AEW UK REIT plc (AEWU)
AEW UK REIT plc: Half Yearly Results
28-Nov-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
28 November 2019
AEW UK REIT PLC (the "Company")
Interim Report and Financial Statements
for the six months ended 30 September 2019
Financial Highlights
? Unaudited Net Asset Value ("NAV") of GBP147.55 million and of
97.36 pence per share ("pps") as at 30 September 2019 (31
March 2019: GBP149.46 million and 98.61 pps).
? Operating profit before fair value changes of GBP7.26 million
for the period (six months ended 30 September 2018: GBP6.86
million).
? Profit Before Tax ("PBT") of GBP4.16 million and 2.74 pps (six
months ended 30 September 2018: GBP11 .68 million and 7.71 pps).
PBT includes a GBP2.41 million loss arising from changes to fair
value of the investment properties in the period (six months
ended 30 September 2018: gain of GBP5.65 million). This change
explains the significant fall in PBT for the period.
? Unadjusted EPRA Earnings Per Share ("EPRA EPS") for the period
of 4.37 pps (six months ended 30 September 2018: 4.10 pps).
See below for the calculation of EPRA EPS.
? Total dividends of 4.00 pps have been declared for the period
(six months ended 30 September 2018: 4.00 pps).
? Shareholder Total Return for the period of 5.50% (six months
ended 30 September 2018: 3.56%).
? The price of the Company's Ordinary Shares on the Main Market
of the London Stock Exchange was 93.90 pps as at 30 September
2019 (31 March 2019: 92.80 pps).
? As at 30 September 2019, the Company had drawn GBP50.00 million
(31 March 2019: GBP50.00 million) of a GBP60.00 million (31 March
2019: GBP60.00 million) term credit facility with the Royal Bank
of Scotland International Limited ('RBSi') and was geared to
25.50% of the portfolio valuation (31 March 2019: 25.30%).
? The Company held cash balances totalling GBP2.01 million as at
30 September 2019 (31 March 2019: GBP2.13 million). Under the
terms of its loan facility, the Company can draw a further
GBP1.64 million (31 March 2019: GBP2.31 million) up to the maximum
35% loan to NAV at drawdown.
Property Highlights
? As at 30 September 2019, the Company's property portfolio had
a fair value of GBP196.05 million across 35 properties (31 March
2019: GBP197.61 million across 35 properties) and a historical
cost of GBP197.02 million (31 March 2019: GBP196.86 million).
? As at 30 September 2019, the Company's property portfolio had
an EPRA vacancy rate of 3.96% (31 March 2019: 2.99%).
? Rental income generated during the period was GBP8.78 million
(six months ended 30 September 2018: GBP8.46 million). The
number of tenants as at 30 September 2019 was 92 (31 March
2019: 95).
? EPRA Net Initial Yield ("EPRA NIY") of 7.45% as at 30
September 2019 (31 March 2019: 7.62%).
? Weighted Average Unexpired Lease Term ("WAULT") of 4.33 years
to break and 5.82 years to expiry (31 March 2019: 4.87 years
to break and 6.10 years to expiry). See below for definition
and relevance to strategy.
Chairman's Statement
Overview
I am pleased to present the unaudited interim results of the Company for the
six month period from 1 April 2019 to 30 September 2019. As at 30 September
2019, the Company has established a diversified portfolio of 35 commercial
investment properties throughout the UK with a value of GBP196.05 million. On
a like-for-like basis, the portfolio valuation decreased by 0.79% over the
six months.
The Company achieved EPRA EPS of 4.37 pps for the period, which represents a
dividend cover of 109.3%, having paid dividends of 4.00 pps in relation to
the period. This is an improvement on the EPRA EPS reported for the year
ended 31 March 2019, which produced a dividend cover of 100.9% and reflects
the success of key asset management transactions which have boosted rental
income and maintained a vacancy rate below 4% by Estimated Rental Value
("ERV") over the six months to September 2019. The portfolio has a short
WAULT of 4.33 years to break and 5.82 years to expiry, which we anticipate
will provide the opportunity to add further value through an active approach
to asset management.
The Company's share price was 93.90 pps as at 30 September 2019,
representing a 3.55% discount to NAV. Over the six month period, the Company
generated a shareholder total return of 5.50% and a NAV total return of
2.79%.
Financial Results
6 month 6 month 12 month
period from period from period from
1 April 2019 1 April 2018 1 April 2018
to 30 to 30 to 31
September September 2018 March
2019 (unaudited) 2019
(unaudited) (audited)
Operating Profit before 7,264 6,859 13,524
fair value changes
(GBP'000)
Operating Profit 4,901 12,334 17,226
(GBP'000)
PBT (GBP'000)* 4,159 11,678 15,544
EPRA EPS (basic and 4.37 4.10 8.07
diluted) (pence)
Ongoing Charges (%) 1.34 1.26 1.40
NAV per share (pence) 97.36 100.06 98.61
EPRA NAV per share 97.32 100.06 98.51
(pence)
*PBT includes a GBP2.41 million loss arising from changes to fair value of the
investment properties in the period (six months ended 30 September 2018:
gain of GBP5.65 million). This change explains the significant fall in PBT for
the period.
Financing
The Company has a GBP60.00 million loan facility, of which it had drawn a
balance of GBP50.00 million as at 30 September 2019 (31 March 2019: GBP60.00
million facility; GBP50.00 million drawn), producing a gearing of 25.50% (31
March 2019: 25.30%) loan to property valuation.
The unexpired term of the facility was 4.1 years as at 30 September 2019 (31
March 2019: 4.6 years). The loan incurs interest at 3 month LIBOR +1.4%,
which equated to an all-in rate of 2.17% as at 30 September 2019 (31 March
2019: 2.32%). The Company is protected from a significant rise in interest
rates as it currently has effective interest rate caps with a combined
notional value of GBP36.51 million (31 March 2019: GBP36.51 million), with
GBP26.51 million capped at 2.50% and GBP10.00 million capped at 2.00%, resulting
in the loan being 73% hedged (31 March 2019: 73%). These interest rate caps
are effective until 19 October 2020. The Company has entered into additional
interest rate caps on a notional value of GBP46.51 million at 2.00% covering
the extension period of the loan from 20 October 2020 to 19 October 2023.
On 9 October 2019, the Company announced that it had completed an amendment
to its loan facility, increasing the loan to NAV covenant from 45% to 55%
(subject to certain conditions). There are no changes to the margin
currently charged under the facility.
The long term gearing target remains 25% or less, however the Company can
borrow up to 35% of Gross Asset Value ("GAV") in advance of an expected
capital raise or asset disposal. The Board and Investment Manager will
continue to monitor the level of gearing and may adjust the target gearing
according to the Company's circumstances and perceived risk levels.
Dividends
The Company has continued to deliver on its target of paying dividends of
8.00 pps per annum. During the period, the Company declared and paid two
quarterly dividends of 2.00 pps, in line with its target.
On 18 October 2019, the Board declared an interim dividend of 2.00 pps in
respect of the period from 1 July 2019 to 30 September 2019. This interim
dividend will be paid on 29 November 2019 to shareholders on the register as
at 1 November 2019.
