23
May 2024
This announcement contains
inside information
Strong operational performance with significant market
opportunity
Great Portland Estates plc results
for the Group for the year ended 31 March
20241, with key highlights:
·
Strong leasing
& operational performance, leasing at
9.1% premium to March 2023 ERV
·
Vacancy only
1.3% as we meet customer demand for best space & service in
supply drought
·
Property
valuations at or around trough following yield expansion, GPE
portfolio down 2.4%3 in H2
·
Rental values up
3.8%; ERV growth guidance upgraded,
prime offices 5% to 10% for
FY'25
·
Net buyer for
first time since 2013; buying at a discount to replacement
cost
·
Identified £1.4
billion of attractive, accretive new opportunities; exchanged on
first purchase
·
Deep experience,
expertise and customer focus; GPE well positioned to unlock
potential
·
Announced fully
underwritten £350 million rights issue in line with our raise and
return strategy
Toby Courtauld, Chief Executive, said:
"We are pleased to report on another year of strong
operational performance. Our appealing blend of best in class HQ
offices and Fully Managed Flex spaces, all in central London's
undersupplied markets, is proving attractive to customers, enabling
us to beat the valuer's ERV estimates by 9.1% on all signed leases,
the highest margin since 2012, and by 11.1% across our office
lettings. Today, our portfolio is effectively full and, having
delivered ERV growth towards the top end of last year's guidance,
we have upgraded our forecast for this year to 5% to 10% for our
prime offices.
We
remain strong believers in London's long-term prospects; whilst its
occupational markets, particularly for centrally located, Grade A
space continue to power ahead with growing demand and shrinking
supply, we believe its investment markets are at an inflection
point; macro-economic effects ushered in a prolonged period of high
inflation and elevated interest rates, triggering capital value
declines of 58% in real terms since 2016, to levels we last saw
after the GFC in 2009. We believe values are now at or around their
cyclical trough and consequently, we turned net buyer during the
year for the first time since 2013, acquiring £152 million of
opportunities since March 2023 at an average 42% discount to
replacement cost.
To
capture the exciting growth opportunities and enable us to take
further advantage of disrupted investment market pricing, we have
today announced a £350 million fully underwritten rights issue and
the acquisition of The Courtyard, a core West End Flex conversion
opportunity. With an increasing pipeline of potential acquisitions,
totalling circa £1.4 billion and a number of encouraging
discussions ongoing, we can look forward to adding accretive
opportunities to our well-located portfolio. Having completed our
asset sales at more opportune points in the cycle, we will return
to selling once investment markets recover.
GPE's prospects are strong; our Flex and HQ development
business streams are both growing with supportive market
conditions, backed up by our market-leading service to our
customers; we expect to add further opportunities, capturing value
in disrupted investment markets; our teams' extensive experience of
successful value creation in cyclical markets and our strong
balance sheet will all combine to enable us to generate attractive
shareholder returns."
Strong leasing 9.1% ahead of
ERV2; vacancy only 1.3% with 83% customer
retention
·
£22.5 million of leases signed in year to 31 March
2024, 9.1% ahead of March 2023 ERV, including;
o £13.7 million of Flex; 29 lettings 12.3% ahead of March 2023
ERV; and
o Offices 11.1% ahead of March 2023 ERV, retail 4.7%
ahead
·
Our committed Flex offer now 503,000 sq ft,
targeting growth to one million sq ft
·
Rent roll of £107.5 million; vacancy 1.3% (Mar
2023: 2.5%)
·
Further
£4.8 million of lettings under offer, 4.0%
above March 2024 ERV
·
Market leading NPS score of +30.2; 83% customer
retention
Committed capex of £0.5 billion, c.£120 million profit to
come; embracing circular economy
·
Good progress at our pre-let net-zero carbon 2
Aldermanbury Square, EC2; Clifford Chance confirmed pre-let
commitment to whole building; anticipated completion Q1
2026
·
Started HQ redevelopments of Minerva House, SE1
and French Railways House, SW1 to provide 210,700 sq ft
of new Grade A
space; reusing steel from City Place House, EC2
·
Updated plans for New City Court, SE1 and Soho
Square, W1 added to the pipeline with vacant possession later this
year
·
Significant refurb programme to grow our Fully
Managed offer, 4 schemes on-site delivering 145,000 sq
ft
·
In total, 7 best-in-class schemes well timed to
deliver into supply constrained market
·
Updated Roadmap to Net zero (announced earlier
this week)
Net
buyer for first time since 2013; with more expected following
Courtyard swap deal
·
Four acquisitions (£152 million) since March 2023,
including:
o Two
Flex (£53 million) inc. 141 Wardour Street,
W1 in core Soho for £39 million (£1,156 per sq ft) and Bramah
House, 65/71 Bermondsey Street, SE1 for £14 million (£892 per sq
ft)
o HQ
development opportunity on Soho Square, W1 for £70 million (£772 per sq ft on consented NIA)
o The
Courtyard, WC1 acquired for £28.6 million (69% discount to
replacement cost ) in April in asset swap deal, adding to our flex
cluster in Fitzrovia
ERVs up 3.8%3, with valuation down 12.1%3 (-2.4%3
in H2) driven by
yield expansion; EPRA4 NTA per share of 624
pence
·
Portfolio valuation of £2.3 billion, down
12.1%3; -11.8% offices (inc. Flex -8.2% of which fully
managed -4.4%) and -13.2% retail; H2 -2.4%
·
Rental values up by 3.8%3 (+3.6%
offices and +4.4% retail); yield expansion of 56 bps
·
Portfolio rental value growth guidance for FY'25
of 3% to 6%, prime offices 5% to 10%
·
IFRS NAV and EPRA4 NTA per share of 624
pence, down 17.6% since March 2023 (H2: -4.0%) as
expected
·
EPRA4 earnings of £17.9 million, as
expected, down 25.4% on 2023. EPRA4 EPS of 7.1
pence
·
IFRS loss after tax of £307.8
million; loss per share of 121.7 pence;
dividend maintained at 12.6 pence
Strong balance sheet with no debt maturities until
2026
·
New £250 million term loan arranged in October
2023 to fund near-term development programme and recently matured
£175 million USPP Notes
·
EPRA LTV 32.6%; cash and undrawn facilities £633
million at 31 March 2024
·
No debt maturities until late 2026
Announced fully underwritten £350 million rights issue (see
today's separate announcement)
·
Attractive identified acquisition pipeline of £1.4
billion; 74% West End &
Midtown
·
Developing recent acquisitions; £168 million capex
into two prime West End opportunities
·
Pro forma liquidity of £594 million and EPRA LTV
of 18.2%; once proceeds deployed, expect LTV to return to upper end
of through the cycle LTV range of 10-35% with capital recycling
discipline maintained
1 All values include share of joint ventures unless otherwise
stated 2 Leasing in period to 31 March
2024 3 On a like-for-like
basis 4 In accordance with EPRA
guidance. We prepare our financial statements using IFRS, however
we also use a number of adjusted measures in assessing and managing
the performance of the business. These include like-for-like
figures to aid in the comparability of the underlying business and
proportionately consolidated measures, which represent the Group's
gross share of joint ventures rather than the net equity accounted
presentation included in the IFRS financial statements. These
metrics have been disclosed as management review and monitor
performance of the business on this basis. We have also included a
number of measures defined by EPRA, which are designed to enhance
transparency and comparability across the European Real Estate
sector, see note 9 to the financial statements. Our primary NAV
metric is EPRA NTA which we consider to be the most relevant
investor measure for the Group.
Contacts:
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Great Portland Estates plc
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+44
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20
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7647
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3000
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Toby Courtauld, Chief
Executive
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Nick Sanderson, Chief Financial
& Operating Officer
Stephen Burrows, Director of
Investor Relations and Joint Director of Finance
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FGS
Global
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+44
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(0)
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20
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7251
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3801
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James Murgatroyd
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Gordon Simpson
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The person responsible for arranging
the release of this announcement on behalf of GPE is Darren
Lennark.
The results presentation will be
broadcast live at 9.00am today with the link available
at:
www.gpe.co.uk/investors
A conference call facility will also
be available to listen to the presentation at 9.00am today on the
following numbers:
UK: 0808 109 0700 (freephone)
International: +44 (0) 33 0551 0200
Conference ID: GPE
A video interview with Toby
Courtauld and Nick Sanderson is available, along with accompanying
presentation materials and appendices, at:
www.gpe.co.uk/investors
For further information see
www.gpe.co.uk or
follow us on X at @GPE_London
LEI Number:
213800JMEDD2Q4N1MC42
A Dividend Reinvestment Plan (DRIP)
is provided by Equiniti Financial Services Limited. The DRIP
enables the Company's shareholders to elect to have their cash
dividend payments used to purchase the Company's shares. More
information can be found at www.shareview.co.uk/info/drip
Disclaimer
This announcement contains certain
forward-looking statements. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
future events and circumstances. Actual outcomes and results may
differ materially from any outcomes or results expressed or implied
by such forward-looking statements.
Any forward-looking statements made
by or on behalf of Great Portland Estates plc (GPE) speak only as
of the date they are made and no representation or warranty is
given in relation to them, including as to their completeness or
accuracy or the basis on which they were prepared. GPE does not
undertake to update forward-looking statements to reflect any
changes in GPE's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based.
Information contained in this
announcement relating to the Company or its share price, or the
yield on its shares, should not be relied upon as an indicator of
future performance.
This announcement is not and does
not contain an offer of securities for sale or a solicitation of an
offer to purchase or subscribe for securities in any jurisdiction,
including the United States, Canada, Japan or South Africa or any
other state or jurisdiction in which such release, publication or
distribution would be unlawful. Any securities to be sold in an
equity raise mentioned in this announcement have not been, and are
not expected to be, registered under the U.S. Securities Act of
1933, as amended (the 'Securities Act'), and may not be offered,
sold, taken up, renounced or delivered, directly or indirectly,
into or within the United States, except pursuant to an exemption
from, or a transaction not subject to, registration under the
Securities Act and in compliance with any applicable securities
laws of any state or other jurisdiction of the United States. The
Company is not intending to make a public offer of the Securities
in the United States.
Statement from the Chief
Executive
Please see accompanied graphics (see
appendix 1)
http://www.rns-pdf.londonstockexchange.com/rns/5552P_1-2024-5-22.pdf
Strong operational performance -
strategic focus
Despite the continued macro-economic
uncertainty and higher interest rates impacting our property valuation over
the year, we
delivered another strong operational performance. Our
excellent leasing results, low vacancy
and positive
rental growth again demonstrated that our offices
are in high customer demand, in a supply constrained market. With
these supportive market conditions, characterised by the
sharp bifurcation between the best spaces and the rest, our clear
strategy of delivering best-in-class HQ buildings and Flex spaces
for our customers means we have both a business
and a portfolio which are well positioned to take advantage.
Positioned to take advantage of
return of the cycle - net buyer for first time since
2013
In this financial year, we added to
our portfolio, acquiring three properties off-market for £122.9
million, including two Flex acquisitions and one HQ in Soho Square,
W1, that has been added to our development pipeline. With two small
non-core sales, we were a net buyer for the first time in more than
ten years. Since the start of the new financial year, we have also
exchanged contracts to buy The Courtyard, WC1 for £28.6 million in
an asset swap deal, adding to our Flex cluster in
Fitzrovia.
We believe the central London
investment market is now at or around its trough and is turning in
our favour with real property values having fallen to 2009 levels,
triggered by elevated inflation and high interest rates. As a
result, we fully expect to add to our growth prospects and have
identified a compelling set of accretive acquisition opportunities.
The rights issue, together with our already strong financial and
liquidity position, will provide further capacity for new
investment. With our strong track record of counter-cyclical
investment and our experienced team, our prospects are
appealing.
Strong leasing year - 9.1% ahead of
ERV
During the year, we signed 66 new
leases, delivering £22.5 million of new
rent, with market lettings 9.1% ahead of the March 2023
ERV. This includes 29 new deals across our Flex
spaces, securing £13.7 million in rent at a
12.3% beat to the March 2023 ERV. At our Fully
Managed spaces, we achieved average rents of £208 per sq ft,
supporting our ambitions for further growth across our identified
central London Flex clusters.
We also had many leasing successes
across our retail portfolio, as the
recovery strengthens with West End footfall back to near pre-pandemic levels and
the Elizabeth line enhancing transport
connectivity for shoppers, workers and tourists alike. We signed 26
retail leases delivering £7.0 million of new rent, beating the March 2023 ERV by
4.7%.
We value every customer - market
leading NPS and high customer retention
Our well established Customer First
approach, putting customer needs at the centre of everything we do,
was further strengthened this year with the addition of a
new employee
value: 'We value
every customer'.
We also continued to deliver a
leading Net Promoter Score of +30.2, significantly ahead of
the office industry average of +6.9, which has supported strong
customer retention. We retained 83% of our
customers across the portfolio in the last 12 months, which
helped us maintain our exceptionally high rent collection rates, securing in
excess of 99%
of all rents within seven working days, whilst also keeping our investment
void low at 1.3%.
Rental value growth more than offset
by increased yields - valuation performance
impacted
With customers increasingly
demanding the very best, sustainable spaces, they are competing in
a market increasingly starved of new, Grade A
supply, putting further upward pressure on prime rents.
Across our portfolio, we saw a like-for-like increase in rental
values of 3.8% over the year, with our retail rental values up
4.4%. Overall our office rents were up 3.6%, whilst our Fully
Managed office spaces again outperformed, up 5.2%.
Despite this attractive rental
growth, our property values reduced by 12.1%, reflecting the global
impact of higher interest rates on property yields. However, this
reduction was first half weighted and we believe prime property
yields are
now likely
around their peak.
The property valuation decline
reduced IFRS NAV and EPRA NTA per share by
17.6% over the year. When combined with an ordinary dividend maintained at
12.6 pence per share, our Total Accounting Return was minus 15.9%.
Including the revaluation of the portfolio, we delivered an IFRS
loss for the year of £307.8
million. Diluted EPRA EPS was 7.1 pence, a decline of 25.3%, primarily
driven by the impact of the higher interest rate
environment.
More rental value growth to come -
London a true global city
Whilst macro-economic volatility
persists, our confidence and belief in London remains. Unrivalled as one of the
world's most
attractive and diverse mixed-use locations, London is a true global
city. Central London is busy and office workers have returned, with
hybrid working now the norm. 74% of our portfolio is in the West End and
93% located close to Elizabeth line stations.
Looking forward, we anticipate
supportive rental conditions for the best
spaces and are optimistic for further rental growth, with
portfolio-wide guidance of 3% to 6% over the
next financial
year. For prime office space, our guidance is stronger still at 5% to
10%.
HQ repositioning - two new major
commitments
We committed to the redevelopment of
French Railways House & 50 Jermyn
Street, SW1, following the agreement of a new headlease. Our prime
office-led scheme on Piccadilly will provide 67,600 sq ft of
new Grade A
space and will embrace the principles of the circular economy. It
is expected to complete in mid-2026 and deliver a profit on cost of
23.7%.
Our latest commitment at Minerva
House, SE1, will take full advantage of its impressive River Thames
frontage, creating an enviable South Bank HQ destination with new
public realm and gardens, whilst delivering
outstanding sustainability and re-use
credentials. It is expected to complete in Q3 2026
and deliver a
profit on cost of 19.1%.
We have also made significant
progress at 2 Aldermanbury Square, EC2. Clifford
Chance LLP have leased the entirety of office space (321,100
sq ft) and our development works are progressing well, where we are
substantially increasing the size of the building (up from 176,000
sq ft) and completion is expected in early 2026.
Preparations for our two other near-term schemes continue, which,
together with our committed schemes, will deliver 0.8 million sq ft
of prime, predominantly office space with exemplary sustainability
credentials, along with £76
million of ERV following our proposed £0.8 billion of total investment.
Flex spaces - four schemes on-site
and on track for
growth to one million sq ft
We have recently committed to the
refurbishment of 141 Wardour Street, W1 which will
provide 29,900 sq ft of new Fully Managed led space in the heart of
Soho. The building will form part of our Soho Flex cluster, close
to our successfully established 16 Dufour's Place, W1 and will complete next
year. Our three other on-site Flex refurbishments are progressing
well, with 6 St Andrew Street, EC4 and 31/34 Alfred Place, WC1 on
track to be
delivered in Q3 2024, whilst Egyptian & Dudley House, SW1
will complete
in 2025.
Together with good progress across
our various on-floor refurbishments, we have
increased our committed Flex space to 503,000 sq ft, as we
advance towards our one million sq ft ambition. We
expect that more than 75% of our Flex footprint will be
delivered as Fully Managed spaces, generating more than £75 million
of net operating income. To deliver on these ambitions, we have enhanced our
organisational structure through promoting from
within and the targeted recruitment of new
talent.
Sustainability: updated Roadmap to
Net Zero and embracing the circular economy
Last year, we updated our approach
to climate resilience and our sustainability Statement of Intent.
This year, we updated our Roadmap to Net Zero, increasing the scope
and ambition of lowering our carbon emissions and aiming to deliver
a 90% reduction in Scope 1, 2 and 3 emissions to reach net zero by
2040. Alongside these ambitious targets, we have continued to
embrace the principles of the circular economy across our
development projects, with market leading steel and glass reuse
projects commenced during the year.
Our valuation
Please see accompanied graphics (see
appendix 2 and 5)
Yield driven valuation
decline
The valuation of our portfolio,
including our share of joint ventures, declined over the 12
months by 12.1% on a like-for-like basis, to
£2,331.2 million at 31
March 2024.
The key drivers behind the Group's
valuation decrease for the year, including joint ventures
at share, were:
• higher investment yields -
given the backdrop of higher interest rates,
equivalent yields increased by 56 basis points (2023: 42 basis points)
during the year (office: +54 basis points; retail: +62
basis points) reducing valuations. At 31 March 2024,
the portfolio true equivalent yield was 5.3%;
• rental value growth - the
continued demand for our best in class spaces has helped increase
our rental values. Since the start of the financial
year we have
seen continued demand for the best spaces and
our rental
values increased by 3.8% on a like-for-like basis, with our office
portfolio up by 3.6%,
with our Fully Managed offices up even higher at 5.2%. ERVs in our
retail portfolio increased by 4.4%;
• developments - the valuation of our committed
development properties decreased by 28.7% on a like-for-like
basis to £201.5 million during the period, given development
returns are more sensitive to movements in investment yields;
and
• portfolio management - we
delivered a strong leasing year, signing 75 new leases,
rent reviews and renewals, with new lettings 9.1% ahead of ERV. This
secured £25.6
million (our share) of annual income, supporting
the valuation
over the year.
At 31 March 2024, the portfolio was 10.1% reversionary.
Including rent from pre-lets and
leases currently in rent-free periods, the
adjusted initial yield of the investment portfolio
at 31 March
2024 was 3.9%, 10 basis points higher than the start of the financial
year.
