TIDMRLE
RNS Number : 9553Q
Real Estate Investors PLC
18 September 2017
Real Estate Investors Plc
("REI" or the "Company" or the "Group")
Half year results for the six months to 30 June 2017
Continued progress and 20% H1 dividend growth
Real Estate Investors Plc (AIM: RLE), the Birmingham based
property group and listed UK Real Estate Investment Trust, today
announces its unaudited half year results for the six-month period
ended 30 June 2017.
Financial Highlights
-- Gross property assets of GBP209.4 million (FY 2016: GBP201.9 million) up 3.7%
-- EPRA** NAV per share 67.6p (FY 2016: 66.2p) up 2.1%
-- Revenue of GBP7.1 million (H1 2016: GBP6.0 million) up 19.9%
-- EPRA** EPS of 1.6p (H1 2016: 1.3p) up 23.1%
-- Underlying profit before tax* of GBP3.1 million (H1 2016: GBP2.4 million) up 29.2%
-- Pre-tax profit of GBP6.4 million (H1 2016: loss of GBP560,000)
-- Second quarter dividend of 0.75p, making total dividend for
the first half of 1.5p (H1 2016: 1.25p) up 20%
-- Average cost of debt 4.0% (H1 2016: 4.1%)
Operational Highlights
-- Contracted rental income of GBP15.2 million (net of
contracted sales) (FY 2016: GBP14.9 million), up 2.0%
-- Like for like portfolio valuation GBP200.4 million (FY 2016: GBP196.6 million) up 1.9%
-- Acquisitions of GBP8.9 million (net of acquisition costs) at
a net initial yield of 7.48% and a reversionary yield of 7.72%
-- Sales of GBP12.4 million (of which GBP7.2 million completed
in Q3 2017) as REI recycles capital for future opportunities
-- Active asset management with 11 new lettings and 3 lease renewals
-- Record occupancy increased to 94.8% (FY 2016: 92.6%)
-- WAULT*** of 5.1 years to break/7.2 years to lease expiry (FY
2016: 4.7 years to break/6.8 years to expiry)
-- 235 tenants (FY 2016: 232)
-- Total ownership 1.4 million sq ft (FY 2016: 1.4 million sq ft)
-- Prime Birmingham City Centre ownership of 128,361 sq ft (FY 2016: 156,425 sq ft)
-- Portfolio benefiting from active asset management programme and seeing:
-- Continued strong occupier demand, in particular in retail, restaurant and bar sector
-- Rental uplift from recessionary rents, and market demand
-- Strong investor appetite for income producing property
Definitions
* Underlying profit excludes profit/loss on revaluation and interest rate swaps and tax
** EPRA = European Public Real Estate Association
*** WAULT = Weighted Average Unexpired Lease Term
Paul Bassi, CEO of Real Estate Investors Plc, commented:
"Despite market and political uncertainty, we continue to
benefit from our focused investment strategy, and a robust
investment market. The weight of investment capital remains
significant and investor demand for regional real estate has
continued.
"We have made some strategic sales and will consider additional
sales during H2. With further acquisitions, we intend to maintain a
GBP200 million portfolio and continue to grow the Company's
dividend payments, which have now seen 5 years of year on year
growth.
"The West Midlands remains economically vibrant and a
beneficiary of a much weakened sterling, and occupancy demand is
set to benefit from the relocation of HSBC to Birmingham City
Centre and the HS2 investment in our region."
Enquiries:
Real Estate Investors Plc
Paul Bassi +44 (0)121 212 3446
Smith & Williamson Corporate
Finance Limited
Azhic Basirov/David Jones +44 (0)20 7131 4000
Liberum
Jamie Richards/Ben Roberts +44 (0)20 3100 2000
Gable Communications Limited +44 (0)20 7193 7463
John Bick +44 (0)7872 061 007
CHIEF EXECUTIVE'S STATEMENT
As a result of our focused investment strategy and active asset
management approach to property investment, we are pleased to
report an excellent set of half year results. Our pre-tax profits
are GBP6.4 million and our underlying profits excluding asset sales
increased by 29% to GBP3.1 million. This strengthened performance
allows us to continue with our progressive dividend payments, with
an interim dividend payment of 0.75p giving an overall 20% increase
in the dividend for H1 to 1.5p. Additionally, our revenue is GBP7.1
million, up 19.9% and our EPRA NAV per share has grown to 67.6p, up
2.1%.
Our portfolio remains stable and our occupancy has improved to a
record 94.8%. Demand across our retail and restaurant/bar units
remains very strong and we have experienced competitive bidding and
rental growth.
Demand for regional investment property remains strong - we are
very much in a sellers' market and have taken advantage of this by
making sales totalling GBP12.4 million since the last year end. We
anticipate further sales above book value in H2, and also
anticipate growing our rental income from acquisitions and lettings
from within our existing portfolio, whilst maintaining a GBP200
million portfolio and a progressive dividend payment. There is
limited criteria compliant property available to buy, and yet
despite the level of competition for assets, we anticipate securing
further criteria compliant property during H2, via our privileged
network. We currently have GBP5 million of deals agreed and in
legals and we are confident of securing further acquisitions before
the year end.
