REG - Great Portland Ests. - Positioned strongly for return of the cycle
16/11/2023 07:00
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RNS Number : 6196T Great Portland Estates PLC 16 November 2023
16 November 2023
Positioned strongly for return of the cycle
The Directors of Great Portland Estates plc announce the results for the Group
for the six months ended 30 September 2023(1), with highlights including:
· Strong leasing as customers demand best, sustainable spaces; record
13.4% ahead of ERV(2)
· Upgrading rental value growth guidance to +2.5% to +5.0%, +3.0% to
+8.0% for Prime office
· Central London busy and workers have returned; 75% portfolio in
West End, 93% near Elizabeth Line
· £123m of acquisitions; two Flex & one HQ opportunity, with
more expected in 2024
· Flex space increased to 434,000 sq ft; £5.4 million of Fully
Managed lettings 13.6% ahead of Flex ERV
· Delivering more than 1 million sq ft of Grade A, sustainable spaces
into supply drought; commitment to French Railways House, SW1 development
· Yield driven valuation decline of 10.3% (ERVs up 1.8%); IFRS &
EPRA NTA per share of 650 pence
· Stable EPRA EPS and ordinary dividend 4.7 pence, in-line with
guidance
· More than £500 million liquidity with new term loan signed; LTV
28.9%; £0.3 billion sales under discussion
· Cycle returning; GPE strong track record & positioning to
capitalise on emerging market opportunities
Toby Courtauld, Chief Executive, said: "Whilst macro-economic concerns and
rising interest rates impacted our property valuation, the fundamentals in our
leasing markets remain healthy. With customers increasingly demanding the very
best, sustainable spaces, and discounting the rest, they are competing in a
market increasingly starved of new, Grade A supply, putting further upward
pressure on prime rents and we have upgraded our rental growth forecasts for
the second half.
With further selective yield expansion a possibility, our investment markets
remain relatively quiet, although we are exploiting these conditions to our
advantage. We bought three buildings in the period, all off market and adding
to both our Flex and development programmes. Looking forward, we expect
further acquisition opportunities to emerge, and with our trademark
disciplined capital management, we will continue to recycle capital, selling
properties to crystallise value on completion of our business plans.
In this context, GPE's positioning is strong; 75% of our portfolio is in the
heart of the West End; our substantial capex programme will deliver the prime
spaces the market demands; our Flex office offer is growing, is well suited to
evolving customer needs, as evidenced by our market-leading NPS score, and is
delivering our highest rental growth; and our strong balance sheet and
plentiful liquidity combined with our long track record of creating
opportunities in cyclical markets means that we are well positioned to
capitalise. With GPE in great shape, and London set to outperform, we look to
our future with confidence."
Strong leasing, record 13.4% ahead of ERV(2); Flex currently 434,000 sq ft,
targeting one million sq ft
· 37 new leases and renewals generating annual rent of £11.2 million
p.a. across 113,500 sq ft, market lettings 13.4% above March 2023 ERV
including:
o three Fitted and nine Fully Managed leases, achieving on average £220 per
sq ft on the Fully Managed space, 13.6% ahead of March 2023 ERV; and
o 18 new retail leases securing £4.1 million of rent, with market lettings
18.1% ahead of March 2023 ERV
· Our committed Flex offer now 434,000 sq ft, targeting growth to one
million sq ft
· Rent roll up 4.2%; vacancy 3.5% (Mar 2023: 2.5%); reversion up to
13.5%
· Further £7.3 million of lettings under offer, 5.7% above March
2023 ERV
· Senior operational team changes to further enhance market-leading
customer experience and satisfaction
ERVs up 1.8%(3), with valuation down 10.3%(3) driven by yield expansion;
EPRA(4) NTA per share of 650 pence
· Portfolio valuation of £2.3 billion, down 10.3%(3); -9.6% offices
(inc. Flex -7.1%) and -12.4% retail
· Rental values up by 1.8%(3) (+1.9% offices (inc. Flex +1.7%) and
+1.2% retail); yield expansion of 43 bp
· Portfolio rental value growth guidance upgraded to 2.5% to 5.0% for
financial year, prime offices 3% to 8%
· IFRS NAV and EPRA(4) NTA per share of 650 pence, down 14.1% since
March 2023
· EPRA(4) earnings of £11.8 million, up 3.5% on 2022. EPRA(4) EPS of
4.7 pence, up 4.4%
· IFRS loss after tax of £253.4 million; loss per share of 100.1
pence; interim dividend maintained at 4.7 pence
Two Flex acquisitions and acquisition of HQ development opportunity in Soho