Whilst the overall valuation
decreased by 12.1% during the year on a
like-for-like basis, elements of the portfolio continued
to show
greater variation:
• the second half performance
was down 2.4% significantly outperforming the
first six months (down 10.3%) with our Flex office space
reducing in value by 8.2% outperforming the Group's wider office
space which fell by 11.8% in value;
• retail space underperformed
offices falling in value by 13.2% resulting from a greater yield
expansion of 62 basis points;
• including developments, our
West End portfolio (-8.4%) performed better than our rest of London
portfolio (-20.7%), given a more aggressive yield expansion in the
City +73 basis points versus +53 basis points for the West
End;
• newer, higher quality
buildings outperformed older assets, with those assets with a
capital value per sq ft in excess of £1,000
per sq ft, reducing in value by 5.5% compared to those with a capital value per
sq ft of less than £1,000 per sq ft which reduced by 21.5%; and
• buildings
with better sustainability credentials outperformed.
Buildings with an EPC rating of A or B reduced in value
by 7.0%,
outperforming properties with an EPC of C or D which fell by 18.2% in the
year.
Our joint venture properties fell in
value by 10.2% over the year, driven by
higher investment yields whilst our wholly-owned portfolio
decreased by 12.6% on a like-for-like basis.
The second half performance (down
2.4% like-for-like) indicates both interest rates and property
yields are now likely around their peak.
Our development activities and capex
programme
Despite a challenging backdrop, we
made good operational progress across our development programme.
This included securing planning permission
and committing to Minerva House,
SE1, our commitment to the redevelopment of
French Railways House & 50 Jermyn Street, SW1 and the
acquisition of the Soho Square Estate, W1. Today, our
capex programme provides a significant
platform for growth, with a capital commitment across
our on-site
schemes of £0.5 billion.
Repositioning our buildings through
redevelopment and refurbishment is a core part of our business
model and presents a significant organic growth opportunity. Our
forecasts suggest that the future supply of new spaces in London is
severely constrained. We estimate that only 3.0
million sq ft p.a. of new space will be delivered on average
over the next four years, in a market where the average
take-up of new space is much greater, at
4.9 million sq ft p.a. Our significant
capex programme is targeted to deliver new high quality space into
these supportive markets through the delivery of new HQ developments
and through the expansion of our Flex spaces.
Three committed HQ development
schemes
Our development works are
progressing well at our fully pre-let 2
Aldermanbury Square, EC2, where we are substantially increasing the
size of the building to 322,600 sq ft (up from 176,000 sq ft).
Following the careful deconstruction of the previous building, the structural steel has been extracted
and is being reconditioned for reuse to form the majority of
the structural elements of French Railways House & 50 Jermyn
Street (see below). This pioneering approach will nearly entirely
eliminate the embodied carbon of the steel and help deliver our
second net zero carbon building, after 50 Finsbury Square, EC2. The
scheme also includes a number of public realm and amenity
improvements that will have a positive impact on
the local area
and improve accessibility to the western entrance of the Liverpool
Street Elizabeth line station. Clifford Chance LLP has confirmed
that it will be proceeding to lease the entirety of office space
(321,100 sq ft) following the expiry of their option to hand back the first to fourth floors
of the building. Whilst the development is currently
anticipated to deliver a loss on cost from
the commitment date of 12.4%, given market yield
expansion driven valuation declines to date, from the 31 March 2024 valuation the scheme is expected
to deliver
around £30 million
of future profit.
At French Railways House & 50
Jermyn Street, SW1, we have now obtained vacant possession and have
commenced the strip out of the buildings. Our major office-led
redevelopment will provide 67,600 sq ft (up from 54,700 sq ft) of
new Grade A space and is expected to complete in mid-2026. The
scheme is designed to embrace the principles of the circular
economy which includes retaining the existing
foundations and basement and reusing the structural steel
from the demolition of 2 Aldermanbury Square, EC2. Once
complete, the building will provide best in class, column free
space together with high-specification amenities including a
wellness suite, private terraces on the upper
floors, a communal roof terrace with panoramic views, as
well as the highest sustainability credentials. We
have £95 million cost to come and the scheme is anticipated to deliver a profit on cost of 23.7%, an
ungeared IRR of 14.5%
and a 6.4%
development yield.
At Minerva House, SE1, Southwark
Council resolved to grant planning
permission for the redevelopment and good progress
has been made to prepare the site to start this year.
We committed to the development in April 2024,
and our plans will take the overall commercial
space to 143,100 sq ft, an increase of approximately 56% on the existing area.
Our proposals will take full
advantage of the building's river frontage and,
by adding
additional storeys, we will be able to create outdoor terraces and
amenity space with commanding views over central London. The
refurbishment will also improve the public realm
around the building, creating new and improved
connections through the site as well as attractive new gardens that
will contribute to local greening and biodiversity and provide space for people
to enjoy in the setting of Southwark Cathedral. Our proposals will
retain and reuse the majority of the existing
building's structure, including two primary façades
and provide market leading sustainability credentials. The scheme is anticipated to deliver a profit on
cost of 19.1%, an ungeared IRR of 11.7% and a development
yield of
7.0%.
In total, across the three on-site
HQ schemes we have committed expenditure to come of £424
million.
Two near-term development
schemes
Beyond our three committed schemes,
we have a substantial and flexible pipeline of four uncommitted HQ schemes, including
two schemes in our near-term pipeline.
At our recently acquired Soho Square
Estate, W1, we continue to work up our plans to refine the existing
planning consent to deliver around 100,300 sq ft of new Grade A
office and prime retail space. The redevelopment will provide a
best-in-class HQ office building on Soho Square with flagship
retail fronting Oxford Street, with multiple private terraces and a
communal roof terrace, all adjacent to the Tottenham Court
Elizabeth line station. We anticipate starting on site early next
year. We anticipate that the redevelopment will deliver healthy
returns, with an expected profit on cost of 20.7%,
an ungeared IRR of 10.4% and a development
yield of 5.8%.
At New City Court, SE1, we submitted
two planning applications to
Southwark Council to redevelop the building, the first
in December 2018 for a 372,500 sq ft scheme, and
a second
in April 2021
for a 389,100 sq ft scheme.
Following an appeal for
non-determination, in September 2023, we received confirmation that
the Planning Inspector's report recommended the
planning applications were refused and the Secretary of State agreed with
its conclusions.
As a result of the planning
decision, we are exploring the opportunity to reuse and extend
the existing building, combining Fully Managed and Ready to Fit
spaces, to create a renewed building with exemplary sustainability
credentials, amenity provision, flexible spaces and far-reaching
views from large, landscaped roof terraces.
In total, our three committed and
two near-term schemes comprise around £770
million of anticipated capital expenditure and are
expected to deliver 0.8 million sq ft of best-in-class, highly sustainable space, perfectly placed to
benefit from a market where forward look supply is
severely constrained. With a further
three schemes in the medium-term pipeline,
our HQ
development programme totals 1.1 million sq ft and will provide
strong growth potential over the coming years,
which we plan
to supplement through further acquisitions.
Commitment to further Flex
expansion
In order to expand our Flex office
offers, and meet our ambitious targets for growth, we are on-site
at four refurbishments to provide new dedicated Fully Managed
spaces, as well as converting a significant number of
individual floors across our portfolio.
Four committed Fully Managed
refurbishments
We have recently committed to the
refurbishment of 141 Wardour Street, W1 which will
provide 29,900 sq ft of new Fully Managed led space in the
heart of Soho. 141 Wardour Street will build on our success to date
at nearby 16 Dufour's Place, W1, delivering light-filled
floorplates of 2,000 to 4,000 sq ft, terraces on the upper floors
and excellent amenity space. The construction is expected to
complete in early 2025 with capex to come of
£20 million.
At 6 St Andrew Street, EC4, we
started on site in June 2023 to deliver
47,800 sq ft
of new Grade A Fully Managed offices. Our plans include the addition of two new
storeys, together with extensive terracing and significant amenity
throughout the building. We anticipate that the scheme will complete
in Q3 2024,
and will cost £16
million to finish.
At 31/34 Alfred Place, WC1, in the
heart of Fitzrovia, we have committed to an extensive
refurbishment of the entirety of the 41,700 sq ft building to provide
outstanding Fully Managed office space. The cost to convert the
space will be £13 million and we anticipate the
scheme will be completed in Q4 2024.
At Egyptian and Dudley House, SW1,
we are
comprehensively refurbishing the building
to provide 25,600 sq ft of Fully Managed space. We are infilling
lightwells to expand floorplates, creating new first-floor amenity
space and creating an external terrace with garden to provide
additional amenity and biodiversity. The
scheme is expected to complete in spring 2025 and will
cost £25 million to
finish.
Together with a number of other
conversions, we anticipate growing our Flex
offerings from 503,000 sq ft today to 605,000 sq ft organically.
Moreover, we are aiming to add to this programme through
acquisition, as demonstrated by our recent exchange of contracts to
purchase of The Courtyard, WC1, and are targeting enlarging our
Flex offerings to one million sq ft over the coming years.
How we are positioned
In total, our HQ development and
Flex capex programme provides a strong platform for organic growth.
Together, our seven on-site schemes will deliver 678,000 sq ft of
well-designed, tech-enabled
and sustainable space into a market where
prospective supply is increasingly limited. Moreover,
with around £120
million of anticipated profit to come from these schemes,
they will
provide a strong foundation to the Group's growth in the coming years.
Our leasing and Flex
activities
With a continued high demand for
best-in-class spaces, we delivered another
strong leasing performance. Supported by our Fully Managed spaces
we signed £22.5 million of new leases, beating
rental values by 9.1%. Our customer retention
also remained high at 83%
During the year, our rental values
increased by 3.8% across the portfolio. Within this, our
retail space outperformed our offices for the
first time in a while, with like-for-like retail rental
values increasing by 4.4% compared
with a 3.6%
increase in office rental values. Within our offices,
our Fully
managed rental values outperformed, increasing by 5.2%
on a like-for-like basis.
With customers increasingly
demanding the very best, sustainable spaces, we expect the trend of
the best spaces outperforming the rest to
continue. This supportive demand in a market starved of new, Grade
A supply, means the occupational market
dynamics remain in our favour. Our rental growth guidance for the
next year continues to remain positive, at 3.0% to 6.0%, with
the best spaces even higher at 5.0% to 10.0%.
The key leasing highlights for the
year included:
• 66 new leases and renewals
completed during the year (2023: 105 leases), generating annual
rent of £22.5 million (our share: £19.8 million; 2023:
£52.8 million), with
market lettings 9.1% ahead of ERV;
• of the new leases signed,
five were Fitted and 24 were Fully Managed space, achieving on
average £208 per sq
ft on the Fully
Managed space, 12.6% ahead of March 2023 ERV;
• 26 new retail leases
securing £7.0 million of rent with market lettings 4.7% ahead of March
2023 ERV, including new London flagship store for TK Maxx on Oxford
Street;
• 11 rent reviews securing
£8.4 million of rent (our share: £5.8 million; 2023: £6.3 million)
were settled at an increase of 3.3% over the previous rent and
16.7% ahead of ERV at review date;
• total space covered by new
lettings, reviews and renewals was 401,500 sq ft (2023: 861,200
sq ft);
• the Group's vacancy rate
decreased to 1.3% (31 March 2023: 2.5%);
• the
Group's rent
roll has increased by 1.0% to £107.5 million following a successful
leasing period (not including the pre-let at 2 Aldermanbury Square,
EC2) offset by vacant possessions ahead of developments;
and
• 97% (by area) of the 104
leases with breaks or expiries in the 12 months to 31 March 2024 were
retained (83%), re-let, or are under offer, leaving 10,200 sq
ft still to transact.
Flex: £13.7 million, strong leasing
successes
At 16 Dufour's Place, W1, we renewed
the 3rd floor (3,100 sq ft) lease with a
marketing firm on a Fully Managed basis. They have taken an
additional two year lease, paying a rent of £278 per
sq ft, an increase of 53% on their previous terms. This new lease, together with a number of other lease
renewals in the building during the year, has increased the average
rent in the
building to £250
per sq ft.
At The Hickman, E1, we completed the
letting to New Look on the third and fourth floors (23,242 sq ft)
on a Fitted basis on ten-year leases with an option to break at
year seven. New Look was an existing GPE customer and vacated
35,860 sq ft
at Wells & More, W1, which has provided GPE with the opportunity to refurbish and re-lease the space in
this prime Fitzrovia location. The
Hickman is now fully let.
In total, we signed £13.7 million of
new leases in our Flex space; £1.6 million Fitted and £12.1 million
Fully Managed leases at a combined 12.3% ahead of March 2023 ERV.
Our Fully Managed deals achieved on average £208 per sq ft, 12.6%
ahead of March 2023 ERV.
Our Flex space continues to grow on
target to hit one million sq ft
During the year, including our Flex
Partnerships, we increased our committed Flex offerings across the portfolio and they
now total 503,000 sq ft (or c.23.5% of our
offices). Our four on-site Flex refurbishments are progressing
well, with 6 St Andrew Street, EC4 and Alfred Place, WC1 on track
to be delivered in Q3 2024, whilst Egyptian and Dudley
House, SW1 and 141 Wardour Street, W1 will complete in 2025.
Looking forward, our portfolio is
well suited to further Flex growth. Our average building size is
small at around 65,000 sq ft and more than 80% of our floors are
sub-10,000 sq ft. Together with good progress across our various
on-floor refurbishments, we have increased our
committed Flex space to 503,000 sq ft (up from 434,000 in
September 2023) as we remain on track to meet our one million sq ft
ambition. Moreover, we are seeing continued strong
demand for our Flex spaces and, following a strong leasing,
our completed Fitted and Fully Managed spaces are now 98% let.
Furthermore, we are excited for opportunities to further supplement this
growth through acquiring buildings that lend themselves
to our
flexible space offer. In total, we are targeting growth,
both organically and through
acquisition, to one million sq ft.
Ready to Fit: £1.8 million deals
completed
We completed ten Ready to Fit deals
across various buildings during the year, beating the March 2023
ERV by 2.2%.
At 2 Aldermanbury Square, EC2,
Clifford Chance chose not to exercise their option
to hand back
the first to fourth floors of the building (up to
89,000 sq ft) in early March 2024, confirming their
commitment to all of the office space. Good progress
has been made
ahead of the building's completion in Q1 2026 and we look forward to welcoming them
to the building.
Retail: £7.0 million, resurgent
demand
During the year, our retail leasing
was strong. At our Piccadilly Buildings,
San Carlo, the award-winning restaurant group, signed a lease for
its new flagship Cicchetti, occupying 7,000 sq ft over ground and basement floors, across two
units.
On Regent Street, we completed two
flagship retail lettings to The North Face and JOSEPH. The North
Face has traded successfully at GPE's
Walmar House site since 2015 and signed a 10 year
lease on an additional 10,000 sq ft ahead
of 31
March 2023
ERV. Further south on Regent Street, British
contemporary designer fashion brand, JOSEPH, also signed
a lease for a
new store located at Kingsland House, 124 Regent Street, W1, completing the
repositioning of the retail offering at the
building.
At Mount Royal, 508/540 Oxford
Street, W1, TK Maxx, Europe's leading
off-price apparel and homeware retailer, signed
up for its
latest London flagship store. The store comprises 22,500 sq ft
across the ground and first floor levels, with 70 ft of Oxford Street frontage. This will be TK
Maxx's
second store on Oxford Street. In addition,
the high street health and beauty retailer, Superdrug, also
recently re-geared its retail lease for their 8,000 sq ft store at
Mount Royal, committing to another 10 years.
In April 2024, we let the retail
space at 141 Wardour Street, W1 to British luxury retail brand,
REPRESENT, for its new London flagship store. The space comprises 5,000 sq ft across
two floors, which will be its second
store globally to date, following its LA opening in West
Hollywood.
Customer retention 83%
Customer relationship management and
retention are also a key
part to our success. In addition to delivering market leading NPS scores, our customer retention numbers are strong.
We have retained 83% across the whole portfolio in the last
12 months.
This high retention rate helps
reduce vacancy costs and lowers refresh
capital expenditure in our Flex spaces. Furthermore, should a
customer need to move, we aim to utilise our broad portfolio to
allow them to grow or contract with us. This includes transitioning
some of our long-term Ready to Fit customers into our Flex space,
as well as providing opportunities for some of our smaller Flex customers to
graduate into larger and longer-term spaces as they
grow.
How we are positioned
Despite a weak macro-economic
backdrop, we anticipate that current occupational trends will
continue. We expect that the demand for the best spaces will
outstrip supply and the trend for smaller spaces
to be provided on a flexible basis to increasingly become
the norm. Buildings that are unable to meet this evolving demand,
particularly in the face of competition from elevated secondary supply, will
underperform. The gap between the best and the rest is
likely to
widen further.
Against this backdrop, we remain
well positioned: our leasing record remains strong, our
committed development programme is focused on high quality,
well-located office-led schemes that have enduring demand, we are
delivering innovative products that lease well, office rents remain
affordable and 93% of our portfolio is within walking
distance of an Elizabeth line station.
Our investment activities
Despite a muted investment market,
we were net investors during the year, acquiring three buildings to
augment both our HQ repositioning pipeline and our Flex office
offers. Looking forward, our acquisition pipeline is growing and
since the year end we have further added to our Flex offer with our
recent exchange of contracts to purchase the Courtyard,
WC1.
Acquisitions for the year ended 31 March 2024
|
Price
£m
|
NIY
%
|
Area
sq ft
|
Cost per
sq ft
|
Soho Square Estate, W1
|
70.0
|
2.1%
|
57,500
|
7721
|
141 Wardour Street, W1
|
39.0
|
n/a
|
33,700
|
1,156
|
Bramah House, SE1
|
13.9
|
5.9%
|
16,000
|
892
|
Total
|
122.9
|
|
107,200
|
911
|
1. On consented
area.
In August 2023, we acquired the Soho
Square Estate, W1, for £70.0
million (£772 per
sq ft on consented NIA). The site is located in the heart of the
West End at the eastern end of Oxford Street and backs onto Soho
Square, just 100 metres from the new Tottenham Court Road Elizabeth
line station. The 0.5 acre site benefits from planning consent to
demolish the existing buildings and deliver around 100,300 sq ft of
new Grade A
office and prime retail space.
We intend to re-work the designs to
improve the quality of the space, further
increasing its attractiveness to prospective customers in a
materially undersupplied market. The redevelopment will provide a
best-in-class HQ office building on Soho Square with flagship retail
fronting Oxford Street, with multiple private terraces on the upper floors and a communal roof
terrace.
In May 2023, we acquired 141 Wardour
Street, W1 for £39.0 million (£1,156 per sq ft). The 33,700 sq ft
building was vacant, had been stripped out by the previous owner
and benefited from planning consent for a comprehensive
refurbishment. The building is in the heart of
Soho, prominently positioned on the corner of Wardour Street
and Broadwick Street and within a five-minute walk of the new
Tottenham Court Road Elizabeth line station. The building is
perfectly suited to our Fully Managed offer and
will provide best-in-class office and retail
accommodation.
Also in May 2023, we acquired Bramah
House, SE1 for £13.9 million, reflecting a 5.9%
net initial yield and a capital value of £892 per sq ft. The
16,000 sq ft freehold building is multi-let, and over time, we
intend to convert the space to Fully Managed offices. The
building is located opposite our existing ownership at Woolyard and
will add to a growing Fully Managed cluster.