The Directors will declare dividends taking into account the current level
of the Company's earnings and the Directors' view on the outlook for
sustainable recurring earnings. As such, the level of dividends paid may
increase or decrease from the current annual dividend of 8.00 pps. Based on
the current profile of the portfolio, the Company expects to pay an
annualised dividend of 8.00 pps in respect of the year ending 31 March 2020,
subject to market conditions.
The following shows the dividend paid (in pps) in relation to each quarter
from the Company's inception:
Quarter ended 2015 2016 2017
January 2.00 2.00
April 2.00 2.00
July 2.00 2.00
October 1.50 2.00 2.00
Quarter ended 2017 2018 2019
March 2.00 2.00
June 2.00 2.00
September 2.00 2.00
December *1.33 2.00
*Note that the Company changed its quarter end dates starting in December
2017 and the dividend payment of 1.33 pps relates to the two month period
from 1 November 2017 to 31 December 2017.
Outlook
The Board and the Investment Manager are pleased with the strong income
returns delivered to shareholders to date. Based on annualised dividend
payments of 8.00 pps, the Company delivered a dividend yield of 8.52% as at
30 September 2019.
The Company was fully invested at the start of the period and achieved
returns during the period which fully covered its dividend payments. The
Board expects this level of returns to continue, based on the projected
income from the portfolio which had a NIY of 7.45% and a Reversionary Yield
of 7.82% as at 30 September 2019.
In the wider political and economic environment, the country is preparing
for a general election on 12 December 2019. The outcome of this should
provide better clarity to the ongoing Brexit debate, for which the deadline
to reach an agreement with the EU has been pushed back to 31 January 2020.
It is hoped that the coming months will see an end to the continued
uncertainty which has hampered the investment markets.
Looking forward, our focus remains on continuing to grow the Company as part
of the 12 month share-issuance programme, closing on 28 February 2020, as
set out in the Company's Prospectus, subject to market conditions. Subject
to future fund raising, the Investment Manager will focus on finding further
acquisitions which will deliver an attractive return as part of a
well-diversified portfolio. There will be a continuation vote at the AGM of
the Company to be held in 2020, under the provisions of the Articles, at
which the Board will propose an ordinary resolution that the Company
continue its business as presently constituted.
Board Composition
James Hyslop retired from the Board at the AGM on 12 September 2019. The
Board expresses its appreciation for his valuable contribution to the
Company since its IPO in 2015. The Board will instigate a search for a
replacement independent non-executive Director at an appropriate time.
Mark Burton
Chairman
27 November 2019
Key Performance Indicators
KPI AND DEFINITION RELEVANCE TO PERFORMANCE
STRATEGY
1. EPRA NIY* The NIY is in line 7.45%
with the Company's
target dividend
yield meaning that,
Annualised rental after costs, the at 30 September 2019
income based on the Company should have (31 March 2019:
cash rents passing at the ability to meet 7.62%).
the balance sheet its target dividend
date, less through property
non-recoverable income.
property expense,
divided by the market
value of the
property, increased
with (estimated)
purchasers' costs.
2. True Equivalent A True Equivalent 7.93%
Yield Yield profile in
line with the
Company's target
dividend yield at 30 September 2019
The average weighted shows that, after (31 March 2019:
return a property costs, the Company 7.94%).
will produce should have the
according to the ability to meet its
present income and proposed dividend
estimated rental through property
value assumptions, income.
assuming the income
is received quarterly
in advance.
3. Reversionary Yield A Reversionary 7.82%
Yield profile that
is in line with an
Initial Yield
The expected return profile shows a at 30 September 2019
the property will potentially (31 March 2019:
provide once rack sustainable income 7.75%).
rented. stream that can be
used to meet
dividends past the
expiry of a
property's current
leasing
arrangements.
4. WAULT to expiry The Investment 5.82 years
Manager believes
that current market
conditions present
The average lease an opportunity at 30 September 2019
term remaining to whereby assets with (31 March 2019: 6.10
expiry across the a shorter unexpired years).
portfolio, weighted lease term are
by contracted rent. often mispriced. It
is also the
Investment
Manager's view that
a shorter WAULT is
useful for active
asset management as
it allows the
Investment Manager
to engage in direct
negotiation with
tenants rather than
via rent-review
mechanisms.
5. WAULT to break The Investment 4.33 years
Manager believes
that current market
conditions present
The average lease an opportunity at 30 September 2019
term remaining to whereby assets with (31 March 2019: 4.87
break, across the a shorter unexpired years).
portfolio weighted by lease term are
contracted rent. often mispriced. It
is also the
Investment
Manager's view that
a shorter WAULT is
useful for active
asset management as
it allows the
Investment Manager
to engage in direct
negotiation with
tenants rather than
via rent-review
mechanisms.
6. NAV The change in NAV GBP147.55 million
reflects the
Company's ability
to grow the
NAV is the value of portfolio and add at 30 September 2019
an entity's assets value to it (31 March 2019:
minus the value of throughout the life GBP149.46 million).
its liabilities. cycle of its
assets.
7. Leverage (Loan to The Company 25.50%
property valuation) utilises borrowings
to enhance returns
over the medium
term. Borrowings at 30 September 2019
The proportion of the will not exceed 35% (31 March 2019:
property portfolio of GAV (measured at 25.30%).
that is funded by drawdown) with a
borrowings. long term target of
25% or less of GAV.
8. Vacant ERV The Company's aim 3.96%
is to minimise
vacancy of the
properties. A low
The space in the level of structural at 30 September 2019
property portfolio vacancy provides an (31 March 2019:
which is currently opportunity for the 2.99%).
unlet, as a Company to capture
percentage of the rental uplifts and
total ERV of the manage the mix of
portfolio. tenants within a
property.
9. Dividend The dividend 4.00 pps
reflects the
Company's ability
to deliver a
Dividends declared in sustainable income for the six months to
relation to the year. stream from its 30 September 2019.
The Company targets a portfolio.
dividend of 8.00 pps
per annum.
This supports an
annualised target of
8.00 pps (six months
to 30 September 2018:
4.00 pps).
10. Ongoing Charges The Ongoing Charges 1.34%
ratio provides a
measure of total
costs associated
The ratio of total with managing and for the six months to
administration and operating the 30 September 2019
operating costs Company, which (six months to 30
expressed as a includes the September 2018:
percentage of average management fees due 1.26%).
NAV throughout the to the Investment
period. Manager. This
measure is to
provide investors
with a clear
picture of
operational costs
involved in running
the Company.
11. PBT The PBT is an GBP4.16 million
indication of the
Company's financial
performance for the
PBT is a period in which its for the six months to
profitability measure strategy is 30 September 2019
which considers the exercised. (six months to 30
Company's profit September 2018:
including fair value GBP11.68 million).
changes before the
payment of income
tax.
12. Shareholder Total This reflects the 5.50%
Return return seen by
shareholders on
their shareholdings
through share price for the six months to
The percentage change movements and 30 September 2019
in the share price dividends received. (six months to 30
assuming dividends September 2018:
are reinvested to 3.56%).
purchase additional
Ordinary Shares.
