Final Results for Year Ended 31 March 2024

25 June 2024

Warehouse REIT plc

(the "Company" or "Warehouse REIT", together with its subsidiaries, the "Group")

FULL YEAR RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2024

Robust occupational demand and multi-let focus underpins rising values and continued leasing momentum

Neil Kirton, Chairman of Warehouse REIT commented: "The standout feature of this year has been the resilience of the industrial occupational markets, reinforcing our conviction in the multi-let asset class and driving a 5.1% increase in like-for-like rental growth.  This part of the market remains structurally under-supplied in terms of well-located, quality assets, supporting an increase in our valuation and enabling us to capture an uplift on previous rents of nearly 30%.

We have continued to execute on our disposal strategy, with £165.2 million of non-core assets sold since our disposal plan was announced in November 2022.  This includes Barlborough Links, Chesterfield, a single-let asset which sold for £46.0 million in June.  Releasing capital from Radway Green in Crewe will complete that plan and negotiations are well advanced. 

This strong progress provides us with the flexibility to undertake selective value accretive acquisitions, and today we are pleased to announce the acquisition of part of the Ventura Retail Park in Tamworth for £38.6 million, a retail warehousing asset which is highly complementary to our business and our skill set."   

High-quality, strategically located assets delivering strong valuation performance

·      Portfolio value up 2.0% on a like-for-like basis to £810.2 million (31 March 2023: £828.8 million)

o  Investment Portfolio value up 2.6%; multi-let portfolio, up 3.1%, like-for-like

o  Strong performance driven by growth in estimated rental values of 7.7% with equivalent yields broadly flat

·      EPRA NTA per share up 1.5% to 124.4p (31 March 2023: 122.6p)

·      Total accounting return of 6.7% (31 March 2023: -25.7%)

Resilient occupational market supporting leasing activity with rents 28.6% ahead of previous rents

·   103 lease events over 1.5 million sq ft securing £10.0 million of contracted rent, 28.6% ahead of previous passing rents and 8.6% ahead of March 2023 ERV's including:

o  £1.6 million from 45 new lettings, 37.7% ahead of previous contracted rent;

o  £2.8 million from 36 renewals, 36.7% ahead of previous contracted rent; and

o  £5.6 million from 22 rent reviews, 23.9% ahead of previous contracted rent

·     5.1% like-for-like growth in contracted rents, with portfolio reversion increased to 13.1%

·     Occupancy at 96.4% with c.99% of FY24 rent already collected

·     Post period-end, a further 21 lease events over 0.6 million sq ft, securing £0.6 million of contracted rent, 13.1% ahead of previous contracted rent

Disposal plan near completion, focused on lower yielding, non-core assets and demonstrating liquidity

·     £110.5 million of asset sales exchanged or completed since 1 April 2023, comprising:   

o  £53.0 million in FY24, 15.6% ahead of March 2023 book value; generating £5.5 million of profit

o  £57.5 million post year end sales, including Barlborough Links, a single-let asset in Chesterfield

·      Negotiations well advanced to release capital from Radway Green, Crewe, completing our disposal plan

£38.6 million acquisition of Phase 2 of the Ventura Retail Park, Tamworth

·  Retail warehousing highly complementary to multi-let industrial and leverages Tilstone's expertise and experience

·     Attractive entry point with a net initial yield of 7.4%, ahead of our cost of debt

Robust operational performance driving improved earnings  

·     Operating profit up 8.7% to £35.0 million (31 March 2023: £32.2 million), reflecting leasing momentum and reduction in EPRA cost ratio of 640 basis points to 24.4%, our lowest ever

·     Adjusted earnings of £20.6 million (31 March 2024: £19.8 million)

·     Adjusted EPS up 2.1% to 4.8p (31 March 2023: 4.7p)

·     Dividend maintained at 6.4p; 95% covered when profits on disposals included

·    £320.0 million of debt refinanced with more favourable covenants and additional interest rate caps of £50.0 million acquired

·     88.0% of debt hedged at year end, rising to over 90% post year end capital activity; no major refinancing until 2028

·     LTV at 33.1% as at 31 March 2024, (31 March 2023: 33.9%)

Progressing our sustainability strategy

·      66.6% of the portfolio now EPC A-C rated (31 March 2023: 60.2%)

Financial highlights

Investment portfolio statistics

Meeting

A meeting for professional investors and analysts will be held at 9am on 25 June 2024.  Registration is required for this event, please email FTI Consulting at [email protected] should you wish to attend.

​
​The results presentation will also be available in the Investor Centre section of the Group's website.

​​
Enquiries

Warehouse REIT plc     

via FTI Consulting

Tilstone Partners Limited

Simon Hope, Peter Greenslade, Paul Makin, Jo Waddingham

+44 (0) 1244 470 090

G10 Capital Limited (part of the IQEQ Group, AIFM)

Maria Baldwin

+44 (0) 207 397 5450

FTI Consulting (Financial PR & IR Adviser to the Company)

Dido Laurimore, Richard Gotla

+44 (0) 7904 122207 / [email protected]

Further information on Warehouse REIT is available on its website: warehousereit.co.uk

Notes

Warehouse REIT is a UK Real Estate Investment Trust that invests in UK warehouses, focused on multi-let assets in industrial hubs across the UK.

We provide a range of warehouse accommodation in key locations which meets the needs of a broad range of occupiers. Our focus on multi-let assets means we provide occupiers with greater flexibility so we can continue to match their requirements as their businesses evolve, encouraging them to stay with us for longer.

We invest in our business by selectively acquiring assets with potential and by delivering opportunities we have created. Through pro-active asset management we unlock the value inherent in our portfolio, helping to capture rising rents and driving an increase in capital values to deliver strong returns for our investors over the long term.

Sustainability is embedded throughout our business, helping us meet the expectations of our stakeholders today and futureproofing our business for tomorrow.

The Company is an alternative investment fund ("AIF") for the purposes of the AIFM Directive and as such is required to have an investment manager who is duly authorised to undertake the role of an alternative investment fund manager ("AIFM"). The AIFM and the Investment Manager is currently G10 Capital Limited (Part of the IQEQ Group).

CHAIRMAN'S STATEMENT

In many respects the standout feature of the year has been the resilience and strength of our occupational markets. The multi-let industrial sector, which remains critically undersupplied in terms of well-located, quality assets has continued to perform well. We have maintained our strong track record of successfully capturing reversion and generating significant rental growth and I am pleased to say that this has underpinned an increase in the net asset valuation for the year under review.

In addition to maximising returns from the existing portfolio, we have continued to focus on reshaping the balance sheet to create a platform that is appropriate for your business. We have sold £165.2 million of assets since the disposal plan was announced in November 2022 but importantly, we have not sold any flagship estates.

We know what our assets are worth and have been patient but proactive in our approach. Releasing capital from Radway Green, our 100-acre site adjacent to the M6 is a very good example of that. We have refused to move with undue haste, recognising the unrealised strategic value in this development and during the year, have seen significant interest develop from various parties with negotiations now well advanced. A successful conclusion completes our disposal plan.