Square, W1
· Three acquisitions (£123 million) 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)
· More opportunities to come, one building under offer further £0.7
billion under review
Committed capex of £392 million, including French Railways House, SW1; Soho
Square added to pipeline
· Good progress at our pre-let net-zero carbon 2 Aldermanbury Square,
EC2; existing building deconstructed; anticipated completion Q1 2026
· Commitment to major office-led redevelopment at French Railways
House, SW1, to provide 67,600 sq ft (up from 54,700 sq ft) of new Grade A
space; reusing steel from City Place House, EC2
· Planning permission obtained for the redevelopment of Minerva
House, SE1 and work underway to prepare the site for a potential start early
next year
· Reviewing the Planning Inspector's report and Secretary of State's
planning refusal at New City Court, SE1
· Significant refurbishment programme to enhance our Fully Managed
offer inc. 6/10 St Andrew Street, EC4
· With construction cost inflation moderating, programme well timed
to deliver into supply constrained market
Significant liquidity; new £250 million Term Loan; £508 million(5) of cash
& undrawn facilities; EPRA LTV 28.9%
· EPRA LTV of 28.9%, weighted average interest rate of 3.8%, cash and
undrawn facilities of £508 million(5) ; weighted average debt maturity of 5.1
years
· New £250 million unsecured Term Loan drawn in October
( )
(1) All values include share of joint ventures unless otherwise stated
(2) Leasing in period to 30 September 2023 (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 7 to the financial statements. Our primary NAV metric is EPRA NTA
which we consider to be the most relevant investor measure for the Group. (5)
Pro forma for new Term Loan
Contacts:
Great Portland Estates plc +44 (0) 20 7647 3000
Toby Courtauld, Chief Executive
Nick Sanderson, Chief Financial & Operating Officer
Stephen Burrows, Director of Investor Relations and Joint Director of Finance
FGS Global +44 (0) 20 7251 3801
James Murgatroyd
Gordon Simpson
The results presentation will be broadcast live at 8.30am today with the link
available at:
www.gpe.co.uk/investors/latest-results
(http://www.gpe.co.uk/investors/latest-results)
A conference call facility will also be available to listen to the
presentation at 10.00am today on the following numbers:
UK: 0808 109 0701 (freephone) International: +44 (0) 33 0551 0202
Conference PIN: 0863454#
A video interview with Toby Courtauld and Nick Sanderson is available, along
with accompanying presentation materials and appendices, at:
www.gpe.co.uk/investors/latest-results
(http://www.gpe.co.uk/investors/latest-results)
For further information see www.gpe.co.uk (http://www.gpe.co.uk) or follow us
on Twitter at @GPE_London
LEI Number: 213800JMEDD2Q4N1MC42
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.
To view the accompanying graphics please paste the below into your web browser
http://www.rns-pdf.londonstockexchange.com/rns/6196T_1-2023-11-15.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6196T_1-2023-11-15.pdf)
Half Year Results
Our business
Our business is accompanied by graphics (see Appendix 1 and 3)
Our leasing activities
During the six months to 30 September 2023, demand in our occupational markets
remained robust despite the challenging macro environment and we continued to
secure new lettings materially ahead of the valuer's estimates. Key highlights
include:
· 37 new leases were signed during the first half (2022:
63 leases), generating annual rent of £11.2 million (our share: £10.5
million; 2022: £15.1 million), with market lettings 13.4% above March 2023
ERVs (offices; 11.1%; retail 18.1%), including:
o three Fitted and nine Fully Managed leases, achieving on average £220
per sq ft on the Fully Managed space, 13.6% ahead of March 2023 ERV; and
o 18 new retail leases securing £4.1 million of rent with market
lettings 18.1% ahead of March 2023 ERV.
· three rent reviews securing £5.7 million p.a. (our
share: £3.2 million; 2022: £5.2 million) of rent were settled during the
half year, 3.0% ahead of previous passing rent and 20.4% ahead of ERV;
· total space covered by new lettings, reviews and
renewals during the first half was 182,900 sq ft (2022: 358,000 sq ft);
· 92% (by area) of the 90 leases with breaks or expiries
in the twelve months to 30 September 2023 were retained, re-let, or are under
offer, leaving only 35,300 sq ft still to transact; and
· following the successful leasing period, the Group's
rent roll has increased by 4.2% to £110.9 million whilst the Group's vacancy
has increased to 3.5% (31 March 2023: 2.5%).