Market Overview
Against a backdrop of economic and political uncertainty, in
particular the Brexit discussions, we anticipate continued demand
for income producing regional property investments and expect
valuations to remain strong in H2, with interest rates remaining at
a record low.
More generally, the occupier market is stable and substantial
development is taking place to accommodate HMRC, HSBC, HS2 and the
continued growth of high end manufacturing, together with the
growing motor industry requirements at Jaguar Land Rover and BMW.
All this activity will bring significant employment to the region,
which in turn has boosted demand for housing, both rental and
sales. This has naturally driven substantial residential
development across Birmingham, the Black Country and the West
Midlands, and we are seeing rental and house price growth.
However, it is possible that there may be moments of concern
during this period of uncertainty, that may provide a "short term"
buying opportunity to a well established and credible buyer like
ourselves. We have retained significant cash and banking facilities
that will allow us to capitalise on any opportunities that meet our
acquisition criteria, and these financial resources will be further
boosted from intended sales in H2 2017.
According to Colliers International, despite post-EU referendum
uncertainty, pricing and volumes have held firm, mostly due to the
insatiable demand from overseas investors, who took advantage of
sterling's devaluation. Indeed, foreign buyers acquired GBP16.2bn
worth UK assets in the first seven-and-a-half months of the year,
representing 51% of all transactions. Demand for real estate assets
has also come from local authorities aiming to take a more active
role in the regeneration of their locations, who can also take
advantage of the low cost of debt on offer from the Public Works
Loan Board (PWLB).
The Midlands' regional yield discount to London is still evident
but there has been a noticeable shift in focus from the South East
markets to core regional markets including Birmingham. There has
also been strong interest in more secondary assets which is in part
due to a lack of availability of prime assets. In H2 2017 prime
yields are expected to remain unchanged, although transaction
volumes are likely to increase as vendors look to capitalise on the
depth of investor demand.
Recent press comment has also identified Birmingham as an
emerging tech hub and further growth within this sector is
expected. We anticipate further space requirements to follow as a
consequence of the gathering momentum around the delivery of HS2
and its associated supply chain. Active demand in the first half
was boosted following HS2 securing Royal Assent in late February,
which is likely to be reflected in lettings as the year progresses.
Consequently, vacancy levels have continued to fall and landlords
are beginning to have the upper edge in negotiations. Although many
tenant negotiations remain finely balanced, it should be possible
to improve our occupancy further and secure further rental growth
across the Company's portfolio in the second half of this year.
Property Overview
We have enjoyed an excellent period of activity, during which we
have secured a further GBP8.9 million of criteria compliant
investment property (net of acquisition costs) and further improved
our occupancy and contracted rental income together with GBP12.4
million of strategic sales, whilst maintaining a GBP200 million
portfolio.
These acquisitions provide immediate income and asset management
opportunities and have the potential to provide capital growth. We
believe that economic uncertainty from Brexit negotiations will
provide further opportunities for acquisitions.
We remain confident that we can continue to acquire properties
that meet the Company's investment criteria and improve the
portfolio mix. In the remainder of this financial year, we expect
to see continued rental growth and low vacancy rates supporting the
Company's investment objectives and support our strategy of
delivering further growth in our fully covered dividend
payments.
Property Acquisitions
Total acquisitions of GBP8.9 million (net of acquisition costs)
were made during the period, with a combined income of GBP708,575
per annum and a potential reversion to GBP731,571 per annum, which
reflects a 7.48% net initial yield and 7.72% reversionary yield.
New tenants from acquisitions include Travelodge, Ladbrokes,
Halfords, Subway, Xercise4less and Domino's.
New acquisitions include:
-- Maypole Retail Parade, Alcester Road South, Maypole,
Birmingham - 27 February 2017 (Retail/Leisure - GBP6.1 million
excluding acquisition costs). Acquired in an off market transaction
from a private investor, at a net initial yield of 7.22% with a
reversionary yield of 7.31%. The investment incorporates a sixty
bed hotel, together with six ground floor retail units, with a
combined contracted rental of GBP469,875 per annum, of which
GBP201,000 per annum is secured against Travelodge for a further 24
years and subject to CPI-linked rent reviews. The property is well
let with other covenants including Wilko Retail, Ladbrokes,
Halfords, Subway and KFC, and with a WAULT of 12.25 years.
-- Barracks Road, Newcastle-under-Lyme - 26 May 2017
(Retail/Leisure - GBP2.8 million, excluding acquisition costs).
Acquired from London Metric Property Plc at a net initial yield of
8.00% and a minimum reversionary yield of 8.78% in February 2018,
producing GBP238,700 per annum, rising to GBP261,696 per annum in
February 2018. The property comprises a Leisure and Retail
investment of four purpose-built units and is let to three tenants
- Xercise4Less, Bathstore and Domino's, with a WAULT of 9.25 years.