This strategy is consistent not only with a higher interest rate environment but also, with sales being accretive to earnings, a commitment to move our shareholders back towards a covered dividend. Reflecting the good progress we have made, the Board is comfortable that the Group now has the flexibility to selectively undertake value accretive acquisitions, and accordingly is pleased to have acquired part of the Ventura Retail Park in Tamworth, a retail warehousing asset which is highly complementary to our business and our skill set.

Operational review

Our asset management in the year has driven a 5.1% increase in like-for-like contracted rent, bringing total contracted rent to £44.6 million. We are successfully capturing reversion, with deals on average 28.6% ahead of prior rents, equating to £2.1 million of new rent and including the letting of vacant space, £3.0 million of new rent was added in the year. Post year end activity adds a further £0.6 million to contracted rent.

With over 100 deals completed in the year, our leasing activity also provides strong evidence of rental growth, supporting our valuation. ERV growth across the portfolio was 7.7%, exceeding our own expectations, and driving a like-for-like portfolio valuation uplift of 2.0%, (with an increase of 3.1% in our multi-let portfolio), taking the total value of our assets to £810.2 million.

This performance is a strong endorsement of our strategic focus on multi-let industrials. As well as providing more opportunities to capture reversion, this is a highly scarce asset class, with rebuild costs well above capital values due to expensive development finance and a strict planning regime. Our capital value of £93.5 per sq ft compares to a reinstatement value of c.£116.2 per sq ft. At the same time, demand for multi-let space is more resilient given the diversity of its occupier base and together these dynamics support our continuing high occupancy of 96.4%, driving future rental growth.

CAPITAL ACTIVITY

Our disposal programme has targeted assets that are non-core or where our asset management plans have been substantially delivered. We executed on £53.0 million of sales in the year, in many cases successfully selling into pockets of demand to achieve a price ahead of book value with an average premium of 15.6%. This crystallised a profit on sale of £5.5 million.

Post year end sales totalled £57.5 million and comprised the £46.0 million disposal of Barlborough Links in Chesterfield, a single-let property with rental growth capped through indexation, as well as two other single-let assets in Plymouth and Newport . These transactions increase our pro forma weighting towards multi-let assets to c.78% from c.72% at year end and further focus the portfolio on our core assets where we see opportunities to drive value for shareholders.

FINANCIAL PERFORMANCE

At £35.0 million, operating profits were 8.6% ahead of last year, with our leasing activity and the fall in operating costs more than offsetting the impact of disposals. Adjusted earnings per share were 4.8 pence, 2.1% ahead of last year and rise to 6.1 pence when profits from disposals are taken into account, meaning that on a cash basis, the full year dividend of 6.4 pence is 95.3% covered.

The uplift in valuation has driven an increase in our EPRA NTA per share of 1.5% to 124.4 pence (31 March 2023: 122.6 pence), contributing to a total accounting return of 6.7%.

BALANCE SHEET

In addition to the disposals programme, in June 2023 we completed a successful refinancing of our previous £320.0 million facility to further optimise our balance sheet. The new facility comprises a £220.0 million term loan and a £100.0million revolving credit facility with a club of four lenders: HSBC, Bank of Ireland, NatWest and Santander. The new facility was agreed on more favourable covenants, reflecting the strength of our banking relationships as well as the quality of the portfolio, and the tenure has been extended from January 2025 to June 2028.

In November 2023, we acquired a further £50.0 million of interest rate caps, replacing the £30.0 million of caps expiring and fixing SONIA at 2.0%. This is in addition to the £200.0 million of interest rate caps acquired in the last financial year. As a result, 88.0% of our debt was hedged at year end and our weighted average cost of debt was 4.2%.

As at 31 March 2024, the Group's loan to value of 33.1% remains well within our target range of 30% to 40%, with £36.0 million of headroom within our new facilities.

ESG

We have continued to progress our ESG agenda. Last year we set out a commitment to be net zero in scope 1 and 2 greenhouse gas emissions by 2030 alongside a framework for reducing our wider carbon footprint. Sustainability is firmly embedded in the way we manage our portfolio with each refurbishment aiming to remove gas, electrify heating and lighting and deliver a minimum EPC B rating. This has driven a significant increase in our EPC A-C rated space, which now accounts for 66.6% of the portfolio compared to 60.2% at the start of the year and, in addition, makes our space more attractive to occupiers, supporting leasing and valuation.

This year, we have also reported some scope 3 emissions for the first time. Looking forward, improving our visibility over, and ultimately setting a target for the reduction of scope 3 emissions is an important priority for the business. Our close engagement with occupiers and the steps we have taken to introduce green leases, which encourage data sharing wherever possible, are already having a positive impact in this respect.

On the Governance side, as previously announced, Martin Meech stepped down from the Board at the Annual General Meeting ("AGM") in September 2023. Following a comprehensive search, Dominic O'Rourke joined the Board as a Non-Executive Director in the same month. He is currently Group Property Director for FTSE 100 retailer Next plc, a role he has held since 2014. His customer-facing experience in a sector that is key for our business is proving to be a highly positive and complementary addition to the Board's expertise.

CONCLUSION AND OUTLOOK

Our disposal plan was announced in November 2022, when the rapid adjustment in interest rates impacted our financing costs, and in turn our earnings. We have largely delivered on that plan and are optimistic of a positive outcome on the Radway process in the coming months.

Thereafter, capturing reversion becomes our primary tool for rebuilding dividend cover. Our focus on what is a resilient part of the market and our active asset management has created more rental upside in our portfolio which is now 13.1% reversionary and looking forward, we believe attractive levels of rental growth will continue.

We are also identifying opportunities to selectively make acquisitions of higher yielding warehousing assets. Retail warehousing is an area in which Tilstone Partners has experience and represents a highly attractive opportunity at this time. We are very well placed to source value accretive opportunities in this space and the Ventura Retail Park is an excellent example of that.

This year, it feels appropriate to comment on the equity market context, which has seen an increase in the level of corporate activity, both in our sector and across listed investment trusts more generally. Our conviction, as a Board, is that this Company owns high-quality, strategically-located assets, but we are acutely aware that that is not reflected in the price at which our equity currently trades. We believe that rebuilding dividend coverage is an important first step in narrowing that discount and are confident the Company has in place a strategy that will deliver this.

In summary, commercial real estate is a sector that has been, and may continue to be, challenged by higher interest rates. We are successfully managing our way through that and the Board are committed to making the decisions and taking the steps that are necessary to create a sound platform from which our operational strength can drive value for all our shareholders.

Neil Kirton

Chairman

We use the following key performance indicators ("KPIs") to monitor our performance and strategic progress

INVESTMENT ADVISOR'S REPORT

GOOD PROGRESS WITH OUR PRIORITIES

At the start of the financial year, we set ourselves four priorities for FY24. These were to:

•    capture the reversionary potential in the portfolio;

•    recycle capital by disposing of assets, enabling us to pay down the Group's floating rate debt, strengthen the balance sheet and support earnings;

•    progress the Radway Green development scheme; and

•    increase dividend cover, by driving earnings through these actions.