The table below summarises our leasing transactions in the period:
Leasing Transactions Three months ended 30 September Six months ended 30 September Six months ended 30 September
2023 2023 2022
New leases and renewals completed
Number 15 37 63
GPE share of rent p.a. £4.3 million £10.5 million £15.1 million
Area (sq ft) 48,000 113,500 205,300
Rent per sq ft (including retail) £121 £131 £104
Rent reviews settled
Number 2 3 9
GPE share of rent p.a. £2.8 million £3.2 million £5.2 million
Area (sq ft) 60,900 69,400 152,700
Rent per sq ft (including retail) £87 £82 £66
Note: Includes joint ventures at share
Notable transactions during the six months included:
· At the Hickman, E1, the building is now fully let following
letting the remaining office space to a digital transformation company, which
will occupy 6,757 sq ft on the second floor on a Fitted five-year lease with
an option to break at year three;
· 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;
· 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. Since inception, our retention rate across our
Fully Managed spaces has been 85%; and
· 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 March 23 ERV. Further south on Regent St, British contemporary
designer fashion brand, JOSEPH, has 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 30 September 2023, the Group's vacancy rate (including share of joint
ventures) was 3.5%, up from 2.5% at 31 March 2023. The average passing rent
across our office portfolio was £71.80 per sq ft, down from £72.20 per sq ft
at 31 March 2023.
Since 30 September 2023, our leasing activity included:
· 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 is an existing GPE customer and will
vacate 35,860 sq ft at Wells & More, W1, which will provide GPE with the
opportunity to refurbish and re-lease the space in this prime Fitzrovia
location; and
· Currently we have 88,800 sq ft of space under offer which would
deliver approximately £7.3 million p.a. in rent (our share: £4.7 million),
with market lettings 5.7% above March 2023 ERVs.
On track to create 1,000,000 sq ft of Fitted and Fully Managed office spaces
Evolving patterns of work are changing what many customers want from their
office space. Across our smaller office floors, rather than providing Ready to
Fit space for our customers to make their own, we are making occupation of our
spaces easier by providing these floors on a Fitted basis, or increasingly
overlaying service provision on a Fully Managed basis. Today, our committed
Flex offerings are an integral part of our office offer and total 434,000 sq
ft, comprising 128,000 sq ft of Fitted space, 189,000 sq ft of Fully Managed
space (of which 75,000 is let with the remainder under refurbishment) and Flex
partnerships of 117,000 sq ft. During the period, our activities included
rolling out our Fully Managed offering to a number of floors across the
portfolio, including Kent House,W1, Woolyard, SE1 and Alfred Place, WC1.
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. Accordingly, we are targeting to grow Flex
organically to more than 640,000 sq ft, with the majority of the growth to be
offered on a Fully Managed basis. Most of this growth will be delivered as we
complete the refurbishment of 6/10 St Andrew Street, EC4 in 2024, and 7/15
Gresse Street, WC1, 141 Wardour Street, W1, and Bramah House, SE1, which are
anticipated to complete in 2025 and 2026. 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 now
targeting growth, both organically and through acquisition, to one million sq
ft.
Team reorganisation to meet evolving market needs
During the period, we made a number of operational team changes to enhance the
delivery of our market-leading, Customer First approach, as we continue to
innovate, further digitise our activities, grow our Flex workspace offer and
deliver both great spaces and experiences for our customers. These included:
· Rebecca Bradley's role as Director of Customer Experience has been
expanded to include leadership of our new Customer Strategy & Insights
team. Her responsibilities include the strategic and operational delivery of
customer experience across all our spaces, ensuring both strong customer
relationship management and retention;
· Simon Rowley has assumed the newly created role of Director of Flex
Workspaces, as we focus on growing our Flex offer to more than one million sq
ft;
· Jordan McLean has joined GPE in the newly created role of Director of
IT, Innovation & Digital Transformation. With over 25 years of experience,
Jordan has a proven track record in driving business transformation through
digital solutions, including spending 10 years in the retail sector with
Morrisons and Asda; and
· Helen Hare's role as Director of Projects has been expanded and now
includes responsibility for our Building Surveying and Technical Services
teams.
Steven Mew (Customer Experience & Flex Director), David O'Sullivan
(Director of Workplace Services) and James Pellatt (Director of Innovation)
will be leaving GPE and we would like to thank them for their loyal service
and contribution to the organisation and senior leadership team.
