TIDMTRY
RNS Number : 4820N
TR Property Investment Trust PLC
01 June 2022
TR PROPERTY INVESTMENT TRUST PLC
LONDON STOCK EXCHANGE ANNOUNCEMENT
Unaudited preliminary results for the year ended 31 March
2022
LEI: 549300BPGCCN3ETPQD32
Information disclosed in accordance with Disclosure Guidance and
Transparency Rule 4.1
TR Property Investment Trust plc, announces its full year
results for the year ended 31 March 2022 (unaudited)
Chairman David Watson commented
"In a year dominated by volatility and powerful global
macroeconomic and political themes, I'm pleased to report a year of
healthy performance. Our NAV total return for the year was 21.4%
against a benchmark of 12.2%."
Manager Marcus Phayre-Mudge commented
"Although the economic outlook remains unsettled, property
assets, particularly where the income is index-linked, should
remain relatively attractive despite rising interest costs."
Year ended Year ended 31
31 March March Change
2022 2021
================================== ========== ============= ========
Balance Sheet
Net asset value per share 492.43p 417.97p +17.8%
Shareholders' funds (GBP'000) 1,562,739 1,326,433 +17.8%
Shares in issue at the end of the
year (m) 317.4 317.4 0.0%
Net debt(1),6 10.2% 16.5%
================================== ========== ============= ========
Share Price
Share price 456.50p 392.50p +16.3%
Market capitalisation GBP1,449m GBP1,246m +16.3%
Year ended Year ended 31
31 March March Change
2022 2021
===================================== ========================= ================ =========
Revenue
Revenue earnings per share 13.69p 12.25p +11.8%
===================================== ========================= ================ =========
Dividends(2)
Interim dividend per share 5.30p 5.20p +1.9%
Final dividend per share 9.20p 9.00p +2.2%
Total dividend per share 14.50p 14.20p +2.1%
===================================== ========================= ================ =========
Performance: Assets and Benchmark
Net Asset Value total return (3,6) +21.4% +20.7%
Benchmark total return (6) +12.2% +15.9%
Share price total return (4,6) +19.9% +28.3%
Ongoing Charges(5,6)
Including performance fee 2.19% 1.40%
Excluding performance fee 0.60% 0.65%
Excluding performance fee and direct
property costs 0.58% 0.63%
1. Net debt is the total value of loan notes, loans (including
notional exposure to CFDs) less cash as a proportion of net asset
value.
2. Dividends per share are the dividends in respect of the
financial year ended 31 March 2022. An interim dividend of 5.30p
was paid on 14 January 2022. A final dividend of 9.20p (2021:
9.00p) will be paid on 2 August 2022 to shareholders on the
register on 24 June 2022. The shares will be quoted ex-dividend on
23 June 2022.
3. The NAV Total Return for the year is calculated by
reinvesting the dividends in the assets of the Company from the
relevant ex-dividend date. Dividends are deemed to be reinvested on
the ex-dividend date as this is the protocol used by the Company's
benchmark and other indices.
4. The Share Price Total Return is calculated by reinvesting the
dividends in the shares of the Company from the relevant
ex-dividend date.
5. Ongoing Charges are calculated in accordance with the AIC
methodology. The Ongoing Charges ratios provided in the Company's
Key Information Document are calculated in line with the PRIIPs
regulation which is different to the AIC methodology.
6. Considered to be an Alternative Performance Measure
Chairman's statement
Introduction
The year was again dominated by powerful global macro- economic
and political themes, propelling the market in the first half and
depressing it in the second. Spring 2021 saw broadly-based market
optimism through the continuation of broad post vaccine recovery
across all economies, aided by the sustained dovish response from
central banks. As inflationary pressures built towards the second
half, particularly due to supply chain disruption and increasingly
tight labour markets, investors began to build in expectation of
increases in base rates and consequently, credit spreads and
expectations of global growth moderated or evaporated. The central
investment theme became inflationary concerns, with the key
questions being its degree of permanence and the various key
central banks' responses. Towards the end of the financial year,
risk was elevated further by the tragic events and unfolding
humanitarian disaster in Ukraine. For global equity markets the
cold-hearted financial repercussions are manifold; evidenced
through the price of energy and the supply and price of a range of
hard and soft commodities which were mined, refined or grown in
abundance in Ukraine. The longer-term impact of Russian aggression
on commodity prices and global trade and energy flows are only now
starting to be understood.
It may therefore seem somewhat surprising that against that back
drop I am able to report a year of healthy performance for the
Company. Our net asset value total return was +21.4%, well ahead of
the benchmark return of +12.2%. The share price total return at
+19.9% was slightly behind the underlying asset growth, as the
discount between the share price and the NAV widened just before
the year end.
At the half year, I highlighted that our Manager continued to
focus on the most sustainable income and that he had further tilted
the portfolio towards index-linked income. This continued to be the
case in the second half and helped drive relative performance. Real
estate has good inflation protecting attributes, not least that the
vast majority of our income is, to varying degrees, explicitly
linked to national inflation indices. Inevitably, it is not just
public market investors who have realised the attraction of steady
real income growth. Private equity investment into real estate
continues to be elevated and there has been much merger and
acquisition activity which is detailed later in the Manager's
report. The consequences for the Company are twofold. In the short
term, we have made sizeable gains from our stakes in those
companies which have been taken private or merged. Secondly,
investors have responded, recognising that if listed property
companies share prices are left to drift well below asset value
then the private market will swoop in. This remains a critical and
valuable underpin.
Revenue results and dividend
Earnings for the year were 13.69p per share, 12% higher than the
previous year (12.25p) but still almost 6% behind pre COVID-19
levels.
As anticipated in the Half Year Report, earnings for the second
half were lower than in the previous year. This was partly because
of one-off items in the second half of the year to March 2021 which
did not recur and partly because of the significant changes in
dividend timetables seen through the year but which largely
impacted the second half. Many companies moved to more frequent and
smaller distributions, which reduced income in comparison to the
prior year due simply to timing. More details are set out in the
Manager's Report.
These factors mask a positive underlying trend and, as described
above, our Manager has focused the portfolio on sources of
sustainable income. The Board is therefore pleased to announce an
increase in the final dividend to 9.20p (2021: 9.00p) bringing the
full year dividend to 14.50p, an increase of just over 2%. This
will require a small contribution from the Company's revenue
reserve. We highlighted in the last Annual Report that we expected
that this would be the case and that the Board was happy to employ
some of the revenue reserve, providing a return to pre COVID-19
income levels could be expected in the medium term.
Revenue outlook
Our Manager is feeling comfortable about the Company's revenue
outlook. Dividends announced for the first quarter are showing
increases on the prior year. Many of our investee companies have
medium term debt arrangements secured when interest rates were at
historic lows and so will not immediately feel the impact of higher
interest rates. Further ahead, this will become more of an issue if
higher rates persist. Our own income tax rate will also increase
for the 2022/23 financial year. As always, the Board will keep an
eye to the longer term, but having built up the revenue reserve
over many years, we feel it is appropriate to maintain dividend
levels where we can easily do so provided a longer term fall in
income is not expected. After the final dividend set out above, the
revenue reserve will still be 11.37p per share.