13. EPRA EPS This reflects the 4.37 pps
Company's ability
to generate
earnings from the
Earnings from core portfolio which for the six months to
operational underpins 30 September 2019
activities. A key dividends. (six months to 30
measure of a September 2018: 4.10
company's underlying pps).
operating results
from its property
rental business and
an indication of the
extent to which
current dividend
payments are
supported by
earnings. See note 7.
* For the current and comparative reporting dates, the calculation of NIY
has been revised to use EPRA methodology to bring consistency with
disclosures made elsewhere in the Interim Report and Financial Statements.
The difference in output is considered immaterial.
Investment Manager's Report
Market Outlook
The portfolio, now increasingly mature, is offering us numerous
opportunities to undertake asset management initiatives which provide
various potential routes to add value. Despite the backdrop of ongoing
political uncertainty, the Company remains confident in its ability to
deliver on its objectives. The value of our assets has remained robust,
particularly in the office and industrial sectors, where assets have either
been acquired at conservative levels or provide exciting value-add
opportunities. There has been some loss of value in retail assets, in line
with the structural changes that we are seeing across the retail sector.
However, this has been mitigated by the portfolio's light exposure to the
sector and also by valuation gains in other parts of the portfolio. Despite
our positive outlook for the portfolio, we are conscious of the opportunity
to limit downside risk in an uncertain macro environment and, with this in
mind, we have recently taken a number of steps to reduce risk associated
with the Company's debt facility, details of these are set out below.
Financial Results
The Company's NAV as at 30 September 2019 was GBP147.55 million or 97.36 pps
(31 March 2019: GBP149.46 million or 98.61 pps). This is a decrease of 1.25
pps or 1.27% over the six months. EPRA EPS for the six month period was 4.37
pps which, based on dividends paid of 4.00 pps, reflects a dividend cover of
109.3%.
Financing
As at 30 September 2019, the Company had a GBP60.0 million loan facility with
RBSi, in place until October 2023, the details of which are presented below:
30 September 2019 31 March 2019
Facility GBP60.00 million GBP60.00 million
Drawn GBP50.00 million GBP50.00 million
Gearing (Loan to 25.50% 25.30%
Property Value)
Gearing (Loan to NAV) 33.89% 33.45%
Interest rate 2.17% all-in (LIBOR 2.32% all-in (LIBOR
+ 1.4%) + 1.4%)
Notional Value of Loan 73.02% 73.02%
Balance Hedged
On 9 October 2019, the Company announced that it had completed an amendment
to its loan facility to increase the hard loan to NAV covenant from 45% to
55% (subject to certain conditions), although the target gearing remains as
set out in the Prospectus. There are no changes to the margin currently
charged under the facility.
The Company has not made any acquisitions or disposals during the period.
The following tables illustrate the composition of the portfolio in relation
to its properties, tenants and income streams:
Summary by Sector as at 30 September 2019
Knight Area Occupancy WAULT Gross ERV
Frank to
Number of by ERV Passing
Valuation break
Rental
Income
Sector Properties (GBPm) ('000 (%) (years) (GBPm) (GBPm)
sq
ft)
Industrial 20 93.93 2,335 99.4 4.1 7.55 8.37
Office 6 44.35 287 88.8 2.8 3.42 4.30
Other 3 30.02 165 100.0 5.6 2.82 2.33
Standard 5 21.65 169 92.1 3.8 1.94 2.00
Retail
Retail 1 6.10 51 100.0 4.5 0.61 0.51
Warehouse
Total 35 196.05 3,007 96.0 4.3 16.34 17.51
Summary by Geographical Area as at 30 September 2019
Number of Knight Area Occupancy WAULT Gross ERV
Frank to
by ERV Passing
Valuation break
Rental
Income
Geographical Properties (GBPm) ('000 (%) (years) (GBPm) (GBPm)
Area sq
ft)
Yorkshire 8 34.80 1,028 98.5 2.8 2.63 3.38
and
Humberside
South East 5 28.65 195 89.7 3.5 2.05 2.42
Eastern 5 23.20 345 100.00 3.5 1.90 2.11
South West 3 22.05 125 100.00 3.3 1.73 1.77
West 4 19.00 397 100.00 3.2 1.69 1.83
Midlands
East 2 17.62 81 100.00 2.5 1.85 1.47
Midlands
North West 4 15.40 302 100.00 3.7 1.45 1.33
Wales 2 14.73 376 100.00 9.6 1.25 1.29
Greater 1 12.00 72 100.00 12.1 0.96 0.75
London
Scotland 1 8.60 86 65.8 1.8 0.83 1.16
Total 35 196.05 3,007 96.0 4.3 16.34 17.51
Sector and Geographical Allocation by Market Value as at 30 September 2019
Sector Allocation
Sector %
Standard Retail 11
Retail Warehouse 3
Offices 23
Industrial 48
Other 15
Geographical Allocation
Geographical %
Greater London 6
South East 15
South West 11
Eastern 12
West Midlands 10
East Midlands 9
North West 8
Yorkshire & Humberside 18
Wales 7
Scotland 4
Properties by Market Value
Market Value
Property Sector Region Range (GBPm)
1 2 Geddington Other (Car East Midlands 10.0-15.0
Road, Corby parking)
2 40 Queen Square, Offices South West 10.0-15.0
Bristol
3 London East Other (Leisure) Greater London 10.0-15.0
Leisure Park,
Dagenham
4 Eastpoint Offices South East 10.0-15.0
Business Park,
Oxford
5 Gresford Industrial Wales 7.5-10.0
Industrial
Estate, Wrexham
6 225 Bath Street, Offices Scotland 7.5-10.0
Glasgow
7 Lockwood Court, Industrial Yorkshire and 5.0-7.5
Leeds Humberside
8 Langthwaite Industrial Yorkshire and 5.0-7.5
Grange Industrial Humberside
Estate, South
Kirkby
9 Above Bar Street, Standard Retail South East 5.0-7.5
Southampton
10 Storeys Bar Road, Industrial Eastern 5.0-7.5
Peterborough
The Company's top ten properties listed above comprise 48.0% of the total
value of the portfolio.