Our development activities and capex programme
We have continued to make progress across our development pipeline and we have
advanced our plans to further invest in the expansion of our Fully Managed
office spaces. Since March 2023, we have committed to the 67,600 sq ft
development of French Railways House, SW1 and continued to make good progress
at 2 Aldermanbury Square, EC2 which is scheduled to complete in Q1 2026 with
the offices 100% pre-let. Whilst we were unsuccessful in our planning
applications at New City Court, SE1, during the period we have added to the
pipeline with the acquisition of the Soho Square Estate, W1. In total we have
committed capital expenditure of £392 million across four development and
Flex schemes, with a further £358 million that we could potentially commence
over the next five years.
Two committed development schemes, including new commitment at French Railways House, SW1
Following the agreement of a new headlease at French Railways House, SW1 in
July 2023, we are now committed to the redevelopment of the site. Our major
office-led redevelopment will provide 67,600 sq ft (up from 54,700 sq ft)
of new Grade A space. The scheme is expected to complete in mid-2026 and will
embrace the principles of the circular economy. We will retain the existing
foundations and basement, typically the largest embodied carbon element of a
building, and construct a lightweight building above to allow the retention of
the substructure. We will also reuse the structural steel from the demolition
of 2 Aldermanbury Square, EC2 in its construction. This will almost eliminate
the embodied carbon in the steelwork and allow for the delivery of 9,500 sq ft
best in class, column-free floorplates.
Good progress ahead of potential start at Minerva House, SE1
During the period, Southwark Council resolved to grant planning permission for
the redevelopment of Minerva House, SE1 and good progress has been made to
prepare the site for a potential start early next year. Our plans will take
the overall commercial space to 143,100 sq ft, an increase of approximately
56% on the existing area.
We plan to reposition the building to take full advantage of its Thames river
frontage and, by adding additional storeys, 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, greatly reducing the carbon impact of the development.
Furthermore, we expect to deliver BREEAM Outstanding, NABERS 5*, WELL Core
Platinum, WiredScore Platinum, SmartScore Platinum and CyclingScore Platinum
accreditations.
Planning applications at New City Court, SE1 refused
We submitted two planning applications to Southwark Council to redevelop New
City Court, SE1 on the Southbank, 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.
In January 2022, having explored all avenues to have both schemes approved
without success, we regretfully appealed for non-determination. This triggered
a planning inquiry that closed in August 2022. 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. We are carefully reviewing the Planning Inspector's report and
Secretary of State's decision and will provide a further update in due course.
New City Court currently has a rent roll of £2.9 million.
Adding to the pipeline with the acquisition of the Soho Square Estate, W1
Building on our successful track record at the eastern end of Oxford Street,
we have added to our near-term programme with the acquisition of 16/19 Soho
Square, 29/43 Oxford Street and 7 Falconberg Mews, W1 for £70 million (£772
per sq ft on consented NIA). The 56,150 sq ft mixed-use buildings are
currently multi-let at c.£1.5 million p.a. with vacant possession expected by
March 2024. The 0.5 acre site benefits from planning consent to demolish the
existing buildings and deliver around 91,000 sq ft of new Grade A office and
prime retail space.
The buildings are located in the heart of the West End at the eastern end of
Oxford Street and back onto Soho Square, just 100 metres from the new
Tottenham Court Road Elizabeth Line station. GPE intends to re-work the
designs to improve the quality of office and retail 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, arranged over
basement, lower ground, ground and eight upper floors, with multiple private
terraces and a communal roof terrace.
Significant refurbishment programme underway to enhance our Fully Managed office offer
As we grow our flexible office offer, we are currently refurbishing three
buildings to provide new dedicated Fully Managed spaces as well as converting
a significant number of floors across our portfolio. The buildings being
refurbished include 6/10 St Andrew Street, EC4 and Alfred Place, WC1 which
together will deliver around 86,000 sq ft of well designed, tech-enabled and
sustainable space which will also benefit from high levels of service delivery
and amenity provision. Beyond these buildings, we are anticipating commencing
Egyptian House, SW1, 141 Wardour Street, W1 and Gresse Street, W1 in 2024.
Together with other flex and refurbishment capex across the portfolio, this
programme will total around £170 million and, once delivered, will increase
our flexible office offerings to around 642,000 sq ft.
Our investment activities
The investment market has slowed significantly over the period as inflation
has remained persistently ahead of projections, resulting in the expectation
that interest rates will need to remain higher for longer. This has put upward
pressure on property yields reducing values, particularly in the City. Whilst
most values have fallen, the declines have not been uniform. Better quality
assets have been more resilient, further widening the gap between the best and
the rest. In this context, we are well placed. Our business model requires raw
material, typically short let, low quality buildings in prime locations, to
reposition towards prime. Markets such as these provide opportunities to
acquire at cyclically attractive pricing and during the period we made three
acquisitions stocking our Fully Managed and HQ development pipelines.