Net Debt and Currencies
The opening gearing position was 16.5% and closed at 10.2%. It
fluctuated over the year between these levels as the gearing was
actively managed. Our debt portfolio gives us considerable
flexibility to increase and decrease gearing levels quickly and
this has proved beneficial yet again.
Sterling has traded in a narrow range against the Euro
throughout the year and it closed only fractionally stronger at the
end of the year. Therefore currencies have not been a significant
factor in this year's results.
Discount and Share Repurchases
From the starting point of 6.1% the discount, for the most part,
gradually narrowed in the period up to the beginning of 2022 and
then traded at a small premium through January. With the invasion
of Ukraine and a general worsening of sentiment, the shares moved
back to a discount, its widest at 9.9% and closing the year at
7.4%. The discount average for the year was 3.4%. This meant that
the share price return was slightly behind the NAV return.
No share buy-backs or issues were made during the year.
Awards
The Company was the winner of in the Specialist Equities
category of the Citywire Investment Trust Awards for the second
year running. It has also been awarded ratings with a number of
platforms and publications and these are included in the
shareholder information section later in this report.
Outlook
The era of cheap money is coming to an end. Inflation is surging
and central banks are reversing their balance sheet expansion that
has defined the period following the Global Financial Crisis.
Consequently, bond markets are volatile and real (as opposed to
nominal) yields on duration debt are getting even more negative.
Inflation protected income is becoming harder to find so
index-linked property income should remain attractive. However,
rising interest costs are clearly a headwind for any leveraged
asset class.
Our strategy remains the same, identifying asset classes and
sub-markets where demand outstrips supply and where rents are
capable of rising. Build cost inflation and the regulatory/social
pressure to build more sustainably (higher upfront cost, but lower
long-term maintenance and running costs)
has squeezed development margins. Our Manager expects a subdued
development cycle in many markets and a reduction in risk of
oversupply must be a positive in the medium term. We continue to
seek more exposure to asset classes where rebuild costs are well
above the current prescribed asset values. Equity market volatility
is providing us with some of these opportunities in the listed
space and we hope to enlarge our physical property portfolio based
on the same investment thesis.
David Watson
Chairman
31 May 2022
Manager's Report
Performance
The Net Asset Value total return for the year to the end of
March 2022 was +21.4%, ahead of the benchmark total return of
+12.2%.
The Spring and Summer of 2021 saw a benign backdrop of
continuing monetary policy largesse from central banks coupled with
an improving outlook for all economies and this bode well for many
parts of the real estate landscape. Share prices across our
universe responded accordingly and our NAV grew by 14% from April
to August. Post the summer holidays investors increasingly fretted
over the themes of a global slowdown (breakdown in supply chains,
COVID-19 impacted manufacturing capabilities in Asia) coupled with
rising wage and energy costs. All of which heightened the risk of
stagflation. Share price volatility increased hugely and we
experienced 20% swings in the value of the benchmark between the
beginning of September and the end of November. Such large swings
in sentiment reflected the changes in expectation of central banks'
behaviour. In simple terms - would they turn hawkish (and at what
pace) to help control these renewed inflationary pressures. The
last phase of the financial year (December to March) was marked by
a steady decline in real estate equity prices as the expectation of
multiple rate rises by the US Federal Reserve and the Bank of
England alongside more hawkish rhetoric from the European Central
Bank was priced in. The last month of the financial year was, of
course, overshadowed by the terrible events in Ukraine immediately
adding to energy and other raw material inflation expectations.
What I have summarised here is the performance of pan-European
real estate equities over the 12 months to the end of March rather
than underlying property values. Share prices are volatile and
react quickly to macro driven sentiment. Underlying real estate
values tend to adjust when the price of capital changes, as opposed
to the expectation of future price changes. They are also anchored
much more locally being dependent on the expectation of local
rental growth or contraction. Spreads have widened and debt costs
are increasing but they remain historically low and crucially, at
the moment, debt is still readily available. As I warned in last
year's Annual Report, if equity markets allow listed companies to
trade on large discounts to their implicit asset value then private
vehicles (who can operate with higher leverage and hence a lower
cost of capital) will take them private. This has been a key theme
this year and the Company's performance has benefited from a number
of transactions. Expectations of capital growth amongst private
owners (be it institutional or retail investors) is much more
important to underlying pricing than the gyrations of publicly
listed share prices. It is encouraging to see transaction volumes
and private market optimism normalise in many of our sub-markets
and this is examined in more detail later in the report.
The portfolio positioning had been heavily adjusted in the
immediate 'post vaccine' period (Q4 2020, Q1
2021) essentially closing the underweight to European shopping
centres and renewing exposure to office markets with shorter
commute times (i.e. a focus on the smaller cities, not London and
Paris). The year under review saw that process extended, with the
portfolio further concentrating on capturing the impact of three
key trends. Those sectors likely to experience the greatest rental
growth in a recovering economic environment such as logistics,
industrial, self-storage and prime office development continue to
be heavily represented in the portfolio. Secondly, security of
income is crucial. Private rented residential property continues to
enjoy virtually full occupancy, particularly in Germany and Sweden
where rents remain heavily regulated (and at sub-market levels).
The final theme was inflation protection and seeking to own
explicitly index-linked, high quality income across a broad range
of sectors. This latter theme overlaps with the residential focus
given the highly defensive nature of the earnings.
All of these themes were drivers of relative outperformance
alongside the positive impact of numerous merger and acquisition
('M&A') situations over the year (that activity will be
detailed later in the report). However, it is important to clarify
that the listed German residential names have - with one exception
- performed relatively poorly this year. The sector saw the largest
piece of M&A activity with the cash takeover of Deutsche Wohnen
by Vonovia and this was extensively reviewed in the Half Year
Report. We have remained loyal to our central view that Berlin
residential property values will continue to outperform the rest of
Germany with a continued supply/demand imbalance. Phoenix Spree
Deutschland (total return +18%) was the performance outlier over
the year and ensured that our German residential portfolio
contributed positively to our relative outperformance of the
benchmark.
Offices
The vast majority of office workers have now returned to the
office, at least part of the time. The longer term consequences of
the dramatic increase in remote working since 2020 are still
evolving. However, we are increasingly confident of a number of key
features which either pre-existed or have emerged. The first is all
around optionality. Most office workers to a greater or lesser
extent can work remotely. This optionality means that the office
environment must become more attractive and/or more efficient than
the alternative for workers. This need for a better quality
workplace coincides with businesses becoming increasingly focused
on their environmental footprint. At the same time government
regulation across the developed world is driving energy efficiency
improvements. The net result will be an increase in demand (and the
rent achieved) for 'green' buildings, in the right locations
offering state of the art amenities. There is already a clear
polarisation in favour of CBD (central business districts) over
decentralised or suburban markets. Central Paris saw take up of
+49% year on year, a drop in immediate supply of 17% over 2020 with
vacancy at 3% driving rents up, whilst the Western Crescent and La
Defense saw rents fall and incentives increase. London experienced
a very similar picture with the West End, Midtown and the City
seeing Q4 2021 take up of 3.8m sq ft, a 7 year quarterly high. The
total take up for 2021 was 10m sq ft, 65% ahead of 2020. Docklands
and other suburban markets did not experience this level of
improving statistics. Investors remain bullish, Knight Frank ('KF')
reported a fourfold increase in Q1, 2022 on the corresponding
quarter of 2021 with GBP5.8bn of transactions (versus
GBP1.2bn).