Sales for
the year ended 31 March 2024
|
Price
£m
|
Premium/(discount) to book value
%
|
Price per
sq ft
£
|
NIY
%
|
Poland Street, W1
|
5.0
|
(13.4%)
|
995
|
5.5%
|
6 Brook Street, W1
|
8.4
|
-
|
2,306
|
3.0%
|
Total
|
13.4
|
(5.4%)
|
1,546
|
|
We also took the opportunity to sell
two smaller non-core West End assets for
£13.4 million, at a 5.4%
discount to the March 2023 valuation.
Disciplined approach
With interest rates remaining
elevated, our investment markets have slowed and we have seen asset
values decline, particularly for assets with vacancy, short-term
income or development risk. We anticipate that against this
backdrop some property owners will be increasingly motivated to
sell and fully expect further opportunities to buy over the
course of 2024. However, we remain disciplined.
Any potential purchase needs to outperform the assets
we already own, and with our existing portfolio stacked with
opportunity, the hurdle is high.
How we are positioned
We are actively seeking new
buildings for our Flex offerings, as well as opportunities for HQ repositioning or
development and we increasingly expect the
sustainability challenge to provide us with opportunities to
acquire stranded assets needing a sustainability
solution.
Encouragingly, there are clear signs
that the investment market is moving in our
favour, with more opportunities trading closer to our view
of fair value. Furthermore, we currently have £1.4 billion of
assets actively under review. They are predominantly off market, split broadly equally between
HQ repositioning opportunities and Flex and around half are
in the West
End. Beyond this we have a further watchlist of £1.4 billion
additional opportunities which we are actively tracking.
Of these opportunities, three
buildings, totalling around £250 million are near-term
opportunities, one of which recently exchanged at The Courtyard,
WC1. We have exchanged to buy the building for £10.4 million of
cash and through a property exchange of 95/96 New Bond Street for
£18.2 million. The Courtyard comprises 62,000 sq ft of vacant
office and partially let retail space and is well suited to be
repositioned into the Group's Fully Managed offering. The Courtyard
is located in a prime West End location, around 400 meters from Tottenham Court
Road Elizabeth line station, and is adjacent to
Alfred Place, one of the Group's other
Fully Managed buildings.
Our financial results
Please see accompanied graphics (see
appendix 4)
As is usual practice in our sector,
we use alternative performance measures
(APMs) to help explain the performance of the business. These
include quoting a number of measures on a proportionately consolidated basis to include joint
ventures, as it best describes how we
manage the portfolio, like-for-like measures and using
measures prescribed by EPRA. The measures defined by
EPRA are
designed to enhance transparency and comparability across the
European real estate sector. Reconciliations of APMs are included
in note 9 of the
financial statements.
Lower IFRS NAV and EPRA NTA per
share driven by valuation declines
IFRS NAV and EPRA NTA per share at
31 March 2024 were 624 pence per share, a decrease of
17.6% over the year, largely due to the 12.1% like-for-like
valuation decrease in the property portfolio. When
combined with ordinary dividends paid of 12.6 pence per share, this delivered
a Total Accounting Return of minus 15.9%.
The main drivers of the 133 pence
per share decrease in EPRA NTA from 31 March 2023
included:
• the decrease of 127 pence
per share arising from the revaluation of the property portfolio,
with virtually all of the decline arising from upward
pressure on property yields as a result of higher interest
rates;
• EPRA earnings for the year
of 7 pence per share enhanced NTA; and
• ordinary dividends paid of
13 pence per share reduced NTA.
At 31 March 2024, the Group's net
assets were £1,583.0 million, down from £1,918.6 million at 31
March 2023, with the decrease largely attributable to the decrease
in property valuation of £322.2
million. EPRA NDV and EPRA NRV were 644 pence and 691 pence at 31 March 2024 respectively,
compared with 790 pence and 826 pence at 31 March 2023.
Revenue increased due to increased
rental income
Revenue for the year was £95.4
million, up from £91.2 million on the prior year, driven by higher
gross rental income (up £0.6 million), increased service charge
income (up £1.9 million)and greater Fully Managed services income
(up £2.7 million) given its expansion. The increase in revenue was
supported by our successful leasing, where we signed 66 leases,
generating new annual income of £22.5 million p.a. (our share:
£19.8 million) and reduced our investment void
from 2.5% at
31 March 2023 to 1.3% at
31 March 2024.
Net rental income, after taking
account of expected credit losses, lease incentives and ground rents, was
£72.1 million,
up from £70.9
million in the prior year, as we saw the benefit from the
commencement of new leases given our strong leasing year and a
reduced credit loss provision as our rental collection rates returned to more
normalised levels.
Given the increase of our Fully
Managed spaces during the year, and the associated management
information, we have presented our Fully Managed spaces as a
separate segment.
Adjusting for acquisitions,
disposals and transfers to and from the development programme, like-for-like rental income
(including share of joint ventures) increased
by 4.1% excluding expected credit
losses.
Joint venture fee income for the
year was £1.7 million, a decrease of £0.7 million, as a result of limited
leasing or sales activity in the joint ventures during the year.
Strong rent collection
We secured in excess of 99% of all
rents, including in our joint ventures, within seven days of the
due date. Since 1 April 2023, four of our
customers have gone into administration, representing less than
0.7% of our rent roll. At 31 March 2024, we held rent deposits and bank guarantees totalling £21.3 million, including our share of joint ventures.
Cost of sales increased
Cost of sales increased from £32.2
million to £33.3 million for the year ended 31 March 2024. This
increase was primarily driven by increased service charge expenses,
which includes Fully Managed services costs, which
rose as our Fully Managed spaces grew over the year. At 31
March 2023, we had 55 Fully Managed units, at 31 March 2024 this
rose to 82 units. Other property expenses reduced
by £5.0 million, due to lower average levels of vacancy
reducing payments for business rates on empty spaces, reduced
leasing costs as activity was lower given last
year's record performance and lower amounts paid to third
parties in respect of joint venture transactions due to lower
levels of activity.
Taken together, net service charge
income, net Fully Managed services income
and expenses, other property costs and expected credit loss
provisions for service charges reduced to £11.4
million from £15.2 million in the prior
year.
Joint venture earnings
EPRA earnings from joint ventures
were £9.8 million, unchanged on the prior year, with a £1.2 million
increase in net rental income offset by
higher property and administration costs.
Administration costs
Administration costs were £42.3
million, £4.0 million higher than the previous year. The increase in the Group's overhead was
due to an increase in employment costs, due to inflationary salary
uplifts and the cost associated with team restructuring of around
£2.0 million. In addition, provisions for share-based payments
returned to more normalised levels as the reversal of prior year
charges under the Group's LTIP scheme in the year ended 31 March
2023 did not reoccur in the current year. Looking forward, we
anticipate that recent years' growth in the Group's overhead cost will moderate
significantly.
Increased interest costs
Gross interest paid on our debt
facilities was £26.5 million, £8.7 million higher than the prior
year. This increase was primarily due to a combination of higher
levels of average drawn debt (including the utilisation of the
Group's new £250 million term loan), which was used to fund both
our recent acquisitions as well capital
expenditure on the Group's development and Flex
refurbishments, together with higher underlying interest
rates.
Capitalised interest increased
by £2.5 million to £11.3 million as
our development activity increased, including the
commitments to develop French Railways
House & 50 Jermyn Street, SW1 and Minerva House, SE1 as well as
the commencement of a growing number of refurbishment schemes to
deliver on our Flex ambitions, including 141 Wardour Street, W1,
Egyptian & Dudley House, SW1 and 31/34 Alfred Place, WC1. As a result,
the Group had net finance costs (including
interest receivable) of £11.6
million (2023: £5.5
million).
EPRA earnings
EPRA earnings were £17.9 million,
25.4% lower than last year as expected, predominantly due to
higher finance costs and administration expenses offset by
increased net rental income and lower property costs.
Revaluation declines in the Group's
investment properties, together with reduced EPRA earnings, led to
the Group's reported IFRS loss after tax of £307.8 million (2023:
£163.9 million).
Basic and diluted loss per share
for the year
were both a 121.7 pence loss, compared with 64.8 pence
for 2023.
Diluted EPRA EPS was 7.1 pence (2023: 9.5 pence), a decrease of 25.3%
and cash EPS
was 1.4 pence
(2023: 1.4 pence).
Results of joint ventures
The Group's net investment in joint
ventures decreased to £491.3 million at 31 March 2024, down from £538.8 million in the previous year. The decrease is
largely due to the 10.2% like-for-like decrease in value
of the joint
venture property portfolio. Our share of joint venture net rental
income was £19.4
million, up 6.6% from last year. This increase was primarily as a
result of completing the leasing of the retail space at Hanover
Square, W1 in the GHS Partnership.
Our capital strength
While our primary objective is to
deliver returns consistently ahead of our
cost of capital, we also seek to minimise the cost of our capital
through the appropriate mix of equity and debt finance, and to
ensure that we have access to sufficient financial
resources to implement our business plans. Optimising and
flexing the allocation of capital across our portfolio, including between our investment and development
activities, is key to our business and ensuring that we
maximise returns on a risk-adjusted basis through the
property cycle. Accordingly, we operate with four key
'givens':
· conservative leverage to enhance, not drive,
returns;
· sustainable ordinary dividends;
· disciplined capital allocation; and
· balance sheet efficiency - track record of accretively
raising and
returning capital.
Our preference for low financial
leverage helps to provide downside protection when
operating in the cyclical central London property market and
to maintain the financial flexibility to allow us to act quickly on
new investment opportunities as they arise.
Our capital strength; EPRA LTV of
32.6%
The Group's consolidated net debt
increased to £721.0 million, or £738.0 million excluding customer
deposits at 31 March 2024, compared with £457.7 million at 31 March
2023. The increase was largely due to the acquisition of three
buildings during the year for £122.9 million (excluding costs),
together with £142.4 million of development and refurbishment
capital expenditure across the Group. As a result, the Group's
gearing increased to 46.8% at 31 March 2024 from 24.0% at 31 March
2023. Including cash balances in joint ventures, total net debt,
excluding net liabilities, was £695.3 million (2023: £440.0
million) or £713.5 million excluding customer deposits, equivalent
to an EPRA LTV of 32.6% (2023: 19.8%). At 31 March 2024, we had no
external debt in any of our joint ventures. At 31 March 2024, the
Group, including its joint ventures, had unrestricted cash (£30.4
million) and undrawn committed credit facilities (£603.0 million)
totalling £633.4 million.
During the year, to support the
delivery of our strategic priorities, including funding the Group's
near-term development programme and the £175 million private
placement debt maturity in May 2024, we secured a new £250 million
term loan at a headline margin of 175 basis points over SONIA with
three existing relationship banks. The loan has an initial
three-year term which may be extended to a maximum of five years.
Given the elevated interest rate environment, and our greater
weighting to SONIA rates through the drawdown of our £250 million
loan facility, the Group's weighted average cost of debt for the
year, including fees, was 4.1% and its weighted average interest
rate (excluding fees) was 4.3% up from 3.0% and 2.7% respectively.
At 31 March 2024, our weighted average drawn debt maturity was at
3.4 years (31 March 2023: 6.4 years). At 31 March 2024, 87% of the
Group's total drawn debt was at fixed or hedged rates (2023: 97%).
The Group is operating with substantial headroom over its debt
covenants. At 31 March 2024, given our low levels of leverage,
property values would have to fall a further 34% before covenant
breach.
Balance sheet discipline
When considering the appropriate
level of financial leverage in the business, we apply the same
capital discipline that we use when making asset-level decisions.
Typically, we aim for an LTV ratio of between 10% and 35% through
the cycle. Additionally, we have a track record of accretively
raising and returning equity capital to shareholders at the
appropriate time and in the appropriate circumstances, including
returning £616 million to shareholders between 2017 and 2020,
following profitable recycling activity. Our key considerations
when making such capital decisions include:
· the
market outlook;
· opportunities for growth (both capital expenditure and
acquisitions);
· opportunities for profitable recycling activity;
and
· current and prospective debt ratios (including LTV and
interest cover).
Taxation
The tax credit in the income
statement for the year was £nil million (2023: £0.1 million) and
the effective tax rate on EPRA earnings was 0% (2023: 0%). The
majority of the Group's income is tax free as a result of its REIT
status, and other allowances were available to set against non-REIT
profits. The Group complied with all relevant REIT tests for the
year to 31 March 2024.
As a REIT, the majority of rental
profits and chargeable gains from our property rental business are
exempt from UK corporation tax, provided we meet a number of
conditions, including distributing at least 90% of the rental
income profits of this business (known as Property Income
Distributions (PIDs)) on an annual basis. These PIDs are then
typically treated as taxable income in the hands of shareholders.
During the year, the Group paid £20.0 million of PIDs.
The Group's REIT exemption does not
extend to either profits arising from the sale of trading
properties or gains arising from the sale of investment properties
in respect of which a major redevelopment has completed within the
preceding three years (including the sale of 50 Finsbury Square,
EC2, which completed in February 2023). The Group is otherwise
subject to corporation tax. Despite being a REIT, we are subject to
a number of other taxes and certain sector-specific charges in the
same way as non-REIT companies. During the year, we incurred £10.6
million in respect of stamp taxes, section 106 contributions,
community infrastructure levies, empty rates in respect of vacant
space, head office rates, employer's National Insurance and
irrecoverable VAT.
All entities within the Group are UK
tax resident; as our business is located wholly in the UK, we
consider this to be appropriate. The Group maintains an open
working relationship with HMRC and seeks pre-clearance in respect
of complex transactions. HMRC regards the Group as 'low risk' and
maintaining this status is a key objective of the Group.
Ordinary dividends
Given the low yielding nature of
London real estate, the Group operates a low and progressive
ordinary dividend policy, with the aim of maintaining average
dividend cover of 1.0x through the cycle. The Board has recommended
a final dividend of 7.9 pence per share (2023: 7.9 pence) which
will be paid, subject to shareholder approval, on 8 July 2024 to
shareholders on the register on 31 May 2024. Approximately half of
the final dividend will be a REIT PID in respect of the Group's
tax-exempt property rental business.
Together with the interim dividend
of 4.7 pence per share, the total dividend for the year is 12.6
pence per share, consistent with the prior 12 months.
Group income statement
For the year ended 31 March
2024
|
Notes
|
2024
£m
|
2023
£m
|
Revenue
|
3
|
95.4
|
91.2
|
Cost of sales
|
4
|
(33.3)
|
(32.2)
|
|
|
62.1
|
59.0
|
Administration expenses
|
5
|
(42.3)
|
(38.3)
|
Expected credit losses
|
|
(0.1)
|
(0.8)
|
Development management
losses
|
|
-
|
(0.1)
|
Operating profit before deficit from
investment property,
revaluation movements and results of joint ventures
|
|
19.7
|
19.8
|
Deficit from investment
property
|
10
|
(267.3)
|
(145.0)
|
(Deficit)/surplus on revaluation of
other investments
|
13
|
(0.2)
|
0.1
|
Share of results of joint
ventures
|
11
|
(46.7)
|
(33.4)
|
Operating loss
|
|
(294.5)
|
(158.5)
|
Finance income
|
6
|
6.1
|
6.0
|
Finance costs
|
7
|
(17.7)
|
(11.5)
|
Fair value loss on
derivatives
|
17
|
(1.7)
|
-
|
Loss before tax
|
|
(307.8)
|
(164.0)
|
Tax
|
8
|
-
|
0.1
|
Loss for the year
|
|
(307.8)
|
(163.9)
|
|
|
|
|
Basic loss per share
|
9
|
(121.7p)
|
(64.8p)
|
Diluted loss per share
|
9
|
(121.7p)
|
(64.8p)
|
Basic EPRA earnings per
share
|
9
|
7.1p
|
9.5p
|
Diluted EPRA earnings per
share
|
9
|
7.1p
|
9.5p
|
All results are derived from
continuing operations in the UK and are attributable to ordinary
equity holders.
Group statement of comprehensive income
For the year ended 31 March
2024
|
Notes
|
2024
£m
|
2023
£m
|
Loss for the year
|
|
(307.8)
|
(163.9)
|
Items that will not be reclassified
subsequently to profit and loss
|
|
|
|
Actuarial gain on defined benefit
scheme
|
26
|
0.1
|
0.3
|
Deferred tax on actuarial gain on
defined benefit scheme
|
8
|
-
|
(0.1)
|
Total comprehensive expense for the
year
|
|
(307.7)
|
(163.7)
|
Group balance sheet
At 31 March 2024
|
Notes
|
2024
£m
|
2023
£m
|
Non-current assets
|
|
|
|
Investment property
|
10
|
1,911.0
|
1,922.2
|
Investment in joint
ventures
|
11
|
491.3
|
538.8
|
Property, plant and
equipment
|
12
|
2.0
|
3.5
|
Pension asset
|
26
|
4.9
|
4.1
|
Derivative financial
instruments
|
17
|
0.4
|
-
|
Other investments
|
13
|
2.4
|
1.8
|
|
|
2,412.0
|
2,470.4
|
Current assets
|
|
|
|
Trade and other
receivables
|
14
|
24.9
|
15.8
|
Cash and cash
equivalents
|
22
|
22.9
|
19.4
|
|
|
47.8
|
35.2
|
Current assets held for
sale
|
|
|
|
Investment property held for
sale
|
10
|
18.2
|
-
|
|
|
18.2
|
-
|
Total assets
|
|
2,478.0
|
2,505.6
|
Current liabilities
|
|
|
|
Interest-bearing loans and
borrowings
|
16
|
(175.0)
|
-
|
Trade and other payables
|
15
|
(76.2)
|
(56.8)
|
Corporation tax
|
8
|
(0.3)
|
-
|
|
|
(251.5)
|
(56.8)
|
Non-current liabilities
|
|
|
|
Interest-bearing loans and
borrowings
|
16
|
(565.4)
|
(458.5)
|
Head lease obligations
|
18
|
(74.1)
|
(66.7)
|
Occupational lease
obligations
|
19
|
(1.0)
|
(2.0)
|
Provisions in respect of warranties
on sold buildings
|
|
(3.0)
|
(3.0)
|
|
|
(643.5)
|
(530.2)
|
Total liabilities
|
|
(895.0)
|
(587.0)
|
Net assets
|
|
1,583.0
|
1,918.6
|
Equity
|
|
|
|
Share capital
|
20
|
38.7
|
38.7
|
Share premium account
|
|
46.0
|
46.0
|
Capital redemption
reserve
|
|
326.7
|
326.7
|
Retained earnings
|
|
1,166.0
|
1,504.4
|
Investment in own shares
|
21
|
5.6
|
2.8
|
Total equity
|
|
1,583.0
|
1,918.6
|
|
|
|
|
Basic net assets per share
(diluted)
|
9
|
624p
|
757p
|
EPRA NTA (diluted)
|
9
|
624p
|
757p
|
Approved by the Board on 22 May 2024
and signed on its behalf by:
Toby Courtauld
Nick
Sanderson
Chief
Executive
Chief Financial & Operating Officer
Group statement of cash flows
For the year ended 31 March
2024
|
Notes
|
2024
£m
|
2023
£m
|
Operating activities
|
|
|
|
Operating loss
|
|
(294.5)
|
(158.5)
|
Adjustments for non-cash
items
|
23
|
313.4
|
175.1
|
(Increase)/decrease in
receivables
|
|
(8.6)
|
5.3
|
Increase/(decrease) in
payables
|
|
4.1
|
(6.1)
|
Cash generated from
operations
|
|
14.4
|
15.8
|
Interest paid
|
|
(22.3)
|
(17.6)
|
Interest received
|
|
0.3
|
0.1
|
Cash flows used in operating
activities
|
|
(7.6)
|
(1.7)
|
Investing activities
|
|
|
|
Distributions from joint
ventures
|
|
-
|
7.5
|
Repayment of loans by joint
ventures
|
|
6.7
|
9.0
|
Investment in joint
ventures
|
|
(0.1)
|
-
|
Purchase of other
investments
|
|
(0.8)
|
(0.7)
|
Development of investment
property
|
|
(121.7)
|
(80.5)
|
Purchase of investment
property
|
|
(128.3)
|
(39.9)
|
Purchase of plant and
equipment
|
|
(0.1)
|
(0.2)
|
Sale of properties
|
|
12.6
|
217.4
|
Cash flows (used in)/generated from
investing activities
|
|
(231.7)
|
112.6
|
Financing activities
|
|
|
|
Revolving credit facility
repaid
|
16
|
(275.4)
|
(387.0)
|
Revolving credit facility
drawn
|
16
|
308.4
|
314.0
|
Term loan drawn
|
16
|
248.0
|
-
|
Purchase of derivative
|
17
|
(2.1)
|
-
|
Payment of lease
obligations
|
|
(3.4)
|
(3.3)
|
Dividends paid
|
24
|
(32.7)
|
(31.9)
|
Cash flows generated from/(used in)
financing activities
|
|
242.8
|
(108.2)
|
Net increase in cash and cash
equivalents
|
|
3.5
|
2.7
|
Cash and cash equivalents at 1
April
|
|
19.4
|
16.7
|
Cash and cash equivalents at 31
March
|
22
|
22.9
|
19.4
|
Group statement of changes in equity
For the year ended 31 March
2024
|
Notes
|
Share
capital
£m
|
Share
premium
account
£m
|
Capital
redemption
reserve
£m
|
Retained
earnings
£m
|
Investment
in own
shares
£m
|
Total
equity
£m
|
Total equity at 1 April
2023
|
|
38.7
|
46.0
|
326.7
|
1,504.4
|
2.8
|
1,918.6
|
Loss for the year
|
|
-
|
-
|
-
|
(307.8)
|
-
|
(307.8)
|
Actuarial gain on defined benefit
scheme
|
26
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
Deferred tax on defined benefit
scheme
|
|
-
|
-
|
-
|
-
|
-
|
-
|
Total comprehensive expense for the
year
|
|
-
|
-
|
-
|
(307.7)
|
-
|
(307.7)
|
Employee incentive plan
charges
|
21
|
-
|
-
|
-
|
-
|
4.0
|
4.0
|
Dividends to shareholders
|
24
|
-
|
-
|
-
|
(31.9)
|
-
|
(31.9)
|
Transfer to retained
earnings
|
21
|
-
|
-
|
-
|
1.2
|
(1.2)
|
-
|
Total equity at 31 March
2024
|
|
38.7
|
46.0
|
326.7
|
1,166.0
|
5.6
|
1,583.0
|
Group statement of changes in equity
For the year ended 31 March
2023
|
Notes
|
Share
capital
£m
|
Share
premium
account
£m
|
Capital
redemption
reserve
£m
|
Retained
earnings
£m
|
Investment
in own
shares
£m
|
Total
equity
£m
|
Total equity at 1 April
2022
|
|
38.7
|
46.0
|
326.7
|
1,697.9
|
3.6
|
2,112.9
|
Loss for the year
|
|
-
|
-
|
-
|
(163.9)
|
-
|
(163.9)
|
Actuarial gain on defined benefit
scheme
|
26
|
-
|
-
|
-
|
0.3
|
-
|
0.3
|
Deferred tax on defined benefit
scheme
|
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
Total comprehensive expense for the
year
|
|
-
|
-
|
-
|
(163.7)
|
-
|
(163.7)
|
Employee Long-Term Incentive Plan
charge
|
21
|
-
|
-
|
-
|
-
|
1.3
|
1.3
|
Dividends to shareholders
|
24
|
-
|
-
|
-
|
(31.9)
|
-
|
(31.9)
|
Transfer to retained
earnings
|
21
|
-
|
-
|
-
|
2.1
|
(2.1)
|
-
|
Total equity at 31 March
2023
|
|
38.7
|
46.0
|
326.7
|
1,504.4
|
2.8
|
1,918.6
|
Notes forming part of the Group
financial statements
1 Material accounting
policies
Basis of preparation
The financial information contained
in this announcement has been prepared on the basis of the
accounting policies set out in the financial statements for the
year ended 31 March 2024. Whilst the financial information included
in this announcement has been prepared in accordance with United
Kingdom adopted international accounting standards in conformity
with the requirements of the Companies Act 2006, this announcement
does not itself contain sufficient information to comply with IFRS.
The financial information does not constitute the Company's
financial statements for the years ended 31 March 2024 or 2023, but
is derived from those financial statements. The auditors' reports
on both the 2024 and 2023 financial statements were not qualified
or modified.
The financial statements have been
prepared on the historical cost basis,
except for the revaluation of properties and certain financial
instruments which are held at fair value. The consolidated
financial statements, including the results and financial position,
are expressed in sterling (£), which is the presentation currency
of the Group.
The Directors have considered the
appropriateness of adopting the going concern
basis in preparing the financial statements
for the year ended 31 March 2024, with particular focus on
the impact of the macro-economic conditions in which the Group is
operating. The Directors also considered the Group's net current
liability position as at 31 March 2024, which is primarily driven
by the maturity in May 2024 of a £175 million private placement
note (see note 16). The Directors' assessment is based on the next
12 months of the Group's financial forecasts from the date of
approval of the annual report, including a going concern scenario
which included
the following key assumptions:
• a 14% decline in the
valuation of the property portfolio; and
• a 35% decline in earnings
before interest and tax.
The going concern scenario did not
include the proceeds of the intended rights issue and demonstrates
that the Group over the next 12 months:
• has
sufficient liquidity to fund its ongoing operations;
• is operating with significant
headroom above its Group debt financing covenants;
• property values would have
to fall by 18% before breach (or 34% from 31 March
2024 values);
• earnings before
interest and
tax would need to fall by 42% before breach (or 63% from 31 March 2024 levels); and
• has sufficient liquidity to
continue its operations on repayment of the
Group's £175 million private placement notes, that mature in May
2024, as were repaid on 22 May 2024.
The Directors also conducted
extensive stress testing, sensitising the
potential impact of climate change as detailed further in the
viability statement as well as the impact of removing non-committed
disposal proceeds and capital expenditure. Based
on these considerations, together with available market
information and the Directors' knowledge and experience of
the Group's property portfolio and markets, the
Directors have adopted the going concern
basis in
preparing the accounts for the year ended 31 March 2024. The Group
has adopted a number of alternative performance measures, see note 9
for further
detail.
Critical accounting judgements and
key sources of estimation uncertainty
In the process of preparing the
financial statements, the Directors are required
to make certain judgements, assumptions and estimates. Not
all of the Group's accounting policies require the Directors to
make difficult, subjective or complex judgements
or estimates. Any estimates and judgements made are continually
evaluated and are based on historical experience
and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. Although these estimates are based on the Directors'
best knowledge of the amount, event or actions, actual results
may differ
from those
estimates.
No critical judgements have been
made.
The following is intended to provide
an understanding of the estimates that management
consider critical because of the level of complexity, judgement or
estimation involved in their application and their material impact
on the financial statements.
Key source of estimation
uncertainty: investment property portfolio valuation
The valuation to determine the fair
value of the Group's investment properties is prepared by its
external valuer. The valuation is based upon a number of
assumptions and estimations, including future rental income,
anticipated capital expenditure, including future
development costs and an appropriate discount rate. The valuer also
makes reference to market evidence of
transaction prices for similar properties. Information about
the valuation techniques, significant assumptions and associated
key unobservable inputs sensitivity disclosures
are disclosed in note 10. An adjustment
to any of
these assumptions could lead to a material change in the property valuation. For the current year and prior year,
the Directors adopted the valuation without
adjustment - further information is provided in the accounting
policy for investment property and note 10.
New accounting standards
In the current year, the Group has
applied a number of amendments to IFRSs that are
mandatorily effective for an accounting period that begins
on or after 1 January 2024. Their adoption has not had any material
impact on the disclosures or on the amounts
reported in
these financial statements. These new standards and amendments are
listed below:
• IFRS
17 - Insurance contracts;
•
Disclosure of accounting policies amendments to IAS 1
and IFRS
Practice Statement 2;
•
Amendments to IAS 8 - Accounting policies - definition
of accounting
estimates;
•
Amendments to IAS 12 - Income taxes - deferred tax
relating to
assets and liabilities arising from a single transaction;
and
• OECD
Pillar Two Rules (out of scope).
At the date of authorisation of
these financial statements, the Group has not applied the
following new and revised IFRSs that have been issued but are
not yet effective:
•
Amendments to IAS 1 - Presentation of financial
statements - classification of liabilities as
current or
non-current and non-current liabilities with
covenants;
•
Amendments to IFRS 16 - Leases - lease liability in a sale and
leaseback;
• IFRS 18 - Presentation and
Disclosure in Financial Statements;
•
Amendments to IAS 7 and IFRS 7 - supplier finance arrangements;
and
• Amendments to IFRS 10 and
IAS 28 - sale or contribution of assets
between an investor and its associate or joint venture.
The Directors do not expect that the
adoption of the standards listed above will
have a material impact on the financial statements of the Group in future periods, with the exception
of IFRS 18, where the Directors are
assessing its potential impact.
Basis of consolidation
The Group's financial statements
consolidate the financial statements of the
Company and all its subsidiary undertakings for
the year ended
31 March 2024. Subsidiary undertakings are those entities controlled by the
Group. Control exists when the Company is exposed, or has
rights, to variable returns from its involvement with the
entity and has the ability to affect
those returns through its power over the investee.
Revenue
Gross rental income comprises rental
income and premiums on lease surrenders on
investment properties for the year, exclusive of service charges receivable,
on a straight-line basis. Initial direct costs incurred in
arranging a lease are added to the carrying value of investment
properties and are subsequently recognised as an
expense over the lease term on
the same basis as the lease income.
Lease incentives, including
rent-free periods and payments to
customers, are allocated to the income statement on
a straight-line basis over the lease term or on another
systematic basis, if applicable. The value of
resulting accrued rental income is included within the
respective property, with the aggregate cost of the
incentive recognised as a reduction in rental income
on a straight-line basis over the term of the lease.
Revenue from Fully Managed spaces is
split between an amount attributable to the rent
on a fitted basis and services income as set out in the
lease agreement, which is based on stand-alone selling prices.
Where the lease agreement does not provide an
attribution, the Group splits the revenue based on the ERV
of the fitted rent, which represents the stand-alone selling price. The rent is recognised in gross
rental income (see above) and the services income
is recorded over the period when the services are provided and
benefit the customer.
The Group's Flex Partnerships
represent leases with third-party operators
where the rent payable is calculated by reference to the profitability of the space under management. The rent
is recognised in gross rental
income (see above).
Service charge income is recorded
over the period when the services are provided and
benefit the customer.
Cost of sales
Service charge expenses represent
the costs of operating the Group's
portfolio and are expensed as incurred.
Fully Managed service costs
represent the costs of operating the Group's Fully
Managed spaces and are expensed as incurred.
Other property expenses represent
irrecoverable running costs directly attributable to
specific properties within the Group's portfolio. Costs incurred in the
improvement of the portfolio which, in the opinion of the Directors, are
not of a
capital nature are written-off to the income statement as incurred.
Administration expenses
Costs not directly attributable to
individual properties are treated as administration
expenses.
Share-based payments
The cost of granting share-based
payments to employees and Directors is recognised within
administration expenses in the income statement. The Group has used
the stochastic model to fair value LTIP grants, which is dependent
upon factors including the share price, expected volatility and
vesting period. The fair value of the RSP is based
on the share price at grant date. The resulting fair value
is amortised through the income statement over the vesting period.
The charge is recognised over the vesting period
and reversed if it is likely that any
non-market-based performance or service criteria will not be met. Any cost in respect of share-based
payments relating to the employees of
a subsidiary company is recharged accordingly.
Investment property
Both leasehold and freehold
investment properties and investment properties
under development are professionally valued on a fair value
basis by qualified external valuers and the Directors must ensure
that they are satisfied that the valuation of the Group's
properties is appropriate for inclusion in the accounts without
adjustment. The valuation of the property portfolio reflects
its fair value taking into account the market view of all relevant
factors, including the climate-related risks associated with the
properties. This includes the impact of expected regulatory
changes.
The valuations have been prepared in
accordance with the current versions of the RICS Valuation - Global
Standards (incorporating the International Valuation Standards
(IVS)) and the UK national supplement (the Red Book)
and have been
primarily derived using comparable recent market transactions on
arm's length
terms.
For investment property, this
approach involves applying market-derived capitalisation yields to
current and market-derived future income streams with appropriate
adjustments for income voids arising from vacancies or rent-free
periods.
These capitalisation yields and
future income streams are derived from comparable property and
leasing transactions and are considered to be the key inputs in the
valuation. Other factors that are taken into account in the
valuations include the tenure of the property,
tenancy details, non-payment of rent, planning, building and
environmental factors that might affect the
property.
An investment property will be
classified as held for sale where it is
available for immediate sale in its present condition and the sale
is highly probable.
In the case of investment property
under development, the approach applied is the
'residual method' of valuation, which is the investment method of
valuation as described above with a deduction for the costs necessary to complete the
development, together with an allowance for the remaining
risk.
The Group recognises sales and
purchases of property when control passes on completion of the
contract. Gains or losses on the sale of properties are calculated
by reference to the carrying value at the end of the previous year,
adjusted for subsequent capital expenditure.
Lease obligations
Where the Group is a lessee, a right
of use asset and lease liability are recognised at the outset of
the lease. The lease liability is initially measured at the
present value of the lease payments based on the
Group's
expectations of the likelihood of the
lease term. The lease liability is subsequently adjusted to reflect an imputed finance charge, payments made
to the lessor
and any lease
modifications.
The right of use asset is initially
measured at cost, which comprises the amount of the lease liability
and direct costs incurred, less any lease incentives received by the
Group. The Group has two categories of right of use assets: those
in respect of head leases related
to its leasehold properties and an occupational lease for its head
office. The right of use asset in respect
of head leases is classified as investment property and is added to
the carrying value of the leasehold investment property. The right
of use asset in respect of its occupational leases is classified as
property, plant and equipment and is subsequently depreciated over
the length of the lease.
Depreciation
No depreciation is provided in
respect of freehold investment properties
and leasehold investment properties. Plant and equipment is held at
cost less accumulated depreciation. Depreciation is provided on
plant and equipment, at rates calculated to write
off the cost, less residual value prevailing
at the balance
sheet date of each asset evenly over its expected useful life, as
follows:
Fixtures and fittings - over three
to five years.
Leasehold improvements - over the
term of the lease.
Joint ventures
Joint ventures are accounted for
under the equity method where, in the
Directors' judgement, the Group has joint control of the entity.
The Group's level of control in its joint ventures is driven both
by the individual agreements which set out how control is shared by
the partners and how that control is exercised in practice. The
Group balance sheet contains the Group's share of the net assets of
its joint ventures. Balances with partners owed to
or from the Group by joint ventures are included within
investments. The Group's share of joint venture profits and
losses are included in the Group income statement in a single line.
All of the
Group's joint
ventures adopt the accounting policies of the Group for inclusion
in the Group financial statements. There have
been no new
joint ventures during the year and no changes to any of the agreements in
place.
Income tax
Current tax is the amount payable on
the taxable income for the year and any adjustment in respect of
previous years. Deferred tax is provided in full
on temporary differences between the tax base of an asset or
liability and its carrying amount in the balance sheet.
Deferred tax is determined using tax rates that have been enacted
or substantively enacted by the balance sheet date
and are expected to apply when the asset is realised or
the liability is settled. Deferred tax assets are recognised when
it is probable that taxable profits will be available against
which the deferred tax assets can be
utilised. No provision is made for temporary differences arising on
the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, with the exception of
leases. Tax is included in the income statement
except when it relates to items recognised directly
in other
comprehensive income or equity, in which case the
related tax is also recognised directly in other comprehensive
income or equity.
Pension benefits
The Group contributes to a defined
benefit pension plan which is funded with assets held
separately from those of the Group. The full value of the net
assets or liabilities of the pension fund is brought onto the
balance sheet at each balance sheet date. Actuarial gains and
losses are taken to other comprehensive income; all other movements are taken to the income statement.
Capitalisation of
interest
Interest associated with direct
expenditure on investment and trading
properties under development and refurbishment is capitalised.
Direct expenditure includes the purchase cost of a site if it
has been
purchased with the specific intention to
redevelop, but
does not include the original book cost of a site where no
intention existed. Interest is capitalised from the start of the
development work until the date of practical completion. The rate
used is the Group's
weighted average cost of borrowings or, if appropriate, the rate on
specific associated borrowings.
Other investments
Other investments comprise
investments in Pi Labs European PropTech venture capital fund,
which is measured at fair value, based on the net assets of the
fund; this is a Level 3 valuation as defined by IFRS 13. Changes in
fair value are recognised in profit or loss.
Financial instruments
i Borrowings The Group's borrowings in the form of its debentures, private
placement notes and bank loans are recognised initially at fair
value, after taking account of any discount or premium on issue and
attributable transaction costs. Subsequently, borrowings are held
at amortised cost, with any discounts, premiums and attributable
costs charged to the income statement using the effective
interest rate
method.
ii Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, demand deposits and other
short-term highly liquid investments that are readily
convertible into a known amount of cash and are subject to
insignificant risk of changes in value.
iii Trade receivables and
payables Trade receivables are initially
measured at the transaction price, and are subsequently measured at amortised cost using the
effective interest rate method. See note 14
for further information on trade receivables and associated expected credit
losses. Trade payables are initially
measured at fair value and subsequently measured at amortised
cost.
iv Derivative financial
instruments The Group uses
derivatives (principally interest rate
caps) in managing interest rate risk, and does not use them for
trading. They
are recorded, and subsequently revalued, at fair value,
with revaluation gains or losses being immediately taken to the
income statement. Derivatives with a maturity of
less than 12 months or that expect to be settled within 12
months of the
balance sheet date are presented as current assets or liabilities.
Other derivatives are presented as non-current assets
or liabilities.
2 Segmental analysis
IFRS 8 Operating Segments requires
the identification of operating segments based on internal
financial reports detailing components of the
Group regularly reviewed by the chief operating decision makers
(the Group's Executive Committee) in order
to allocate
resources to the segments and to assess their
performance.
In recent years, the Group has
evolved the types of office space it provides to its customers.