Following acquisition, we have since extended the Bathstore lease
by a further 5 years, taking the WAULT on acquisition to 11.03
years. Strategically located within the centre of this busy town,
the property and immediate vicinity will further benefit from
substantial on-going developments of new student accommodation and
new head offices for the Local Council.
Overall availability in the investment market for criteria
compliant stock has been limited as few investors have been willing
to sell. However, we are considering investment opportunities
including retail and office sector assets with existing income or
angles to improve value. We expect to see good value opportunities
throughout the coming months and are well placed to react when
potential acquisitions become available. We expect some of the
larger funds to sell smaller lots regarded as being sub-scale in
comparison to other larger assets that are considered to be less
management intensive.
With our established network of regional contacts and our well
established reputation for efficient transactions we will continue
to target good income with low gearing in a well-diversified
regional portfolio and continue to focus on delivering stable long
term returns for shareholders.
Sales
We completed the sale of Latitude, Bromsgrove Street, Birmingham
for GBP2.7 million on 27 January 2017 (exchanged 23 December 2016),
representing a net initial yield of 7.95% and ahead of cost and 31
December 2016 valuation. We sold a non-core retail property in
London Road, Norwich in April 2017 (exchanged 5 December 2016) for
GBP800,000 at a sale yield of 8.46% and The Broadway, Crawley in
January 2017 (exchanged 1 December 2016) for GBP1,925,000 at a sale
yield of 8.87%. More recently, we exchanged contracts on 5 June
2017 to sell 6 Bennetts Hill, 102 Colmore Row, & 104-106
Colmore Row, three adjoining City Centre offices, for a total
consideration of GBP7.2million, reflecting a current net initial
yield of 4.36% and a 4.35% capital premium above the December 2016
valuation. The sale completed on 2 August 2017, and so will be
reflected in the H2 results.
Including sales that completed in Q3 2017, in total, we have
disposed of GBP12.4 million of assets which provided a combined
income of GBP816,710 per annum and a running yield of 6.07%. The
Company will use the proceeds from these disposals to fund
acquisitions better aligned to its stated investment strategy. In
view of the low interest environment and limited supply, we expect
demand for stock to increase in the second half of this year. We
have identified a number of properties that are suitable for sale
and will monitor this position over the coming months, and will
only seek to make sales above existing book values.
Asset management
We have continued to focus on active asset management
initiatives including rent reviews, new lettings, lease extensions
and the retention of tenants beyond their contractual obligations,
which has resulted in valuation increases, with further initiatives
expected to complete over the coming months.
Key asset management initiatives undertaken during the period
include:
-- Gateway House, 50-53 High St, Birmingham - The building
comprises a mixed retail and office scheme of 27,071 sq. ft.
extending over seven floors. Following the refurbishment of the
second floor offices, Instant Offices has taken two floors in the
building. The building is now fully-let. The deal was done at
GBP13.00 per sq ft, a new high for the building. Additionally, the
letting on the ground floor to Holland & Barrett already shows
signs of a positive reversion.
-- Acocks Green Shopping Centre, Acocks Green - The property
comprises a 60,457 sq ft retail scheme in Acocks Green on the
outskirts of Solihull and Birmingham. The scheme is anchored by
Wilkinson, Boots, Argos and Lloyds Bank. Wilkinson has re-geared
its lease, the new lease is a 10 year term at the passing rent.
This has enhanced the value of the scheme. Work is underway on the
refurbishment of all vacant units. The Lloyds TSB tenant only lease
break in December 2017 has been removed, giving a lease expiry of
December 2022.
-- Peat House, 1 Waterloo Way, Leicester - Prime City centre
office building. Innes England taken part of second floor at
GBP13.50psf on a 10 year term. First and second floor common areas
have been comprehensively refurbished by the landlord and there is
interest from a number of parties for the vacant space.
-- Dudley Street, Wolverhampton - the lease expired shortly
after purchase and we assumed the tenant would vacate. Our
intention was to take the benefit of the short term income and
market the unit to find a new tenant. After negotiations we have a
renewed lease with River Island. The new lease commenced in March
2017 and secures a rent of GBP187,300 per annum and a lease term of
10 years with a break option at the fifth year.
-- Dutton Road, Coventry - We extended Personal Hygiene
Services' lease, with expiry moving from July 2019 to July 2024, in
exchange for 3 months' rent free. With the benefit of more
attractive unexpired lease term, we have recently sold our long
leasehold ownership to the freeholder (Coventry City Council).
-- Bearwood Shopping Centre, Bearwood - We let the only vacant
retail unit on a new lease to Costa Coffee at GBP42,500 per annum
for a term of 15 years.
-- Market Centre, Crewe - We have re-geared the lease to Roman
Originals for a further two years at GBP60,000 per annum and have
re-geared the lease with Sky UK for a further 3 year term.
Additionally, we are in the process of negotiating with local
landowners to acquire the adjoining Victoria Centre with potential
redevelopment of a larger amalgamated shopping centre.
-- 24 Bennetts Hill, Birmingham - Active asset management
(including a refurbishment of the reception and common areas) has
resulted in an occupancy rate of just under 90%. The most recent
letting being to Singh & Jones Ltd, a niche recruitment agency.
