

 

(1,147)

 

                      -

 

1,147

 

 

 

 

 

 

 

 

 

 

Total dividends in respect of the period/year

 

 

1,811

 

2,214

 

4,025

 

* Dividends declared after the period/year end are not included in the Consolidated Financial Statements as a liability.

** Dividends paid per cash flow statement amount to £2,129 (£'000) include the amount of withholding tax paid.

 

9.    Investment property

 

 

 

 Half year ended
31 December 2020      
(unaudited)

 

 Half year ended 31 December 2019       (unaudited)

 

Year ended         30 June 2020 (audited)

 

Investment
properties
freehold

 

Investment
properties
leasehold

 

 Total

 

 Total

 

 Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

UK Investment property

 

 

 

 

 

 

 

 

 

At the beginning of the period/year

     87,130

 

14,780

 

   101,910

 

      112,990

 

       112,990

Acquisition during the period/year

5,007

 

    -  

 

      5,007

 

                  -

 

                  -

Addition to investment property

1,101

 

-

 

1,101

 

-

 

-

Reclassification between assets

(12,089)

 

12,089

 

             -  

 

                 -

 

                  -

Revaluation of investment property

542

 

70

 

         612

 

333

 

(8,087)

Non-current asset held for sale (note 15)

              -

 

    -  

 

                    -  

 

                      -

 

(2,850)

Adjustment to cost*

              -

 

    -  

 

                    -  

 

(333)

 

(143)

Valuation provided by Knight Frank LLP

81,591

 

26,939

 

           108,530

 

112,990

 

101,910

 

 

 

 

 

 

 

 

 

 

Adjustment to fair value for rent smoothing (note 10)

 

 

 

(2,466)

 

(1,522)

 

(2,224)

Reclassification to Non-current asset held for sale (note 15)

 

                      -

 

                      -

 

116

Adjustment for lease obligations

 

 

 

 

487

 

498

 

471

Total investment property

 

 

 

 

106,551

 

111,966

 

100,273

 

 

 

 

 

 

 

 

 

 

Change in fair value of Investment property

 

 

 

 

 

 

 

 

Change in fair value before adjustments for lease incentives and lease obligations

 

612

 

333

 

(8,087)

Movement in lease obligations

 

 

 

 

16

 

                 -

 

(46)

Adjustment to fair value for rent smoothing of lease income (including reversal as result of sale)

 

 

(358)

 

(578)

 

(1,278)

 

 

 

 

 

270

 

(245)

 

(9,411)

 

 

*The adjustment on cost relates to the reversal of a provision raised in the prior period.

 

Valuation of investment property

Valuation of investment property is performed by Knight Frank LLP, accredited independent external valuers with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued.

 

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 (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, 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 flows.

 

10.  Receivables and prepayments

 

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited)

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

Receivables

 

 

 

 

 

 

 

 

 

Rent debtor

 

 

 

 

               1,342

 

                  424

 

              1,174

Less: Provision for impairment of trade receivables*

 

 

 

(210)

 

                      -

 

(213)

Other debtors

 

 

 

 

 -  

 

                      -

 

             2,211

Total Receivables

 

 

 

 

 

424

 

3,172

Rent smoothing debtor - rent indexation

               1,881

 

 

1,522

 

               1,598

Rent smoothing debtor - rent free periods

                  585

 

                    -  

 

                626

Tenant deposit asset (note 11)

123

 

                    -  

 

                    -  

Other prepayments

 

 

 

 

19

 

                    34

 

                   21

Total

 

 

 

 

               3,740

 

               1,980

 

               5,417

 

The aged debtor analysis of receivables which are past due but not impaired is as follows:

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited)

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

Less than three months due

 

 

 

 

                  618

 

                  424

 

               3,089

Between three and six months due

 

 

 

 

                  514

 

                    -  

 

                    83

Between six and twelve months due

 

 

 

 

                    -  

 

                    -  

 