Savills produced a detailed research note in March 2022,
predicting reductions in office space demand across all European
cities to varying degrees. We have sympathy with the overall
expectation but the crucial point is the other side of the
equation. If this demand is very focused on quality, where is that
supply coming from? If we look at the UK's six regional markets (to
avoid only discussing London) we see all six cities as having less
than two years' supply. Cost inflation and the inability to tie
down risk pricing with contractors results in reduced speculative
construction which will exacerbate the problem.
KF's M25 report for Q4 2021 highlights technology, media and
telecom (TMT) and Life Science tenant demand but generally subdued
take up levels versus pre-pandemic levels. Oxford and Cambridge
continue to experience strong rental growth but Reading, Uxbridge
and St Albans saw little, given greater supply of new buildings.
The traditional occupiers of these strong satellite towns are in
the throes of assessing their office needs. One would have expected
the investment market to also reflect this 'pause for thought' but
this has not been the case. According to KF, South East office
volumes reached GBP4bn in 2021, a record for the region and 45%
ahead of the long term average. International buyers dominated but
they generally have a longer investment horizon than local buyers.
The build cost inflation we are now seeing may well prove that
buying high quality existing assets was a very sensible
strategy.
Retail
Negative sentiment towards this sector had begun to soften as
the post pandemic retail environment experienced the predicted
recovery in sales and footfall. Across Europe, consumers had
rebuilt savings (or reduced debt) over the last two years and the
re-opening statistics didn't disappoint the optimists. However,
looking forward the investment community is trying to establish the
likely sales volumes post this initial re-opening surge. All the
major firms of valuers are reporting stability in yields over the
last few quarters across both shopping centres and high streets at
both prime and secondary assets. This may well appear optimistic as
it is based on low volumes but the number of deals is increasing
and we are confident of much higher transaction volumes in 2022
than 2021.
The one area of real valuation recovery has been retail
warehousing. The last year has seen an extraordinarily competitive
landscape in this sub-sector with yields compressing over 1% at the
prime end and even more amongst secondary assets. What is
understandable is that where tenant demand/affordability has been
proven then investors are happy to own. As retailing evolves into a
seamless 'clicks and bricks' omnichannel experience, retail parks
are a key part of the value chain for the retailers. If the
retailer can offer a fast and efficient 'click and collect' service
which the customer is happy to use, then the sales margins from
selling online improve materially. It is the 'last mile' delivery
which is so cost inefficient.
The outlook for large, regional shopping centres remains
uncertain. The vast majority are too big for their market in an
omnichannel world. Owners are seeking to demolish part or repurpose
to non-traditional uses, in many cases trying to redefine
themselves as a community hub as opposed to just a covered
retailing arena. The strategy feels correct but the costs of
conversion and the inability of new users to pay anything like the
previous rents will lead to subdued returns. However, there has
been some price discovery with high profile examples such as
Hammerson's sale of Silverburn in Glasgow and a wide range of
smaller transactions across Europe from Eurocommercial, Klepierre
and Unibail providing evidence that buyers believe that rents are
stabilising.
Industrial and Logistics
2021 was yet another record year in terms of take up, capital
value growth and, all importantly, further shrinkage in the amount
of vacancy. The UK market saw take up exceed 50 million sq ft and
vacancy is now below 3% across the whole range of 'big box' unit
sizes. Like for like rental growth for Segro's portfolio was in
excess of 5% and this has driven yields nationwide 75-100 bps
leading to huge capital growth. Yet urban logistics has been even
hotter, with investors focused on the supply inelasticity of infill
markets. Greater London prime industrial transactional evidence now
regularly sees equivalent yields (i.e. based off market rents which
are higher than passing rents) of less than 3%. This price
inflation has been fuelled by evidence of another year
of rental growth exceeding 10%. Segro reported rental growth
averaging 13.1% in its UK portfolio during 2021. Savills estimate
that inner London rents have moved 25% in the last year alone.
UK industrial transaction volumes reached GBP16.7bn in 2021,
113% growth on 2020 and 152% growth on the five year average. Given
such an acceleration we must closely watch the fundamentals, there
may well be capital seeking deployment without due consideration.
However, for now, the demand/supply imbalance at the occupier level
is driving rental growth. The entire UK industrial market recorded
a drop in available space to 18.1million sq ft, a contraction of
one third over the year. No wonder rents are rising.
On the Continent, we have also seen market rental growth
outstrip annual indexation. This is set to continue even with the
printing of record high annualised inflation of 5.1%. Segro are the
only fully pan-European listed player and they reported 4.1% like
for like rental growth across Continental Europe for 2021. We
remain confident that in many key markets this level of growth will
be exceeded in 2022. Across Continental Europe, online sales
penetration now averages 15-18%, still a long way behind the UK at
c.28%. Shortening supply chains and reshoring has driven demand in
cheaper markets such as Poland. Savills European Logistics Survey
2021 showed that 46% of all occupiers canvassed expected to
increase their warehouse requirements over the next year.
Availability continues to shrink, with vacancy down from 5.1% to
3.5%, with record low levels in Dublin (1.1%), the Netherlands
(3.3%), Czech Republic (1.7%) and take up levels well ahead of
decade averages with Madrid (+9), Poland (+13%) and the Netherlands
(+10%). For the best space, rents are responding very rapidly and
we expect average rental growth to exceed 5% across the Continent.
However in early May this year (post the year end) Amazon announced
a dramatic pause in its expansion programme. Whilst we believe that
these comments were focused on their domestic US market, it has
caused reverberations across all logistics/ecommerce real estate
markets. Major owners and developers such as Segro and Tritax point
to full orderbooks and strong transactional evidence, forward
looking equity markets took fright. Share prices of these two names
are down - 22% and 17% respectively, calendar year to date.
Residential
This sector remains a strong store of value. In the short term
capital values should be impacted by rising interest rate
expectations. For PRS (private rental sector) this uncertainty
(along with the broader geo-political backdrop) has probably
encouraged would be buyers to remain renters in the near term.
Occupancy rates remain at record levels across both open-market
rental markets (UK, Finland) and regulated rental markets (Germany
and Sweden). In the latter group of companies, we expect below
market rents to assist in maintaining affordability even as energy
costs rise and consumption is squeezed. Rent is not a bill which
can be reduced, particularly when it is already below market. We
are not predicting greater vacancy (the structural issues of
demand/supply disequilibrium are still there) but we are mindful of
the potential for slower rental growth.
This cost of energy crisis will accelerate the need to improve
the energy efficiency of all residential stock. This is
particularly an issue in Germany where so much of the housing stock
owned by the listed companies requires upgrading, coupled with the
need to find alternatives to Russian gas (the major domestic energy
source). The cost of these improvements will ultimately be split
between the state, the landlord and the tenant. The outstanding
question is in what proportions. There is certainly no 'one size
fits all' solution but if the bulk of this energy efficiency
expenditure is subsidised by the state and the landlord can, in
addition, gain a return on their share of the investment via higher
rents (and reduced energy bills), this doesn't have to be a bear
investment case for this sector.