The rent review with Punch Taverns was recently settled at
GBP135,000p.a. an increase from GBP117,000p.a.
-- 37a Waterloo Street, Birmingham - New lease to 'Dirty Martini
Limited' on better terms and a strengthened covenant following the
administration of Viva Brazil. The deal was off market and
completed in under a week with potential to convert upper floors to
residential.
Portfolio Conclusion
As at 30 June 2017, the Company's property portfolio comprised
56 assets and 235 tenants. Further to recent acquisitions, the
portfolio is split (by income) into the following sectors: Retail
(57%); Offices (39%); and
Other (4%). Our existing occupancy is currently at 94.8%.
Our recent acquisitions have improved the tone of the portfolio
and continue to provide us with a variety of opportunities to add
value and increase rental income. In comparison to FY 2016 figures,
allowing for sales, our contracted rent is up 2%, despite disposals
comprising GBP816,710 per annum of contracted rent, and our like
for like valuation and capital value per square foot have increased
by 1.9%. Our revenue is up 19.9% to GBP7.1 million per annum
compared to H1 2016.
Outlook
Our objective for H2 is to grow the portfolio further, subject
to making strategic sales, and to grow our rental income. This will
allow us to continue with our objective of growing our quarterly
dividend payments, which have now seen 5 years of year on year
growth, in line with our progressive dividend policy. We expect
property yields to remain stable or compress further, particularly
with the secondary market place increasing demand and a shortage of
investment stock at the end of the year.
REI remains confident that the outlook for our regional economy
is positive, and that our portfolio will benefit from healthy
occupancy levels and a growing rental income and revenues.
There is no doubt that we are operating in a sellers' market,
and we will continue to make sales of assets that we believe are
ready for sale or where we receive attractive offers. At the same
time, our privileged network within the regional property community
and our market reputation will assist us in securing further
criteria compliant property that will provide capital growth
potential and additional rental income.
Our local economy is going through a period of 're-birth' and
will continue to do so, regardless of some of the national economic
uncertainty and will benefit further as the uncertainty falls
away.
Our team has the capacity to grow the portfolio, without the
need for any material additional overheads, and we remain committed
to maintaining a GBP200 million portfolio, with the potential to
grow further, whilst growing our dividend payment to our
shareholders.
At 30 Value % Sq Ft Contracted ERV Net Equivalent Reversionary Occupancy
June GBP Rent GBP Initial Yield Yield %
2017 GBP Yield % %
%
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Birmingham
City
Centre 39.4m 18.8% 128,361 1,802,544 2,330,783 4.25 6.42 5.49 82.56
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Other
Midlands 162.4m 77.5% 1,239,124 13,088,792 14,640,587 7.58 7.89 8.47 95.91
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Total
Core 201.8m 96.3% 1,367,485 14,891,336 16,971,370 6.93 7.60 7.90 94.66
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Non
Core
Portfolio 3.9 1.9 33,027 332,826 360,826 8.14 8.04 8.83 100
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Land 3.7 1.8 - - - - - - -
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Total
Portfolio 209.4m 100% 1,400,512 15,224,162 17,332,196 6.95 7.61 7.91 94.78
------------ ------- ------ ---------- ------------ ----------- --------- ------------ -------------- -----------
Finance Review
The underlying profit for the six months to 30 June 2017 was
GBP3.1 million (2016: 2.4 million), an increase of 29.2%
(underlying profit excludes the effect of property revaluations and
financial instrument valuations).
The statutory profit before tax for the period was GBP6.4
million (H1 2016: loss GBP560,000) due to property revaluation
surplus of GBP2.9 million (2015: deficit GBP1.8 million) and a
surplus on revaluation of financial instruments of GBP465,000
(2016: deficit GBP1.2 million).
Revenue increased due to acquisition of properties and letting
of void space and was up 19.9% to GBP7.1 million (2016: GBP6.0
million). Direct costs increased during the period to GBP960,000
(2016: GBP600,000) due to professional fees on new leases as well
as void costs on certain buildings, which have subsequently been re
let or sold. Property acquisitions during the period were GBP9.7
million and the revaluation surplus has absorbed the SDLT costs on
these properties.
30 June 2017 31 December Change
2016
------------------------- ------------- ------------ -------
Gross Property
Assets GBP209.4m GBP201.9m + 3.7%
------------------------- ------------- ------------ -------
EPRA NAV per share 67.6p 66.2p + 2.1%
------------------------- ------------- ------------ -------
EPRA NNNAV per
share 65.8p 64.2p + 2.5%
------------------------- ------------- ------------ -------
Net Assets GBP125.0m GBP121.2m + 3.1%
------------------------- ------------- ------------ -------
Loan to Value 41.5% 43.1% + 3.7%
------------------------- ------------- ------------ -------
Loan to Value (net
of cash) 37.8% 37.2% - 1.6%
------------------------- ------------- ------------ -------
Like for like rental
income GBP14.5m GBP14.6m - 0.7%
------------------------- ------------- ------------ -------
Like for like capital
value per sq ft GBP141.20 GBP138.60 + 1.9%
------------------------- ------------- ------------ -------
Like for like valuation GBP200.4m GBP196.6m + 1.9%
------------------------- ------------- ------------ -------
Banking
REI is multi banked and we continue to receive excellent support
from our bankers, who are open to us increasing our facilities.