                    -  

 

 

 

 

 

               1,132

 

                  424

 

               3,172

 

11.  Payables and accrued expenses

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited)

 

 30 June 2020 (audited)

 

 

 

£'000

 

£'000

 

£'000

Deferred income

 

 

1,443

 

               1,018

 

               1,265

Trade creditors

 

 

62

 

                  237

 

                    87

Accruals

 

 

618

 

                    -  

 

                  395

Tenant deposit liability (note 10)

 

 

123

 

                    -  

 

                    -  

Other creditors

 

 

                  693

 

                  428

 

                  848

 

 

 

               2,939

 

               1,683

 

               2,595

 

12.  Interest bearing loans and borrowings

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited)

 

 30 June 2020 (audited)

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Facility drawn at the beginning of the period/year

 

             41,000

 

             41,000

 

             41,000

 

 

 

 

 

 

 

Less: unamortised loan issue costs incurred

(583)

 

(686)

 

(686)

Less: adjustment on loan issue cost

 

                      -

 

(21)

 

(21)

Plus: amortised loan issue costs

 

47

 

                    56

 

124

At end of period/ year

 

             40,464

 

             40,349

 

             40,417

 

 

 

 

 

 

 

Repayable between 1 and 2 years

 

                    -  

 

                    -  

 

                    -  

Repayable between 2 and 5 years

 

                    -  

 

                    -  

 

                    -  

Repayable in over 5 years

 

             41,000

 

             41,000

 

             41,000

Total

 

             41,000

 

             41,000

 

             41,000

 

 

As at 31 December 2020, the Group had utilised all of its £41 million fixed interest loan facility with Canada Life Investments and was geared at a loan to Gross Asset Value ('GAV') of 36.6%. The weighted average interest cost of the Group's facility is 3.19% and the facility is repayable on 20 October 2025.

 

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited)

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

Reconciliation to cash flows from financing activities

 

 

 

 

 

 

At the beginning of the period/year

 

 

 

 

             40,417

 

             40,314

 

             40,314

 

 

 

 

 

 

 

 

 

 

Interest paid

 

 

 

 

(709)

 

(673)

 

(1,435)

Total changes from financing cash flows

 

 

 

(709)

 

(673)

 

(1,435)

 

 

 

 

 

 

 

 

 

 

Other changes

 

 

 

 

 

 

 

 

 

Movement in interest payable presented under other creditors

(3)

 

(42)

 

(7)

Interest expense

 

 

 

 

                  712

 

                  715

 

               1,442

Adjustment on loan issue costs

 

 

 

 

                    -  

 

(21)

 

(21)

Amortisation of loan issue costs

 

 

 

 

                    47

 

                    56

 

                  124

Total other changes

 

 

 

 

                  756

 

                  708

 

               1,538

 

 

 

 

 

 

 

 

 

 

At the end of the period/year

 

 

 

 

             40,464

 

             40,349

 

             40,417

 

13.  Lease obligations

At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid on that date.

The following table analyses the minimum lease payments under non-cancellable leases:

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited) - restated

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

Within one year

 

 

 

 

                    50

 

                    48

 

                    50

After one year but less than five years

                  200

 

                  167

 

                 200

More than five years

 

 

 

 

                  538

 

                  283

 

                  563

Total undiscounted lease liabilities:

                  788

 

                  498

 

                 813

Less: Future finance charge on lease obligations

(396)

 

                    -  

 

(399)

Present value of lease liabilities:

                  392

 

                  498

 

                 414

 

 

 

 

 

 

 

 

 

 

Lease liabilities included in the statement

of financial position:

 

 

 

 

Current

 

 

 

 

                    39

 

                    48

 

                    41

Non-current

 

 

 

 

                  353

 

                  450

 

                 373

Total:

 

 

 

 

                  392

 

                  498

 

                 413

 

14.  Commitments

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 between 6 months and 90 years.