We made good progress with the first two of these priorities, and we have a clear plan in place to deliver value from Radway Green, Crewe, which will position the Group to increase its dividend cover over time.

PRIORITY: CAPTURING REVERSION

At the year end, the contracted rent roll for the investment portfolio (excluding developments) was £44.6 million, compared to an ERV of £53.5 million. The difference reflects £7.0 million (or 13.1%) of portfolio reversion and £1.9 million of potential rent on vacant space.

The structure of the Group's leases supports capturing this reversion, with less than 10% being index linked through either a cap or collar arrangement. This flexibility is an important advantage in a more inflationary environment

We made good progress capturing reversion in FY24, with a total of 103 lease events completed, covering 1.5 million sq ft. As a result, we were able to capture £3.0 million of new contracted rent for the year, with £0.9 million of contracted rent coming from the letting vacant space.

Total contracted rents for the investment property portfolio stood at £44.6 million at year end, an increase of 5.1% on a like-for-like basis during the year.

The table following demonstrates the potential for continuing to capture reversion in the years ahead. These represent good opportunities for further rental growth and reflects the position before any further ERV growth or outperformance.

PRIORITY: CAPITAL RECYCLING

We keep the portfolio under constant review, to identify mature or non-core assets that are candidates for disposal. This has been a particular focus in FY24.

During the year, the Group sold seven estates for £53.0 million. This was 15.6% ahead of their aggregate book value, crystallising a profit on disposal of £5.5 million in the year, and reflecting a blended net initial yield of 5.0%. Sales have focused on single-let assets, or assets where we have substantially completed our asset management initiatives leaving little further upside. This good performance demonstrates our ability to match assets that are non-core for Warehouse REIT with pockets of demand across the market. We will continue to rigorously assess our portfolio to ensure we remain focused on the highest returning opportunities to maximise value for shareholders.

The assets sold in FY24 were:

•     Dales Manor Business Park, Cambridge for £27.0 million;

•     Warrington South Industrial Estate, for £11.6 million; and

•     smaller assets in Ipswich, Ellesmere Port, the Isle of Wight, Cardiff and Halifax totalling £14.4 million.

The Group's total asset sales since we announced the disposal plan in November 2022 stood at £107.7 million at 31 March 2024. Since the year end, we have announced further disposals totalling £57.5 million. This takes total disposals since November 2022 to £165.2 million demonstrating the liquidity of the Group's portfolio. See Post-Period End Activity for more information.

PRIORITY: PROGRESSING RADWAY GREEN

Radway Green is the Group's key logistics development opportunity, in a premier location just 1.5 miles from Junction 16 of the M6 near Crewe. At the interim results in November 2023, the Group announced that it was evaluating options for the scheme, including the sale of all or part of Radway Green, and that it would not progress the development alone. Negotiations are now well advanced.

This is a highly attractive scheme, with full planning permission and the potential to deliver at least 1.8 million sq ft of space, across two phases of 0.8 million sq ft and 1.0 million sq ft.

PRIORITY: INCREASE DIVIDEND COVER

Adjusted earnings per share was 4.8 pence for the year (FY23: 4.7 pence), representing cover of 75.0% of the total dividend for the year of 6.4 pence. The table below reconciles the movement in adjusted EPS between the two years:

The actions we have taken in FY24 position the Group to deliver rising earnings and dividend cover moving forwards.

In FY24, the Group generated profits on disposals of £5.5 million or 1.3 pence per share. Adding these profits to adjusted EPS results in earnings of 6.1 pence per share, increasing dividend cover on a cash basis to 95.3% for the year.

AN ATTRACTIVE AND RESILIENT PORTFOLIO

Focus on multi-let estates

The Group is highly focused on multi-let estates, which made up 71.6% of the portfolio by value at the year end (excluding development land). We favour these estates because they:

•    offer more asset management opportunities than single-let assets, helping us to raise the rental tone more quickly and capture the reversion created;

•    reduce risk by having a more diverse range of occupiers, spread across different industries;

•    provide flexibility for occupiers with a range of unit sizes to suit the life cycle of a company and the ability to scale up by taking multiple units; and

•    are a scarce asset class, with rebuild costs generally below capital values, constraining supply and supporting rental growth.

The portfolio analysis table below provides more information on the split between multi-let and single-let assets at the year end.

A strategically located portfolio

The portfolio is spread across important economic hubs, in gateway locations with access to major arterial routes and a plentiful local labour force. This contributes to occupier demand and the potential for long-term rental growth.

In particular, the portfolio has exposure to key industrial hubs in:

•     the North West (25.1% of the investment portfolio);

•     the Midlands (22.7%); and

•     the Oxford-Cambridge Arc, centred on Milton Keynes (24.2%).

Portfolio analysis

At the year end, the investment portfolio comprised 642 units across 7.8 million sq ft of space (31 March 2023: 833 units across 8.2 million sq ft). The table below analyses the portfolio as at 31 March 2024:

Capital values show upside potential

The NIY of the investment portfolio was 5.7% at 31 March 2024, with a reversionary yield of 6.8%. The average capital value across the portfolio was £93.52 per sq ft, which remains well below the reinstatement value for this type of asset, which is £116.16 per sq ft on our portfolio.

Occupancy remains high

Occupancy across the investment portfolio remained high at 96.4% at the year end (31 March 2023: 95.8%). Effective occupancy, which excludes units under offer to let or undergoing refurbishment, was 97.6% (31 March 2023: 98.4%), with 0.4% of the investment portfolio under offer to let and a further 0.8% undergoing refurbishment at that date.

The weighted average unexpired lease term for the investment portfolio stood at 5.0 years (31 March 2023: 5.5 years).

DIVERSE OCCUPIER BASE INCREASES RESILIENCE

The Group has a diverse occupier base of 445 businesses, with around 73.8% generating revenues of more than £10 million and around 89.2% exceeding £1 million of revenues.

The table below shows the occupier split by sector at the year end:

The Group's rent roll is also well diversified. The top 15 occupiers account for 36.3% of the contracted rents from the investment portfolio, with the top 100 generating 77.7%.

This spread of occupiers across industries and business sizes means the Group is not reliant on any one occupier or industry. This increases the Group's resilience and helps to mitigate both financial and leasing risks.

Occupiers remain in robust shape

We monitor the strength of the occupiers' covenants by using credit software such as Dun & Bradstreet, anti-money laundering software such as Dow Jones, monitoring news flow and analysing company reports. This keeps us informed of how evolving macroeconomic conditions are affecting their businesses. For smaller occupiers, the Group also often has the benefit of rent deposits, giving it additional protection from bad debts.

Overall, the Group's occupiers appear well placed in the current environment, which is reflected in our rent collection and the continued low level of bad debts (see the Financial Review). As at 17 June 2024, we had collected 99.3% of the rent due in respect of the year and we expect this to increase further as we work with occupiers to collect the outstanding amount.

Working with occupiers

While the Group's outsourced property managers handle some day-to-day administrative tasks with occupiers, we ensure that we always own the occupier relationship. Our asset management team regularly visits sites, meets occupiers face to face and holds calls with them. Initiatives such as the recently opened estate office at Bradwell Abbey in Milton Keynes enable our team to be on site, build stronger relationships and helps develop letting interest.