Market
Value
Property Sector Region Range (GBPm)
11 Sarus Court Industrial North West 5.0-7.5
Industrial
Estate, Runcorn
12 Barnstaple Retail South West 5.0-7.5
Retail Park Warehouse
13 Sandford House, Offices West Midlands 5.0-7.5
Solihull
14 Apollo Business Industrial Eastern 5.0-7.5
Park, Basildon
15 Euroway Trading Industrial Yorkshire and 5.0-7.5
Estate, Bradford Humberside
16 Brockhurst Industrial West Midlands 5.0-7.5
Crescent,
Walsall
17 Odeon Cinema, Other (Leisure) Eastern 5.0-7.5
Southend
18 Oak Park, Industrial West Midlands 5.0-7.5
Droitwich
Commercial Road, Standard Retail South East 5.0-7.5
Portsmouth
19
20 Diamond Business Industrial Yorkshire and <5.0
Park, Wakefield Humberside
21 Pearl Assurance Standard Retail East Midlands <5.0
House,
Nottingham
22 Excel 95, Industrial Wales <5.0
Deeside
23 Walkers Lane, St Industrial North West <5.0
Helens
24 Cedar House, Offices South West <5.0
Gloucester
25 Bank Hey Street, Standard Retail North West <5.0
Blackpool
26 Brightside Lane, Industrial Yorkshire and <5.0
Sheffield Humberside
Bessemer Road, Industrial South East <5.0
Basingstoke
27
Magham Road, Industrial Yorkshire and <5.0
Rotherham Humberside
28
29 Pipps Hill Industrial Eastern <5.0
Industrial
Estate, Basildon
30 Eagle Road, Industrial West Midlands <5.0
Redditch
31 Vantage Point, Offices Eastern <5.0
Hemel Hempstead
Clarke Road, Industrial South East <5.0
Milton Keynes
32
33 Knowles Lane, Industrial Yorkshire and <5.0
Bradford Humberside
34 Moorside Road, Industrial North West <5.0
Salford
35 Fargate and Standard Retail Yorkshire and <5.0
Chapel Walk, Humberside
Sheffield
Tenancy Profile
Top Ten Tenants by Passing Rent
% of
Portfolio
Passing Total
Rental Passing
Income Rental
Tenant Sector Property (GBP'000) Income
1 GEFCO UK Logistics 2 Geddington 1,320 8.1
Limited Road, Corby
2 Plastipak UK Manufacturing Gresford 883 5.4
Limited Industrial
Estate,
Wrexham
3 The Government Body Sandford 832 5.1
Secretary of House,
State Solihull and
Cedar House,
Gloucester
4 Ardagh Glass Manufacturing Langthwaite 676 4.1
Limited Industrial
Estate, South
Kirkby
5 Mecca Bingo Leisure London East 625 3.8
Limited Leisure Park,
Dagenham
6 Egbert H Manufacturing Oak Park, 620 3.8
Taylor & Droitwich
Company
Limited
7 Odeon Leisure Odeon Cinema, 535 3.3
Cinemas Southend
8 Sports Retail Barnstaple 525 3.2
Direct Retail Park
and Bank Hey
Street,
Blackpool
9 Wyndeham Manufacturing Storeys Bar 525 3.2
Peterborough Road,
Limited Peterborough
10 Advance Logistics Euroway 428 2.6
Supply Chain Trading
(BFD) Estate,
Limited Bradford
The Company's top ten tenants, listed above, represent 42.6% of the total
passing rental income of the portfolio.
Asset Management
Knowles Lane, Bradford - in September 2019, the Company settled a rent
review back-dated to September 2018 at this industrial property. The review
documents a new passing rent of GBP182,500, representing a 14% increase on the
previous rent and which was also ahead of the valuer's ERV at the date of
signing.
Bessemer Road, Basingstoke - in September 2019, a lease extension for a term
of six months was completed with HFC Prestige Manufacturing in Basingstoke.
Due to the short extension period, a rental level was agreed 46% ahead of
the previous passing rent.
Lease Expiry Profile
Approximately GBP3.36 million of the Company's current contracted income
stream is subject to an expiry or break within the 12 month period
commencing 1 October 2019. Of this GBP3.36 million, GBP940,000 (28%) is already
subject to an agreed renewal in principle, either at or above the current
level of passing rent. In respect of a further GBP1.52 million (45%), the
Investment Manager is currently engaged in active renewal discussions where
tenants are expected to remain in occupation subject to agreeing final lease
terms. The Investment Manager expects to engage further tenants in renewal
discussion throughout the period. To date, tenants that have served notice
to vacate within this period and have made clear that they intend to do so
amount to c.GBP71,000 (2%).
AEW UK Investment Management LLP
27 November 2019
Interim Management Report & 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 six months of the financial year are set out
in the Chairman's Statement and the Investment Manager'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 31 March 2019 and
continue to be as set out in that report on pages 29 to 34 and Note 20 to
the Financial Statements on pages 92 to 95.
Risks faced by the Company include, but are not limited to: property market,
property valuation, tenant default, asset management initiatives, due
diligence, fall in rental rates, breach of borrowing covenants, interest
rate rises, availability and cost of debt, use of service providers,
dependence on the Investment Manager, ability to meet objectives, Company
REIT status, political/economic risks, market price risk, real estate risk,
credit risk and liquidity risk.
Responsibility Statement
We confirm that to the best of our knowledge:
· the 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, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the entity
during that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Mark Burton
Chairman
27 November 2019
Independent Review Report to AEW UK REIT plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the Interim Report & Financial Statements for the six months
ended 30 September 2019 which comprises the Condensed Statement of
Comprehensive Income, Condensed Statement of Changes in Equity, Condensed
Statement of Financial Position, Condensed Statement of Cash Flows and the
related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2019 are not
prepared, in all material respects, in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU and the DTR of the UK's Financial
Conduct Authority (the "FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting
matters, and applying analytical and other review procedures. We read the
other information contained in the Interim Report & Financial Statements and
consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
The impact of uncertainties due to the UK exiting the European Union on our
review
Uncertainties related to the effects of Brexit are relevant to understanding
our review of the condensed financial statements. Brexit is one of the most
significant economic events for the UK, and at the date of this report its
effects are subject to unprecedented levels of uncertainty of outcomes, with
the full range of possible effects unknown. An interim review cannot be
expected to predict the
unknowable factors or all possible future implications for a company and
this is particularly the case in relation to Brexit.
Directors' responsibilities
The Interim Report & Financial Statements is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for preparing
the Interim Report & Financial Statements in accordance with the DTR of the
FCA.
The annual financial statements of the Company are prepared in accordance
with International Financial Reporting Standards as adopted by the EU. The
Directors are responsible for preparing the condensed set of financial
statements included in the Interim Report & Financial Statements in
accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the Interim Report & Financial
Statements based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of
our engagement to assist the Company in meeting the requirements of the DTR
of the FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for
no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our review
work, for this report, or for the conclusions we have reached.