 

Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2020 are as follows:

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited) - restated

 

 30 June 2020 (audited)

 

 

 

 

 

 £'000

 

£'000

 

£'000

Less than one year

 

 

 

 

               6,880

 

               6,332

 

               6,449

One to two years

 

 

 

 

               6,947

 

               6,758

 

              6,603

Two to three years

 

 

 

 

               7,101

 

               6,754

 

              6,626

Three to four years

 

 

 

 

               7,187

 

               6,841

 

              6,729

Four to five years

 

 

 

 

               6,966

 

               6,934

 

              6,758

Five to ten years

 

 

 

 

             30,470

 

             31,681

 

            30,429

Ten to fifteen years

 

 

 

 

             27,615

 

             29,520

 

            28,231

Over fifteen years

 

 

 

 

             61,807

 

             67,931

 

            64,735

Total

 

 

 

 

           154,973

 

           162,751

 

          156,559

 

During the half year ended 31 December 2020 (2019: £nil) there were no material contingent rents recognised as income.

 

 

15.  Non-current assets held for sale

 

 

 

 

 

 

 

 31 December 2020 (unaudited)

 

 31 December 2019 (unaudited) - restated

 

 30 June 2020 (audited)

 

 

 

 

 

 £'000

 

£'000

 

£'000

Assets held for sale

 

 

 

 

 

 

 

 

 

Investment property - Wet 'n' Wild

                    -  

 

                    -  

 

              2,734

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

                    -  

 

                    -  

 

               2,734

 

 

Details of the disposal of Wet 'n' Wild is as follows:

 

Gain on sale of investment property

 

 

 

 

 Half year from 1 July 2020 to               31 December 2020       (unaudited)

 

 Half year from 1 July 2019 to               31 December 2019       (unaudited)

 

 Year ended         30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Gross proceeds on disposal

 

 

 

 

3,204

 

                      -

 

                      -

Selling costs

 

 

 

 

(45)

 

                      -

 

                      -

Net proceeds on disposal

 

 

 

 

3,159

 

                      -

 

                      -

Carrying value

 

 

 

 

(2,734)

 

                      -

 

                      -

Gain on disposal

 

 

 

 

425

 

                      -

 

                      -

 

In addition to above gain on sale, an amount of £115,568 relating to the property were released in the statement of comprehensive income under "rental and other income".

 

16.  Investments in subsidiaries

The Company has two wholly owned subsidiaries as disclosed below:

 

 

Name and company number

 

 

Country of registration and incorporation

 

Date of incorporation

 

Principal activity

Ordinary Shares held

 

 

 

 

 

 

 

 

 

 

Alternative Income REIT
Holdco Limited (Company
number 11052186)

 

 

England and
Wales

 

7 November 2017

Real Estate Company

 

73,158,502*

 

 

 

 

 

 

 

 

 

 

Alternative Income Limited (Company number 10754641)

 

 

England and
Wales

 

4 May 2017

 

Real Estate Company

 

73,158,501*

* Ordinary shares of £1.00 each.

 

Alternative Income REIT Plc as at 30 June 2020 owns 100% controlling stake of Alternative Income REIT Holdco Limited.

 

Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited.

 

17.  Issued share capital

 

 

 

 

 

 Half year ended
31 December 2020      
(unaudited)

 

 For the year ended
30 June 2020 (audited)

 

 

 

 

 

 

 

 

 

 Number of
Ordinary Shares

 

 

 

 Number of
Ordinary Shares

 

 

 

£'000

 

 

£'000

 

Ordinary Shares issued and
fully paid

 

 

 

 

 

 

 

At the beginning of the period/year

805

 

     80,500,000

 

                805

 

     80,500,000

At the end of the period/year

  805

 

     80,500,000

 

                 805

 

     80,500,000

 

 

18.  Transactions with related parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Subsidiaries

Alternative Income REIT Plc as at 31 December 2020 owns 100% controlling stake of Alternative Income REIT Holdco Limited and Alternative Income REIT Holdco Limited holds 100% of Alternative Income Limited.