We also run surveys to obtain insights from occupiers, so we can support them better and to inform our asset management plans. These typically cover current and future space requirements, the number of people on site, where their stock comes from and goes to, what, if any, on site amenities they would value and what their ESG priorities are. This year our occupier survey covered the top 25 occupiers and two of the Group's largest estates; responses covered around 19% of contracted rents. It was conducted in person, providing an excellent opportunity to develop these key relationships.

LEASING ACTIVITY

Robust occupier demand has helped us to continue to capture the reversion in the portfolio through lease renewals and new lettings. New leases were ahead of ERVs, while lease renewals and rent reviews are achieving strong average uplifts against previous rental levels.

New leases

The Group completed 45 new leases on 0.2 million sq ft of space during the year, which will generate annual rent of £1.6 million, 37.7% ahead of the previous contracted rent and 8.7% ahead of the 31 March 2023 ERV. The level of incentives has reduced compared with the prior year.

Highlights are shown in the table below:

Lease renewals

The Group continues to retain the majority of its occupiers, with 76.7% remaining in occupation at lease expiry and 74.3% with a break arising in the year.

There were 36 lease renewals on 0.4 million sq ft of space during FY24, with an average uplift of 36.7% above the previous passing rent and 9.9% above the ERV.

Highlights are shown in the table below:

Rent reviews

During the year, we completed 22 rent reviews, generating an additional £5.6 million per annum, 23.9% ahead of previous rent and 8.0% ahead of the March 2023 ERV.

Highlights are shown in the table below:

TARGETED CAPITAL EXPENDITURE DRIVING RENTAL GROWTH AND IMPROVED ENERGY PERFORMANCE

On average, the Group budgets to invest around 0.75% of its gross asset value ("GAV") in capital expenditure each year. This excludes development projects and is therefore based on GAV excluding developments. Our priorities when investing in the estate are to drive rental growth, improve EPC ratings and secure other ESG improvements. Approximately 20% of capex is typically directed to EPC-related improvements and all capex must generate a minimum return of 10% on the capital deployed. Our capital expenditure plans also take account of local demand and supply, the requirements of individual units versus the overall estate, and our longer-term aspirations to hold or sell the asset.

Total capital expenditure in the year was £3.3 million, equivalent to 0.4% of GAV excluding developments. At the year end, approximately 0.8% of the portfolio's ERV was under refurbishment (31 March 2023: 1.3%).

FINANCIAL REVIEW

Performance

Rental income for the year was £44.0 million (FY23: £45.8 million), with the reduction reflecting the impact of asset disposals, partially offset by the Group's leasing activity, EPRA like-for-like rental growth of 5.7% and a full year contribution from Bradwell Abbey (acquired in the first half of FY23).

The Group's operating costs include its running costs (primarily the management, audit, company secretarial, other professional, and Directors' fees), and property-related costs (including legal expenses, void costs and repairs). Total operating costs for the year were £16.0 million (FY23: £18.9 million), with the cost base benefiting from a reduction in the Investment Advisor's fee of £1.2 million to £5.7 million (FY23: 6.9 million) and lower vacancy costs, following successful lettings activity in the year.

The net increase in the expected credit loss allowance remained low at £0.2 million (FY23: £0.2 million). This reflects the diversity and quality of the Group's occupiers and our close relationships with them.

The total cost ratio, which is the adjusted cost ratio including direct vacancy costs, was 24.4% (FY23: 28.4%). The ongoing charges ratio, representing the costs of running the REIT as a percentage of NAV, was 1.4% (FY23: 1.3%).

The Group disposed of assets totalling £53.0 million in the year, resulting in a net profit on disposal of £5.5 million.

At 31 March 2024, the Group recognised a gain of £15.1 million on the revaluation of its portfolio (FY23: loss of £193.4 million). See the Valuation section below for more information.

Financing income in the year was £8.5 million (FY23: £6.9 million), including £8.2 million (FY23: £2.0 million) of interest receipts from interest rate derivatives.

Financing costs include the interest and fees on the Group's revolving credit facility ("RCF") and term loan (see Debt Financing and Hedging). The finance expenses were £24.6 million (FY23: £15.5 million). While the impact has been partly mitigated by the Group's interest rate caps (see below), the all-in cost of debt for the year reduced to 4.2% (FY23: 4.3%). The Group also had a £5.2 million change in fair value of derivatives (FY23: £4.9 million gain), as well as £1.7 million related to the accelerated amortisation of loan issue costs, as a result of the debt refinancing in the first half of the year.

The statutory profit before tax was £34.3 million (FY23: £182.9 million loss).

The Group has continued to comply with its obligations as a REIT and the profits and capital gains from its property investment business are therefore exempt from corporation tax. The corporation tax charge for the year was therefore £nil (FY23: £nil).

Earnings per share under IFRS was 8.1 pence (FY23: 43.0 pence loss per share). EPRA EPS was 2.9 pence (FY23: 3.9 pence). Adjusted earnings per share was 4.8 pence (FY23: 4.7 pence).

Dividends

The Company has declared the following interim dividends in respect of the year:

The total dividend was therefore in line with the Group's target for the year of 6.4 pence and was 95.3% covered by adjusted EPS and profit on sale of investment properties. Three dividends were property income distributions and one was a non-property income distribution. The cash cost of the total dividend for the year will be £27.2 million (FY23: £27.6 million).

Valuation

The portfolio was independently valued by CBRE as at 31 March 2024, in accordance with the internationally accepted RICS Valuation - Global Standards 2020 (incorporating the International Valuation Standards) (the "Red Book"), and the RICS Valuation - Global Standards 2021 - UK national supplement.

The portfolio valuation was £810.2 million (31 March 2023: £828.8 million), representing a 2.0% like-for-like valuation increase. The value of the investment portfolio was up 2.6% on a like-for-like basis with development land down 2.5% reflecting the impact of higher interest rates on financing development schemes.

The EPRA NIY at the year end was 5.4% (31 March 2023: 5.0%) and the EPRA topped up NIY was 5.6% (31 March 2023: 5.5%). Whilst there was some softening in valuation yields in the December 2023 quarter across the whole, FY24 valuation yields for mulit-let warehouses generally remained flat. The increase in valuation was therefore driven by an increase in rental levels and ERVs brought about by a combination of market forces and active asset management.

Net asset value

EPRA Net Tangible Assets ("NTA") per share was 124.4 pence at 31 March 2024 (31 March 2023: 122.6 pence.) The table below reconciles the movement in the EPRA NTA in FY24:

Debt financing and hedging

The Group refinanced its debt facilities in the first half of FY24, extending the term and improving the covenants. The new £320.0 million facility comprises a £220.0 million term loan and a £100.0 million RCF. It replaces the Company's previous £320.0 million debt facility and extends the tenure from January 2025 to June 2028. The facility is provided by a club of four lenders: HSBC, Bank of Ireland, NatWest and Santander. The minimum interest cover is 1.5 times, compared to 2.0 times under the previous facility, and the maximum LTV has been extended from 55% to 60%. Both the term loan and the RCF attract a margin of 2.2% plus SONIA for an LTV below 40% or 2.5% if the LTV is above 40%.