Henry Todd
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
27 November 2019
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2019
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Income
Rental and 3 8,777 8,459 17,183
other income
Property 4 (509) (630) (1,462)
operating
expenses
Net rental and 8,268 7,829 15,721
other income
Other operating 4 (1,004) (970) (2,197)
expenses
Operating 7,264 6,859 13,524
profit before
fair value
changes
Change in fair 9 (2,407) 5,653 4,184
value of
investment
properties
Gain/(loss) on 9 44 (178) (482)
disposal of
investment
properties
Operating 4,901 12,334 17,226
profit
Finance expense 5 (742) (656) (1,682)
Profit before 4,159 11,678 15,544
tax
Taxation 6 - - -
Profit after 4,159 11,678 15,544
tax
Other - - -
comprehensive
income
Total 4,159 11,678 15,544
comprehensive
income for the
period
Earnings per 7 2.74 7.71 10.26
share (pence
per share)
(basic and
diluted)
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Changes in Equity
for the six months ended 30 September 2019
For the period Share Share Capital Total capital
1 April 2019
to
capital premium reserve and and reserves
account retained attributable to
earnings owners of
the Company
30 September Notes GBP'000 GBP'000 GBP'000 GBP'000
2019
(unaudited)
Balance as at 1,515 49,770 98,171 149,456
1 April 2019
Total - - 4,159 4,159
comprehensive
income
Dividends paid 8 - - (6,062) (6,062)
Balance as at 1,515 49,770 96,268 147,553
30 September
2019
For the period Share Share Capital Total capital
1 April 2018
to
capital premium reserve and and reserves
account retained attributable to
earnings owners of
the Company
30 September Notes GBP'000 GBP'000 GBP'000 GBP'000
2018
(unaudited)
Balance at 1 1,515 49,768 94,751 146,034
April 2018
Total - - 11,678 11,678
comprehensive
income
Share issue - 3 - 3
costs
Dividends paid 8 - - (6,062) (6,062)
Balance as at 1,515 49,771 100,367 151,653
30 September
2018
Share Share Capital Total capital
capital premium reserve and and reserves
account retained attributable to
earnings owners of
the Company
For the year Notes GBP'000 GBP'000 GBP'000 GBP'000
ended 31 March
2019 (audited)
Balance at 1 1,515 49,768 94,751 146,034
April 2018
Total - - 15,544 15,544
comprehensive
income
Share issue - 2 - 2
costs
Dividends paid 8 - - (12,124) (12,124)
Balance as at 1,515 49,770 98,171 149,456
31 March 2019
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Financial Position
as at 30 September 2019
As at As at As at
30 September 30 September 31 March 2019
2019
(unaudited)
2018 (audited)
(unaudited)
Notes GBP'000 GBP'000 GBP'000
Assets
Non-Current Assets
Investment 9 193,979 192,519 196,129
property
193,979 192,519 196,129
Current Assets
Receivables and 10 7,621 3,394 4,469
prepayments
Other financial 11 58 9 162
assets held at
fair value
Cash and cash 2,012 8,145 2,131
equivalents
9,691 11,548 6,762
Total assets 203,670 204,067 202,891
Non-Current
Liabilities
Interest bearing 12 (49,528) (49,714) (49,476)
loans and
borrowings
Finance lease 14 (636) (573) (636)
obligations
(50,164) (50,287) (50,112)
Current
Liabilities
Payables and 13 (5,905) (2,080) (3,275)
accrued expenses
Finance lease 14 (48) (47) 48
obligations
(5,953) (2,127) (3,323)
Total Liabilities (56,117) (52,414) (53,435)
Net Assets 147,553 151,653 149,456
Equity
Share capital 1,515 1,515 1,515
Share premium 49,770 49,771 49,770
account
Capital reserve 96,268 100,367 98,171
and retained
earnings
Total capital and 147,553 151,653 149,456
reserves
attributable to
equity holders of
the Company
Net Asset Value 7 97.36 100.06 98.61
per share (pps)
The financial statements were approved by the Board of Directors on 27
November 2019 and were signed on its behalf by:
Mark Burton
Chairman
AEW UK REIT plc
Company number: 09522515
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Cash Flows
for the six months ended 30 September 2019
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flows from
operating activities
Profit after tax 4,159 11,678 15,544
Adjustment for
non-cash items:
Finance expenses 742 656 1,682
Loss/(gain) from 2,407 (5,653) (4,184)
change in fair value
of investment
property
Realised (gain)/loss (44) 178 482
on disposal of
investment property
Increase in other (3,152) (455) (1,318)
receivables and
prepayments
Increase/(decrease) 2,640 (385) 587
in other payables and
accrued expenses
Net cash generated 6,752 6,019 12,793
from operating
activities
Cash flows from
investing activities
Additions to (257) (506) (7,945)
investment property
Proceeds from 44 4,508 6,629
disposal of
investment property
Net cash (used (213) 4,002 (1,316)
in)/generated from
investing activities
Cash flows from
financing activities
Share issue costs - (31) (32)
Loan arrangement fees - - (294)
Premiums on interest - - (531)
rate caps
Finance costs (596) (494) (1,076)
Dividends paid (6,062) (6,062) (12,124)
Net cash used in (6,658) (6,587) (14,057)
financing activities
Net (119) 3,434 (2,580)
(decrease)/increase
in cash and cash
equivalents
Cash and cash 2,131 4,711 4,711
equivalents at start
of the period/year
Cash and cash 2,012 8,145 2,131
equivalents at end of
the period/year
The notes below form an integral part of these condensed financial
statements.
Notes to the Condensed Financial Statements
for the six months ended 30 September 2019
1. Corporate information
AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment
Trust ('REIT') incorporated on 1 April 2015 and domiciled in the UK.
The comparative information for the year ended 31 March 2019 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. 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.
2. Accounting policies
2.1 Basis of preparation
These interim 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 Company's last financial statements
for the year ended 31 March 2019. These 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 Company's financial position and performance since the last
financial statements. A review of the interim financial information has been
performed by the Independent Auditor of the Company for issue on 27 November
2019.
The comparative figures disclosed in the condensed unaudited financial
statements and related notes have been presented for both the six month
period ended 30 September 2018 and year ended 31 March 2019 and as at 30
September 2018 and 31 March 2019.
These condensed unaudited financial statements have been prepared under the
historical-cost convention, except for investment property and interest rate
derivatives that have been measured at fair value. The condensed unaudited
financial statements are presented in Sterling and all values are rounded to
the nearest thousand pounds (GBP'000), except when otherwise indicated.
The Company is exempt by virtue of section 402 of the Companies Act 2006
from the requirement to prepare group financial statements. These financial
statements present information solely about the Company as an individual
undertaking.
New standards, amendments and interpretations
There were a number of new standards and amendments to existing standards
which are required for the Company's accounting periods beginning after 1
April 2019, which have been considered and applied. These being:
· IFRS 16, Leases. In January 2016, the IASB published the final version
of IFRS 16 Leases. IFRS specifies how an IFRS reporter will recognise,
measure, present and disclose leasing arrangements. The accounting for
lessors did not significantly change. For finance lease obligations, the
Company is already carrying a right of use asset at fair value so
treatment remains in line with prior years in that regard.
· Amendments to IFRS 9 - Prepayment Features with Negative Compensation.
This seeks to enable companies to measure at amortised cost some
prepayable financial assets with negative compensation.
· IFRIC 23, Uncertainty over Income Tax Treatments. This seeks to clarify
the application of recognition and measurement requirements in IAS 12,
Income Taxes, when there is uncertainty over income tax treatment.
· Amendments to IAS 28 Long Term interests in Associates and Joint
Ventures. This seeks to clarify the impact of expected credit loss model
in IFRS 9 on any long-term interests in an associate or joint venture to
which the equity method is not applied but that, in substance, form part
of the net investment in associate or joint venture.
· Amendments to IAS 19 Plan Amendment, Curtailment or Settlement. This
seeks to clarify when an entity is required to determine the current
service cost and net interest for the remainder of the period after a plan
amendment, curtailment or settlement.
The Company has applied the new standards and there has been no impact on
the financial statements.