Directors

Directors of the Group are considered to be the key management personnel. Directors' remuneration is disclosed in note 4.

Investment Manager

M7 Real Estate Ltd - from 14 May 2020 to date

M7 Real Estate Ltd was appointed as Investment Advisor on 14 May 2020. The Interim Investment Advisory agreement specifies that there are no fees payable up to 30 September 2020. From 1 October 2020, an annual management fee of 0.50% per annum of NAV (subject to a minimum fee of £90,000 per quarter) will be due and paid quarterly in advance. During the period 1 October 2020 to 31 December 2020, the Group incurred £90,000 in respect of investment management fees and expenses of which £nil was outstanding at period end.

AEW UK Investment Management LLP("AEW UK") - from 1 July 2019 to 9 April 2020

The Group was party to an Investment Management Agreement, with AEW UK, pursuant to which the Group appointed AEW UK to provide investment management services relating to the respective assets on a day-to-day basis in accordance with their respective investment objectives and policies, subject to the overall supervision and direction of the Board of Directors.

 

Under the Investment Management Agreement, AEW UK received a management fee which was calculated monthly at a rate equivalent to 0.75% per annum of NAV (excluding un-invested fund-raising proceeds) and paid quarterly in arrears. During the period 1 July 2019 to 9 April 2020, the Group incurred £407,708 (half year ended 31 December 2019: £269,584, 30 June 2020: £nil) in respect of investment management fees and expenses of which £137,445 (31 December 2019: 134,576, 30 June 2020: £137,445) was outstanding at 31 December 2020.

 

19.  Events after reporting date

Dividend

On 4 February 2021, the Board declared an interim dividend of 1.00 pps in respect of the period from 1 October 2020 to 31 December 2020. This will be paid on 26 February 2021 to shareholders on the register as at 12 February 2021. The ex-dividend date was 11 February 2021.

 

EPRA Unaudited Performance Measures Calculations

 

 

 

 

 

31 December 2020 (unaudited)

 

31 December 2019 (unaudited)

 

30 June 2020 (audited)

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Investment property - wholly owned

           108,530

 

         112,990

 

            104,760

Allowance for estimated purchaser's costs

              8,140

 

            7,683

 

                7,857

Gross up completed property portfolio valuation

 

           116,670

 

         120,673

 

            112,617

 

 

 

 

 

 

 

 

Annualised cash passing rental income

              6,460

 

            6,117

 

                6,496

Property outgoings

 

 

(55)

 

(40)

 

(55)

Annualised net rents

 

 

              6,405

 

            6,077

 

                6,441

 

 

 

 

 

 

 

 

Add: notional rent expiration of rent free periods and fixed uplifts

              1,812

 

            1,531

 

                1,407

EPRA 'topped-up' NIY

 

 

              8,217

 

            7,608

 

                7,848

 

 

 

 

 

 

 

 

EPRA NIY

 

 

5.49%

 

5.04%

 

5.72%

EPRA 'topped-up' NIY

 

 

7.04%

 

6.30%

 

6.97%

 

 

EPRA NIY basis of calculation

EPRA NIY is calculated as the annualised net rent, divided by the gross value of the completed property portfolio.

The valuation of grossed up completed property portfolio is determined by Knight Frank as at 31 December 2020, plus an allowance for estimated purchasers' costs. Estimated purchasers' costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.

In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent free periods and future contracted rental uplifts.