At 31 March 2024, £64.0 million was drawn against the RCF and £220.0 million against the term loan. This gave total debt of £284.0 million (31 March 2023: £306.0 million), with the Group also holding cash balances of £16.0 million (31 March 2023: £25.1 million). The LTV ratio at 31 March 2024 was therefore 33.1% (31 March 2023: 33.9%). Interest cover for the period was 3.1 times, meaning the Group was substantially within the covenants in the debt facility.

At the year end, the Group had £250.0 million of interest rate caps in place, of which £200.0 million fixed SONIA at 1.5% and £50.0 million fixed SONIA at 2.0%. The Group took out the £50.0 million cap in November 2023, to replace a £30.0 million cap that expired in the month.

We continue to explore opportunities to diversify the Group's sources of debt funding, extend the average maturity of its debt and further reduce the average cost of debt.

TILSTONE PARTNERS LIMITED

As the Investment Advisor, our team plays a crucial role in the Group's success. Our people have a range of relevant skills, including real estate investment, asset management, finance and sustainability.

While everyone who joins us has the experience and qualifications they need for their role, we are committed to supporting professional and personal development and training. We therefore run an annual appraisal process and provide both statutory and individual training, according to each person's job or personal requirements. This year we have provided some additional disclosure on training and development within our EPRA Sustainability tables.

In March 2024 we also conducted our first employee survey. We had a 100% participation rate and were particularly pleased that over 90% rated their overall working environment as Very Good or Good. Responding to the survey, we have introduced a number of benefits, including employee volunteering days and match funding. We set annual objectives which align to our values and every employee has at least one ESG-related objective. Diversity and inclusion are important to us, as we recognise the benefits of diverse viewpoints and life experiences. At the year end, our gender diversity was 55% male, 45% female across the Investment Advisor.

POST-PERIOD END ACTIVITY

The Group exchanged or completed on the sale of £57.5 million of single-let assets in three separate transactions. These sales bring the total since 1 April 2023 to £110.5 million.

The transactions comprise Barlborough Links in Chesterfield, which has exchanged for £46.0 million, Parkway Industrial Estate in Plymouth sold for £6.3 million and Celtic Business Park, Newport sold for £5.2 million.

Also in June 2024, the Group exchanged contracts to acquire Ventura Retail Park in Tamworth, a retail warehousing asset for £38.6 million, representing a net initial yield of 7.4% Ventura is one of the top 20 shopping parks in the UK with an excellent occupier line up including Boots, Sports Direct and H&M. Comprising 13 units and covering 119,000 sq ft, it is part of a larger retail cluster including M&S and Asda, adjacent to the A5.

COMPLIANCE WITH THE INVESTMENT POLICY

The investment policy is summarised below. The Group continued to comply in full with this policy throughout the year.

GOING CONCERN

In preparing the financial statements, we and the Company's Board are required to assess whether the Group remains a going concern. During the year, the Group generated total property income of £51.0 million and operating profits of £35.0 million, showing that rents would have to fall by approximately 31.4% before the business became loss-making. This is considered highly unlikely given the high occupational demand for warehouse assets, our strong relationships with the broad range of occupiers across the portfolio, the level of rent collection and the fact that the portfolio ERV exceeds the year-end contracted rent roll by 20.0%.

At the same time, the Group has a strong balance sheet, with substantial cash and headroom within its facilities at the year end of £45.9 million. The Group has refinanced its debt facilities, extending the term by more than three years to June 2028, and at the date of this report has interest rate caps on £250.0 million of debt.

We and the Company's Board have also carefully reviewed the risk landscape and do not believe that the risks facing the Group have materially increased. As a result, we are confident that the Group remains a going concern.

INVESTMENT MANAGER

The Company is an alternative investment fund for the purposes of the Alternative Investment Fund Managers Directive ("AIFMD") and, as such, is required to have an Investment Manager who is duly authorised to undertake that role. G10 Capital Limited ("G10") is the Company's AIFM and Investment Manager and is authorised and regulated by the Financial Conduct Authority.

INVESTMENT ADVISOR

Tilstone Partners Limited is Investment Advisor to the Company.

Simon Hope

Tilstone Partners Limited

24 June 2024

PRINCIPAL RISKS AND UNCERTAINTIES

GOING CONCERN AND VIABILITY STATEMENT

GOING CONCERN

The Board monitors the Group's ability to continue as a going concern. Specifically, at quarterly Board meetings, the Board reviews summaries of the Group's liquidity position and compliance with loan covenants, as well as forecast financial performance and cash flows. Throughout the year, the Board met, in conjunction with the Investment Advisor, Tilstone, to review the uncertainties created by geopolitical tensions and inflation and interest rates, and specifically their potential impact on rent collection, cash resources, loan facility headroom, covenant compliance, acquisitions and disposals of investment properties, discretionary and committed capital expenditure and dividend distributions.

The Group ended the year with £9.9 million of unrestricted cash and £36.0 million of headroom readily available under its facilities. Disposals are an important part of our approach to portfolio optimisation and we continually review the portfolio to identify opportunities to increase efficiency and dispose of any assets that are considered ex-growth or non‑core, recycling that capital into accretive acquisitions or to reduce debt. The Group made disposals totalling £53.0 million during the year and completed £61.6 million post year end.

The Group is operating significantly within its covenants and a sensitivity analysis has been performed to identify the decrease in valuations and rental income that would result in a breach of the LTV, market value covenants or interest cover covenants. Valuations would need to fall by c.40% or rents by c.45%, when compared with 31 March 2024, before these covenants would be breached, which, based on available market data, is considered unlikely.

As at 21 June 2024, 99.3% of rents invoiced in relation to the year ended 31 March 2024 have been received. Furthermore, current debt and associated covenants are summarised in note 17, with no covenant breaches during the period.

Tilstone has prepared projections for the Group covering the going concern period to 30 June 2025, which have been reviewed by the Directors. As part of the going concern assessment, and taking the above into consideration, the Directors reviewed a number of scenarios that included extreme downside sensitivities in relation to rental cash collection, making no discretionary capital expenditure, adverse refinancing conditions and minimum dividend distributions under the REIT rules.

Accordingly, based on this information, and in light of mitigating actions available and the recent refinancing, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in business for a period of at least 12 months from the date of approval of the Annual Report and Financial Statements.

ASSESSMENT OF VIABILITY

In accordance with the AIC Code of Corporate Governance, the Directors have assessed the Group's prospects over a period greater than the 12 months considered by the going concern provision.

The Directors have conducted their assessment over a three-year period to June 2027, allowing a reasonable level of accuracy given typical lease terms and the cyclical nature of the UK property market.

The principal risks summarise the matters that could prevent the Group from delivering its strategy. The Board seeks to ensure that risks are kept to a minimum at all times and, where appropriate, the potential impact of such risks is modelled within its viability assessment.