Although these potential headwinds are well flagged, underlying
house (and apartment) prices continue to rise driven by
affordability. Mortgage rates, whilst rising, are still very low by
historical standards and wage inflation is feeding through, which
drives affordability. Major cities such as Berlin and Stockholm
where there is very little new supply continue to see values rising
at c.1% per month. According to JLL, there was an 11.6% year on
year increase in Berlin condominium prices.
Alternatives
The record occupancy increases and rate growth in self storage
recorded through the pandemic will undoubtably slow. However we are
confident that growth will continue, fuelled by the structural
drivers of commercial usage (last mile, business to consumer,
supply chain resilience) and increasing awareness of the product
from residential customers. The Self Storage Association UK
reported further occupancy growth across all its members. This
remains a highly fragmented sector with over 1,900 separate sites
and only 30% are operated by 'large' operators (defined as those
with 10 or more stores). The marketing advantage for the largest
operators (the listed companies) is very valuable, ensuring that
almost all potential customers searching via the internet (the vast
majority) will see an offer from one or more of the largest
operators.
Healthcare property had a tougher year. Those focused on primary
healthcare have the benefit of rental underpin (directly or
indirectly) from the state however, in the case of the UK, rental
growth risks being at sub-inflation levels due to its deferred
reference point (historic build cost).
In Continental Europe, the exposure of poor care and financial
irregularities at Orpea, a large listed nursing home operator has
highlighted (amongst many things) the meagre margins which these
businesses are run off. A state investigation is underway by the
French authorities and we maintain very minimal exposure
to this underlying operator. The vast majority of our
Continental European healthcare exposure is in the Netherlands and
Belgium rather than France.
Purpose built student accommodation (PBSA) has fared better as
students clearly want the campus experience and value for money.
The structural fundamentals remain sound; the combination of the
growing numbers of students (post the recent demographic dip)
coupled with the desire to live in better quality accommodation
than previous student generations. According to UCAS, 30% of first
year students live in PBSA and this has increased from 22% five
years ago. An encouraging growth rate. Another 40% start their
university life in halls of residence but that percentage has
remained static over the same period, reflecting the lack of
capacity or capability for universities to add to their own
residential real estate portfolios. Cushman Wakefield have
identified 681,000 student accommodation beds across the UK with a
net increase of just 21,000 over 2020/21. Q1 2022 data has also
revealed a marked slowdown in planning applications for new PBSA
units. Importantly, quality is a key priority with prices up by 17%
since 2019/20 for those with en suite bathrooms.
We continue to hold Unite (UK) and Xior (Belgium, Spain) and
note the recent takeover of American Campus Communities, an $8bn
market cap US student accommodation REIT by Blackstone. Yet another
privatisation.
Debt and Equity Markets
Debt markets continued to be supportive for real estate
companies throughout the year under review, with central banks
continuing to provide support through quantitative easing and bond
purchases as well as maintaining very low rates. The start of 2022
brought a change in investor attitude with a marked shift in
expectation of more hawkish behaviour from central banks, led by
the US Federal Reserve. Reviewing listed European real estate debt
issuance, we may well look back on the EUR20.9bn raised in 2021
(alongside the EUR23bn in 2017) as record years unlikely to be seen
again as the cycle of rising rates evolves during 2022 and beyond.
German residential businesses were again busy customers of the bond
market with Vonovia's cheapest deal raising EUR1,250m at 0.25% for
a 7 year bond; whilst they also raised 30 year money (EUR750m) at
1.625%. LEG, their smaller competitor, managed 0.875% for 12 years
raising EUR500m.
Equity markets were also very busy with the 'deal sheet'
highlight being the record breaking EUR8bn rights issue by Vonovia,
required to fund the acquisition of Deutsche Wohnen. Logistics
businesses were once again avid raisers of capital, given their
premium rated paper. Tritax Bigbox raised GBP350m, Eurobox GBP215m,
VGP EUR300m and Aberdeen European Logistics GBP45m. Elsewhere
equity raisings were focused on stocks with strong underlying
income with LXI raising twice in the year (totalling GBP225m)
alongside fellow index linked income play Supermarket Income Reit
raising GBP200m. The latter name has already come back to the
market shortly after the year end. Healthcare falls into this
secure income camp with the UK's Target Healthcare (GBP125m) and
Assura (GBP182m) seizing the moment alongside Belgium listed
Aedifica (EUR285m).
Whilst considerable primary issuance added to the size of the
listed real estate sector, this capital inflow was dwarfed by the
record breaking amount of M&A activity which in the majority of
cases led to privatisation and shrinkage in the sector's market
capitalisation.
Investment Activity - property shares
Turnover (purchases and sales divided by two) totalled GBP549m
equating to 36% of the average net assets over the year. This is,
coincidentally, the same as last year's equivalent figure (36%)
which itself was slightly ahead of the year to March 2020 (32%). It
has therefore now been three years of elevated portfolio rotation
due to
a combination of market volatility, sector rotation and,
importantly, M&A activity.
Last year, this section of the report highlighted several moves
by private equity ('PE') into the listed space with PE firms such
as Brookfield buying into British Land and KKR into Great Portland
Estates (now called GPE). Starwood had taken RDI (market cap
GBP325m) private in February 2021and this turned out to be a
precursor to the elevated levels of activity seen thereafter.
In June, Blackstone was required to increase its initial bid for
St Modwen Properties, paying a 21% premium to the net asset value
of 463p. Once again, private equity was able to look beyond the
immediate development pipeline and value the high quality land bank
more aggressively than public markets. In the same month, ABG
(alongside Blackstone again) announced the acquisition of GCP
Student Living (market cap GBP960m). Blackstone and ABG were also
co-investors in several UK and European student funds.
Brookfield, another giant private equity firm struck 3 times in
the year. Firstly in November in Germany, they acquired 91% of
Alstria (market cap EUR3bn), the only pure German only office
investor. In Belgium in February this year, they announced an
agreed bid for Befimmo, an unloved owner of primarily Brussels
offices. As if that was not enough, just before our year end they
announced the agreed take private of Hibernia, Dublin's only listed
office developer. In each of these deals, Brookfield paid
substantial premiums (+20%) to the undisturbed share price but
still acquired at close to or even below net asset value. Offices
remain out of favour with stock market investors and therefore
these businesses were - in the eyes of private equity - undervalued
in the public domain. The Company held both Alstria and Hibernia.
In the case of the latter, our holding was 4% of the issued
capital. The transaction is bittersweet: whilst we saw a
significant valuation gain we have lost a well managed company with
strong technical expertise in developing prime office space. Not
easy to replace.
Corporate activity between listed companies was also much in
evidence. In November, Landsec acquired U+I (previously called
Development Securities) for GBP170m, at an eyewatering 70% premium
to the undisturbed share price. This small urban regeneration
stock's performance had been lacklustre as investors worried about
its balance sheet and inability to fund its long dated development
pipeline. For Landsec, this was a precursor to announcing a
strategic initiative in regional regeneration with the acquisition
of 75% of MediaCity in Manchester (GBP426m).