Three acquisitions for £123 million
In May we acquired the freehold interest at 141 Wardour Street W1 for £39
million (£1,156 per sq ft). The 33,717 sq ft building is currently vacant,
has been stripped out and benefits from planning consent for a comprehensive
refurbishment. The building is located in the heart of Soho, within five
minutes walking distance of the new Tottenham Court Road Elizabeth line
station. Following our substantial refurbishment, the building will provide
outstanding Fully Managed office space designed to meet evolving customer
needs and GPE's net zero carbon commitments.
Also in May, we acquired Bramah House, 65/71 Bermondsey Street, SE1 for £14
million, reflecting a 5.9% net initial yield and a capital value of £892 per
sq ft. The 15,696 sq ft freehold building is currently multi-let with a WAULT
of 3.2 years to expiries. The property is located opposite our existing
ownership at Woolyard. Together, both buildings will create a GPE Fully
Managed campus on Bermondsey Street, adjacent to London Bridge Station.
As detailed earlier, in August, we also acquired King Sloane Properties
Limited, which owns the freehold interests at 16/19 Soho Square, 29/43 Oxford
Street and 7 Falconberg Mews, W1.
Further opportunities to come
Looking ahead, we anticipate that market conditions will continue to provide
opportunities to buy. We are monitoring the market closely and have around
£0.7 billion of potential acquisitions currently under review. Our focus
remains on development and repositioning opportunities, buildings that would
suit our flex offer and assets that are challenged from a sustainability
perspective. We also have around £300 million of sales under discussion where
we have completed our business plans, which, once sold, will provide
additional firepower to take advantage of current market conditions.
Valuation
Valuation is accompanied by graphics (see Appendix 2)
The valuation of the Group's properties was £2,302.7 million as at 30
September 2023 (31 March 2023: £2,380.0 million), reflecting a valuation
decrease of 10.3% on a like-for-like basis since 31 March 2023. At 30
September 2023, the wholly-owned portfolio was valued at £1,819.1 million (31
March 2023: £1,855.5 million) and the Group had three active joint ventures
which owned properties valued at £483.6 million (our share) (31 March 2023:
£524.5 million) by CBRE. At 30 September 2023, 75% of our portfolio was
located in the West End.
Yield driven valuation decline
The key drivers behind the Group's valuation movement for the six-month period
were:
· higher investment yields - given the backdrop of higher
interest rates, equivalent yields increased by 43 basis points over the period
(office +35 basis points; retail +52 basis points) reducing valuation. City
yields increased by 63 basis points. At 30 September 2023, the portfolio true
equivalent yield was 5.2 % (West End: 5.1%; Rest of central London: 5.7%) and
reversionary yield was 6.2%;
· 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, rental values increased by 1.8% on a like-for-like basis, with
our flex offices increasing by 1.7% and our overall office portfolio up by
1.9%, whilst our retail portfolio increased by 1.2%;
· developments - the valuation of our committed
development properties decreased by 33.0% on a like-for-like basis to £129.5
million during the period, given development returns are more sensitive to
movements in investment yields; and
· portfolio management - a strong six months, 37 new
leases, rent reviews and renewals were completed, securing £13.7 million
(our share) of annual income, supporting the valuation. At 30 September 2023,
the portfolio was 13.5% reversionary.
Including rent from pre-lets and leases currently in rent free periods, the
topped-up initial yield of the investment portfolio at 30 September 2023 was
4.2%, 40 basis points higher than the start of the financial year.
Whilst the overall valuation decreased by 10.3% during the six months on a
like-for-like basis, (or cumulatively by 16.2% from the 31 March 2022 peak),
elements of the portfolio continued to show greater variation:
· our Flex office space reduced in value by 7.1%
outperforming the Group's wider office space which fell by 9.6% in value,
after a 49 basis point yield shift in comparison to a 35 basis point movement
for the whole office portfolio;
· retail space underperformed offices falling in value by
12.4% resulting from a greater yield expansion of 52 basis points;
· including developments, our West End portfolio
(-7.1%) performed better than our rest of London portfolio (-18.5%), given a
more aggressive yield expansion in the City (+63 bp) versus +32 bp 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 5.0% compared to those with a capital value
per sq ft of less than £1,000 per sq ft which reduced by 18.2%; and
· buildings with better sustainability credentials
outperformed. Buildings with an EPC rating of A or B reduced in value by 6.2%,
out-performing properties with an EPC of C or D which fell by 16.0% in the six
months.