The nature of the Group's business as the owner of a diverse portfolio of UK warehouses, principally located close to urban centres or major highways and let to a wide variety of occupiers, reduces the impact of adverse changes in the general economic environment or market conditions, particularly as the properties are typically flexible spaces, adaptable to changes in occupational demands.

The Directors' assessment takes into account forecast cash flows, debt maturity and renewal prospects, forecast covenant compliance, dividend cover and REIT compliance. The model is then stress tested for severe but plausible scenarios, individually and in aggregate, along with consideration of potential mitigating factors. The key sensitivities applied to the model are a downturn in economic outlook and restricted availability of finance, specifically:

i.    increased occupier churn and occupier defaults;

ii.   increased void periods following break or expiry;

iii.  decreased rental income;

iv.  decrease in property valuation; and

v.   increased interest rates.

The sensitivity analysis identifies the decrease in valuations and rental income that would result in a breach of the LTV, market value covenants or interest cover covenants as set out in the Going Concern section above. Taking into account mitigating actions, the results of the sensitivity analysis and stress testing demonstrated that the Group would have sufficient liquidity to meet its ongoing liabilities as they fall due, maintain compliance with banking covenants and maintain compliance with the REIT regime over the period of the assessment.

Furthermore, the Board, in conjunction with the Audit and Risk Committee, carried out a robust assessment of the principal risks and uncertainties facing the Group, including those that would threaten its business model, strategy, future performance, solvency or liquidity over the three-year period. The risk review process provided the Board with assurance that the mitigations and management systems are operating as intended. The Board believes that the Group is well positioned to manage its principal risks and uncertainties successfully, taking into account the current economic and political environment.

The Board's expectation is further supported by regular briefings provided by Tilstone. These briefings consider market conditions, opportunities, changes in the regulatory landscape and the current economic and political risks and uncertainties. Additionally, the shortage of supply nationally, is seen as mitigation. These risks, and other potential risks that may arise, continue to be closely monitored by the Board.

VIABILITY STATEMENT

The period over which the Directors consider it is feasible and appropriate to report on the Group's viability is a three-year period to June 2027. This period has been selected because it is the period that is used for the Group's medium‑term business plans. Underpinning this plan is an assessment of each individual unit's performance, driving the overall letting assumptions and corresponding forecast cash flows.

Having made an assessment of each individual unit's performance, the forecast cash flows, covenant compliance and the impact of sensitivities in combination, the Directors confirm that, taking account of the Group's current position, the principal risks and in light of the current economic uncertainty, they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

Neil Kirton

Chairman

24 June 2024

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with UK adopted international accounting standards and applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements of the Group in accordance with UK adopted international accounting standards and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Additionally, the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that year.

In preparing the financial statements, the Directors are required to:

•    select suitable accounting policies and apply them consistently;

•    present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•    provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

•    state whether the Group financial statements have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements;

•    state whether the Company financial statements have been prepared in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' ('FRS101') subject to any material departures disclosed and explained in the Company financial statements;

•    make judgements and estimates that are reasonable and prudent;

•    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business; and

•    prepare a directors' report, a strategic report and directors' remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, including ensuring the Annual Report and Financial Statements are made available. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. As such, the Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements and visitors to the website need to be aware that legislation in the UK covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

•    The Directors confirm that, pursuant to their responsibilities under DTR4, to the best of their knowledge: the financial statements, prepared in accordance with UK adopted international accounting standards and in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Company (and Group as a whole); and

•    this Annual Report includes a fair review of the development and performance of the business and the position of the Company (and Group as a whole), together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit and Risk Committee, the Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Neil Kirton

Chairman

24 June 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2024

All items in the statement derive from continuing operations. No operations were acquired or discontinued during the year.

There is no other comprehensive income and therefore the profit for the year after tax is also the total comprehensive income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2024

These financial statements were approved by the Board of Directors of Warehouse REIT plc on 24 June 2024 and signed on its behalf by:

Neil Kirton

Company number: 10880317

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2024

Further details of retained earnings are presented in note 23

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2024

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2024

1. General information

Warehouse REIT plc is a closed-ended Real Estate Investment Trust ("REIT") with an indefinite life incorporated in England and Wales on 24 July 2017. The Company began trading on 20 September 2017. The registered office of the Company is located at 65 Gresham Street, London EC2V 7NQ. The Company's shares are admitted to trading on the Premium Listing Segment of the Main Market, a market operated by the London Stock Exchange.

The Group's consolidated financial statements for the year ended 31 March 2024 comprise the results of the Company and its subsidiaries (together constituting the "Group") and were approved by the Board and authorised for issue on 24 June 2024. The nature of the Group's operations and its principal activities are set out in the strategic report on pages 02 to 62.

2. Basis of preparation

These financial statements are prepared in accordance with UK adopted international accounting standards and in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared under the historical cost convention, except for the revaluation of investment properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The audited financial statements are presented in Pound Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated.

Going concern

The Directors have made an assessment of the Group's ability to continue as a going concern. They carefully considered areas of potential financial risk and reviewed cash flow forecasts, evaluating a number of scenarios, which included extreme downside sensitivities in relation to rental cash collection, making no acquisitions or discretionary capital expenditure and minimum dividend distributions under the REIT rules.

Accordingly, based on this information, and in light of mitigating actions available, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in business for a period of at least 12 months from the date of approval of the Annual Report and Financial Statements (see the going concern on pages 61 to 62).

Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements have been prepared on the going concern basis.

2.1 Changes to accounting standards and interpretations

New standards and interpretations effective in the current period

There were a number of new standards and amendments to existing standards that are required for the Group's accounting period beginning on 1 April 2023, which have been considered and applied as follows:

•    amendments to IAS 1 and IFRS Practice Statement 2 'Presentation of Financial Statements' clarifies that significant accounting policies has been replaced with material accounting policies; and

•    amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' clarifies the distinction between accounting policies and accounting estimates and also replaces the definition of accounting estimates. Under the new definition, estimates are 'monetary amounts in financial statements that are subject to measurement uncertainty'.

There was no material effect from the adoption of the above-mentioned amendments to IFRS effective in the period. They have no significant impact to the Group as they are either not relevant to the Group's activities or require accounting which is already consistent with the Group's current accounting policies. Other amendments with an effective date this year are not relevant to the Group.

New and revised accounting standards not yet effective

There are a number of new standards and amendments to existing standards that have been published and are mandatory for the Group's accounting periods beginning on or after 1 April 2024 or later. The Group is not adopting these standards early. There are no accounting standards expected to have a material impact on the Group.

2.2 Significant accounting judgements and estimates

The preparation of these financial statements in accordance with IFRS requires the Directors of the Group to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

Judgements

In the course of preparing the financial statements, no judgements have been made in the process of applying the Group's accounting policies, other than those involving estimations detailed below, that have had a significant effect on the amounts recognised in the financial statements.

Estimates

In the process of applying the Group's accounting policies, the Investment Advisor has made the following estimates, which have the most significant risk of material change to the carrying value of assets recognised in the consolidated financial statements:

Valuation of property

The valuations of the Group's investment property are at fair value as determined by the external independent valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards January 2022 (incorporating the International Valuation Standards) and in accordance with IFRS 13. The key estimates made by the valuer are the ERV and equivalent yields of each investment property and land values per acre for development properties. The valuers have the buildings location, building specification and various other climate-related considerations and have factored this into the valuation See notes 13 and 25 for further details.