Banks have remained 'open for business', with healthy competition
amongst banks to secure new lending to experienced management teams
with diversified portfolios and prudently geared balance sheets.
REI comfortably meets these criteria.
As at 30 June 2017, we had cash and undrawn facilities of GBP12
million. Our current average cost of debt has reduced to 4.0% (H1
2016: 4.1%) and the average term of debt is 4.6 years (H1 2016: 5
years), with our GBP20 million facility with Lloyds Banking Group
to be renewed in January 2018.
The RBS facilities at 1.75% above Libor demonstrate our ability
to secure debt going forward, with a number of other banks prepared
to lend on similar terms. We are capitalising on the low interest
rate environment and it is our intention to grow the portfolio
further, whilst maintaining prudent levels of gearing.
Currently, 57% of our facilities are on variable terms and we
are exploring terms to convert some of this variable debt to fixed
rates and capitalise on the low interest rate environment. This
will provide protection against rates rising in the future and fix
our outgoings to allow us to manage our dividend growth with
confidence.
Dividend
From January 2016, the Company commenced quarterly dividend
payments. For 2017, the first quarterly interim dividend of 0.75p
was paid in July 2017 and the second quarterly interim dividend of
0.75p will be paid in October 2017. The third quarterly interim
dividend will be paid in January 2018 and the final dividend will
be announced with the results in March 2018 and paid in April
2018.
The dividend for the first half year is therefore 1.50p, an
increase of 20%. We have now seen 5 years of year on year
growth.
The Board's intention is to continue with a sustained, covered
and progressive dividend.
Dividend Timetable
Q2 Ex-dividend date: 28 September 2017
Q2 Record date: 29 September 2017
Q2 Dividend payment date: 31 October 2017
REI's Regional Review
Economy/Trade/Business/Employment
-- The West Midlands attracted more foreign businesses than
anywhere outside of London and the South East in 2016/2017,
according to new Department for International Trade figures
-- The Midlands continues to lead the rest of the UK in regional
output growth, increasing at the fastest rate in two years. The
West Midlands PMI recorded 60.3 in April - the strongest
nationally
-- Business activity increased in the West Midlands at a faster
pace than any region in the UK, according to the Lloyds Bank UK
Regional PMI survey, rising to 58.6 in August from 56.7 in July
-- Birmingham has been ranked among the top ten UK cities that
are most attractive to businesses in the creative industries sector
in the CBRE Creative Regions report
-- West Midlands business confidences edges higher with the
latest ICAEW Business Confidence Index standing at -0.5 in the
region, with domestic and export sales "on an upward trend"
-- A total of 21 companies in the Midlands have won places on a
league table of UK businesses with the fastest-growing
international sales, up 17 from last year with 11 new entrants
-- The relocation of Channel 4 to Birmingham could add GBP5
billion to the region's economy, according to the West Midlands
Combined Authority (WMCA) with an estimated GBP2.3 billion of gross
value added (GVA) between 2021 and 2030, along with a further
GBP2.7 billion indirect GVA
-- The West Midlands is set to become a leading UK financial
services centre according to report by TheCityUK suggesting the
West Midlands could become the third fastest-growing financial
services (FS) centre in the UK, growing by around 23% and sharing
in an industry creating GBP16 billion of additional GVA by 2025
-- Birmingham is named one of top global cities for start ups
ahead of cities like Rome and Moscow in terms of quality of life
for those employed in a start-up business. The city is also the
best in England after London for young professionals looking to
start their careers
-- The Midlands is "well placed" for the future despite
uncertainty sparked by Brexit, due to initiatives such as the
Midlands Engine according to an MBO specialist. The region's
economy is "resilient" and businesses should take advantage of
private equity funds. "Mid-market deal volumes are likely to
continue to grow but private vendors need to be realistic on
pricing. Foreign owned divestments declined in 2016 and dependent
on how Brexit pans out, then foreign owners could be selling off
subsidiaries which will bring additional opportunities for private
equity-backed deals."