Near-term market outlook
Our markets are cyclical, as a result, we actively monitor numerous lead
indicators to help identify key trends in our marketplace. Over the last six
months, given the increased economic uncertainty, our property capital value
indicators have deteriorated from those we reported in May. Investment market
activity has remained subdued, with current levels of interest rates and
uncertainty putting some upward pressure on yields. However, we anticipate
that once there is confidence that rates have peaked, and inflation is under
control, investment activity will return given the weight of money waiting on
the sidelines to invest.
In the occupational market, given the scarcity of high quality spaces in
central London we expect our leasing and rental performance of the portfolio
in the first half of the year to continue. Accordingly, we have upgraded our
rental value growth range for the financial year to 31 March 2024 to between
2.5% and 5.0%.
Our financial results
Our financial results are accompanied by graphics (see Appendix 4)
We prepare our financial statements using IFRS. We also use a number of
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 describes how we manage
the portfolio, like-for-like measures 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. Reconciliations of APMs are included in note 7 to the
accounts.
We calculate net assets and earnings per share in accordance with EPRA's Best
Practice Recommendations. The recommendations are designed to make the
financial statements of public real estate companies clearer and more
comparable across Europe, enhancing the transparency and coherence of the
sector. EPRA's Best Practice 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 investor metric for the
Group and the primary measure of net asset value and relevant reconciliations
between IFRS numbers and EPRA metrics are included in note 7 to the accounts.
Valuation fall from yield expansion drives 14.1% decrease in EPRA NTA per share
IFRS NAV per share and EPRA NTA per share at 30 September 2023 were 650 pence
per share, a decrease of 14.1% over the last six months, largely due to the
10.3% like-for-like decrease in the value of the property portfolio. The main
drivers of the 107 pence per share decrease in NTA from 31 March 2023 were:
· the decrease of 104 pence per share arising from the
revaluation of the property portfolio;
· EPRA earnings for the period of 5 pence per share
increased NTA; and
· the final dividend of 8 pence per share reduced NTA.
The EPRA NTA decrease of 14.1%, combined with the payment of last year's final
dividend of 7.9 pence per share, delivered a total accounting return for the
six months to 30 September 2023 of minus 13.1% (2022: -4.0%).
At 30 September 2023, the Group's net assets were £1,647.1 million, down from
£1,918.6 million at 31 March 2023, with the decrease largely attributable to
the fall in property valuation. EPRA NDV per share reduced marginally to 680
pence at 30 September 2023 compared to 790 pence at 31 March 2023
(down 13.9%), supported by the impact of rising interest rates on the fair
values of our fixed rate low coupon debt.
Earnings stable, in line with guidance and our portfolio activities
Revenue from our wholly-owned properties rose from £43.5 million to £47.6
million. Whilst rental income (including the spreading of lease incentives)
was largely stable, service charge income rose by £3.8 million as we
recovered higher service charge spend across the portfolio and Fully Managed
services income rose from £1.4 million to £2.7 million as we continued to
roll out and lease up our flexible office offer.
Adjusting for acquisitions, disposals and transfers to and from the
development programme, like-for-like rental income (including from joint
venture properties) increased 5.8% on the prior period after estimated credit
loss provisions.
Cost of sales increased from £14.2 million to £16.3 million for the period
to 30 September 2023, with the increase primarily due to higher service charge
expenses as a result of increased redecoration and refurbishment works and
higher utility costs. This increase was in part offset by lower other property
costs due to reduced levels of vacancy and the recovery of business rates paid
in prior years.
Administration costs were £20.9 million, an increase of £3.3 million,
primarily driven by inflationary pressures on employee costs, including
provisioning for share-based payments, along with investment associated with
further digitising our business, including the delivery of a new CRM.
EPRA earnings from joint ventures (excluding fair value movements) were £5.9
million, an increase of £3.0 million from the prior year, largely driven by
Hanover Square, W1 now being fully let in addition to receiving an insolvency
settlement at Mount Royal, W1 from the Arcadia administration, which had
previously been written off. In total, our joint ventures delivered a IFRS
loss before tax of £39.6 million (2022: £14.8 million).
Gross interest on our debt facilities was £10.4 million, up £2.1 million on
the prior period. This increase was primarily due to higher drawn balances,
and higher underlying rates, on our £450 million revolving credit facility.