2.3 Summary of material accounting policies

The principal accounting policies applied in the preparation of these financial statements are stated in the notes to the financial statements.

a) Basis of consolidation

The Company does not meet the definition of an investment entity and therefore does not qualify for the consolidation exemption under IFRS 10. The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March 2024.

b) Functional and presentation currency

The overall objective of the Group is to generate returns in Pound Sterling and the Group's performance is evaluated in Pound Sterling. Therefore, the Directors consider Pound Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have therefore adopted it as the functional and presentation currency.

c) Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment in, and provision of, UK urban warehouses.

3. Property income

No occupier accounts for more than 10% of rental income.

Accounting policy

Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term and is included in gross property income in the Group statement of comprehensive income. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income. Rental income is invoiced in advance and for all rental income that relates to a future period, this is deferred and appears within current liabilities in the Group statement of financial position.

For leases that contain fixed or minimum uplifts, the rental income arising from such uplifts is recognised on a straight-line basis over the lease term. A rental adjustment is recognised from the rent review date in relation to unsettled rent reviews, once the rental uplifts are agreed.

Occupier lease incentives are recognised as an adjustment of rental revenue on a straight-line basis over the term of the lease. The lease term is the non-cancellable period of the lease together with any further term for which the occupier has the option to continue the lease where, at the inception of the lease, the Directors are reasonably certain that the occupier will exercise that option.

Insurance income is recognised in the accounting period in which the services are rendered.

Amounts received from occupiers to terminate leases or to compensate for dilapidations are recognised in the Group statement of comprehensive income when the right to receive them arises, typically at the cessation of the lease.

Service charge income is recognised when the related recoverable expenses are incurred. The Group acts as the principal in service charge transactions as it directly controls the delivery of the services at the point at which they are provided to the occupier.

4. Property operating and administration expenses

Details of how the Investment Advisor fees are calculated are disclosed in note 29.

Accounting policy

All property operating expenses and administration expenses are charged to the consolidated statement of comprehensive income and are accounted for on an accruals basis.

Property expenses are costs incurred by the Group that are not directly recoverable from an occupier, as well as professional fees relating to the letting of our estates.

5. Directors' remuneration

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' remuneration report. The Group had no employees in either period. All payments made are short-term employee benefits.

6. Auditor's remuneration

The Group reviews the scope and nature of all proposed non-audit services before engagement, to ensure that the independence and objectivity of the Auditor are safeguarded. Audit fees are comprised of the following items:

Non-audit fees payable to the Group's Auditor comprised the following:

The Audit Committee receives assurance from the Auditor that its independence is not compromised. The Group's Auditor for the year ended 31 March 2024 was BDO LLP.

7. Finance income

Accounting policy

Interest income is recognised on an effective interest rate basis and shown within the Group statement of comprehensive income as finance income. See note 18 for details on the accounting policy for interest rate derivatives.

8. Finance expenses

Finance expenses include accelerated amortisation of £1.6 million given the refinancing of the facility that took place in July 2023. Refer to note 17 for details.

The interest capitalisation rates for the year ended 31 March 2024 ranged from 4.3% to 4.7% (31 March 2023: 3.2% to 4.3%).

Accounting policy

Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. Any finance costs that are separately identifiable and directly attributable to an asset that takes a period of time to complete are capitalised as part of the cost of the asset. Ongoing services fees relating to the maintenance of the facility are expensed in the period in which they occur. Fair value movements on derivatives are recorded in finance expenses or in finance income depending on the fair value movement during the year. See note 19 for the accounting policy on head lease interest expensed.

9. Taxation

Corporation tax has arisen as follows:

Reconciliation of tax charge to profit before tax:

Accounting policy

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property rental business, provided it continues to meet certain conditions as per the REIT regulations.

Non-qualifying profits and gains of the Group continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the non-qualifying taxable income for the period, if applicable, using tax rates enacted or substantively enacted at the balance sheet date.

10. Operating leases

Operating lease commitments - as lessor

The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have a remaining term of up to 14 years.

Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2024 are as follows:

11. Dividends

As a REIT, the Group is required to pay property income distributions ("PIDs") equal to at least 90% of the property rental business profits of the Group.

A third interim property income dividend for the year ended 31 March 2024 of 1.60 pence per share was declared on 26 February 2024 and paid on 2 April 2024. In addition, a fourth interim non-property income dividend for the year ended 31 March 2024 of 1.60 pence per share will be declared on 25 June 2024 and paid on 26 July 2024.

Accounting policy

Dividends due to the Group's shareholders are recognised when they become payable.

12. Earnings per share

Basic EPS is calculated by dividing profit for the period attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares during the period. As there are no dilutive instruments in issue, basic and diluted EPS are identical.

The European Public Real Estate Association ("EPRA") publishes guidelines for calculating adjusted earnings on a comparable basis. EPRA EPS is a measure of EPS designed by EPRA to enable entities to present underlying earnings from core operating activities, which excludes fair value movements on investment properties.

The Group has also included an additional earnings measure called 'Adjusted Earnings' and 'Adjusted EPS'. Adjusted Earnings and Adjusted EPS recognises finance income earned from derivatives held at fair value through profit and loss used to hedge the Group's floating interest rate exposure. The premiums for the interest rate caps, which are being paid in quarterly instalments, are included in the statement of financial position as a derivative asset measured at fair value and have not been deducted in the calculation of adjusted earnings. Also included in adjusted earnings is the add back of the costs associated with the early close out of debt, as these costs will not be recurring.

The Board deems this a more relevant indicator of core earnings as it reflects our ability to generate earnings from our portfolio and matches the basis on which interest cover is measured for loan covenant compliance.

13. UK investment property

All completed investment properties are charged as collateral on the Group's borrowings. See note 17 for details.

Included within the carrying value of investment properties as at 31 March 2024 is £11.5 million (31 March 2023: £10.4 million) in respect of rent incentives as a result of the IFRS treatment of leases with rent-free periods, which require recognition on a straight-line basis over the lease term. The difference between this and cash receipts change the carrying value of the property on which revaluations are measured.

During the period the Group capitalised £1.2 million (31 March 2023: £1.2 million) of interest paid in development properties. Please see note 8 for details on the capitalisation rate used.

Realised (gain)/loss on disposal of investment properties

Accounting policy

Development property and land is where the whole or a material part of an estate is identified as having potential for development. Assets are classified as such until development is completed and they have the potential to be fully income-generating. Development property and land is measured at fair value if the fair value is considered to be reliably determinable. Where the fair value cannot be determined reliably but where it is expected that the fair value of the property will be reliably determined when construction is completed, the property is measured at cost less any impairment until the fair value becomes reliably determinable or construction is completed, whichever is earlier. In addition, it is the Group's policy to capitalise finance costs relating to the development of the assets with planning permission, where development work is underway see note 8 for details.