CTP, the newly listed Eastern European logistics developer
agreed to buy Deutsche Industrie, a small listed German property
company owning secondary industrial assets and development land
across Germany. Whilst the acquisition currency was shares in CTP,
the price reflected a 48% premium to the undisturbed price. At the
time we felt this transaction was a positive read across to our
other German holdings, Sirius and VIB Vermoegen. A couple of months
later, DIC, a listed manager of property funds, surprised the
market with a partial tender for 51% of VIB Vermoegen at EUR51 per
share. This well run Bavarian logistics owner /developer is listed
on a local exchange and not the main market. DIC were therefore
able to acquire over 10% before announcing their intentions and
they quickly reached 25% of the share capital (ahead of the
tender).
At this point I chose to sell our holding (3% of the Company's
net assets) at a 'block premium' of EUR54 per share. I was fearful
that DIC's control would result in the loss of the highly regarded
management team and this has come to pass with CEO and CFO
departing. However, we have been handsomely rewarded through the
corporate activity. The share price at the beginning of the
financial year was just under EUR30 per share. This company has
been a key component of our logistics exposure over more than a
decade.
In Sweden, SBB the highly acquisitive social infrastructure
company, announced control of a small residential business,
Amasten. We had recently completed our own research on this
business and we had begun to build a holding. The bid price was a
20% premium to where we were buying shares a month earlier.
Finally, in March we saw the final act in the Mckay Securities
saga. Longstanding shareholders will have been aware of our view
that this well run owner of South East office and industrial
property was being materially undervalued by the equity market.
Essentially the company was too small and the shares too
illiquid for today's stock market. This company is absolutely not
alone in this regard, there are many companies which are just too
small and need to join forces with fellow minnows. The key with
this business was the high quality of the portfolio. We were
pleased to read that Rothschild had undertaken a competitive sales
process which culminated in an agreed bid from Workspace, a listed
owner of flexible office space in London. Owning 9% of the issued
capital we were invited to provide an irrevocable undertaking
(subject to no higher offer) which we provided. The bid was two
thirds cash (209p) and one third shares and reflected a premium of
30% to the undisturbed price. We will open a holding in Workspace
in May on completion of the transaction.
Investment Activity - direct property portfolio
The physical property portfolio produced a total return for the
12 months of 18.1% made up of a capital return of 15.4% and an
income return of 2.7%. This can be compared to the return from the
MSCI All property index which produced a total return of 23.9% made
up of a capital return of 18.0% and an income return of 5.0%.
The core driver of returns was rental growth at the two
industrial properties in Wandsworth and Gloucester. At Gloucester,
we let the largest unit at a new headline rent on the estate
following a short marketing period to an online health food
business. This will allow us to move rents forward with other lease
events on the estate scheduled for 2022 and 2023. In Wandsworth we
completed a number of new lettings including a letting to the
online leisure fashion brand Sweaty Betty. They plan to use the
premises as a photographic studio for their online offering. We are
delighted to add them to the tenant line-up and this not only
reflects the diversity of tenants on the estate but also
exemplifies the versatility of uses in a standard steel portal
industrial building.
At the Colonnades our restaurant operator, Happy Lamb Hot Pot,
completed their fit out and opened for trading as soon as COVID-19
restrictions were lifted in May 2021. They have become a successful
and vibrant addition to the local area. We are currently exploring
opportunities to sell this asset.
Revenue and Revenue Outlook
Revenue earnings for the current year have increased by almost
12% over the prior year.
The increase in earnings was attributable to the first half. At
the half year stage we announced earnings some 34% ahead of the
prior year. It was flagged at the time that this increase would not
be repeated in the second half.
The comparison of the first half (April to September 2021) was
being made against April to September 2020, which had suffered an
extreme fall in income. As a reaction to the COVID-19 pandemic many
companies suspended dividends and, in some cases even cancelling
ones which had already been announced. Distributions were very
cautious against such an uncertain backdrop. In the current year,
the vaccination programme was well underway and confidence began to
return in the first half.
Comparing second half earnings year to year in isolation, they
fell by around 27%, although this is not a fair comparison. Just
before March 2021 we finally received a tax refund as a result of a
long running reclaim. This enhanced the earnings for the year to
March 2021 so a more realistic comparison of the second half of the
year shows a fall of around 12% rather than the 27% highlighted
above . The explanation for this 5% fall is explained largely by
the fact that many companies changed their dividend schedules, not
only in timing but also the frequency, annual payers moved to
paying half yearly, half-yearly to quarterly etc. so the amounts
being paid in each distribution were proportionately lower. The new
payment schedules will have been established for the forthcoming
year so we don't expect this to have an ongoing impact.
The overall trend for earnings is positive, the majority of
companies have resumed distributions although there are some
exceptions, mainly in the retail sector where we are significantly
underweight.
Whilst the year to 31 March 2022 earnings result is still some
6% behind pre COVID-19 levels, we do expect some further recovery
in the year to March 2023. There are some new clouds on the horizon
though, the era of cheap money is over, inflation is reaching
levels not seen for many years and a cost of living crisis looms
for a number of well documented reasons. However, many of our
companies secured debt at historically low levels and will enjoy
the benefit of this for a while. Changing market outlook and
sentiment is likely to lead to lower gearing levels from time to
time and that in turn reduces income levels.
As previously documented, providing the Board is comfortable
with longer term income prospects, it is prepared to supplement
distributions from the revenue reserve to cover shorter term
fluctuations.
Gearing and Debt
The Chairman has already commented on gearing levels and
highlighted the benefits of our flexible borrowing structure.
This flexibility has been crucial in such a volatile year. Our
gearing oscillated in a 10 - 16% range as we responded to the
dramatic changes in market sentiment through the year. Over the
year we utilised both our revolving loan facilities and our CFD
capability in addition to our longer-term debt. Although the
shorter-term debt is linked to market rates and therefore the cost
will increase, the flexibility this affords in adjusting gearing
levels is more of an advantage than the lower cost of fixed term
debt. We aim to achieve a balance between pricing and flexibility
which is why our debt is sourced from a number of providers.
Outlook
As recently as this January, central bankers across the world
were indicating that they believed that inflationary pressures were
transitory. The rise in energy costs seen in Q4, 2021 were then
supercharged by events in Ukraine in February and March. Supply
chain disruption, particularly around Chinese shutdowns and post
COVID-19 workforce shortages, have compounded these pressures. The
result has been a period of sustained inflation, Euroland CPI
reached 7.5% in April, its sixth consecutive new monthly high. The
UK's March figure was 7%. We now expect these elevated figures to
continue into 2023 and for the central banks to be forced to react
quickly with interest rate rises. The unanswered question is
whether raising mortgage costs, which will cool consumer demand and
house price growth, will do much to assist in reducing the supply
driven pressures. Build cost inflation is equally strong and we
expect much potential development to be mothballed as the required
return on capital employed evaporates. However, this drop in
potential supply will form an underpin for rental growth where
demand is stable or growing. Our strategy remains twin-tracked. We
will continue to own long and strong income which offers genuine
index-linked income whilst simultaneously maintaining exposure to
markets where we see tenant demand remaining robust even in the
face of an economic slowdown. Renewed focus on balance sheet
strength, debt structures and flexibility will help us ensure that
we steer the Company carefully through the terrain of rising
rates.
Writing this outlook in the middle of May, pan-European real
estate equities have already collectively corrected 14% from the
start of the new financial year (1st April). This fall is greater
than the FTSE 100, 250 or the EuroStoxx 600. The most leveraged
businesses have, predictably, been hit hardest but previously
highly rated businesses with strong growth prospects have also been
hit hard and we expect to find value amongst those with the most
secure balance sheets. Much of our world offers solid earnings from
real assets; buildings which are often crucial to a company's
operation or a basic necessity for domestic users.
Marcus Phayre-Mudge
Fund Manager
31 May 2022
Principal and emerging risks and uncertainties
In delivering long-term returns to shareholders, the Board must
also identify and monitor the risks that have been taken in order
to achieve that return. The Board has included below details of the
principal and emerging risks and uncertainties facing the Company
and the appropriate measures taken in order to mitigate these risks
as far as practicable. The ongoing impact of COVID-19 on economies
around the world has been recovering throughout this financial year
however the invasion of Ukraine by Russia in February had a
significant effect on global markets and market uncertainty
remains. In addition rising inflation and interest rates bring
challenges not seen for many years.
Share price performs poorly in comparison to the underlying
NAV
Risk Identified
The shares of the Company are listed on the London Stock
Exchange and the share price is determined by supply and demand.
The shares may trade at a discount or premium to the Company's
underlying NAV and this discount or premium may fluctuate over
time.
Board monitoring and mitigation
The Board monitors the level of discount or premium at which the
shares are trading over the short and longer-term.
The Board encourages engagement with the shareholders. The Board
receives reports at each meeting on the activity of the Company's
brokers, PR agent and meetings and events attended by the Fund
Manager. The Company's shares are available through the BMO share
schemes and the Company participates in the active marketing of
these schemes. The shares are also widely available on open
architecture platforms and can be held directly through the
Company's registrar.
The Board takes the powers to issue and to buy back shares at
each AGM.
Poor investment performance of the portfolio relative to the
benchmark
Risk Identified
The Company's portfolio is actively managed. In addition to
investment securities the Company also invests in commercial
property and accordingly, the portfolio may not follow or
outperform the return of the benchmark.
Board monitoring and mitigation
The Manager's objective is to outperform the benchmark. The
Board regularly reviews the Company's long- term strategy and
investment guidelines and the Manager's relative positions against
these.
The Management Engagement Committee reviews the Manager's
performance annually. The Board has the powers to change the
Manager if deemed appropriate.
Market risk
Risk Identified
Both share prices and exchange rates may move rapidly and
adversely impact the value of the Company's portfolio. Although the
portfolio is diversified across a number of geographical regions,
the investment mandate is focused on a single sector and therefore
the portfolio will be sensitive towards the property sector, as
well as global equity markets more generally.
Property companies are subject to many factors which can
adversely affect their investment performance, these include the
general economic and financial environment in which their tenants
operate, interest rates, availability of investment and development
finance and regulations issued by governments and authorities.
Although we have now exited the European Union, the structure of
our relationship with Continental Europe continues to evolve and
there could be an impact on occupation across each sector.
The COVID-19 global pandemic continued for much of the financial
year. It has changed the way we live and work, uncertainties remain
regarding the impact on economies and property markets around the
world both in the short and longer term.
The invasion of Ukraine by Russia in February 2022 created
further market volatility and uncertainty which remains.
Inflation and interest rates are rising globally to levels not
seen in over 10 years.
Any strengthening or weakening of sterling will have a direct
impact as a proportion of our Balance Sheet is held in non-GBP
denominated currencies. The currency exposure is maintained in line
with the benchmark and will change over time. As at 31 March 2022,
66% of the Company's exposure was to currencies other than
sterling.
Board monitoring and mitigation
The Board receives and considers a regular report from the
Manager detailing asset allocation, investment decisions, currency
exposures, gearing levels and rationale in relation to the
prevailing market conditions.
The report considers the impact of a range of current issues and
sets out the Manager's response in positioning the portfolio and
the ongoing implications for the property market, valuations
overall and by each sector.
The Company is unable to maintain dividend growth
Risk Identified
Lower earnings in the underlying portfolio putting pressure on
the Company's ability to grow the dividend could result from a
number of factors:
-- lower earnings and distributions in investee companies.
Companies in some property sectors continue to be negatively
impacted by the COVID-19 pandemic although most have returned to
paying dividends, some are at a lower level than previously and a
few are continuing to withhold dividends;
-- prolonged vacancies in the direct property portfolio and
lease or rental renegotiations as a result of longer term changes
anticipated following COVID-19;
-- strengthening of sterling reducing the value of overseas
dividend receipts in sterling terms. The Company did see a material
increase in the level of earnings in the years leading up to the
COVID-19 pandemic. A significant factor in this was the weakening
of sterling following the Brexit decision. Although this has now
passed, the value of sterling may continue to fluctuate in the near
or medium term as the longer term implications of Brexit and
COVID-19 and the impact on the UK and European economies become
clearer. The invasion of Ukraine by Russia has also increased
market uncertainty. The longer term implications will differ across
the European economies. This could lead to currency volatility.
Strengthening of sterling would lead to a fall in earnings;
-- adverse changes in the tax treatment of dividends or other
income received by the Company; and changes in the timing of
dividend receipts from investee companies.
-- impact of higher interest rates on distributions from investee companies.
-- negative outlook leading to a reduction in gearing levels in
order to protect capital has an adverse effect on earnings.
Board monitoring and mitigation
-- The Board receives and considers regular income forecasts.
-- Income forecast sensitivity to changes in FX rates is also monitored.
-- The Company has substantial revenue reserves which are drawn upon when required.
-- The Board continues to monitor the impact of Brexit and
COVID-19 and the long term implications for income generation.
Accounting and operational risks
Risk Identified
Disruption or failure of systems and processes underpinning the
services provided by third parties and the risk that these
suppliers provide a sub-standard service.
The impact of the COVID-19 pandemic and the longer term changes
in working practices at the administrator and other service
providers.
Board monitoring and mitigation
Third party service providers produce periodic reports to the
Board on their control environments and business continuation
provisions on a regular basis.
The Management Engagement Committee considers the performance of
each of the service providers on a regular basis and considers
their ongoing appointment and terms and conditions.
The Custodian and Depositary are responsible for the
safeguarding of assets. In the event of a loss of assets the
Depositary must return assets of an identical type or corresponding
value unless it is able to demonstrate that the loss was the result
of an event beyond their reasonable control.
Monitoring the quality and timeliness of service as service
providers adopt widespread home working following the COVID-19
pandemic and consideration of the durability of the arrangements.
Many organisations have now incorporated home working into their
operational structure as a permanent feature.
Financial risks
Risk Identified
The Company's investment activities expose it to a variety of
financial risks which include counterparty credit risk, liquidity
risk and the valuation of financial instruments.
Board monitoring and mitigation
Details of these risks together with the policies for managing
them are found in the Notes to the Financial Statements in the full
Annual Report and Accounts.
Loss of Investment Trust Status
Risk Identified
The Company has been accepted by HM Revenue & Customs as an
investment trust company, subject to continuing to meet the
relevant eligibility conditions. As such the Company is exempt from
capital gains tax on the profits realised from the sale of
investments.
Any breach of the relevant eligibility conditions could lead to
the Company losing investment trust status and being subject to
corporation tax on capital gains realised within the Company's
portfolio.
Board monitoring and mitigation
The Investment Manager monitors the investment portfolio, income
and proposed dividend levels to ensure that the provisions of CTA
2010 are not breached. The results are reported to the Board at
each meeting.
The income forecasts are reviewed by the Company's tax advisor
through the year who also reports to the Board on the year-end tax
position and on CTA 2010 compliance.
Legal, regulatory and reporting risks
Risk Identified
Failure to comply with the London Stock Exchange Listing Rules
and Disclosure Guidance and Transparency Rules; failure to meet the
requirements of the Alternative Investment Fund Managers
Regulations, the provisions of the Companies Act 2006 and other UK,
European and overseas legislation affecting UK companies.
Failure to meet the required accounting standards or make
appropriate disclosures in the Interim and Annual Reports
Board monitoring and mitigation
The Board receives regular regulatory updates from the Manager,
Company Secretary, legal advisors and the Auditors. The Board
considers these reports and recommendations and takes action
accordingly.
The Board receives an annual report and update from the
Depositary.
Internal checklists and review procedures are in place at
service providers.
Inappropriate use of gearing
Risk Identified
Gearing, either through the use of bank debt or derivatives may
be utilised from time to time. Whilst the use of gearing is
intended to enhance the NAV total return, it will have the opposite
effect when the return of the Company's investment portfolio is
negative or where the cost of debt is higher than the return from
the portfolio.
Board monitoring and mitigation
The Board receives regular reports from the Manager on the
levels of gearing in the portfolio. These are considered against
the gearing limits set in the Investment Guidelines and also in the
context of current market conditions and sentiment. The cost of
debt is monitored and a balance sought between term, cost and
flexibility.
Personnel changes at Investment Manager
Risk Identified
Loss of portfolio manager or other key staff.
Board monitoring and mitigation
The Chairman conducts regular meetings with the Fund Management
team.
The fee basis protects the core infrastructure and depth and
quality of resources. The fee structure incentivises outperformance
and is fundamental in the ability to retain key staff.
Statement of Directors' Responsibilities in relation to the
Group Financial statements
The Directors are responsible for preparing the Annual Report,
the Strategic Report, the Directors' Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Directors are
required to prepare the Group financial statements in accordance
with
UK-adopted International Accounting Standards, in conformity
with the requirements of the Companies Act 2006 and applicable law
and have elected to prepare the Parent Company financial statements
on the same basis. In addition, the Group financial statements are
required under the UK Disclosure Guidance and Transparency Rules to
be prepared in accordance with UK-adopted International Accounting
Standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the Group's profit or loss for that period. In preparing each of
the Group and Parent Company financial statements, the Directors
are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether the Group and Parent Company have been prepared
in accordance with UK-adopted International Accounting Standards
and in conformity with the requirements of the Companies Act
2006;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations or have no realistic alternative but to do so.
The Directors are responsible for maintaining adequate
accounting records that are sufficient to show and explain the
Parent Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Parent Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance
Statement.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
By order of the Board
David Watson
Chairman
31 May 2022
Group statement of comprehensive income
for the year ended 31 March 2022
Year ended 31 March 2022 Year ended 31 March 2021
Revenue Capital Revenue Capital Total
Return Return Total Return Return
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ===================================== =====================================
Income
Investment income 44,170 - 44,170 36,557 - 36,557
Other operating income 5 - 5 67 - 67
Gross rental income 2,773 - 2,773 3,185 - 3,185
Service charge income 1,103 - 1,103 1,051 - 1,051
Gains on investments held
at fair value - 249,038 249,038 - 196,582 196,582
Net movement on foreign
exchange; investments
and loan notes - 1,136 1,136 - (3,144) (3,144)
Net movement on foreign
exchange; cash and cash
equivalents - 637 637 - (1,474) (1,474)
Net returns on contracts
for
difference 5,701 16,361 22,062 3,320 17,978 21,298
Net return on total return
swap - - - - (188) (188)
============================== ========== ========= ============== =========== =========== ===========
Total Income 53,752 267,172 320,924 44,180 209,754 253,934
============================== ========== ========= ============== =========== =========== ===========
Expenses
Management and performance
fees (1,663) (29,477) (31,140) (1,556) (14,328) (15,884)
Direct property expenses,
rent
payable and service charge
costs (1,435) - (1,435) (1,321) - (1,321)
Other administrative expenses (1,621) (608) (2,229) (1,231) (604) (1,835)
============================== ========== ========= ============== =========== =========== ===========
Total operating expenses (4,719) (30,085) (34,804) (4,108) (14,932) (19,040)
============================== ========== ========= ============== =========== =========== ===========
Operating profit/(loss) 49,033 237,087 286,120 40,072 194,822 234,894
Finance costs (629) (1,886) (2,515) (416) (1,969) (2,385)
============================== ========== ========= ============== =========== =========== ===========
Profit/(loss) from operations
before tax 48,404 235,201 283,605 39,656 192,853 232,509
Taxation (4,967) 3,049 (1,918) (767) 2,667 1,900
============================== ========== ========= ============== =========== =========== ===========
Total comprehensive income 43,437 238,250 281,687 38,889 195,520 234,409
============================== ========== ========= ============== =========== =========== ===========
Earnings/(loss) per Ordinary
share 13.69p 75.07p 88.76p 12.25p 61.61p 73.86p
The Total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with
UK-adopted International Accounting Standards. The Revenue Return
and Capital Return columns are supplementary to this and are
prepared under guidance published by the Association of Investment
Companies. All items in the above statement derive from continuing
operations.
The Group does not have any other income or expense that is not
included in the above statement therefore "Total comprehensive
income" is also the profit for the year.
All income is attributable to the shareholders of the parent
company.