We capitalised interest of £4.3 million (2022: £4.6 million). As a result,
the Group had net finance costs (including interest receivable) of £4.4
million (2022: £1.9 million).
EPRA earnings were £11.8 million, 3.5% higher than for the same period last
year. Revaluation losses together with EPRA earnings resulted in an IFRS loss
after tax of £253.4 million (2022: £86.6 million). The basic and diluted
loss per share for the period was 100.1 pence, compared to loss of 34.3 pence
per share for 2022. Diluted EPRA earnings per share was 4.7 pence (2022: 4.5
pence). Looking forward, we anticipate that the combination of higher interest
rates and increased vacancy, as we refurbish our spaces for our Flex offerings
and commit to our near-term developments, will reduce the Group's earnings
over the forthcoming 18 months.
Results of joint ventures
The Group's net investment in joint ventures was £500.4 million, a decrease
from £538.8 million at 31 March 2023, largely due to an 8.2% like-for-like
decrease in value of the property portfolio. Our share of joint venture net
rental income was £10.0 million, up from £8.4 million last year primarily as
a result of the leasing activity at Hanover Square, W1 completing. The
underlying joint venture profits are stated after charging £0.6 million of
GPE management fees (2022: £1.5 million) with the decrease attributable to a
reduction in leasing fees following the completion of leasing at Hanover
Square, W1.
Overall, our three active joint ventures represent an important proportion of
the Group's business. At 30 September 2023, joint ventures represented 21.0%
of the portfolio valuation, 30.4% of net assets and 22.5% of rent roll (31
March 2023: 22.0%, 28.1% and 23.9% respectively).
Strong liquidity; more than £500 million of cash and undrawn facilities; EPRA
LTV 28.9%
The Group's consolidated net debt increased to £663.3 million at 30 September
2023, compared to £457.7 million at 31 March 2023. The increase was largely
due to three acquisitions in the period totalling some £123.0 million
(excluding costs) as well as the on-going development capital expenditure
across the Group of £51.4 million in the six months. Group gearing increased
to 40.5% at 30 September 2023 (31 March 2023: 24.0%). Including cash balances
in the joint ventures, total net debt was £638.0 million (31 March 2023:
£440.0 million) equivalent to an EPRA loan to value of 28.9% (31 March 2023:
19.8%).
The Group is operating with substantial headroom over its debt covenants. At
30 September 2023, property values would have to fall by around 38% before
covenant breach. Through the cycle, the Group aims to maintain a target LTV
range between 10% and 35%, consistent with our low leverage levels over the
last 10 years. Our interest cover ratio under our Group covenants was high at
6.2 times (covenant: 1.35 times).
The Group's weighted average cost of debt, including fees, for the period was
3.7% (year to 31 March 2023: 3.0%). The weighted average interest rate
(excluding fees) at the period end was 3.8%, up from 2.7% at 31 March 2023, as
we increased amounts drawn on the RCF over the period, which had an all-in
rate of 6.1% at 30 September 2023.
In September 2023, we agreed 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.
GPE has put in place a £200 million interest rate cap to protect against any
further increases in rates whilst preserving the benefit of any reductions.
The loan was drawn on 9 October 2023. Following this financing, the Group has
cash and undrawn credit facilities in excess of £500 million. This
significant liquidity will support the delivery of our strategic priorities,
including funding the Group's near-term development programme and the Group's
£175 million private placement debt maturity in May 2024.
Today, including the new Term Loan, 93% of the Group's total debt was at fixed
or capped rates (31 March 2023: 97%), 97% (31 March 2023: 95%) was unsecured
and our weighted average drawn debt maturity was 4.7 years (31 March 2023: 6.4
years).
Taxation
The tax charge in the income statement for the half year was £nil (2022:
£0.1 million credit) and the effective tax rate on EPRA earnings was 0%
(2022: 0%). The majority of the Group's income is tax-free as a result of its
REIT status. Other allowances were available to set against non-REIT profits.
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 six months ended 30 September
2023, the Group paid a PID of £20.0 million.
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.
Dividends
The Board has declared an interim ordinary dividend of 4.7 pence per share
(2022: 4.7 pence) which will be paid on 4 January 2024. None of this interim
dividend will be a REIT Property Income Distribution (PID) in respect of the
Group's tax-exempt property rental business.