There are a number of new standards and amendments to existing standards
which have been published and are mandatory for the Company's accounting
periods beginning on or after 1 April 2020 or later. The following are the
most relevant to the Company and their impact on the financial statements is
as follows:
· Definition of Material - amendments to IAS 1 and IAS 8.
· Annual improvements to IFRS 2015-2017 Cycle: amendments to IFRS 3
Business Combinations, IFRS 11 Joint Arrangements.
The impact of the adoption of new accounting standards issued and becoming
effective for accounting periods beginning on or after 1 April 2020 has been
considered and is not considered to be significant.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IAS 34 requires
the Directors of the Company to make judgements, estimates and assumptions
that affect the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the
asset or liability in the future.
i) Valuation of investment property
The Company's investment property is held at fair value as determined by the
independent valuer on the basis of fair value in accordance with the
internationally accepted Royal Institution of Chartered Surveyors ('RICS')
Appraisal and Valuation Standards.
2.3 Segmental information
In accordance with IFRS 8, the Company is organised into one main operating
segment being investment in property and property related-investments in the
UK.
2.4 Going concern
The Directors have made an assessment of the Company's ability to continue
as a going concern and are satisfied that the Company has the resources to
continue in business for at least 12 months. Furthermore, the Directors are
not aware of any material uncertainties that may cast significant doubt upon
the Company's ability to continue as a going concern. Therefore, the
financial statements have been prepared on the going concern basis.
2.5 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are consistent with those applied within the Company's
Annual Report and Financial Statements for the year ended 31 March 2019
except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross rental income 8,777 8,456 17,179
received
Other property income - 3 4
Total rental and 8,777 8,459 17,183
other income
Rent receivable under the terms of the leases is adjusted for the effect of
any incentives agreed.
4. Expenses
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Property operating 509 630 1,462
expenses
Other operating
expenses
Investment management 665 648 1,302
fee
Auditor remuneration 48 43 98
Operating costs 230 226 675
Directors' 61 53 122
remuneration
Total other operating 1,004 970 2,197
expenses
Total operating 1,513 1,600 3,659
expenses
5. Finance expense
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on 556 540 1,103
loan borrowings
Amortisation of loan 53 71 127
arrangement fee
Agency fee payable on - 2 3
loan borrowings
Commitment fee 29 26 54
payable on loan
borrowings
638 639 1,287
Change in fair value 104 17 395
of interest rate
derivatives
Total 742 656 1,682
6. Taxation
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Analysis of charge in
the period
Profit before tax 4,159 11,678 15,544
Theoretical tax at UK 790 2,219 2,953
corporation tax
standard rate of 19%
(30 September 2018:
19%; 31 March 2019:
19%)
Adjusted for:
Exempt REIT income (1,239) (1,178) (2,249)
Non taxable 449 (1,041) (704)
investment
losses/(gains)
Total - - -
7. Earnings per share and NAV per share
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
EPS:
Total comprehensive 4,159 11,678 15,544
income (GBP'000)
Weighted average 151,558,251 151,558,251 151,558,251
number of shares
EPS (basic and 2.74 7.71 10.26
diluted) (pence)
EPRA EPS: 4,159 11,678 15,544
Total comprehensive
income (GBP'000)
Adjustment to total
comprehensive
income:
Change in fair 2,407 (5,653) (4,184)
value of investment
property (GBP'000)
(Gain)/loss on (44) 178 482
disposal of
investment property
(GBP'000)
Change in fair 104 17 395
value of interest
rate derivatives
(GBP'000)
Total EPRA Earnings 6,626 6,220 12,237
(GBP'000)
EPRA EPS (basic and 4.37 4.10 8.07
diluted) (pence)
NAV per share:
Net assets (GBP'000) 147,553 151,653 149,456
Ordinary Shares 151,558,251 151,558,251 151,558,251
NAV per share 97.36 100.06 98.61
(pence)
EPRA NAV per share:
Net assets (GBP'000) 147,553 151,653 149,456
Adjustments to net
assets:
Other financial (58) (9) (162)
assets held at fair
value (GBP'000)
EPRA NAV (GBP'000) 147,495 151,644 149,294
EPRA NAV per share 97.32 100.06 98.51
(pence)
EPS amounts are calculated by dividing 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. As at 30 September 2019, EPRA
NNNAV was equal to IFRS NAV and as such a reconciliation between the two
measures has not been presented.
8. Dividends paid
Period from Period from Year ended
1 April 2019 to 1 April 2018 to 31 March
30 September 30 September 2019
2019 2018
Dividends paid GBP'000 GBP'000 GBP'000
during the period
Represents 6,062 6,062 12,124
two/two/four
interim dividends
of 2.00 pps each
Period from Period from
1 April 2019 to 1 April 2018 to Year ended
30 September 31 October 31 March
2019 2018 2019
Dividends relating GBP'000 GBP'000 GBP'000
to the period
Represents 6,062 6,062 12,124
two/two/four
interim dividends
of 2.00 pps each
Dividends paid during the period relate to Ordinary Shares only.
9. Investments
9.a) Investment property
Period from 1 April 2019 to
30 September 2019
(unaudited)
Period from Year
ended
1 April
2018 31 March
to 31
September
Investment Investment 2018 2019
properties properties (unaudited) (audited)
freehold leasehold Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK
Investment
property
As at 159,080 38,525 197,605 192,342 192,342
beginning
of period
Additions 262 (5) 257 151 7,590
in the
period
Disposals - - - (4,628) (7,053)
in the
period
Revaluation (2,617) 805 (1,812) 5,665 4,726
of
investment
property
Valuation 156,725 39,325 196,050 193,530 197,605
provided by
Knight
Frank
Adjustment (2,755) (1,631) (2,160)
for rent
free debtor
Adjustment 684 620 684
for finance
lease
obligations
*
Total 193,979 192,519 196,129
Investment
property
Change in
fair value
of
investment
property
Change in (1,812) 5,665 4,726
fair value
before
adjustments
for lease
incentives
Adjustment
for
movement in
the period:
in value (595) (12) (542)
for rent
free debtor
(2,407) 5,653 4,184
Gain/(loss)
on disposal
of the
investment
property
Net 44 4,508 6,629
proceeds
from
disposals
of
investment
property
during the
period
Cost of - (4,628) (7,053)
disposal
Lease - (58) (58)
incentives
amortised
in current
period/year
Gain/(loss) 44 (178) (482)
on disposal
of
investment
property
* Adjustment in respect of minimum payment under head leases separately
included as a liability within the Condensed Statement of Financial
Position.
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, an
accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued.
The valuation of the Company'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.
9.b) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for
non-current assets:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets measured
at fair value
30 September 2019
Investment - - 193,979 193,979
property
30 September 2018
Investment - - 192,519 192,519
property
31 March 2019
Investment - - 196,129 196,129
property
Explanation of the fair value hierarchy:
Level 1 - Quoted prices for an identical instrument in active markets;
Level 2 - Prices of recent transactions for identical instruments and
valuation techniques using observable market data; and
Level 3 - Valuation techniques using non-observable data.
There have been no transfers between Level 1 and Level 2 during either
period, nor have there been any transfers in or out of Level 3.