Group and Company statement of changes in equity
Group
Share Share Capital Retained
Capital Premium Redemption Earnings Total
For the year ended Ordinary Account Reserve Ordinary GBP'000
31 March GBP'000 GBP'000 GBP'000 GBP'000
2022 Notes
==================== ==================== ================ ================== ================= =================
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
Total comprehensive
income - - - 281,687 281,687
Dividends paid - - - (45,381) (45,381)
==================== ==================== ================ ================== ================= =================
At 31 March 2022 79,338 43,162 43,971 1,396,268 1,562,739
==================== ==================== ================ ================== ================= =================
Company
Share Share Capital Retained
Capital Premium Redemption Earnings Total
For the year ended Ordinary Account Reserve Ordinary GBP'000
31 March GBP'000 GBP'000 GBP'000 GBP'000
2022 Notes
==================== ==================== ================ ================== ================= =================
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
Total comprehensive
income - - - 281,687 281,687
Dividends paid - - - (45,381) (45,381)
==================== ==================== ================ ================== ================= =================
At 31 March 2022 79,338 43,162 43,971 1,396,268 1,562,739
==================== ==================== ================ ================== ================= =================
Group
Share Capital
Ordinary Account Reserve Ordinary Total
For the year ended 31 Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
March 2021
=========================== ======== ========= ========= ========= ========= =========
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
Total comprehensive income - - - 234,409 234,409
Dividends paid - - - (44,429) (44,429)
===================================== ========= ========= ========= ========= =========
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
===================================== ========= ========= ========= ========= =========
Company
Share Share Capital Retained
Capital Premium Redemption Earnings Total
For the year ended 31 Notes Ordinary Account Reserve Ordinary GBP'000
March 2021 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ======== ========= ==================== ========= =========
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
Total comprehensive income - - - 234,409 234,409
Dividends paid - - - (44,429) (44,429)
===================================== ========= ========= ========= ========= =========
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
===================================== ========= ========= ========= ========= =========
Group and Company balance sheets
as at 31 March 2022
Group 2022 Company 2022 Group 2021 Company 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
================================== =========== ============ =========== ============
Non-current assets
Investments held at
fair value 1,506,436 1,506,436 1,400,516 1,400,516
Investments in subsidiaries - 36,297 - 43,312
Investments held for
sale 48,980 48,980 - -
================================== =========== ============ =========== ============
1,555,416 1,591,713 1,400,516 1,443,828
Deferred taxation
asset 903 903 686 686
================================== =========== ============ =========== ============
1,556,319 1,592,616 1,401,202 1,444,514
Current assets
Debtors 97,673 97,208 60,990 60,520
Cash and cash equivalents 32,109 32,107 29,114 29,112
================================== =========== ============ =========== ============
129,782 129,315 90,104 89,632
Current liabilities (66,109) (101,939) (107,280) (150,120)
================================== =========== ============ =========== ============
Net current assets/(liabilities) 63,673 27,376 (17,176) (60,488)
Total Assets plus
net current
assets/(current liabilities) 1,619,992 1,619,992 1,384,026 1,384,026
Non-current liabilities (57,253) (57,253) (57,593) (57,593)
================================== =========== ============ =========== ============
Net assets 1,562,739 1,562,739 1,326,433 1,326,433
================================== =========== ============ =========== ============
Capital and reserves
Called up share capital 79,338 79,338 79,338 79,338
Share premium account 43,162 43,162 43,162 43,162
Capital redemption
reserve 43,971 43,971 43,971 43,971
Retained earnings 1,396,268 1,396,268 1,159,962 1,159,962
================================== =========== ============ =========== ============
Equity shareholders' funds 1,562,739 1,562,739 1,326,433 1,326,433
================================== =========== ============ =========== ============
Net Asset Value per:
Ordinary share 492.43p 492.43p 417.97p 417.97p
================================== =========== ============ =========== ============
Notes
1 Accounting policies
The financial statements for the year ended 31 March 2022 have been
prepared on a going concern basis, in accordance with UK-adopted
International Accounting Standards and in conformity with the requirements
of the Companies Act 2006. The financial statements have also been
prepared in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" ("SORP"), to the extent that it is consistent with
UK-adopted International Accounting Standards.
In assessing Going Concern the Board has made a detailed assessment
of the ability of the Company and the Group to meet its liabilities
as they fall due, including stress and liquidity tests which considered
the effects of substantial falls in investment valuations, substantial
reductions in revenues received and reductions in market liquidity
including the effects of the likely ongoing economic impact of the
war in Ukraine. The Board is satisfied with the operational resilience
of the Company's third party service providers as working practices
change following the COVID-19 pandemic but continues to monitor
their performance.
In light of the testing carried out, the liquidity of the level
1 assets held by the Company and the significant net asset value
and net current asset position of the Group and Parent Company (which
could be mitigated by the sale of liquid level 1 investments), the
Directors are satisfied that the Company and Group have adequate
financial resources to continue in operation for at least the next
12 months following the signing of the financial statements and
therefore it is appropriate to adopt the going concern basis of
accounting.
The Group and Company financial statements are expressed in sterling,
which is their functional and presentational currency. Sterling
is the functional currency because it is the currency of the primary
economic environment in which the Group operates. Values are rounded
to the nearest thousand pounds (GBP'000) except where otherwise
indicated.
2 Investment income
Year ended Year ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------ ----------------- -----------
Dividends from UK listed investments 3,101 3,753
Dividends from overseas listed
investments 21,349 18,656
Scrip dividends from listed investments 10,693 7,482
Property income distributions 9,027 6,666
------------------------------------------------------------------ ----------------- -----------
44,170 36,557
------------------------------------------------------------------ ----------------- -----------
3 Earnings/(loss) per Ordinary share
The earnings/(loss) per Ordinary share can be analysed between
revenue and capital, as below:
Year ended
31 March Year ended
2022 31 March
2021
GBP'000 GBP'000
------------------------------------------------------ --------------------- ------------
Net revenue profit 43,437 38,889
Net capital profit/(loss) 238,250 195,520
------------------------------------------------------ --------------------- ------------
Net total profit/(loss) 281,687 234,409
------------------------------------------------------ --------------------- ------------
Weighted average number
of shares in issue during
the year 317,350,980 317,350,980
------------------------------------------------------ --------------------- ------------
pence pence
------------------------------------------------------ --------------------- ------------
Revenue earnings per share 13.69 12.25
Capital earnings/(loss)
per share 75.07 61.61
------------------------------------------------------ --------------------- ------------
Earnings/(loss) per Ordinary
share 88.76 73.86
------------------------------------------------------ --------------------- ------------
The Group has no securities in issue that could dilute the return
per Ordinary share. Therefore the basic and diluted return per Ordinary
share are the same.
4 Net Asset Value Per Ordinary Share
Net asset value per Ordinary share is based on the net assets
attributable to Ordinary shares of GBP1,562,739,000 (2021:
GBP1,326,433,000) and on 317,350,980 (2021: 317,350,980) Ordinary
shares in issue at the year end.
5. Dividends
An interim dividend of 5.30p was paid in January 2022. A nal
dividend of 9.20p (2021: 9.00p) will be paid on 2 August 2022 to
shareholders on the register on 24 June 2022. The shares will be
quoted ex-dividend on 23 June 2022.
6. Status of preliminary announcement
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2022 or
2021. The financial information for 2021 is derived from the statutory
accounts for 2021 which have been delivered to the Registrar of
Companies.
The auditor has reported on the 2021 accounts; their report was
(i) unqualified, (ii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
The statutory accounts for 2022 will be finalised on the basis of
the financial information presented by the Directors in this preliminary
announcement and will be delivered to the Registrar of Companies
in due course.
By order of the Board
BMO Investment Business Limited
Company Secretary,
31 May 2022
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
ENDS
A copy of the Annual Report and Accounts will be submitted to
the National Storage Mechanism and will shortly be available for
inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report and Accounts will also be available shortly on
the Company's website at www.trproperty.com where up to date
information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
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END
FR EAFSFDDAAEAA
(END) Dow Jones Newswires
June 01, 2022 02:01 ET (06:01 GMT)
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