Subsequent to initial recognition, investment property is stated at fair value (see note 25). Gains or losses arising from changes in the fair values are included in the profit and loss in the period in which they arise under IAS 40 Investment Property.

Investment properties cease to be recognised when they have been disposed of or withdrawn permanently from use and no future economic benefit is expected. Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset.

Movements in rent incentives are presented within the total portfolio valuation.

Where an investment property is held under a leasehold interest, the headlease is initially recognised as an asset at cost plus the present value of minimum ground rent payments and is subsequently measured at fair value. The corresponding rental liability to the head leaseholder is included in the balance sheet as a finance lease obligation (see note 19).

14. Investment properties held for sale

As at 31 March 2024, Radway Green, Crewe along with the associated land are designated as held for sale, as sales offers are in progress and will likely be completed during the year ended 31 March 2025. St Modwen Road, Plymouth completed on 29 April 2024 and Barlborough Links Chesterfield exchanged contracts for completion which will occur during H1 of FY'25. Pikelaw Place, Skelmersdale is expected to complete during H1 of FY'25.

Accounting policy

An asset will be classified as held for sale in line with IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations' if its carrying value is expected to be recovered through a sale transaction rather than continuing use. An asset will be classified in this way only when a sale is highly probable, management are committed to selling the asset at the year-end date, the asset is available for immediate sale in its current condition and the asset is expected to be disposed of within 12 months after the date of the consolidated statement of financial position.

15. Cash and cash equivalents

Cash in transit comprises £6.1 million (31 March 2023: £6.1 million) of cash held by the Group's Registrar to fund the shareholder dividend, less withholding tax, which was paid on 2 April 2024 as disclosed in note 11.

Accounting policy

Cash and cash equivalents comprise cash at bank and short-term deposits with banks and other financial institutions, with an initial maturity of three months or less.

16. Trade and other receivables

The rent and insurance receivables balance represents gross receivables of £4.7 million (31 March 2023: £4.2 million), net of a provision for doubtful debts of £0.3 million (31 March 2023: £0.2 million).

Payments in advance of property completion represent the deposits paid to vendors upon exchange of purchase contracts.

Accounting policy

Rent and other receivables are recognised at their original invoiced value and become due based on the terms of the underlying lease or at the date of invoice.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing.

The expected loss rates are based on the Group's historical credit losses experienced over the two-year period prior to the year end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers.

17. Interest-bearing loans and borrowings

On 2 June 2023, the Group entered into a new £320.0 million facility, replacing the Group's previous £320.0 million debt facility and extending the tenure from January 2025 to June 2028. It comprises a £220.0 million term loan (2023: £182.0 million) and a £100.0 million RCF (2023: £138.0 million) with a club of four lenders; HSBC, Bank of Ireland, NatWest and Santander. The minimum interest cover is 1.5 times compared to 2.0 times under the previous facility and the maximum LTV has been extended to 60% from 55%. Both the term loan and the RCF attract a margin of 2.2% plus SONIA for an LTV below 40% or 2.5% if above. The Group has £250.0 million of interest rate caps in place, £50.0 million has a termination date of 20 November 2026, £100.0 million has a termination date of 20 July 2025 and £100.0 million has a termination date of 20 July 2027 (see note 18). The facilities are secured on all completed investment properties within the portfolio.

At 31 March 2024, £64.0 million was drawn against the RCF (31 March 2023: 124.0 million) and £220.0 million against the term loan (31 March 2023: £182.0 million). This gave total debt of £284.0 million (31 March 2023: £306.0 million); with the Group also holding cash balances of £16.0 million (31 March 2023: £25.1 million), the Group's net debt as at 31 March 2024 was £268.0 million (31 March 2023: £280.9 million). The LTV ratio at 31 March 2024 was therefore 33.1% (31 March 2023: 33.9%), with the decrease reflecting the disposal of properties in the year and the higher portfolio valuation.

As at 31 March 2024, there was £36.0 million (31 March 2023: £14.0 million) available to draw.

The debt facility includes interest cover and market value covenants that are measured at a Group level. The Group has complied with all covenants throughout the financial period.

Accounting policy

Loans and borrowings are initially recognised as the proceeds received net of directly attributable transaction costs. Loans and borrowings are subsequently measured at amortised cost with interest charged to the consolidated statement of comprehensive income at the effective interest rate, and shown within finance costs. Transaction costs are spread over the term of the loan.

18. Interest rate derivatives

To mitigate the interest rate risk that arises as a result of entering into variable rate linked loans, the Group entered into interest rate derivatives ("caps") against movements in SONIA. The caps have a combined notional value of £250.0 million with £200.0 million at a strike rate of 1.50% and the remaining £50 million at a strike rate of 2.00%. The £50.0 million cap has a termination date of 20 November 2026, £100.0 million has a termination date of 20 July 2025 and £100.0 million has a termination date of 20 July 2027.

Total consideration payable for the interest rate caps has been deferred over eight consecutive quarters, subsequent to the issuance of the instrument. The Group has paid £5.1 million in deferred premiums during the year to 31 March 2024 (2023: £2.2 million). The remaining premium of £7.5 million is due in quarterly instalments with the final payment due in October 2025.

Accounting policy              

Interest rate derivatives are initially recognised at fair value and are subsequently measured at fair value, being the estimated amount that the Group would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the Group and its counterparties. Premiums payable under such arrangements are initially capitalised into the statement of financial position.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes in fair value of interest rate derivatives are recognised within finance expenses in profit or loss in the period in which they occur.

All receipts of income from the instrument are recognised as finance income in note 8 of the financial statements separate from the fair value measurement recorded.

19. Head lease obligations

The following table analyses the present value of minimum lease payments under non-cancellable head leases using an average discount rate of 6.91% for each of the following periods:

The maturity analysis has been expanded in the current year to provide more information. The comparatives have been amended for consistency.

The following table analyses the minimum undiscounted lease payments under non-cancellable head leases for each of the following periods:

The weighted average unexpired lease term of head leases is 88.2 years (31 March 2023: 93.9 years).

Accounting policy

At the commencement date, head lease obligations are recognised at the present value of future lease payments using the discount rate implicit in the lease, if determinable, or, if not, the property-specific incremental borrowing rate.

20. Other liabilities - other payables and accrued expenses, provisions and deferred income

Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost. No discounting is applied to deferred consideration on the grounds of materiality.

During the year ended 31 March 2021, the Group exchanged contracts to acquire land for £15.0 million. The first three instalments were paid for a total of £2.5 million to the year ended 31 March 2022 with an additional £1.5 million paid during the year ended 31 March 2023 and £1.0 million paid during the year ended 31 March 2024. The final instalment of £10.3 million is due to be paid on 1 September 2024.

​

Deferred income is rental income received in advance during the accounting period. The income is deferred and is unwound to revenue on a straight-line basis over the period in which it is earned.

21. Share capital

Share capital is the nominal amount of the Group's ordinary shares in issue.

The share capital comprises one class of ordinary shares. At general meetings of the Group, ordinary shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every share held. There are no restrictions on the size of a shareholding or the transfer of shares, except for the UK REIT restrictions.

22. Share premium

Share premium comprises the following amounts: