- Strong operating metrics supported by good occupational market fundamentals and active management of the portfolio. 43 per cent increase in new rent commitments in the half year to £21.5 million.
- Adjusted EPS up 6.5 per cent to 9.8 pence (H1 2015: 9.2 pence), underpinned by a 4.1 per cent increase in like-for-like net rental income, a continued low vacancy rate at 4.8 per cent and strong income from development completions. IFRS EPS of 25.9 pence (H1 2015: 44.4 pence), which includes the impact of unrealised capital gains on the portfolio, was lower due mainly to stable property investment yields on our investment portfolio.
- EPRA NAV per share up 2.6 per cent to 475 pence, driven by a 1.9 per cent increase in the value of the portfolio, due primarily to development gains and active asset management.
- Future earnings growth underpinned by largely de-risked development programme with £125 million of future committed development expenditure (£26.5 million of new rent, 67 per cent pre-let) and advanced discussions or contracts signed subject to planning approval on a further £160 million of expenditure (£15m of new rent).
- Interim dividend increased by 4.0 per cent to 5.2 pence (2015 interim dividend: 5.0 pence).
“Our strong first half operating performance reflects the continuing occupier demand for modern, well located urban and big box warehouses which appeared to be largely unaffected by pre-referendum uncertainty. Active asset management, combined with tight demand-supply dynamics, has driven healthy like-for-like net rental income growth.
“While it is too early to assess the full effects of the EU referendum result on our business, we remain optimistic about the outlook for our occupational markets given the underlying structural drivers for, and the limited supply of, well located, modern warehouse buildings: thanks to strong first half leasing activity, we have started the third quarter with record low vacancy and a large pipeline of developments under construction or due to commence shortly, over two-thirds of which is pre-let, and which will be income-enhancing by the first half of 2017 at the latest. The relatively short construction timescales in our sector means that we are able to add further accretive speculative and pre-let development exposure in the months ahead, should the occupational demand outlook remain supportive.”
FINANCIAL AND OPERATING HIGHLIGHTS1
Strong occupier demand and successful asset management reflected in first half operating performance
- 43 per cent increase in new rent contracted to £21.5 million (H1 2015: £15.0 million), including £8.0 million from standing stock and £8.7 million from new development pre-let agreements and lettings of speculative space prior to completion.
- 4.1 per cent like-for-like net rental income growth, including 6.2 per cent in the UK, partly offset by a 1.0 per cent fall in Continental Europe, the latter mainly due to slightly increased operating costs and lower rents on renewal in Central Europe.
- Vacancy rate remains at record low of 4.8 per cent (31 December 2015: 4.8 per cent) due to strong demand for modern, well-located warehouse space. Average vacancy during the period improved to 5.0 per cent from 6.8 per cent in H1 2015, contributing to the like-for-like net rental income growth.
- Completed developments added £8.2 million of annualised rental income (increasing to £9.9 million when fully leased). Additionally, the committed development pipeline, most of which will be completed in the second half, is 67 per cent pre-let and expected to deliver a further £26.5 million of annualised rental income when fully leased.
- Portfolio capital value growth of 1.9 per cent. Completed assets increased by 1.5 per cent, reflecting asset management initiatives, stable yields and improving UK rental values. The portfolio return was enhanced by developments completed during the period or under construction, which delivered a valuation uplift of 14.2 per cent.
- EPRA NAV per share increased by 2.6 per cent to 475 pence (31 December 2015: 463 pence), primarily the result of the improvement in the value of the portfolio.
- £174 million of investment in our portfolio, focused on developing new assets (£115 million) and adding to the land bank (£44 million), as well as £15 million of urban warehouse acquisitions in Continental Europe. In addition to this investment, we secured a number of options over development sites in London and the South East and Midlands regions of the UK, providing a secure but flexible and scalable development pipeline.
- £383 million of disposals of assets not core to our strategy, including the Bath Road office portfolio and two small industrial estates in London, which resulted in a look-through LTV ratio of 36 per cent (31 December 2015: 38 per cent).