This has included a Fully Managed offer with additional service
provision. As this element of the Group's business has grown, so
has the level of financial information and oversight. As a result,
the Directors have concluded that, based on the level of
information provided to the Executive Committee,
for the current year this element of the business is an operating
segment as defined by IFRS 8. Furthermore, given the revenue
for the current financial year is in excess of 10% of wider Group
revenue, the segment should be separately reported from the
remainder of the Group's activities. The Executive Committee
reviews the performance of its Fully Managed offer based on gross
revenue (including Fully Managed services income) net of cost of
sales on a proportionally consolidated basis (including the Group's
joint ventures at share). The cost of sales information is not
available for the prior year due to the information not being
available and the cost to develop it would be excessive. Total
assets and liabilities are not monitored by segment.
The remainder of the Group's
components are managed together, with their operating results
reviewed on an aggregated basis. All of the Group's revenue is
generated from investment properties located in a small radius
within central London. The properties are managed as a single
portfolio by a portfolio management team whose responsibilities are
not segregated by location or type, but are managed on an
asset-by-asset basis. The majority of the Group's assets are
mixed-use, therefore the office, retail and any
residential space is managed together. The Directors have
considered the nature of the business, how the business is managed and how
they review performance, and in their judgement, the Group has only
two reportable
segments.
Segmental analysis for the year
ended 31 March 2024
|
Fully Managed offices including
joint ventures
£m
|
Joint
ventures
£m
|
Group Fully Managed
offices
£m
|
Remainder
of portfolio
£m
|
Total
2024
£m
|
Total
2023
£m
|
Revenue
|
13.6
|
(1.4)
|
12.2
|
83.2
|
95.4
|
91.2
|
Cost of sales
|
(8.6)
|
0.5
|
(8.1)
|
(25.2)
|
(33.3)
|
n/a
|
Net result
|
5.0
|
(0.9)
|
4.1
|
58.0
|
62.1
|
n/a
|
Revenue for the Group's Fully
Managed offices in the year to 31 March 2023 was £7.8 million (£8.0
million including share of joint ventures).
3 Revenue
|
2024
£m
|
2023
£m
|
Gross rental income
|
67.2
|
66.6
|
Spreading of lease
incentives
|
5.7
|
5.9
|
Service charge income
|
14.4
|
12.5
|
Fully Managed services
income
|
6.4
|
3.7
|
Trading property revenue
|
-
|
0.1
|
Joint venture fee income
|
1.7
|
2.4
|
|
95.4
|
91.2
|
The table below sets out the Group's
gross rental income split between types of space
provided:
|
2024
£m
|
2023
£m
|
Ready to Fit
|
37.9
|
42.4
|
Retail
|
10.5
|
11.1
|
Fitted
|
6.8
|
3.8
|
Fully Managed
|
5.8
|
4.1
|
Flex Partnerships
|
3.8
|
3.2
|
Hotel
|
2.4
|
2.0
|
|
67.2
|
66.6
|
The table below sets out the Group's
net rental income, which is an alternative performance
measure:
|
2024
£m
|
2023
£m
|
Gross rental income
|
67.2
|
66.6
|
Expected credit loss
|
(0.2)
|
(0.6)
|
Rental income
|
67.0
|
66.0
|
Spreading of lease
incentives
|
5.7
|
5.9
|
Ground rent
|
(0.6)
|
(1.0)
|
Net rental income
|
72.1
|
70.9
|
4 Cost of sales
|
2024
£m
|
2023
£m
|
Service charge expenses (including
Fully Managed service costs - see note 2)
|
25.8
|
19.3
|
Other property expenses
|
6.9
|
11.9
|
Ground rent
|
0.6
|
1.0
|
|
33.3
|
32.2
|
For the year ended 31 March 2024,
the Fully Managed service costs comprised £8.1 million of the £25.8
million service charge expenses (see note 2).
The table below sets out the Group's
property costs, which is an alternative performance
measure:
|
2024
£m
|
2023
£m
|
Service charge income
|
(14.4)
|
(12.5)
|
Fully Managed services
income
|
(6.4)
|
(3.7)
|
Service charge expenses (including
Fully Managed service costs)
|
25.8
|
19.3
|
Other property expenses
|
6.9
|
11.9
|
Expected credit
(recovery)/loss
|
(0.1)
|
0.2
|
Property costs
|
11.8
|
15.2
|
5 Administration expenses
|
2024
£m
|
2023
£m
|
Employee costs
|
30.9
|
26.3
|
Depreciation (see note
12)
|
1.6
|
1.7
|
Other head office costs
|
9.8
|
10.3
|
|
42.3
|
38.3
|
Included within employee costs is an
accounting charge for the Employee Long Term Incentive Plan and
deferred bonus shares of £4.0
million (2023: £1.3
million). Employee costs, including those of Directors, comprise
the following:
|
2024
£m
|
2023
£m
|
Wages and salaries (including annual
bonuses)
|
24.4
|
22.4
|
Share-based payments
|
4.1
|
1.5
|
Social security costs
|
3.7
|
3.4
|
Other pension costs
|
2.4
|
2.3
|
|
34.6
|
29.6
|
Less: recovered through service
charges
|
(1.9)
|
(2.0)
|
Less: capitalised into development
projects
|
(1.8)
|
(1.3)
|
|
30.9
|
26.3
|
Key management
compensation
The emoluments and pension benefits
of the Directors are set out in detail within the Directors'
remuneration report. The Directors and the
Executive Committee are considered to be key management for the
purposes of IAS 24 - Related
Party Transactions with their aggregate compensation set out
below:
|
2024
£m
|
2023
£m
|
Wages and salaries (including annual
bonuses)
|
6.8
|
6.8
|
Share-based payments
|
1.9
|
0.3
|
Social security costs
|
1.1
|
1.0
|
Other pension costs
|
0.5
|
0.5
|
|
10.3
|
8.6
|
The number of people considered key
management totalled 17 (2023: 18). The Group had loans to key
management of £2,880 (2023: £17,882) outstanding at 31 March 2024.
The Group's key management, its pension plan and joint ventures are
the Group's only related parties.
Employee information
The monthly average number of
employees of the Group, including Directors, was:
|
2024
Number
|
2023
Number
|
Head office and property
management
|
150
|
145
|
Auditor's remuneration
|
2024
£000
|
2023
£000
|
Audit of the Group and Company's
annual accounts
|
394
|
242
|
Audit of subsidiaries
|
107
|
94
|
|
501
|
336
|
Audit-related assurance services,
including the interim review
|
61
|
49
|
Sustainability assurance
|
68
|
63
|
Auditor's remuneration
|
630
|
448
|
For the year ended 31 March 2024,
PricewaterhouseCoopers LLP was appointed as auditor to the Group,
succeeding Deloitte LLP.
6 Finance income
|
2024
£m
|
2023
£m
|
Interest income on joint ventures
balances
|
5.8
|
5.9
|
Interest on cash deposits
|
0.3
|
0.1
|
|
6.1
|
6.0
|
7 Finance costs
|
2024
£m
|
2023
£m
|
Interest on revolving credit
facilities
|
5.8
|
5.7
|
Interest on term loan
|
8.5
|
-
|
Interest on private placement
notes
|
11.0
|
10.9
|
Interest on debenture
stock
|
1.2
|
1.2
|
Interest on obligations under
occupational leases
|
-
|
0.1
|
Interest on obligations under head
leases
|
2.4
|
2.4
|
Other
|
0.1
|
-
|
Gross finance costs
|
29.0
|
20.3
|
Less: capitalised
interest
|
(11.3)
|
(8.8)
|
|
17.7
|
11.5
|
The Group capitalised interest on
certain developments with specific associated borrowings at 6.8%
(2023: nil), with the remainder at the
Group's weighted average cost of non-specific borrowings of 3.5%
(2023: 3.0%).
8 Tax
|
2024
£m
|
2023
£m
|
Current tax
|
|
|
UK corporation tax - current
period
|
-
|
-
|
UK corporation tax - prior
periods
|
-
|
-
|
Total current tax
|
-
|
-
|
Deferred tax
|
-
|
(0.1)
|
Tax credit for the year
|
-
|
(0.1)
|
The effective rate of tax is lower
(2023: lower) than the standard rate of tax. The difference arises
from the items set out below:
|
2024
£m
|
2023
£m
|
Loss before tax
|
(307.8)
|
(164.0)
|
Tax credit on loss at standard rate
of 25% (2023: 19%)
|
(77.0)
|
(31.2)
|
REIT tax exempt rental profits and
gains
|
(7.4)
|
(7.1)
|
Changes in fair value of properties
not subject to tax
|
80.5
|
35.1
|
Difference between accounting profit
and tax profit on disposal
|
-
|
2.0
|
Other
|
3.9
|
1.1
|
Tax credit for the year
|
-
|
(0.1)
|
During the year, £nil million (2023:
£0.1 million) of deferred tax was debited directly to equity. The
Group recognised a net deferred tax asset at 31 March 2024
of £nil
(2023: £nil). This
consists of deferred tax assets of £1.6 million (2023:
£1.2 million)
and deferred
tax liabilities of £1.6 million (2023: £1.2 million).
Deferred tax is calculated using tax
rates that have been enacted or substantively enacted at the
balance sheet date. The standard rate of tax increased on 1 April
2023 from 19% to 25%.
Movement in deferred tax
|
At 1 April
2023
£m
|
Recognised
in the income statement
£m
|
Recognised
in equity
£m
|
At 31 March 2024
£m
|
Net deferred tax asset/(liability)
in respect of other temporary differences
|
-
|
-
|
-
|
-
|
The Group has not recognised further
deferred tax assets in respect of gross temporary differences
arising from the following items, because it is uncertain whether
future taxable profits will arise against which these assets can be
utilised:
|
2024
£m
|
2023
£m
|
Revenue losses
|
24.6
|
15.7
|
Share-based payments
|
8.4
|
10.5
|
Other
|
1.3
|
1.4
|
|
34.3
|
27.6
|
As a REIT, the majority of rental
profits and chargeable gains from the Group's property rental
business are exempt from UK corporation tax. The Group is otherwise
subject to corporation tax. In particular, the Group's REIT
exemption does not extend to either profits arising from the
sale of trading properties or gains arising from the sale of
investment properties in respect of which a major redevelopment has completed within the preceding
three years (including the sale of 50 Finsbury Square, EC2,
which completed in February 2023).
In order to ensure that the Group is
able to both retain its status as a REIT and avoid financial
charges being imposed, a number of tests (including a
minimum distribution test) must be met by both Great Portland
Estates plc and by the Group as a whole on an ongoing basis. These
conditions are detailed in the Corporation Tax Act 2010.
9 Alternative performance measures
and EPRA metrics
As is usual practice in our sector,
we use alternative performance measures (APMs) to help explain the
performance of the business. These include
quoting a number of measures on a proportionally consolidated basis
to include joint ventures, as it best describes how
we manage the portfolio, and using measures prescribed by the
European Public Real Estate Association (EPRA). The measures
defined by EPRA are designed to enhance transparency and
comparability across the European real estate sector in
accordance with its Best Practice Recommendations. The
Directors consider these EPRA metrics, and the other metrics provided,
to be the most
appropriate method of reporting the value and
performance of the business.
Earnings per share
Weighted average number of ordinary
shares
|
2024
Number of
shares
|
2023
Number of
shares
|
Issued ordinary share capital at 1
April
|
253,867,911
|
253,867,911
|
Investment in own shares
|
(887,159)
|
(941,432)
|
Weighted average number of ordinary
shares at 31 March - basic
|
252,980,752
|
252,926,479
|
Basic and diluted earnings per
share
|
Loss
after tax
2024
£m
|
Number
of shares
2024
million
|
Loss
per share
2024
pence
|
Loss
after tax
2023
£m
|
Number
of shares
2023
million
|
Loss
per share
2023
pence
|
Basic
|
(307.8)
|
253.0
|
(121.7)
|
(163.9)
|
252.9
|
(64.8)
|
Dilutive effect of LTIP
shares
|
-
|
-
|
-
|
-
|
-
|
-
|
Diluted
|
(307.8)
|
253.0
|
(121.7)
|
(163.9)
|
252.9
|
(64.8)
|
Basic and diluted EPRA earnings per
share
|
(Loss)/ Earnings
after tax
2024
£m
|
Number
of shares
2024
million
|
(Loss)/ Earnings
per share
2024
pence
|
(Loss)/ Earnings
after tax
2023
£m
|
Number
of shares
2023
million
|
(Loss)/ Earnings
per share
2023
pence
|
Basic
|
(307.8)
|
253.0
|
(121.7)
|
(163.9)
|
252.9
|
(64.8)
|
Deficit from investment property net
of tax (note 10)
|
267.3
|
-
|
105.7
|
145.0
|
-
|
57.3
|
Deficit from joint venture
investment property (note 11)
|
56.5
|
-
|
22.3
|
43.2
|
-
|
17.1
|
Trading property revenue
|
-
|
-
|
-
|
(0.1)
|
-
|
-
|
Deficit on revaluation of
derivatives
|
1.7
|
-
|
0.7
|
-
|
-
|
-
|
Deficit/(surplus) on revaluation of
other investments (note 13)
|
0.2
|
-
|
0.1
|
(0.1)
|
-
|
-
|
Deferred tax in respect of
adjustments (note 8)
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
Basic EPRA earnings
|
17.9
|
253.0
|
7.1
|
24.0
|
252.9
|
9.5
|
Dilutive effect of LTIP shares (note
21)
|
-
|
0.2
|
-
|
-
|
0.2
|
-
|
Diluted EPRA earnings
|
17.9
|
253.2
|
7.1
|
24.0
|
253.1
|
9.5
|
Net assets per share
The Group has adopted EPRA's Best
Practice Recommendations for Net Asset Value (NAV) metrics. The
recommendations include three NAV metrics:
EPRA Net Tangible Assets (NTA), Net Reinvestment Value (NRV) and
Net Disposal Value (NDV). We consider EPRA NTA to be the most
relevant measure for the Group and the primary measure of IFRS net
asset value, definitions are included in the
glossary.
Number of ordinary shares
|
2024
Number of
shares
|
2023
Number of
shares
|
Issued ordinary share
capital
|
253,867,911
|
253,867,911
|
Investment in own shares
|
(887,159)
|
(887,159)
|
Number of shares - basic
|
252,980,752
|
252,980,752
|
Dilutive effect of LTIP
shares
|
563,956
|
326,340
|
Number of shares -
diluted
|
253,544,708
|
253,307,092
|
EPRA net assets per share at 31
March 2024
|
IFRS
£m
|
EPRA
NTA
£m
|
EPRA
NDV
£m
|
EPRA
NRV
£m
|
IFRS basic and diluted net
assets
|
1,583.0
|
1,583.0
|
1,583.0
|
1,583.0
|
Fair value of derivative financial
instruments
|
-
|
(0.4)
|
-
|
(0.4)
|
Fair value of financial liabilities
(note 17)
|
-
|
-
|
50.7
|
-
|
Real estate transfer tax
|
-
|
-
|
-
|
170.1
|
Net assets used in per share
calculations
|
1,583.0
|
1,582.6
|
1,633.7
|
1,752.7
|
|
IFRS
|
EPRA
NTA
|
EPRA
NDV
|
EPRA
NRV
|
Net assets per share
(pence)
|
626
|
626
|
646
|
693
|
Diluted net assets per share
(pence)
|
624
|
624
|
644
|
691
|
EPRA net assets per share at 31
March 2023
|
IFRS
£m
|
EPRA
NTA
£m
|
EPRA
NDV
£m
|
EPRA
NRV
£m
|
IFRS basic and diluted net
assets
|
1,918.6
|
1,918.6
|
1,918.6
|
1,918.6
|
Fair value of financial liabilities
(note 17)
|
-
|
-
|
83.4
|
-
|
Real estate transfer tax
|
-
|
-
|
-
|
173.6
|
Net assets used in per share
calculations
|
1,918.6
|
1,918.6
|
2,002.0
|
2,092.2
|
|
IFRS
|
EPRA
NTA
|
EPRA
NDV
|
EPRA
NRV
|
Net assets per share
(pence)
|
758
|
758
|
791
|
827
|
Diluted net assets per share
(pence)
|
757
|
757
|
790
|
826
|
Total Accounting Return
(TAR)
|
2024
Pence per
share
|
2023
Pence per
share
|
Opening EPRA NTA (A)
|
757.0
|
835.0
|
Closing EPRA NTA
|
624.0
|
757.0
|
Decrease in EPRA NTA
|
(133.0)
|
(78.0)
|
Ordinary dividends paid in the
year
|
12.6
|
12.6
|
Total return (B)
|
(120.4)
|
(65.4)
|
|
|
|
Total Accounting Return
(B/A)
|
(15.9%)
|
(7.8%)
|
EPRA loan-to-property value and net
debt
We consider loan-to-property value,
including our share of joint ventures, to be the best measure of
the Group's risk from financial leverage. We also
present net gearing as it is a key covenant on our loan facilities
(see note 16).
|
2024
£m
|
2023
£m
|
£21.9 million 55⁄8% debenture stock
2029
|
21.9
|
21.9
|
£450.0 million revolving credit
facility
|
47.0
|
14.0
|
£250.0 million term loan
|
250.0
|
-
|
Private placement notes
|
425.0
|
425.0
|
Less: cash and cash
equivalents
|
(22.9)
|
(19.4)
|
Group net debt
|
721.0
|
441.5
|
Net payables (including customer
rent deposits)
|
54.6
|
44.0
|
Group net debt including net
payables
|
775.6
|
485.5
|
Joint venture net payables (at
share)
|
10.5
|
3.4
|
Less: joint venture cash and cash
equivalents (at share)
|
(25.7)
|
(17.7)
|
Net debt including joint ventures
(A)
|
760.4
|
471.2
|
|
|
|
Group properties at market
value
|
1,855.1
|
1,855.5
|
Joint venture properties at market
value (at share)
|
476.1
|
524.5
|
Property portfolio at market value
including joint ventures (B)
|
2,331.2
|
2,380.0
|
|
|
|
EPRA loan-to-property value
(A/B)
|
32.6%
|
19.8%
|
Group cash and cash equivalents
includes customer rent deposits (as restated) held in separate
designated bank accounts of £17.0 million (2023:
£16.2 million), the use of
the deposits is subject to restrictions as set out in the
customer's lease
agreement and therefore not available for
general use by the Group.
EPRA cost ratio (including share of
joint ventures)
|
2024
£m
|
2023
£m
|
Administration expenses
|
42.3
|
38.3
|
Net property costs (excluding Fully
Managed services income and costs1)
|
10.1
|
15.2
|
Joint venture management fee income
(note 3)
|
(1.7)
|
(2.4)
|
Joint venture property and
administration costs (note 11)
|
3.6
|
2.2
|
EPRA costs (including direct vacancy
costs) (A)
|
54.3
|
53.3
|
Direct vacancy costs
|
(5.1)
|
(7.8)
|
Joint venture direct vacancy
cost
|
(2.2)
|
(0.3)
|
EPRA costs (excluding direct vacancy
costs) (B)
|
47.0
|
45.2
|
|
|
|
Net rental income (note
3)
|
72.1
|
70.9
|
Joint venture net rental income
(note 11)
|
19.4
|
18.2
|
Gross rental income (C)
|
91.5
|
89.1
|
|
|
|
Portfolio at fair value including
joint ventures (D)
|
2,331.2
|
2,380.0
|
|
|
|
Cost ratio (including direct vacancy
costs) (A/C)
|
59.3%
|
59.8%
|
Cost ratio (excluding direct vacancy
costs) (B/C)
|
51.4%
|
50.7%
|
Cost ratio (by portfolio value)
(A/D)
|
2.3%
|
2.2%
|
1. For 2024 only, the information is
not available for the prior year see note 2.
Net gearing
|
2024
£m
|
2023
£m
|
Nominal value of interest-bearing
loans and borrowings (see note 16)
|
743.9
|
460.9
|
Obligations under occupational
leases
|
1.0
|
2.0
|
Less: cash and cash equivalents
(unrestricted) (see note 22)
|
(5.9)
|
(3.2)
|
Adjusted net debt (A)
|
739.0
|
459.7
|
|
|
|
Net assets
|
1,583.0
|
1,918.6
|
Pension scheme asset
|
(4.9)
|
(4.1)
|
Adjusted net equity (B)
|
1,578.1
|
1,914.5
|
|
|
|
Net gearing (A/B)
|
46.8%
|
24.0%
|
Cash earnings per share
|
Profit
after tax
2024
£m
|
Number
of shares
2024
million
|
Earnings
per share
2024
pence
|
Profit
after tax
2023
£m
|
Number
of shares
2023
million
|
Earnings
per share
2023
pence
|
Diluted EPRA earnings
|
17.9
|
253.2
|
7.1
|
24.0
|
253.1
|
9.5
|
Capitalised interest
|
(11.3)
|
-
|
(4.5)
|
(8.8)
|
-
|
(3.5)
|
Spreading of lease
incentives
|
(5.7)
|
-
|
(2.3)
|
(5.9)
|
-
|
(2.3)
|
Spreading of lease incentives in
joint ventures
|
(1.4)
|
-
|
(0.5)
|
(7.0)
|
-
|
(2.8)
|
Employee incentive plan
charges
|
4.0
|
-
|
1.6
|
1.3
|
-
|
0.5
|
Cash earnings per share
|
3.5
|
253.2
|
1.4
|
3.6
|
253.1
|
1.4
|
10 Investment property
Investment property
|
Freehold
£m
|
Leasehold
£m
|
Total
£m
|
Book value at 1 April
2022
|
929.6
|
1,047.2
|
1,976.8
|
Costs capitalised
|
17.6
|
11.2
|
28.8
|
Movement in lease
incentives
|
4.8
|
1.1
|
5.9
|
Acquisitions
|
7.5
|
36.1
|
43.6
|
Disposals
|
(27.3)
|
-
|
(27.3)
|
Transfer to investment property
under development
|
-
|
(101.2)
|
(101.2)
|
Net valuation deficit on investment
property
|
(48.7)
|
(69.4)
|
(118.1)
|
Book value at 31 March
2023
|
883.5
|
925.0
|
1,808.5
|
Costs capitalised
|
28.0
|
57.3
|
85.3
|
Movement in lease
incentives
|
7.8
|
(0.4)
|
7.4
|
Interest capitalised
|
2.2
|
2.6
|
4.8
|
Acquisitions
|
128.3
|
-
|
128.3
|
Disposals
|
(5.8)
|
(8.4)
|
(14.2)
|
Transfer to investment property
under development
|
(50.1)
|
(59.6)
|
(109.7)
|
Transfer to investment property held
for sale
|
-
|
(18.2)
|
(18.2)
|
Net valuation deficit on investment
property
|
(108.8)
|
(106.0)
|
(214.8)
|
Book value at 31 March 2024
(A)
|
885.1
|
792.3
|
1,677.4
|
Investment property under
development
|
Freehold
£m
|
Leasehold
£m
|
Total
£m
|
Book value at 1 April
2022
|
167.6
|
-
|
167.6
|
Costs capitalised
|
21.1
|
32.0
|
53.1
|
Disposals
|
(193.4)
|
-
|
(193.4)
|
Interest capitalised
|
4.7
|
4.1
|
8.8
|
Transfer from investment
property
|
-
|
101.2
|
101.2
|
Net valuation deficit on investment
property under development
|
-
|
(23.6)
|
(23.6)
|
Book value at 31 March
2023
|
-
|
113.7
|
113.7
|
Costs capitalised
|
-
|
54.6
|
54.6
|
Interest capitalised
|
-
|
6.5
|
6.5
|
Transfer from investment
property
|
50.1
|
59.6
|
109.7
|
Net valuation deficit on investment
property under development
|
-
|
(50.9)
|
(50.9)
|
Book value at 31 March 2024
(B)
|
50.1
|
183.5
|
233.6
|
Book value of investment property
& investment property under development (A+B)
|
935.2
|
975.8
|
1,911.0
|
Investment property held for
sale
|
Freehold
£m
|
Leasehold
£m
|
Total
£m
|
Book value at 1 April 2022 and 31
March 2023
|
-
|
-
|
-
|
Transfer from investment property -
held for sale
|
-
|
18.2
|
18.2
|
Book value of investment property
held for sale at 31 March 2024 (C)
|
-
|
18.2
|
18.2
|
|
|
|
|
Book value of total investment
property at 31 March 2024 (A+B+C)
|
935.2
|
994.0
|
1,929.2
|
The book value of investment
property includes £74.1 million (2023: £66.7 million) in respect of
the present value of future ground rents. The market value of the portfolio (excluding these
amounts) is £1,855.1 million. The total portfolio value
including joint venture properties of £476.1 million (see note 11)
was £2,331.2
million. At 31 March 2024, property with a
carrying value
of £107.0 million (2023:
£111.0 million) was
secured under the first mortgage debenture stock (see note 16).
At the balance sheet date, one property
had exchanged for sale and accordingly was classified as held for
sale. The sale is anticipated to complete in
January 2025.
Surplus from investment
property
|
2024
£m
|
2023
£m
|
Net valuation deficit on investment
property
|
(265.7)
|
(141.7)
|
Loss on sale of investment
properties
|
(1.6)
|
(3.3)
|
|
(267.3)
|
(145.0)
|
The Group's investment properties,
including those held in joint ventures (note 11), were valued on
the basis of fair value by CBRE Limited (CBRE), external
valuers, as at 31 March 2024. The valuations have been prepared in
accordance with the current versions of the RICS Valuation - Global
Standards (incorporating the International Valuation Standards
(IVS)) and the UK national supplement (the Red Book) and have been primarily
derived using comparable recent market transactions
on arm's
length terms.
The total fees, including the fixed
fee for this assignment, earned by CBRE (or other companies forming
part of the same group of companies within the UK) from the Group
are less than 5.0% of its total UK revenues. CBRE has carried out
valuation instructions, agency and professional services
on behalf of
the Group for in excess of 20 years.
Real estate valuations are complex
and derived using comparable market transactions which are not
publicly available and involve an element of judgement.
Therefore, we have classified the valuation of the property
portfolio as Level 3 as defined by IFRS 13; this is in line with
EPRA guidance. There were no transfers between levels during the
year. Inputs to the valuation, including capitalisation yields (typically
the true equivalent yield) and rental values, are defined as
'unobservable' as defined by IFRS 13.
Everything else being equal, there
is a positive relationship between rental values and the property
valuation, such that an increase in rental values will increase the
valuation of a property and a decrease in rental values will reduce
the valuation of the property. Any percentage movement in rental
values will translate into approximately the same percentage
movement in the property valuation. However, due to the long-term
nature of leases, where the passing rent is fixed and often subject
to upwards only rent reviews, the impact will not be immediate and
will be recognised over a number of years. The relationship between
capitalisation yields and the property valuation is negative and
more immediate; therefore, an increase in capitalisation yields
will reduce the valuation of a property and a reduction will increase its
valuation. There is a negative relationship between development
costs and the property valuation, such that an increase in
estimated development costs will decrease the valuation of a
property under development and a decrease in estimated development
costs will increase the valuation of a property
under development.
An increase of 10% on the capital
expenditure on the Group's three HQ development schemes and four
Flex conversion schemes, which the Directors believe is a
reasonable variance to budgeted cost based on industry experience,
would reduce the valuation by £49.8 million, with a decrease of 10%
increasing the valuation by £49.8 million.
A decrease in the capitalisation
yield by 50
basis points would result in an increase in the fair value of the
Group's investment property by £203.2 million (£241.4 million
including a share of joint ventures), whilst a 50 basis point
increase would reduce the fair value by £166.7 million (£200.0
million including a share of joint ventures). A movement of
60 basis
points (56 including share of joint ventures) was shown across the
portfolio over the last 12 months and a 50 basis point movement is
therefore considered to be a reasonably possible change.
Given there is only a marginal difference in the overall yields for
office and retail and the movement in year, we feel this
sensitivity to be appropriate. There are interrelationships between
these inputs as they are determined by market conditions, and the valuation
movement in any one period depends on the balance between them. If
these inputs move in opposite directions (i.e. rental values increase and yields
decrease), valuation movements can be amplified,
whereas if they
move in the same direction, they may offset, reducing the overall
net valuation movement.
The valuation of the property
portfolio reflects its fair value taking into account the climate
related risks associated with the properties. This includes the
impact of expected regulatory changes, and we estimate that the investment
required to upgrade our existing buildings to the new minimum EPC B
rating by 2030 is less than £10 million (including
share of joint ventures) over and above specific refurbishment
and development assumptions included in the valuation.
During the year, the Group
capitalised £1.8 million (2023: £1.3 million) of employee costs in
respect of its development team into investment properties under
development. At 31 March 2024, the Group had capital commitments of
£502.3 million (2023: £311.6 million). For further detail,
see Our development activities.
In April 2024, the Group exchanged
contracts to buy The Courtyard, WC1 for £10.4 million of cash and
through a property exchange of 95/96 New Bond Street for
£18.2 million. At the
reporting date, the acquisition has not yet completed.
Key inputs to the valuation (by
building and location) at 31 March 2024
|
|
ERV
|
True equivalent yield
|
|
|
Average
£ per sq ft
|
Range
£ per sq ft
|
Average
%
|
Range
%
|
North of Oxford Street
|
Office
|
102
|
74 - 174
|
5.3
|
4.8 - 7.3
|
|
Retail
|
67
|
34 - 110
|
5.3
|
4.5 - 10.0
|
Rest of West End
|
Office
|
143
|
70 - 249
|
5.8
|
5.0 - 7.3
|
|
Retail
|
115
|
15 - 295
|
5.0
|
3.2 - 6.8
|
City, Midtown and
Southwark
|
Office
|
83
|
47 - 173
|
5.7
|
5.4 - 7.3
|
|
Retail
|
36
|
28 - 363
|
5.9
|
5.5 - 6.7
|
Key inputs to the valuation (by
building and location) at 31 March 2023
|
|
ERV
|
True equivalent yield
|
|
|
Average
£ per sq ft
|
Range
£ per sq ft
|
Average
%
|
Range
%
|
North of Oxford Street
|
Office
|
88
|
54 - 131
|
4.8
|
4.3 - 6.8
|
|
Retail
|
63
|
33 - 107
|
4.5
|
4.2 - 7.5
|
Rest of West End
|
Office
|
101
|
57 - 163
|
5.4
|
3.3 - 7.3
|
|
Retail
|
96
|
15 - 266
|
4.7
|
3.2 - 7.1
|
City, Midtown and
Southwark
|
Office
|
75
|
47 - 167
|
5.0
|
4.5 - 6.1
|
|
Retail
|
25
|
25 - 27
|
5.5
|
4.6 - 5.9
|
EPRA capital expenditure
|
2024
£m
|
2023
£m
|
Group
|
|
|
Acquisitions
|
128.3
|
43.6
|
Developments
|
54.6
|
53.1
|
Interest capitalised
|
11.3
|
8.8
|
Investment properties: incremental
lettable space
|
-
|
-
|
Investment properties: no
incremental lettable space
|
85.3
|
28.8
|
Movement in lease
incentives
|
7.4
|
5.9
|
Group total
|
286.9
|
140.2
|
|
|
|
Joint ventures (at share)
|
|
|
Developments
|
-
|
-
|
Interest capitalised
|
-
|
-
|
Investment properties: incremental
lettable space
|
-
|
-
|
Investment properties: no
incremental lettable space
|
5.7
|
1.3
|
Movement in lease
incentives
|
2.4
|
7.8
|
Total capital expenditure
|
295.0
|
149.3
|
Conversion from accrual to cash
basis
|
(12.0)
|
7.3
|
Total capital expenditure on a cash
basis
|
283.0
|
156.6
|
EPRA net initial yield (NIY) and
topped-up NIY
|
2024
£m
|
2023
£m
|
Properties at fair value including
joint ventures
|
2,331.2
|
2,380.0
|
Less: properties under development
including joint ventures
|
(201.5)
|
(89.0)
|
Less: residential
properties
|
(4.7)
|
(12.4)
|
Like-for-like investment property
portfolio, proposed and completed developments
|
2,125.0
|
2,278.6
|
Plus: estimated purchasers'
costs
|
155.0
|
166.3
|
Grossed-up completed property
portfolio valuation (B)
|
2,280.0
|
2,444.9
|
Annualised cash passing rental
income1
|
85.9
|
76.7
|
Net service charge expense including
joint ventures
|
(5.1)
|
(3.3)
|
Other irrecoverable property costs
including joint ventures
|
(7.9)
|
(12.9)
|
Annualised net rents (A)
|
72.9
|
60.5
|
Plus: rent-free periods and other
lease incentives including joint ventures
|
3.9
|
16.8
|
Topped-up annualised net rents
(C)
|
76.8
|
77.3
|
|
|
|
EPRA net initial yield
(A/B)
|
3.2%
|
2.5%
|
EPRA topped-up initial yield
(C/B)
|
3.4%
|
3.2%
|
1. Annualised passing rental
income as calculated by the Group's external valuers including
joint ventures at share.
See note 9 for further detail on
EPRA measures which are Alternative Performance Metrics.
11 Investment in joint
ventures
The Group has the following
investments in joint ventures:
|
Equity
£m
|
|
Balances
with
partners
£m
|
|
2024
Total
£m
|
|
2023
Total
£m
|
At 1 April
|
324.4
|
|
214.4
|
|
538.8
|
|
582.8
|
Movement on joint venture
balances
|
-
|
|
(0.9)
|
|
(0.9)
|
|
(3.1)
|
Additions
|
0.1
|
|
-
|
|
0.1
|
|
-
|
Share of profit of joint
ventures
|
9.8
|
|
-
|
|
9.8
|
|
9.8
|
Share of revaluation deficit of
joint ventures
|
(56.5)
|
|
-
|
|
(56.5)
|
|
(43.2)
|
Share of results of joint
ventures
|
(46.7)
|
|
-
|
|
(46.7)
|
|
(33.4)
|
Distributions
|
-
|
|
-
|
|
-
|
|
(7.5)
|
At 31 March
|
277.8
|
|
213.5
|
|
491.3
|
|
538.8
|
All of the Group's joint ventures
operate solely in the United Kingdom and comprise the
following:
|
Country of registration
|
2024
ownership
|
2023
ownership
|
The GHS Limited
Partnership
|
Jersey
|
50%
|
50%
|
The Great Ropemaker
Partnership
|
United Kingdom
|
50%
|
50%
|
The Great Victoria
Partnerships
|
United Kingdom
|
50%
|
50%
|
The Group's share in the assets and
liabilities, revenues and expenses for the joint ventures is set
out below:
|
The GHS
Limited
Partnership
£m
|
|
The Great
Ropemaker
Partnership
£m
|
The Great
Victoria
Partnerships
£m
|
|
|
2024
Total
£m
|
|
2024
At share
£m
|
|
2023
At share
£m
|
Balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment property
|
643.6
|
|
245.4
|
|
73.5
|
|
|
962.5
|
|
481.2
|
|
529.6
|
Current assets
|
0.5
|
|
3.8
|
|
1.1
|
|
|
5.4
|
|
2.7
|
|
3.6
|
Cash and cash equivalents
|
13.1
|
|
19.6
|
|
18.7
|
|
|
51.4
|
|
25.7
|
|
17.7
|
Balances from partners
|
(222.0)
|
|
(131.8)
|
|
(73.1)
|
|
|
(426.9)
|
|
(213.5)
|
|
(214.4)
|
Current liabilities
|
(12.0)
|
|
(13.2)
|
|
(1.3)
|
|
|
(26.5)
|
|
(13.2)
|
|
(7.0)
|
Obligations under head
leases
|
-
|
|
(10.2)
|
|
-
|
|
|
(10.2)
|
|
(5.1)
|
|
(5.1)
|
Net assets
|
423.2
|
|
113.6
|
|
18.9
|
|
|
555.7
|
|
277.8
|
|
324.4
|
|
The GHS
Limited
Partnership
£m
|
|
The Great
Ropemaker
Partnership
£m
|
The Great
Victoria
Partnerships
£m
|
|
|
2024
Total
£m
|
|
2024
At share
£m
|
|
2023
At share
£m
|
Income statements
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
24.7
|
|
21.5
|
|
6.8
|
|
|
53.0
|
|
26.5
|
|
25.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net rental income
|
20.1
|
|
14.6
|
|
4.1
|
|
|
38.8
|
|
19.4
|
|
18.2
|
Property and
administration costs
|
(2.0)
|
|
(3.2)
|
|
(2.0)
|
|
|
(7.2)
|
|
(3.6)
|
|
(2.2)
|
Net finance costs
|
(9.0)
|
|
(3.1)
|
|
0.1
|
|
|
(12.0)
|
|
(6.0)
|
|
(6.2)
|
Share of profit from
joint ventures
|
9.1
|
|
8.3
|
|
2.2
|
|
|
19.6
|
|
9.8
|
|
9.8
|
Revaluation of
investment property
|
(25.8)
|
|
(77.4)
|
|
(9.8)
|
|
|
(113.0)
|
|
(56.5)
|
|
(43.2)
|
Results of joint ventures
|
(16.7)
|
|
(69.1)
|
|
(7.6)
|
|
|
(93.4)
|
|
(46.7)
|
|
(33.4)
|
At 31 March 2024 and 31 March 2023,
the joint
ventures had no external debt facilities.
Transactions during the year between
the Group and its joint ventures, which are related parties, are
disclosed below:
|
2024
£m
|
2023
£m
|
Movement on joint venture balances
during the year
|
0.9
|
3.1
|
Balances receivable at the year end
from joint ventures
|
(213.5)
|
(214.4)
|
Interest on balances with partners
(see note 6)
|
5.8
|
5.9
|
Distributions
|
-
|
7.5
|
Joint venture fees paid (see note
3)
|
1.7
|
2.4
|
The joint venture balances are
repayable on demand and bear interest as follows: the GHS Limited
Partnership at 4.0% and the Great Ropemaker
Partnership at 2.0%. In measuring expected credit losses of the
balances receivable at the year end from joint ventures under IFRS
9, the ability of each joint venture to repay the loan at the
reporting date if demanded by the Group is assumed to be through
the sale of the investment properties held by the joint venture.
Investment properties are held at fair value at each reporting date
as described in note 10. Therefore, the net asset value of the
joint venture is considered to be a reasonable approximation of the
available assets that could be realised to recover the loan balance
and the requirement to recognise expected credit losses.
The investment properties include
£5.1 million (2023: £5.1 million) in respect of the present value
of future ground rents; net of these amounts, the market value of our share of the total joint
venture properties is £476.1 million. The Group earns fee income from
its joint ventures for the provision of management
services. All of the above transactions are made on terms
equivalent to those that prevail in arm's length transactions. See notes 10,
14 and 17 for more information on the valuation of investment
properties and expected credit losses in joint ventures.
At 31 March 2024, the Group had £nil
contingent liabilities arising in its joint ventures (2023: £nil).
At 31 March 2024, the Group had capital commitments in respect
of its joint ventures of £nil million (2023:
£0.4 million).
12 Property, plant and
equipment
|
Right of use asset for occupational
leases
£m
|
Leasehold
improvements
£m
|
Fixtures and
fittings/ other
£m
|
Total
£m
|
Cost
|
|
|
|
|
At 1 April 2022
|
4.9
|
5.6
|
1.9
|
12.4
|
Costs capitalised
|
-
|
-
|
0.2
|
0.2
|
At 31 March 2023
|
4.9
|
5.6
|
2.1
|
12.6
|
Costs capitalised
|
-
|
-
|
0.1
|
0.1
|
At 31 March 2024
|
4.9
|
5.6
|
2.2
|
12.7
|
Depreciation
|
|
|
|
|
At 1 April 2023
|
3.3
|
3.9
|
1.9
|
9.1
|
Charge for the year
|
0.8
|
0.6
|
0.2
|
1.6
|
At 31 March 2024
|
4.1
|
4.5
|
2.1
|
10.7
|
Carrying amount at 31 March
2023
|
1.6
|
1.7
|
0.2
|
3.5
|
Carrying amount at 31 March
2024
|
0.8
|
1.1
|
0.1
|
2.0
|
13 Other investments
|
2024
£m
|
2023
£m
|
At 1 April
|
1.8
|
1.0
|
Acquisitions
|
0.8
|
0.7
|
(Deficit)/surplus on
revaluation
|
(0.2)
|
0.1
|
At 31 March
|
2.4
|
1.8
|
In January 2020, the Group entered
into a commitment of up to £5.0 million to invest in the Pi Labs
European PropTech venture capital fund. At 31 March 2024, the Group
had made net investments of £2.5 million. Launched in 2014, Pi Labs
is Europe's longest standing PropTech VC, and this third fund has a
primary focus to invest in early stage PropTech start-ups across
Europe and the UK that use technology solutions to enhance any
stage of the real estate value chain. The valuation of the fund is
based on the net assets of its investments therefore, given these
are not readily traded, we have classified the valuation of the
investments as Level 3 as defined by IFRS 13. Key areas of focus for the fund
include sustainability, future of work, future of retail,
commercial real estate technologies, construction
technology and smart cities.
14 Trade and other
receivables
|
2024
£m
|
2023
£m
|
Trade receivables
|
6.7
|
8.3
|
Expected credit loss
allowance
|
(0.3)
|
(1.7)
|
|
6.4
|
6.6
|
Prepayments
|
0.2
|
4.4
|
Other sales taxes
|
5.9
|
-
|
Other receivables
|
12.4
|
4.8
|
|
24.9
|
15.8
|
Trade receivables consist of rent
and service charge monies, which are typically due on the quarter
day with no credit period. Interest
is charged on trade receivables in accordance with the terms of
the customer's
lease. Trade receivables are provided for
based on the expected credit loss, which uses a lifetime expected
loss allowance for all trade receivables based on an assessment of each individual customer's circumstances. This
assessment reviews the outstanding balances of each individual
customer and makes an assessment of the likelihood of recovery,
based on an evaluation of their financial situation. Where
the expected credit loss relates to revenue already
recognised, this has been recognised immediately in the income
statement.
Of the gross trade receivables of
£6.7 million, £4.4 million (2023: £5.5 million) was past due, of
which £1.2 million (2023: £3.0 million) was
over 30 days.
|
2024
£m
|
2023
£m
|
Movements in expected credit loss
allowance
|
|
|
Balance at the beginning of the
year
|
(1.7)
|
(6.0)
|
Expected credit loss allowance
during the year
|
(0.3)
|
(1.0)
|
Expected credit loss allowance in
respect of prior years
|
-
|
0.8
|
Amounts written-off as
uncollectable
|
1.7
|
4.5
|
|
(0.3)
|
(1.7)
|
The expected credit loss for the
year represents 5% (2023: 26%) of the net trade receivables balance
at the balance sheet date.
15 Trade and other
payables
|
2024
£m
|
2023
£m
|
Rents received in advance
|
16.4
|
15.1
|
Accrued capital
expenditure
|
18.1
|
5.9
|
Payables in respect of customer rent
deposits
|
17.0
|
16.2
|
Other accruals
|
23.3
|
15.2
|
Other taxes
|
-
|
0.7
|
Other payables
|
1.4
|
3.7
|
|
76.2
|
56.8
|
The Directors consider that the
carrying amount of trade payables approximates their fair
value.
16 Interest-bearing loans and
borrowings
|
2024
£m
|
2023
£m
|
Current liabilities at amortised
cost
|
|
|
Unsecured
|
|
|
£175.0 million 2.15% private
placement notes 2024
|
175.0
|
-
|
|
|
|
Non-current liabilities at amortised
cost
|
|
|
Secured
|
|
|
£21.9 million
55⁄8% debenture stock
2029
|
22.0
|
22.0
|
Unsecured
|
|
|
£450.0 million revolving credit
facility
|
46.1
|
12.8
|
£250.0 million term loan
|
248.3
|
-
|
£175.0 million 2.15% private
placement notes 2024
|
-
|
174.8
|
£40.0 million 2.70% private
placement notes 2028
|
39.9
|
39.9
|
£30.0 million 2.79% private
placement notes 2030
|
29.9
|
29.9
|
£30.0 million 2.93% private
placement notes 2033
|
29.9
|
29.9
|
£25.0 million 2.75% private
placement notes 2032
|
24.9
|
24.9
|
£125.0 million 2.77% private
placement notes 2035
|
124.4
|
124.3
|
Non-current interest-bearing loans
and borrowings
|
565.4
|
458.5
|
Total interest-bearing loans and
borrowings
|
740.4
|
458.5
|
In April 2023, the Group extended
the maturity of £50 million of its £450 million unsecured revolving
credit facility (RCF) to January 2027, coterminous with the
remainder of the facility. The facility is unsecured, attracts a
floating rate based on a headline margin
that was unchanged at 90.0 basis points over SONIA (plus or minus
2.5 basis points subject to a number of ESG-linked
targets in future
years).
In September 2023, the Group
arranged a new £250 million unsecured term loan at a headline
margin of 175 basis points over SONIA with three existing relationship banks. The loan has an
initial three-year term which may be extended to a maximum of
five years at
GPE's request,
subject to bank consent. The Group also entered a
£200 million interest rate
cap (at a cost of £2.1 million) to protect against any further increases in rates
whilst preserving the benefit of any reductions. The loan and
interest rate
cap were both effective from 9 October 2023.
In January 2024, the Group arranged
a new £200 million loan facility at a headline margin of 75 basis
points over SONIA, with the margin stepping up by 0.25%
after six months, a further 0.25% after 12 months and a final
step-up of 0.50% at 18 months. The loan has
a one-year term, which may be extended by up to a further year at
GPE's request and was undrawn at 31 March 2024.
The Group's £175.0 million 2.15%
private placement notes 2024 were repaid on 22 May 2024.
At 31 March 2024, the nominal value
of the Group's interest-bearing loans and borrowing was £743.9
million (2023: £460.9 million) and the
Group had £603
million (2023: £436.0 million) of undrawn credit facilities.
17 Financial instruments
Categories of financial
instrument
|
Carrying
amount
2024
£m
|
Amounts
recognised in
income
statement
2024
£m
|
Gain/(loss)
to equity
2024
£m
|
Carrying
amount
2023
£m
|
Amounts
recognised in
income
statement
2023
£m
|
Gain/(loss)
to equity
2023
£m
|
|
|
|
|
|
|
|
Other investments
|
2.4
|
(0.2)
|
-
|
1.8
|
0.1
|
-
|
Interest rate cap
|
0.4
|
(1.7)
|
-
|
-
|
-
|
-
|
Assets at fair value
|
2.8
|
(1.9)
|
-
|
1.8
|
0.1
|
-
|
|
|
|
|
|
|
|
Balances with joint
ventures
|
213.5
|
5.8
|
-
|
214.4
|
5.9
|
-
|
Trade receivables
|
24.7
|
(0.1)
|
-
|
11.4
|
(0.8)
|
-
|
Cash and cash equivalents
|
22.9
|
0.3
|
-
|
19.4
|
0.1
|
-
|
Assets at amortised cost
|
261.1
|
6.0
|
-
|
245.2
|
5.2
|
-
|
|
|
|
|
|
|
|
Trade and other payables
|
(1.4)
|
-
|
-
|
(4.4)
|
-
|
-
|
Payables in respect of customer rent
deposits
|
(17.0)
|
-
|
-
|
(16.2)
|
-
|
-
|
Interest-bearing loans and
borrowings
|
(740.4)
|
(15.2)
|
-
|
(458.5)
|
(9.0)
|
-
|
Obligations under occupational
leases
|
(1.0)
|
-
|
-
|
(2.0)
|
(0.1)
|
-
|
Obligations under finance
leases
|
(74.1)
|
(2.4)
|
-
|
(66.7)
|
(2.4)
|
-
|
Liabilities at amortised
cost
|
(833.9)
|
(17.6)
|
-
|
(547.8)
|
(11.5)
|
-
|
Total financial
instruments
|
(570.0)
|
(13.5)
|
-
|
(300.8)
|
(6.2)
|
-
|
Financial risk management
objectives
Capital risk
The Group manages its capital to
ensure that entities in the Group will be able to operate on a
going concern basis and as such it aims to maintain an appropriate
mix of debt and equity financing. The current capital structure of
the Group consists of a mix of equity and
debt. Equity comprises issued share capital, reserves and retained
earnings as disclosed in the Group statement of changes in equity.
Debt comprises long-term debenture stock, private placement notes
and drawings
against committed revolving credit facilities from banks. The Group
aims to maintain a loan-to-property value of between 10-35% (see note 10). The Group operates solely in the United Kingdom, and its
operating profits and net assets are sterling denominated. As
a result, the Group's policy is to have no unhedged
assets or liabilities denominated in foreign currencies.
Credit risk
Credit risk refers to the risk that
a counterparty will default on its contractual obligations
resulting in financial loss to the Group. The Group has a policy of reviewing the financial information
of prospective customers and only dealing with those that are
creditworthy and obtaining sufficient rental cash deposits or
third-party guarantees as a means of mitigating financial loss
from defaults.
The concentration of credit risk is limited due to the large and
diverse customer base, with no one customer providing more than 10% of the Group's rental income. Details
of the Group's receivables, and the associated expected
credit loss, are summarised in notes 11 and
14 of the financial statements. The Directors believe that
there is no
further expected credit loss required in excess of that provided.
The carrying amount of financial assets recorded in the financial
statements, which is net of impairment losses, represents
the Group's
maximum exposure to credit risk. The Group's cash deposits are
placed with a
diversified range of investment grade banks, and strict counterparty limits
ensure the Group's
exposure to
bank failure
is minimised.
Liquidity risk
The Group operates a framework for
the management of its short-, medium- and long-term funding
requirements. Cash flow and funding needs
are regularly monitored to ensure sufficient undrawn facilities are
in place. The Group's funding sources are diversified across a range of
bank and bond markets and strict counterparty limits are operated
on deposits.
The Group meets its day-to-day
working capital requirements through the utilisation of its
revolving credit facility. The availability of
this facility depends on the Group complying with a number of key
financial covenants; these covenants and the Group's compliance with them are set out in
the table below:
Key covenants
|
Covenant
|
March 2024
actuals
|
Group
|
|
|
Net gearing (see note 9)
|
<125%
|
46.8%
|
Inner borrowing (unencumbered asset
value/unsecured borrowings)
|
>1.66x
|
2.42x
|
Interest cover
|
>1.35x
|
3.65x
|
The Group has undrawn credit
facilities of £603.0 million and has substantial headroom above all
of its key covenants. As a result, the
Directors consider the Group to have adequate liquidity
to be able to
fund the ongoing operations of the business.
The following tables detail the
Group's remaining contractual maturity on its financial instruments
and have been drawn up based on the undiscounted cash flows of
financial liabilities, including associated interest payments,
based on the earliest date on which the Group is required
to pay, and conditions existing at the balance sheet
date:
At 31 March 2024
|
Carrying
amount
£m
|
Contractual
cash flows
£m
|
Less than
one year
£m
|
One to
two years
£m
|
Two to
five years
£m
|
More than
five years
£m
|
Non-derivative financial
liabilities
|
|
|
|
|
|
|
£21.9 million 55⁄8% debenture stock
2029
|
22.0
|
27.8
|
1.2
|
1.2
|
25.4
|
-
|
£450.0 million revolving credit
facility
|
46.1
|
58.9
|
4.2
|
4.2
|
50.5
|
-
|
£250.0 million term loan
|
248.3
|
291.3
|
17.2
|
17.2
|
256.9
|
-
|
Private placement notes
|
424.0
|
489.6
|
182.5
|
7.0
|
60.0
|
240.1
|
Derivative financial
instruments
|
|
|
|
|
|
|
Interest rate cap
|
(0.4)
|
(0.3)
|
(0.2)
|
(0.1)
|
-
|
-
|
|
740.0
|
867.3
|
204.9
|
29.5
|
392.8
|
240.1
|
At 31 March 2023
|
Carrying
amount
£m
|
Contractual
cash flows
£m
|
Less than
one year
£m
|
One to
two years
£m
|
Two to
five years
£m
|
More than
five years
£m
|
Non-derivative financial
liabilities
|
|
|
|
|
|
|
£21.9 million 55⁄8% debenture stock
2029
|
22.0
|
29.0
|
1.2
|
1.2
|
3.7
|
22.9
|
£450.0 million revolving credit
facility
|
12.8
|
22.0
|
2.1
|
2.1
|
17.8
|
-
|
Private placement notes
|
423.7
|
500.2
|
10.8
|
182.5
|
20.8
|
286.1
|
|
458.5
|
551.2
|
14.1
|
185.8
|
42.3
|
309.0
|
The maturity of lease obligations is
set out in notes 18 and 19.
Interest rate risk
Interest rate risk arises from the
Group's use of interest-bearing financial instruments. It is the
risk that future cash flows arising from a
financial instrument will fluctuate due to changes in interest
rates. It is the Group's policy to reduce interest rate risk in
respect of the cash flows arising from its debt finance either
through the use of fixed rate debt or through the use of interest
rate derivatives such as swaps, caps
and floors. It is the Group's usual policy to maintain the
proportion of floating interest rate exposure to between 20-40% of forecast total debt. However,
this target is flexible, and may not be adhered to at all times
depending on, for example, the Group's view of future interest rate
movements.
Interest rate caps
Interest rate caps protect the Group
from rises in short-term interest rates by making a payment to the
Group when the underlying interest rate exceeds a
specified rate (the 'cap rate') on a notional value. If the
underlying rate exceeds the cap rate, the
payment is based upon the difference between the two rates,
ensuring the Group only pays the maximum of the cap rate. At
31 March 2024, the Group's only interest rate derivative was a £200
million interest rate cap.
Interest rate sensitivity
The sensitivity analysis below has
been determined based on the exposure to interest rates for
financial instruments at the balance sheet date,
and represents management's assessment of possible changes in
interest rates based on historical trends. For the floating
rate liabilities, the analysis is prepared assuming the amount of
the liability at 31 March 2024 was outstanding
for the whole
year:
|
Impact on loss
|
|
Impact on equity
|
|
2024
£m
|
2023
£m
|
|
2024
£m
|
2023
£m
|
Increase of 50 basis
points
|
(0.5)
|
(0.1)
|
|
(0.5)
|
(0.1)
|
Increase of 25 basis
points
|
(0.2)
|
(0.1)
|
|
(0.2)
|
(0.1)
|
Decrease of 25 basis
points
|
0.7
|
0.1
|
|
0.7
|
0.1
|
Decrease of 50 basis
points
|
1.5
|
0.1
|
|
1.5
|
0.1
|
Fair value of interest-bearing loans
and borrowings
|
Book value
2024
£m
|
Fair value
2024
£m
|
Book value
2023
£m
|
Fair value
2023
£m
|
Items carried at fair
value
|
|
|
|
|
Interest rate cap (asset)
|
(0.4)
|
(0.4)
|
-
|
-
|
Items not carried at fair
value
|
|
|
|
|
£21.9 million 55⁄8% debenture stock
2029
|
22.0
|
22.0
|
22.0
|
22.4
|
£450.0 million revolving credit
facility
|
46.1
|
46.1
|
12.8
|
12.8
|
£250.0 million term loan
|
248.3
|
248.3
|
-
|
-
|
Private placement notes
|
424.0
|
373.3
|
423.7
|
339.9
|
|
740.0
|
689.3
|
458.5
|
375.1
|
The fair values of the Group's
private placement notes were determined by comparing the discounted
future cash flows using the contracted yields with those of the
reference gilts plus the implied margins, representing Level 2 fair
value measurements as defined by IFRS 13 - Fair Value Measurement.
The fair values of the Group's outstanding interest rate cap has
been estimated by calculating the present value of future cash
flows, using appropriate market discount rates, representing Level
2 fair value measurements as defined by IFRS 13.
The fair values of the Group's cash and cash equivalents and trade
payables and receivables are not materially different from those at which they are
carried in the financial statements.
The following table details the
principal amounts and remaining terms of interest rate derivatives
outstanding:
|
Average contracted
fixed interest rate
|
|
Notional
principal amount
|
|
Fair value asset
|
2024
%
|
2023
%
|
|
2024
£m
|
2023
£m
|
|
2024
£m
|
2023
£m
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
Interest rate cap
|
5.094%
|
-
|
|
200.0
|
-
|
|
0.4
|
-
|
The Group entered a £200 million
interest rate cap (at a cost of £2.1 million) effective from 9
October 2023 and expires in September 2025.
18 Head lease obligations
Head lease obligations in respect of
the Group's leasehold properties are payable as follows:
|
Minimum
lease
payments
2024
£m
|
Interest
2024
£m
|
Principal payments
2024
£m
|
Minimum
lease
payments
2023
£m
|
Interest
2023
£m
|
Principal payments
2023
£m
|
Less than one year
|
2.9
|
(2.9)
|
-
|
2.4
|
(2.4)
|
-
|
Between one and five
years
|
11.5
|
(11.3)
|
0.2
|
9.7
|
(9.5)
|
0.2
|
More than five years
|
358.0
|
(284.1)
|
73.9
|
304.5
|
(238.0)
|
66.5
|
|
372.4
|
(298.3)
|
74.1
|
316.6
|
(249.9)
|
66.7
|
19 Occupational lease
obligations
Obligations in respect of the
Group's occupational leases for its head office are payable as
follows:
|
Minimum
lease
payments
2024
£m
|
Interest
2024
£m
|
Principal
payments
2024
£m
|
Minimum
lease
payments
2023
£m
|
Interest
2023
£m
|
Principal
payments
2023
£m
|
Less than one year
|
1.0
|
-
|
1.0
|
1.0
|
-
|
1.0
|
Between one and five
years
|
-
|
-
|
-
|
1.0
|
-
|
1.0
|
|
1.0
|
-
|
1.0
|
2.0
|
-
|
2.0
|
20 Share capital
|
2024
Number
|
2024
£m
|
2023
Number
|
2023
£m
|
Allotted, called up and fully paid
ordinary shares of 155⁄19 pence
|
|
|
|
|
At 1 April and 31 March
|
253,867,911
|
38.7
|
253,867,911
|
38.7
|
At 31 March 2024, the Company
had 253,867,911 ordinary shares with a nominal value of
155⁄19 pence
each.
21 Investment in own
shares
|
2024
£m
|
2023
£m
|
At 1 April
|
(2.8)
|
(3.6)
|
Employee share-based incentive
charges
|
(4.0)
|
(1.3)
|
Transfer to retained
earnings
|
1.2
|
2.1
|
At 31 March
|
(5.6)
|
(2.8)
|
The investment in the Company's own
shares is held at cost and comprises 887,159 shares (2023: 887,159
shares) held by the Great Portland Estates plc LTIP Employee Share
Trust, which will vest for certain senior employees of the Group if
performance conditions are met. During the year, no shares (2023:
192,112) vested to Directors and senior employees and no additional
shares were acquired by the Trust (2023: 201,936). The fair value
of shares awarded and outstanding at 31 March 2024
was £9.8 million
(2023: £8.4
million).
Details of outstanding share plans
are set out below:
Date of Grant /Fair value
(pence)
|
At 1 April 2023
No. of shares
|
Granted
No. of shares
|
Vested
No. of shares
|
Lapsed/
forfeit
No. of shares
|
At 31 March 2024
No. of shares
|
Vesting dates
|
Long Term Incentive Plan
|
|
|
|
|
|
|
29 July 2020 / 581p
|
1,619,621
|
-
|
-
|
(1,619,621)
|
-
|
28 July 2023
|
12 November 2020 / 704p
|
19,522
|
-
|
-
|
(19,522)
|
-
|
11 November 2023
|
7 June 2021 / 733p
|
1,358,980
|
-
|
-
|
(19,545)
|
1,339,435
|
6 June 2024
|
27 May 2022 / 645p
|
1,926,632
|
-
|
-
|
(126,942)
|
1,799,690
|
26 May 2025
|
|
|
|
|
|
|
|
Restricted Share Plan
|
|
|
|
|
|
|
7 July 2023 / 422p
|
-
|
1,220,784
|
-
|
(119,474)
|
1,101,310
|
6 July 2026
|
24 November 2023 / 408p
|
-
|
10,283
|
-
|
-
|
10,283
|
23 November 2026
|
|
4,924,755
|
1,231,067
|
-
|
(1,905,104)
|
4,250,718
|
|
22 Cash and cash
equivalents
|
2024
£m
|
2023
£m
|
Cash held at bank
(unrestricted)
|
5.9
|
3.2
|
Amounts held in respect of customer
rent deposits (restricted)
|
17.0
|
16.2
|
|
22.9
|
19.4
|
Amounts held in respect of customer
rent deposits are subject to restrictions as set out in the
customers' lease agreement and therefore not available for
general use by the Group.
23 Notes to the Group statement of
cash flows
Reconciliation of financing
liabilities
|
1 April
2023
£m
|
New
obligations
£m
|
Inflows/ (outflows)
£m
|
Other non-cash movements
£m
|
31 March
2024
£m
|
Long-term interest-bearing loans
and borrowings
|
458.5
|
248.0
|
33.5
|
(174.6)
|
565.4
|
Short-term interest-bearing loans
and borrowings
|
-
|
-
|
-
|
175.0
|
175.0
|
Obligations under leases
|
68.7
|
7.4
|
(3.3)
|
2.3
|
75.1
|
|
527.2
|
255.4
|
30.2
|
2.7
|
815.5
|
|
1 April
2022
£m
|
New obligations
£m
|
Inflows/ (outflows)
£m
|
Other non cash movements
£m
|
31 March
2023
£m
|
Long-term interest-bearing loans
and borrowings
|
531.0
|
-
|
(73.0)
|
0.5
|
458.5
|
Short-term interest-bearing loans
and borrowings
|
0.2
|
-
|
(0.2)
|
-
|
-
|
Obligations under leases
|
58.5
|
11.1
|
(3.3)
|
2.4
|
68.7
|
|
589.7
|
11.1
|
(76.5)
|
2.9
|
527.2
|
Adjustment for non-cash
items
Adjustments for non-cash items used
in the reconciliation of cash generated used in operations in the
Group statement of cash flows' is disclosed below.
|
2024
£m
|
2023
£m
|
Deficit from investment
property
|
267.3
|
145.0
|
Deficit/(surplus) on revaluation of
other investments
|
0.2
|
(0.1)
|
Employee share-based incentive
charge
|
4.0
|
1.3
|
Spreading of lease
incentives
|
(5.7)
|
(5.9)
|
Share of results of joint
ventures
|
46.7
|
33.4
|
Depreciation
|
1.6
|
1.7
|
Other
|
(0.7)
|
(0.3)
|
Adjustments for non-cash
items
|
313.4
|
175.1
|
24 Dividends
|
2024
£m
|
2023
£m
|
Dividends paid
|
|
|
Interim dividend for the year ended
31 March 2024 of 4.7 pence per share
|
11.9
|
-
|
Final dividend for the year ended 31
March 2023 of 7.9 pence per share
|
20.0
|
-
|
Interim dividend for the year ended
31 March 2023 of 4.7 pence per share
|
-
|
11.9
|
Final dividend for the year ended 31
March 2022 of 7.9 pence per share
|
-
|
20.0
|
|
31.9
|
31.9
|
A final dividend of 7.9 pence per
share was approved by the Board on 22 May 2024 and, subject to
shareholder approval, will be paid on
8 July 2024 to shareholders on the register on 31 May 2024. The
dividend is not recognised as a liability at 31
March 2024.
The 2023 final dividend and the 2023
interim dividend are included within the Group statement of changes
in equity.
25 Lease receivables
Future aggregate minimum rentals
receivable under non-cancellable leases are:
|
2024
£m
|
2023
£m
|
The Group as a lessor
|
|
|
Less than one year
|
66.0
|
58.3
|
Between two and five
years
|
141.0
|
129.9
|
More than five years
|
62.9
|
66.7
|
|
269.9
|
254.9
|
The Group leases its investment
properties under operating leases. The weighted average length of
lease at 31 March 2024 was 3.4 years (2023: 3.2 years). All
investment properties, except those under development, generated
rental income, and £nil contingent rents were recognised
in the year (2023: £nil).
26 Employee benefits
The Group operates a UK-funded
approved defined contribution plan. The Group's contribution for
the year was £1.8 million (2023: £1.5 million). The Group also
contributes to a defined benefit final salary pension plan (the
Plan), the assets of which are held and managed by trustees
separately from the assets of the Group. The Plan has been closed
to new entrants since April 2002. The most recent actuarial
valuation of the Plan was conducted at 1 April 2023 by a qualified
independent actuary using the projected unit method. The Plan was
valued using the following key actuarial assumptions:
|
2024
%
|
2023
%
|
Discount rate
|
4.90
|
4.80
|
Expected rate of salary
increases
|
4.10
|
4.20
|
RPI inflation
|
3.10
|
3.20
|
Rate of future pension
increases
|
2.90
|
2.90
|
Life expectancy assumptions at age
65:
|
2024
Years
|
2023
Years
|
Retiring today age 65 -
male:female
|
23:25
|
25:26
|
Retiring in 25 years (age 40 today)
- male:female
|
25:27
|
27:29
|
Changes in the present value of the
pension obligation are as follows:
|
2024
£m
|
2023
£m
|
Defined benefit obligation at 1
April
|
26.9
|
35.9
|
Service cost
|
0.2
|
0.3
|
Interest cost
|
1.2
|
1.1
|
Effect of changes in demographic
assumptions
|
(1.9)
|
-
|
Effect of changes in financial
assumptions
|
(0.5)
|
(10.5)
|
Effect of experience
adjustments
|
1.3
|
1.1
|
Benefits paid
|
(1.3)
|
(1.0)
|
Present value of defined benefit
obligation at 31 March
|
25.9
|
26.9
|
Changes to the fair value of the
Plan assets are as follows:
|
2024
£m
|
2023
£m
|
Fair value of the Plan assets at 1
April
|
31.0
|
39.4
|
Interest income
|
1.5
|
1.1
|
Actuarial loss
|
(1.0)
|
(9.1)
|
Employer contributions
|
0.6
|
0.6
|
Benefits paid
|
(1.3)
|
(1.0)
|
Fair value of the Plan assets at 31
March
|
30.8
|
31.0
|
|
|
|
Net pension asset
|
4.9
|
4.1
|
The amount recognised immediately in
the Group statement of comprehensive income was £0.1 million (2023:
£0.3 million).
The amount recognised in the balance
sheet in respect of the Plan is as follows:
|
2024
£m
|
2023
£m
|
Present value of unfunded
obligations
|
(25.9)
|
(26.9)
|
Fair value of the Plan
assets
|
30.8
|
31.0
|
Pension asset
|
4.9
|
4.1
|
Amounts recognised as administration
expenses in the income statement are as follows:
|
2024
£m
|
2023
£m
|
Current service cost
|
(0.2)
|
(0.3)
|
Net interest income
|
0.3
|
-
|
|
0.1
|
(0.3)
|
All equity and debt instruments have
quoted prices in active markets. The fair value of the Plan assets
at the balance sheet date is analysed as follows:
|
2024
£m
|
2023
£m
|
Cash
|
0.1
|
0.1
|
Equities
|
1.6
|
11.9
|
Bonds
|
27.6
|
19.0
|
Derivatives
|
1.5
|
-
|
|
30.8
|
31.0
|
Other than market and demographic
risks, which are common to all retirement benefit schemes, there
are no specific risks in the relevant benefit schemes
which the Group considers to be significant or unusual. Detail on
two of the more specific risks are detailed below:
Changes in bond yields
Falling bond yields tend to increase
the funding and accounting liabilities. However, the investment in
corporate and government bonds offers a
degree of matching, i.e. the movement in assets arising from
changes in bond yields partially matches the movement in the
funding or accounting liabilities. In this way, the exposure to
movements in bond yields is reduced.
Life expectancy
The majority of the obligations are
to provide a pension for the life of the member on retirement, so
increases in life expectancy will result in an increase in the
liabilities. The inflation-linked nature of the majority of benefit
payments increases the sensitivity of the liabilities to changes in life
expectancy.
The effect on the defined benefit
obligation of changing the key assumptions, calculated using
approximate methods based on historical trends, is set out
below:
|
2024
£m
|
2023
£m
|
Discount rate -0.25%
|
26.9
|
27.9
|
Discount rate +0.25%
|
25.1
|
26.0
|
RPI inflation -0.25%
|
25.6
|
26.5
|
RPI inflation +0.25%
|
26.3
|
27.4
|
Post-retirement mortality assumption
- one year age rating
|
26.9
|
27.9
|
Given the Plan surplus, the Group
has agreed to pause contributions to the Plan. Accordingly, the
Group expects to contribute £nil (2023: £0.6 million) to the Plan
in the year ending 31 March 2024. The expected total benefit
payments for the year ending 31 March 2024 are
£0.9 million, rising to around £1.1 million per annum over the next
five years. A total of c.£6.6 million is expected
to be paid
over the subsequent five year period.
27 Reserves
The following describes the nature
and purpose of each reserve within equity:
Share capital: The nominal value of the Company's issued share capital,
comprising 155⁄19 pence ordinary shares.
Share premium: Amount subscribed for share capital in excess of nominal
value, less directly attributable issue costs.
Capital redemption reserve:
Amount equivalent to the nominal value of the
Company's own shares acquired as a result of share buyback programmes.
Retained earnings:
Cumulative net gains and losses recognised in the
Group income statement together with other items
such as
dividends.
Investment in own shares:
Amount paid to acquire the Company's own shares
for its Employee Long-Term Incentive Plan less accounting charges.
Glossary
Building Research Establishment
Environmental Assessment Methodology (BREEAM)
Building Research Establishment
method of assessing, rating and certifying the
sustainability of buildings.
Cash EPS
EPRA EPS adjusted for certain
non-cash items (including our share of joint ventures): lease
incentives, capitalised interest and charges for share-based
payments.
Core West End
Areas of London with W1 and SW1
postcodes.
Development profit on
cost
The value of the development at
completion, less the value of the land at the point of development
commencement and costs to construct
(including finance charges, letting fees, void costs and marketing
expenses).
Development profit on cost
%
The development profit on cost
divided by the land value at the point of development
commencement together with the costs to
construct.
Earnings Per Share (EPS)
Profit after tax divided by the
weighted average number of ordinary shares in
issue.
EPRA metrics
Standard calculation methods for
adjusted EPS and NAV and other operating metrics as set out by the European
Public Real
Estate Association (EPRA) in their Best Practice and Policy
Recommendations.
EPRA Net Disposal Value
(NDV)
Represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. Diluted
net assets per share adjusted to remove the impact of goodwill
arising as a result of deferred tax and fixed interest rate
debt.
EPRA Net Reinstatement Value
(NRV)
Represents the value of net assets
on a long-term basis. Assets and liabilities that are not expected
to crystallise
in normal circumstances, such as
the fair value
movements on financial derivatives,
real estate
transfer taxes and deferred taxes on property valuation surpluses, are therefore
excluded.
EPRA Net Tangible Assets
(NTA)
Assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable
deferred tax. Diluted net assets per share adjusted to remove the
cumulative fair value movements on interest-rate swaps and similar
instruments, the carrying value of goodwill arising as a result of
deferred tax and other intangible assets.
Estimated rental value
(ERV)
The market rental value of lettable
space as estimated by the Group's valuers at each balance sheet
date.
Fair value - investment
property
The amount as estimated by the
Group's valuers for which a property should exchange on the
date of valuation between a willing buyer and a
willing seller in an arm's-length transaction after proper
marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. In line with market practice, values
are stated
net of
purchasers' costs.
Ready to fit
For businesses typically taking
larger spaces on longer leases who want to fit out the space
themselves.
Fitted spaces
Where businesses can move into fully
furnished, well designed workspaces, with their
own front door, furniture, meeting rooms, kitchen and
branding.
Fully Managed
Fitted space where GPE handles all
day-to-day services and running of the workplace in one
monthly bill.
Flex space partnerships
Revenue share agreements with
flexible space operators; these are typically structured via lease
arrangements with the revenue share recognised within rental income.
Full repairing and Insuring (FRI)
lease
In an FRI lease, the customer is
responsible for managing the space they
occupy, including all costs associated with repairing and maintaining the
property, as well as obtaining insurance coverage.
IFRS
United Kingdom adopted international
accounting standards.
Internal rate of return
(IRR)
The rate of return that if used as a
discount rate and applied to the projected cash flows that would
result in a net
present value of zero.
Like-for-like (Lfl)
The element of the portfolio that
has been held for the whole of the period of
account.
MSCI
Morgan Stanley Capital International
(MSCI) is a company that produces an independent
benchmark of property returns.
EPRA Loan-to-Value (LTV)
The nominal value of total bank
loans, private placement notes, debenture stock and any net
liabilities/assets, net of cash (including our share of
joint ventures
balances), expressed as a percentage of the market value
of the
property portfolio (including our share of joint ventures).
MSCI central London
An index, compiled by MSCI, of the
central and inner London properties in their March annual valued
universes.
Net assets per share or net asset
value (NAV)
Equity shareholders' funds divided
by the number of ordinary shares at the balance sheet date.
Net debt
The book value of the Group's bank
and loan facilities, private placement notes and debenture
loans plus the nominal value of the convertible bond less cash and
cash equivalents.
Net gearing
Total Group borrowings at nominal
value plus obligations under occupational
leases less short-term deposits and
cash as
a percentage
of equity shareholders' funds adjusted for value of the
Group's pension scheme, calculated in accordance with our bank
covenants.
Net initial yield
Annual net rents on investment
properties as a percentage of the
investment property valuation having added notional purchasers'
costs.
Net rental income
Gross rental income adjusted for the
spreading of lease incentives less expected
credit losses for rental income and ground rents.
Non-PIDs
Dividends from profits of the
Group's taxable residual business.
Property costs
Service charge and Fully Managed
services income less service charge
expenses, Fully Managed services cost, other property expenses and
expected credit losses for service charges.
Property Income Distributions
(PIDs)
Dividends from profits of the
Group's tax-exempt property rental business.
PMI
Purchasing Managers
Index.
REIT
UK Real Estate Investment
Trust.
Rent roll
The annual contracted rental
income.
Reversionary potential
The percentage by which ERV exceeds
rent roll on let space.
Topped-up initial yield
Annual net rents on investment
properties as a percentage of the
investment property valuation having added notional
purchasers' costs
and contracted uplifts from tenant incentives.
Total potential future
growth
Portfolio rent roll plus the ERV of
void space, space under refurbishment and the committed development
schemes, expressed as a percentage uplift on the rent roll at the
end of the
period.
Total Accounting Return
(TAR)
The growth in EPRA NTA per share
plus ordinary dividends paid, expressed as a percentage of EPRA NTA
per share at the beginning of the period.
Total Property Return
(TPR)
Capital growth in the portfolio plus
net rental income derived from holding these properties plus
profit on sale of disposals expressed as a percentage return
on the
period's opening
value.
Total Shareholder Return
(TSR)
The growth in the ordinary share
price as quoted on the London Stock Exchange, plus dividends per
share received for the period expressed as a percentage of the share
price at the
beginning of the period.
True equivalent yield
The constant capitalisation rate
which, if applied to all cash flows from an investment property,
including current rent, reversions to current market rent and such
items as voids and expenditures, equates to the market value having
taken into
account notional purchasers'
costs. Assumes rent is received quarterly in
advance.
Ungeared IRR
The ungeared internal rate of return
(IRR) is the interest rate at which the net present value of
all the cash flows (both positive and negative) from a
project or investment equal zero, without the benefit of financing.
The internal rate of return is used to evaluate the attractiveness of
a project or
investment.
EPRA vacancy rate
The element of a property which is
unoccupied, expressed as the ERV of the vacant
space divided
by the ERV
of the total portfolio, excluding committed developments.
Weighted Average Unexpired Lease
Term (WAULT)
The Weighted Average Unexpired Lease
Term expressed in years.
Whole life surplus
The value of the development at
completion, less the value of the land at the point of
acquisition and costs to construct (including finance
charges, letting fees, void costs and marketing expenses),
plus any income earned over the period.