-- West Midlands Mayor Andy Street's 2020 aims include making
everyone's commute to work quicker, have wages rising faster in the
West Midlands than in any other British city region, and to build
25,000 homes
-- A challenger bank is set to move into the West Midlands with
the opening of a new flagship store in the heart of Birmingham city
centre
Property
-- Birmingham is set to become a commercial property hotspot as
large pension funds battle it out with foreign investors for
opportunities and to capitalise on a calmer environment outside of
London
-- House prices continue to rise in the West Midlands with 31%
of RICS chartered surveyors reporting an uplift, according to the
August 2017 UK Residential Market Survey, a marked contrast to the
picture in Central London, where the reading remains in negative
territory
-- Office take up in Birmingham city centre could reach 750,000
sq ft in 2017, driven by strong demand from engineering companies
preparing for HS2, a new report from Savills has claimed
-- Retail rents in Birmingham are now higher than Manchester,
Leeds, Edinburgh, Bristol and Belfast, according to the Midsummer
Retail Report 2017, by Colliers with a 4% increase in Birmingham in
prime zone A retail rental growth, compared to 0.2% regionally and
0.8% nationally, excluding London
-- Birmingham office availability declines with the amount of
lettable office space in the city centre at a ten-year low, CBRE
has claimed. Current availability in the city is 1.76 million sq
ft, 19% lower than the five-year average
-- More than a quarter of UK student accommodation sales
totalling GBP950 million were struck in the Midlands in the first
three months of 2017, according to a new report by property
consultancy JLL. Student beds worth approximately GBP250 million
have changed hands in the year so far, equating to 29% of total UK
deals
-- Institutions in the region are also investing heavily with
four of Birmingham's five universities planning to spend GBP870
million and 3,932 student beds have planning permission across the
city
-- The Midlands is facing stagnation over commercial property
shortage later this year unless a greater quantity of large scale
commercial property becomes available, GVA's latest Industrial
Intelligence suggests
-- A Birmingham development investment site which could create
up to 10,000 jobs and contribute GBP350 million to the city
region's economy has been officially launched. The Peddimore scheme
was unveiled at this year's MIPIM property exhibition in Cannes and
Birmingham City Council has now invited expressions of interest for
the massive site
Manufacturing/Technology
-- Thousands of new jobs to be created as JLR expands again,
boosting its UK workforce by 15% to more than 40,000 staff
-- Midland carmaker Aston Martin has announced plans for GBP500
million in investment and trade with Japan
-- The West Midlands' manufacturing sector is among the top
performing in the UK according to a new report by insolvency trade
body R3. The report found just 18.4% of manufacturers were
operating with an above average risk of insolvency in April
2017
-- The number of manufacturing businesses in the West Midlands
has increased while employment figures have swelled by more than
four times the national average, according to The annual Regional
Manufacturing Outlook report by EEF and accountancy and business
advisory company BDO has revealed the number of manufacturers in
the region has risen by 3.1% to 14,670 over the last year, while
the number of jobs in the sector has been boosted by 9.9%
Travel/Tourism
-- Birmingham has been selected by the government as the UK's
preferred City to host the Commonwealth Games in 2022, beating
Liverpool
-- Emirates records record breaking month at Birmingham Airport
with 4,000 passengers travelling to Dubai using the airline
-- The country's largest hotel outside of London, the 790
bedroom Hilton Birmingham Metropole has been sold as part of a
GBP500 million plus deal
-- Jet2 has announced it will expand its offering at Birmingham
Airport, with 13 new destinations, 900,000 seats, two new planes
and thousands of hotel choices for customers travelling from
Birmingham in Summer 2018
-- World-famous restaurant brand The Ivy has lined up a site in
Birmingham for a new venue and will opens its doors in the first
quarter of 2018 on a 25-year lease
-- The West Midlands rail network is set for a GBP1 billion
investment, delivered by the new West Midlands rail franchise
operator, announced by the Department for Transport
-- Birmingham Airport's passenger numbers soar to an average of
1 million per month, up more than 30% in the last three years with
the Airport's latest financial figures revealing that its pre-tax
profits were up 52% to GBP38.1 million in the year to March, a 55%
increase on 2016. Revenues rose 12% to GBP145.8 million
PAUL BASSI
CHIEF EXECUTIVE
15 SEPTEMBER 2017
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the 6 months ended
30 June 2017
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
(Unaudited) (Unaudited)
Note GBP'000 GBP'000 GBP'000
Revenue 7,142 5,957 13,453
Cost of sales (964) (600) (1,600)
------------ ------------ -------------------------------
Gross profit 6,178 5,357 11,853
Administrative expenses (1,464) (1,598) (3,503)
Change in fair value
of investment properties 2,899 (1,776) 3,531
------------ ------------ -------------------------------
Profit from operations 7,613 1,983 11,881
Finance income 13 26 45
Finance costs (1,674) (1,351) (3,157)
Profit/(loss) on financial
liabilities held at
fair value 465 (1,218) (566)
------------ ------------ -------------------------------
Profit/(loss) on ordinary
activities before taxation 6,417 (560) 8,203