Calculation of EPRA Vacancy Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 31 December 2020       (unaudited)

 

 31 December 2019       (unaudited)

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Annualised potential rental value of vacant premises

 

 

 

                       -  

 

                     -  

 

                -  

Annualised potential rental value for the completed property portfolio

 

 

 

                  6,925

 

                6,698

 

           6,729

 

 

 

 

 

 

 

 

 

 

EPRA Vacancy Rate

 

 

 

 

0.00%

 

0.00%

 

0.00%

 

 

Calculation of EPRA Cost Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 31 December 2020       (unaudited)

 

 31 December 2019       (unaudited)

 

 30 June 2020 (audited)

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Administrative/operating expense per IFRS income statement

                     388

 

                   539

 

           1,491

Property operating expenses

 

 

 

 

                       53

 

                     50

 

               56

EPRA Costs (including and excluding direct vacancy costs)

                     441

 

                   589

 

           1,547

 

 

 

 

 

 

 

 

 

 

Gross Rental Income

 

 

 

 

                  3,526

 

                3,616

 

           7,351

 

 

 

 

 

 

 

 

 

 

EPRA Cost Ratio (including direct vacancy costs)

 

 

12.51%

 

16.29%

 

21.05%

EPRA Cost Ratio (excluding direct vacancy costs)

 

 

12.51%

 

16.29%

 

21.05%

 

 

Company Information

 

Share Register Enquiries

 

The register for the Ordinary Shares is maintained by Computershare Investor Services PLC. In the event of queries regarding your holding, please contact the Registrar on 0370 707 1874 or email: web.queries@computershare.co.uk.

 

Changes of name and/or address must be notified in writing to the Registrar, at the address shown below. You can check your shareholding and find practical help on transferring shares or updating your details at www.investorcentre.co.uk. Shareholders eligible to receive dividend payments gross of tax may also download declaration forms from that website.

 

Share Information

 

Ordinary £0.01 shares 80,500,000

SEDOL Number BDVK708

ISIN Number GB00BDVK7088

Ticker/TIDM AIRE

 

Share Prices

 

The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.

 

Frequency of NAV publication

 

The Group's NAV is released to the London Stock Exchange on a quarterly basis and is published on the Company's website www.alternativeincomereit.com.

 

Annual and Interim Reports

 

Copies of the Annual and Interim Reports are available from the Group's website.

 

Financial Calendar

 

February 2021 Announcement of interim results

30 June 2021 Year end

October 2021 Announcement of annual results

November 2021 Annual General Meeting

31 December 2021 Half year end

 

Directors

Steve Smith (Independent non-executive Chairman)

Jim Prower (Independent non-executive Director)

Alan Sippetts (Independent non-executive Director)

 

Registered Office

1 King William Street

London

EC4N 7AF

 

AIFM

Langham Hall Fund Management LLP

1 Fleet Place

8th Floor

London

EC4M 7RA

 

Property Manager

Mason Owen and Partners Limited

7th Floor

20 Chapel Street

Liverpool

L3 9AG

 

Corporate Broker

Panmure Gordon (UK) Limited

One New Change

London

EC4M 9AF

 

Legal Adviser to the Company

Travers Smith LLP

10 Snow Hill

London

EC1A 2AL

 

Company Website

https://www.alternativeincomereit.com/ 

 

Depositary

Langham Hall UK Depositary LLP

8th Floor

1 Fleet Place

London

EC4M 7RA

 

Investment Adviser and Administrator

M7 Real Estate Limited

3rd Floor

The Monument Building

11 Monument Street

London

EC3R 8AF

 

Consultant Portfolio Manager

King Capital Consulting Limited

140a Tachbrook Street

London

SW1V 2NE 

      

Company Secretary

Hanway Advisory Limited

1 King William Street

London

EC4N 7AF

 

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS13 8AE

 

Auditor

KPMG LLP

15 Canada Square

London

E14 5GL

 

Valuer

Knight Frank LLP

55 Baker Street

London

W1U 8AN

 

Communications Advisor

Maitland/AMO

3 Pancras Square

London

N1C 4AG

  Glossary

 

Alternative Investment Fund Manager or AIFM or Investment Manager

Langham Hall Fund Management LLP.

Annualised charges

A measure of the Group's annualised operating costs for the period as a percentage of NAV.