Sensitivity analysis to significant changes in unobservable inputs within
Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the entity's
portfolios of investment properties are:
1) ERV
2) Equivalent yield
Increases/(decreases) in the ERV (per sq ft per annum) in isolation would
result in a higher/(lower) fair value measurement. Increases/(decreases) in
the yield in isolation would result in a lower/(higher) fair value
measurement.
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the portfolio of
investment property are:
Significant
Fair value Valuation unobservable
Class GBP'000 technique inputs Range
30 September
2019
Investment 196,050 Income ERV GBP0.50 -
Property capitalisati GBP127.00
on
Equivalent yield
5.95% -
9.69%
30 September
2018
Investment 193,530 Income ERV GBP1.00 -
Property capitalisati GBP127.00
on
Equivalent yield
4.23% -
12.09%
31 March 2019
Investment 197,605 Income ERV GBP1.00-
Property capitalisati GBP127.00
on
Equivalent yield
5.87% -
10.25%
Where possible, sensitivity of the fair values of Level 3 assets are tested
to changes in unobservable inputs to reasonable alternatives.
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property and investments held at the end of the reporting period.
With regards to both investment property and investments, gains and losses
for recurring fair value measurements categorised within Level 3 of the fair
value hierarchy, prior to adjustment for rent free debtor and rent guarantee
debtor, are recorded in profit and loss.
The carrying amount of the assets and liabilities, detailed within the
Condensed Statement of Financial Position, is considered to be the same as
their fair value.
The tables below sets out a sensitivity analysis for each of the key sources
of estimation uncertainty with the resulting increase/(decrease) in the fair
value of investment property.
Fair Change in ERV Change in equivalent
value yield
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sensitivity +5% -5% +5% -5%
Analysis
30 September 196,05 204,427 187,935 185,802 207,198
2019 0
30 September 193,53 200,241 183,820 181,321 203,387
2018 0
31 March 197,60 205,803 189,720 187,352 208,707
2019 5
Fair Change in ERV Change in equivalent
value yield
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sensitivity +10% -10% +10% -10%
Analysis
30 September 196,05 213,858 179,153 178,444 217,351
2019 0
30 September 193,53 208,704 175,911 173,762 213,834
2018 0
31 March 197,60 215,108 181,156 179,876 219,000
2019 5
10. Receivables and prepayments
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Receivables
Rent debtor 2,789 1,283 1,477
Allowance for expected (51) - (39)
credit losses
Rent agent float account 1,363 184 92
Other receivables 481 221 381
4,582 1,688 1,911
Rent free debtor 2,755 1,631 2,160
Prepayments 284 75 398
Total 7,621 3,394 4,469
The aged debtor analysis of receivables as follows:
30 30 September 31 March
September
2019 2018 2019
GBP'000 GBP'000 GBP'000
Less than three months due 4,257 1,688 1,911
Between three and six months 325 - -
due
Total 4,582 1,688 1,911
11. Interest rate derivatives
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At the beginning of the 162 26 26
period
Interest rate cap premium - - 531
paid
Changes in fair value of (104) (17) (395)
interest rate derivatives
At the end of the period 58 9 162
The Company is protected from a significant rise in interest rates as it has
interest rate caps with a combined notional value of GBP36.51 million (31
March 2019: GBP36.51 million), resulting in the loan being 73% hedged (31
March 2019: 73%). These interest rate caps are effective until 19 October
2020. In October 2018, the Company entered into additional interest rate
caps on a notional value of GBP46.51 million at 2.00% covering the extension
period of the loan from October 2020 to October 2023.
Fair Value hierarchy
The following table provides the fair value measurement hierarchy for
interest rate derivatives:
Assets measured at fair value
Quoted prices Significant Significant
in active observable unobservable
markets input inputs
(Level 1) (Level 2) (Level 3) Total
Valuation date GBP'000 GBP'000 GBP'000 GBP'000
30 September - 58 - 58
2019
30 September - 9 - 9
2018
31 March 2019 - 162 - 162
The fair value of these contracts are recorded in the Condensed Statement of
Financial Position as at the period end.
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during the
period.
The carrying amount of the assets and liabilities, detailed within the
Condensed Statement of Financial Position, is considered to be the same as
their fair value.
12. Interest bearing loans and borrowings
Bank borrowings drawn
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At the beginning of the 50,000 50,000 50,000
period
Bank borrowings drawn in the - - -
period
Interest bearing loans and 50,000 50,000 50,000
borrowings
Unamortised loan arrangement (472) (286) (524)
fees
At the end of the period 49,528 49,714 49,476
Repayable between two and 50,000 50,000 50,000
five years
Bank borrowings available 10,000 10,000 10,000
but undrawn in the period
Total facility available 60,000 60,000 60,000
The Company has a GBP60.00 million (31 March 2019: GBP60.00 million) credit
facility with RBSi of which GBP50.00 million (31 March 2019: GBP50.00 million)
has been utilised as at 30 September 2019.
Under the terms of the Prospectus, the Company has a target gearing of 25%
loan to GAV, but can borrow up to 35% loan to GAV in advance of a capital
raise or asset disposal. As at 30 September 2019, the Company's gearing was
25.50% loan to property valuation (31 March 2019: 25.30%).
Under the terms of the loan facility, the Company can draw up to 35% loan to
NAV at drawdown. On 9 October 2019, the Company announced that it had
completed an amendment to its loan facility, increasing the loan to NAV
covenant from 45% to 55% (subject to certain conditions). There are no
changes to the margin currently charged under the facility.
Borrowing costs associated with the credit facility are shown as finance
costs in note 5 to these financial statements.
13. Payables and accrued expenses
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Deferred income 3,312 929 1,137
Accruals 1,037 467 1,189
Other creditors 1,556 684 949
Total 5,905 2,080 3,275
14. Finance lease obligations
Finance leases are capitalised at the lease's commencement at the present
value of the minimum lease payments. The present value of the corresponding
rental obligations are included as liabilities.
The following table analyses the minimum lease payments under
non-cancellable finance leases:
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Not later than one year 48 47 48
Later than one year but not 160 152 160
later than five years
Later than five years 476 421 476
636 573 636
Total 684 620 684
15. Issued share capital
There was no change to the issued share capital during the period. The
number of ordinary shares in issue and fully paid remains 151,558,251 of
GBP0.01 each.
16. Transactions with related parties
As defined by IAS 24 Related Party Disclosures, parties are considered to be
related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial or
operational decisions.
For the six months ended 30 September 2019, the Directors of the Company are
considered to be the key management personnel. Directors' remuneration is
disclosed in note 4.
The Company is party to an Investment Management Agreement with the
Investment Manager, pursuant to which the Company has appointed the
Investment Manager to provide investment management services 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, the Investment Manager receives a
quarterly management fee which is calculated and accrued monthly at a rate
equivalent to 0.9% per annum of NAV (excluding uninvested proceeds from
fundraising).
During the period from 1 April 2019 to 30 September 2019, the Company
incurred GBP665,344 (six months ended 30 September 2018: GBP648,247) in respect
of investment management fees and expenses of which GBP664,962 was outstanding
at 30 September 2019 (31 March 2019: GBP328,323).