Income tax charge (93) (5) (121)
------------ ------------ -------------------------------
Net profit/(loss) after
taxation and total
comprehensive income 6,324 (565) 8,082
------------ ------------ -------------------------------
Basic earnings per
share 6 3.4p (0.3p) 4.3p
------------ ------------ -------------------------------
Diluted earnings per
share 6 3.3p (0.3p) 4.3p
------------ ------------ -------------------------------
EPRA Earnings per share 6 1.6p 1.3p 2.8p
------------ ------------ -------------------------------
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the 6 months ended 30
June 2017
Share Share Capital Other Retained Total
Capital Premium Redemption Reserve Earnings
Account Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December
2015 18,642 51,721 45 300 47,230 117,938
Share based payment - - - 300 - 300
Dividends - final
2015 - - - - (1,864) (1,864)
Dividends - interim
2016 - - - - (1,165) (1,165)
-------- ------------------ ----------- -------- --------- --------
Transactions with
owners - - - 300 (3,029) (2,729)
-------- ------------------ ----------- -------- --------- --------
Loss for the period
and total comprehensive
income - - - - (565) (565)
At 30 June 2016 18,642 51,721 45 600 43,636 114,644
Share based payment - - - 200 - 200
Dividends - interim
2016 - - - (2,330) (2,330)
-------- ------------------ ----------- -------- --------- --------
Transactions with
owners - - - 200 (2,330) (2,130)
-------- ------------------ ----------- -------- --------- --------
Profit for the
period and total
comprehensive
income - - - - 8,647 8,647
At 31 December
2016 18,642 51,721 45 800 49,953 121,161
Share based payment - - - 300 - 300
Dividends - final
2016 - - - - (1,398) (1,398)
Dividends - interim
2017 - - - - (1,398) (1,398)
-------- ------------------ ----------- -------- --------- --------
Transactions with
owners - - - 300 (2,796) (2,496)
-------- ------------------ ----------- -------- --------- --------
Profit for the
period and total
comprehensive
income - - - - 6,324 6,324
At 30 June 2017 18,642 51,721 45 1,100 53,481 124,989
======== ================== =========== ======== ========= ========
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
as at 30
June 2017
30 June 30 June 31 December
2017 2016 2016
(Unaudited) (Unaudited)
Note GBP'000 GBP'000 GBP'000
Assets
Non current
assets
Intangible assets - 171 -
Investment properties 5 205,681 190,872 198,202
Property, plant
and equipment 15 15 14
Deferred taxation 592 806 685
206,288 191,864 198,901
----- ------------ -------------------------------- ------------
Current
assets
Inventories 3,742 3,599 3,695
Trade and other
receivables 2,824 3,576 2,925
Cash and cash
equivalents 7,437 9,413 11,775
14,003 16,588 18,395
----- ------------ -------------------------------- ------------
Total assets 220,291 208,452 217,296
===== ============ ================================ ============
Liabilities
Current liabilities
Bank loans 20,456 20,499 20,412
Trade and other
payables 5,880 6,887 6,023
26,336 27,386 26,435
----- ------------ -------------------------------- ------------
Non-current liabilities
Bank loans 64,836 61,177 65,106
Financial liabilities 4,130 5,245 4,594
68,966 66,422 69,700
----- ------------ -------------------------------- ------------
Total liabilities 95,302 93,808 96,135
===== ============ ================================ ============
Net assets 124,989 114,644 121,161
===== ============ ================================ ============
Equity
Ordinary share
capital 18,642 18,642 18,642
Share premium
account 51,721 51,721 51,721
Capital redemption
reserve 45 45 45
Other reserves 1,100 600 800
Retained earnings 53,481 43,636 49,953
----- ------------ -------------------------------- ------------
Total equity 124,989 114,644 121,161
----- ------------ -------------------------------- ------------
CONSOLIDATED STATEMENT OF CASHFLOWS
for the 6 months ended 30 June 2017
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Cashflows from operating activities
Profit/(loss) after taxation 6,324 (565) 8,082
Adjustments for:
Depreciation 2 2 4
Net goodwill written
off - - 53
Net valuation (surpluses)/deficits (2,899) 1,776 (3,531)
Share based payment 300 300 500
Finance income (13) (26) (45)
Finance costs 1,674 1,351 3,157
(Surplus)/loss on financial
liabilities held at fair
value (465) 1,218 566
Taxation charge recognised
in profit and loss 93 5 121
Increase in inventories (47) (1,219) (1,315)
Decrease/(increase) in
trade and other receivables 101 (191) 461
(Decrease)/increase in
trade and other payables (376) 1,140 281
4,694 3,791 8,334
Interest paid (1,674) (1,351) (3,157)
Net cash from operating
activities 3,020 2,440 5,177
============ ============ =====================
Cash flows from investing activities
Purchase of investment
properties (9,729) (37,556) (39,462)
Purchase of property,
plant and equipment (2) (2) (2)
Proceeds from sale of
property, plant and equipment 5,149 - -
Interest received 13 26 45
(4,569) (37,532) (39,419)
============ ============ =====================
Cash flow from financing activities
Equity dividends paid (2,563) (1,864) (4,194)
Proceeds from bank loans - 38,000 42,200
Payment of bank loans (226) (408) (766)
(2,789) 35,728 37,240
============ ============ =====================
Net (decrease)/increase
in cash and cash equivalents (4,338) 636 2,998
Cash and cash equivalents
at beginning of period 11,775 8,777 8,777
Cash and cash equivalents
at end of period 7,437 9,413 11,775
============ ============ =====================
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the 6 months ended 30 June 2017
1. BASIS OF PREPARATION
Real Estate Investors Plc, a Public Limited Company, is
incorporated and domiciled in the United Kingdom.
The interim financial report for the period ended 30 June 2017
(including the comparatives for the year ended 31 December 2016 and
the period ended 30 June 2016) was approved by the board of
directors on 15 September 2017. Under the Security Regulations Act
of the EU, amendments to the financial statements are not permitted
after they have been approved.
It should be noted that accounting estimates and assumptions are
used in preparation of the interim financial information. Although
these estimates are based on management's best knowledge and
judgement of current events and action, actual results may
ultimately differ from these estimates. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the interim financial
information are set out in note 3 to the interim financial
information.
The interim financial information contained within this
announcement does not constitute statutory accounts within the
meaning of the Companies Act 2006. The full accounts for the year
ended 31 December 2016 received an unqualified report from the
auditor and did not contain a statement under Section 498 of the
Companies Act 2006.
2. ACCOUNTING POLICIES
The interim financial information has been prepared under the
historical cost convention.
The principal accounting policies and methods of computation
adopted to prepare the interim financial information are consistent
with those detailed in the 2016 financial statements approved by
the Company on 17 March 2017.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next accounting year
are as follows:
Investment property revaluation
The Group uses the valuations performed by its independent
valuers or the directors as the fair value of its investment
properties. The valuation is based upon assumptions including
future rental income, anticipated maintenance costs, anticipated
purchaser costs and the appropriate discount rate. The valuer and
the directors also make reference to market evidence of transaction
prices for similar properties.
Interest rate swap valuation
The Group carries the interest rate swap as a liability at fair
value through the profit or loss at a valuation. This valuation has
been provided by the Group's bankers.
Critical judgements in applying the Group's accounting
policies
The Group makes critical judgements in applying accounting
policies. The critical judgement that has been made is as
follows:
REIT Status
The Group elected for REIT status with effect from 1 January
2015. As a result, providing certain conditions are met, the
Group's profit from property investment and gains are exempt from
UK corporation tax. In the Directors' opinion the Group have met
these conditions.
4. SEGMENTAL REPORTING
Primary reporting - business segment
The only material business that the Group has is that of
investment in commercial properties. Revenue relates entirely to
rental income from investment properties.
5. INVESTMENT PROPERTIES
The carrying amount of investment properties for the periods
presented in the interim financial information is reconciled as
follows:
GBP'000
Carrying amount at 31 December
2015 155,092
Additions 37,556
Revaluation (1,776)
---------
Carrying amount at 30 June
2016 190,872
Additions 1,906
Adjustment 117
Revaluation 5,307
---------
Carrying amount at 31 December
2016 198,202
Additions 9,729
Disposals (5,149)
Revaluation 2,899
Carrying amount at 30 June
2017 205,681
=========
6. EARNINGS PER SHARE
The calculation of the earnings per share is based on the profit
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period. The
calculation of the diluted earnings per share is based on the basic
earnings per share adjusted to allow for all dilutive potential
ordinary shares.
The basic earnings per share has been calculated on the profit
for the period of GBP6,417,000 (31 December 2016: GBP8,082,000
profit and 30 June 2016: GBP565,000 loss) and on 186,420,598
ordinary shares being the weighted average number of shares in
issue during the period, and at 31 December 2016 and 30 June
2016.
The European Public Real Estate Association ("EPRA") earnings
and asset value figures have been included to allow more effective
comparisons to be drawn between the Group and other businesses in
the real estate sector.
EPRA EPS per share
30 June 2017 31 December 2016
Earnings Shares Earnings per share Earnings Shares Earnings per share
GBP'000 p GBP'000 p
Basic earnings per share 6,324 186,420,598 3.4 8,082 186,420,598 4.3
Fair value of investment
properties (2,899) (3,531)
Profit on disposal of
investment properties - -
Change in fair value of
derivatives (465) 566
Deferred tax in respect
of EPRA adjustments 93 121
---------- ------------ --------- ------------
EPRA Earnings 3,053 186,420,598 1.6 5,238 186,420,598 2.8
========== ============ =================== ========= ============ ===================
EPRA NAV per share
30 June 2017 31 December 2016
Net asset value per Net asset value per
Net Assets Shares share Net Assets Shares share
GBP'000 GBP'000 p GBP'000 GBP'000 p
Basic 124,989 186,420,598 67.0 121,161 186,420,598 65.0
Dilutive impact of
share options and
warrants - 3,588,563 - 2,406,745
----------- ------------ ----------- ------------
Diluted 124,989 190,009,161 65.8 121,161 188,827,343 64.2
Adjustment to fair
value of
derivatives 4,130 - 4,594 -
Deferred tax (592) - (685) -
----------- ------------ ----------- ------------
EPRA NAV 128,527 190,009,161 67.6 125,070 188,827,343 66.2
Adjustment to fair
value of
derivatives (4,130) - (4,594) -
Deferred tax 592 - 685 -
----------- ------------ ----------- ------------
EPRA NNNAV 124,989 190,009,161 65.8 121,161 188,827,343 64.2
=========== ============ ==================== =========== ============ ====================
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDCUSBBGRU
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