Company

Alternative Income REIT plc.

Contracted rent

The annualised rent adjusting for the inclusion of rent subject to rent free periods.

Earnings Per Share ('EPS')

Profit for the period attributable to equity shareholders divided by the weighted average number of Ordinary Shares in issue during the period.

EPRA

European Public Real Estate Association, the industry body representing listed companies in the real estate sector.

EPRA cost ratio (including direct vacancy costs)

The ratio of net overheads and operating expenses against gross rental income (with both amounts excluding ground rents payable). Net overheads and operating expenses relate to all administrative and operating expenses.

EPRA cost ratio (excluding direct vacancy costs)

The ratio calculated above, but with direct vacancy costs removed from net overheads and operating expenses balance.

EPRA Earnings Per Share

A key measure of a company's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.

EPRA NAV

NAV adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long term investment property business.

EPRA NNNAV

EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.

EPRA Net Initial Yield ('NIY')

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.

EPRA Topped-Up Net Initial Yield

This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent periods and step rents).

EPRA Vacancy Rate

Estimated Rental Value of vacant space as a percentage of the Estimated Rental Value of the whole portfolio.

Equivalent Yield

The internal rate of return of the cash flow from the property, assuming a rise to Estimated Rental Value at the next review or lease expiry. No future growth is allowed for.

Estimated Rental Value ('ERV')

The external valuer's opinion as to the open market rent which, on the date of the valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

External Valuer

An independent external valuer of a property. The Group's External Valuer is Knight Frank LLP.

Fair value

The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion.

Fair value movement

An accounting adjustment to change the book value of an asset or liability to its fair value.

FCA

The Financial Conduct Authority.

Gross Asset Value ('GAV')

The aggregate value of the total assets of the Group as determined in accordance with IFRS.

IASB

International Accounting Standards Board.

IFRS

International Financial Reporting Standards, as adopted by the European Union.

Investment Adviser

M7 Real Estate Limited.

IPO

The admission to trading on the London Stock Exchange's Main Market of the share capital of the Company and admission of Ordinary Shares to the premium listing segment of the Official List on 6 June 2017.

Lease incentives

Incentives offered to occupiers to enter into a lease. Typically this will be an initial rent free period, or a cash contribution to fit out. Under accounting rules the value of the lease incentives is amortised through the Consolidated Statement of Comprehensive Income on a straight line basis until the lease expiry.

Loan to Value ('LTV')

The value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the combined valuation of the property portfolio (as provided by the valuer) and the fair value of other investments.

Net Asset Value ('NAV')

Net Asset Value is the equity attributable to shareholders calculated under IFRS.

Net Asset Value per share

Equity shareholders' funds divided by the number of Ordinary Shares in issue.

Net equivalent yield

Calculated by the External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears.

Net Initial Yield ('NIY')

The initial net rental income from a property at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase.

Net rental income

Rental income receivable in the period after payment of ground rents and net property outgoings.

Ongoing Charges

The ratio of annualised total administration and property operating costs expressed as a percentage of average NAV throughout the period.

Ordinary Shares

The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both income, in the form of dividends paid by the Company, and any capital growth.

Passing rent

The gross rent, less any ground rent payable under head leases.

pps

Pence per share.

REIT

A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria being met, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax.

Reversion

Increase in rent estimated by the Company's External Valuers, where the passing rent is below the ERV.

Share price

The value of a share at a point in time as quoted on a stock exchange. The Company's Ordinary Shares are quoted on the Main Market of the London Stock Exchange.

Total returns

The returns to shareholders calculated on a per share basis by adding dividend paid in the period to the increase or decrease in the share price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets.

Total Shareholder Return

The percentage change in the share price assuming dividends are reinvested to purchase additional Ordinary Shares.

Weighted Average Unexpired Lease Term ('WAULT')

The average lease term remaining before first break, or expiry, across the portfolio weighted by contracted rental income (including rent frees).

 

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