17. Events after reporting date
Dividend
On 18 October 2019, the Board declared its second interim dividend of 2.00
pps in respect of the period from 1 July 2019 to 30 September 2019. The
dividend payment will be made on 29 November 2019 to shareholders on the
register as at 1 November 2019. The ex-dividend date was 31 October 2019.
The dividend of 2.00 pps was designated as an interim property income
distribution ("PID"). Unless shareholders have elected to receive the PID
gross, 20% tax will be deducted at source.
Financing
On 9 October 2019, the Company announced that it had completed an amendment
to its loan facility, increasing the loan to NAV covenant from 45% to 55%
(subject to certain conditions).
EPRA Performance Measures
Detailed below is a summary table showing the EPRA performance measures of
the Company. All EPRA performance measures have been calculated in line with
EPRA Best Practices Recommendations Guidelines which can be found at
www.epra.com [1].
MEASURE AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings
Earnings from A key measure of GBP6.63 million/4.37
operational activities. a company's pps
underlying
operating results
and an indication
of the extent to EPRA earnings for the
which current six month period
dividend payments ended 30 September
are supported by 2019 (six month
earnings. period ended 30
September 2018: GBP6.22
million/4.10 pps)
2. EPRA NAV
NAV adjusted to include Makes adjustments GBP147.50 million/97.32
properties and other to IFRS NAV to pps EPRA NAV as at 30
investment interests at provide September 2019 (At 31
fair value and to stakeholders with March 2019: GBP149.29
exclude certain items the most relevant million/ 98.51 pps)
not expected to information on
crystallise in a the fair value of
long-term investment the assets and
property business. liabilities
within a true
real estate
investment
company with a
long-term
investment
strategy.
3. EPRA NNNAV
EPRA NAV adjusted to Makes adjustments GBP147.55 million/97.36
include the fair values to EPRA NAV to pps EPRA NNNAV as at
of: provide 30 September 2019
stakeholders with
the most relevant
information on
(i) financial the current fair (At 31 March 2019:
instruments; value of all the GBP149.46 million/98.61
assets and pps)
liabilities
within a real
(ii) debt; and estate company.
(iii) deferred taxes.
4.1 EPRA NIY
Annualised rental income
based on the cash rents
passing at the balance
sheet date, less
non-recoverable property A comparable 7.45%
operating expenses, measure for
divided by the market portfolio
value of the property, valuations. This
increased with measure should EPRA NIY
(estimated) purchasers' make it easier
costs. for investors to
judge themselves,
how the valuation as at 30 September
of portfolio X 2019
compares with
portfolio Y.
(At 31 March 2019:
7.62%)
4.2 EPRA 'Topped-Up' NIY
This measure A comparable 8.27%
incorporates an measure for
adjustment to the EPRA portfolio
NIY in respect of the valuations. This
expiration of rent-free measure should EPRA 'Topped-Up' NIY
periods (or other make it easier
unexpired lease for investors to
incentives such as judge themselves,
discounted rent periods how the valuation as at 30 September
and step rents). of portfolio X 2019
compares with
portfolio Y.
(At 31 March 2019:
8.58%)
5. EPRA Vacancy
Estimated Market Rental A "pure" (%) 3.96%
Value ('ERV') of vacant measure of
space divided by ERV of investment
the whole portfolio. property space
that is vacant, EPRA vacancy
based on ERV.
as at 30 September
2019
(At 31 March 2019:
2.99%)
6. EPRA Cost Ratio
Administrative and A key measure to 16.93%
operating costs enable meaningful
(including and excluding measurement of
costs of direct vacancy) the changes in a
divided by gross rental company's EPRA Cost Ratio
income. operating costs. (including direct
vacancy cost) as at
30 September 2019
(At 30 September
2018: 18.68%)
13.76%
EPRA Cost ratio
excluding direct
vacancy costs as at
30 September 2019
(At 30 September
2018: 14.96%)
Calculation of EPRA NIY and 'topped-up' NIY
30 September
2019
GBP'000
Investment property - wholly-owned 196,050
Allowance for estimated purchasers' costs 13,331
Gross up completed property portfolio valuation 209,381
Annualised cash passing rental income 16,335
Property outgoings (738)
Annualised net rents 15,597
Rent expiration of rent-free periods and fixed 1,716
uplifts
'Topped-up' net annualised rent 17,313
EPRA NIY 7.45%
EPRA 'topped-up' NIY 8.27%
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
our external valuers as at 30 September 2019, 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
30 September
2019
GBP'000
Annualised potential rental value of vacant 694
premises
Annualised potential rental value for the 17,512
completed property portfolio
EPRA Vacancy Rate 3.96%
30 September
2019
GBP'000
Administrative/operating expense per IFRS income 1,513
statement
Less: Ground rent costs (33)
EPRA Costs (including direct vacancy costs) 1,480
Direct vacancy costs (277)
EPRA Costs (excluding direct vacancy costs) 1,203
Gross Rental Income less ground rent costs 8,744
EPRA Cost Ratio (including direct vacancy costs) 16.93%
EPRA Cost Ratio (excluding direct vacancy costs) 13.76%
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 889 4069 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 [2]. Shareholders eligible to receive dividend
payments gross of tax may also download declaration forms from that website.
Share Information
Ordinary GBP0.01 Shares 151,558,251
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
The Company's Ordinary Shares are traded on the Main Market of the London
Stock Exchange.
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Company's
website: www.aewukreit.com [3].
Provisional Financial Calendar
31 March 2020 Year end
June 2020 Announcement of annual results
September 2020 Annual General Meeting
30 September 2020 Half-year end
November 2020 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the
period:
GBP
Interim dividend for the period 1 April 2019 to 30 3,031,165
June 2019 (payment made on 30 August 2019)
Interim dividend for the period 1 July 2019 to 30 3,031,165
September 2019 (payment to be made on 29 November
2019)
Total 6,062,330
Independent Directors
Mark Burton (Non-executive Chairman)
Bim Sandhu (Non-executive Director)
Katrina Hart (Non-executive Director)
Registered Office
6th Floor
65 Gresham Street
London
EC2V 7NQ
Investment Manager and AIFM
AEW UK Investment Management LLP
33 Jermyn Street
London
SW1Y 6DN
Tel: 020 7016 4880
Website: www.aewuk.co.uk
Property Manager
M J Mapp
180 Great Portland Street
London
W1W 5QZ
Corporate Broker
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
Company Secretary
Link Company Matters Limited
6th Floor
65 Gresham Street
London
EC2V 7NQ
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
Frequency of NAV publication:
The Company's NAV is released to the London Stock Exchange on a quarterly
basis and is published on the Company's website.
National Storage Mechanism
A copy of the Interim Report will be submitted shortly to the National
Storage Mechanism ('NSM') and will be available for inspection at the NSM,
which is situated at www.morningstar.co.uk/uk/NSM [4].
LEI: 21380073LDXHV2LP5K50
ISIN: GB00BWD24154
Category Code: IR
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 32012
EQS News ID: 923461
End of Announcement EQS News Service
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(END) Dow Jones Newswires
November 28, 2019 02:00 ET (07:00 GMT)
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