Principal risks and uncertainties
The Group recognises that the successful management of risk is critical to
enable delivery of the Group's strategic priorities. Ultimate responsibility
for risk rests with the Board but the effective day-to-day management of risk
is integral to the way the Group does business and its culture. The Board
undertakes a robust assessment of the principal risks facing the Group on a
regular basis.
The principal risks and uncertainties facing the Group for the remaining six
months of the financial year remain in line with those detailed on pages 64 to
77 of the 2023 Annual Report with no material changes:
Failure to meet customer needs Failure to profitably deliver the development programme
Climate change and decarbonisation People
London attractiveness Health and safety
Adverse macro-economic environment Cyber security and infrastructure failure
Poor capital allocation decisions and/or misreading market conditions Failure to profitably deliver the Flex Strategy
The Board and Executive Committee continue to regularly review the potential
risks and impacts presented by the volatile economic backdrop, including in
relation to elevated levels of inflation and higher underlying interest rates,
as well as the potential impacts of geo-political tensions arising from events
both in the Ukraine and, more recently, the Middle East. The Board also
continues to monitor both short-term impacts and potential longer-term
structural changes in working practices, an evolving planning regime and the
level and nature of demand for space in central London.
As a result of heightened economic uncertainty, the Group's forecasts and
business plans continue to be prepared under a variety of market scenarios to
reflect a number of potential outcomes.
Condensed group income statement
For the six months ended 30 September 2023
Year to 31 March 2023 Notes Six months to 30 September Six months to 30 September
Audited
2023
2022
£m
Unaudited
Unaudited
£m
£m
91.2 Revenue 2 47.6 43.5
(32.2) Cost of sales 3 (16.3) (14.2)
59.0 31.3 29.3
(38.3) Administrative expenses (20.9) (17.6)
(0.8) Expected credit losses 12 (0.1) (1.2)
(0.1) Development management income/(losses) - 0.1
19.8 Operating profit before deficit from investment property and results of joint 10.3 10.6
ventures
(145.0) Deficit from investment property 8 (219.7) (80.6)
0.1 Surplus on revaluation of other investments - -
(33.4) Share of results of joint ventures 9 (39.6) (14.8)
(158.5) Operating loss (249.0) (84.8)
6.0 Finance income 4 2.9 3.1
(11.5) Finance costs 5 (7.3) (5.0)
(164.0) Loss before tax (253.4) (86.7)
0.1 Tax 6 - 0.1
(163.9) Loss for the period (253.4) (86.6)
(64.8p) Basic loss per share 7 (100.1p) (34.3p)
(64.8p) Diluted loss per share 7 (100.1p) (34.3p)
9.5p Basic EPRA earnings per share 7 4.7p 4.5p
9.5p Diluted EPRA earnings per share 7 4.7p 4.5p
All results are derived from continuing operations in the United Kingdom and
are attributable to ordinary equity holders.
Condensed group statement of comprehensive income
For the six months ended 30 September 2023
Year ended Six months to 30 September Six months to 30 September
31 March
2023
2022
2023
Unaudited
Unaudited
Audited
£m
£m
£m
(163.9) Loss for the period (253.4) (86.6)
Items that will not be reclassified subsequently to profit and loss:
0.3 Actuarial gain on defined benefit scheme - 0.6
(0.1) Deferred tax on actuarial loss on defined benefit scheme - (0.1)
(163.7) Total comprehensive expense for the period (253.4) (86.1)
Condensed group balance sheet
At 30 September 2023
As at Notes As at * Restated
31 March
30 September
2023
2023 As at
Audited
Unaudited
30 September
£m
£m
2022
Unaudited
£m
Non-current assets
1,922.2 Investment property 8 1,880.8 2,135.7
538.8 Investment in joint ventures 9 500.4 561.5
3.5 Property, plant and equipment 10 2.7 4.2
4.1 Pension asset 4.4 4.3
1.8 Other investments 11 2.2 1.5
2,470.4 2,390.5 2,707.2
Current assets
15.8 Trade and other receivables 12 29.5 14.0
19.4 Cash and cash equivalents 19 23.4 23.6
Current assets held for sale
- Investment property held for sale 8 5.0 -
35.2 57.9 37.6
2,505.6 Total assets 2,448.4 2,744.8
Current liabilities
- Interest-bearing loans and borrowings 14 (174.9) -
- Corporation tax (0.3) -
(56.8) Trade and other payables 13 (63.0) (57.3)
(56.8) (238.2) (57.3)
Non-current liabilities
(458.5) Interest-bearing loans and borrowings 14 (491.9) (610.3)
(66.7) Head lease obligations 16 (66.7) (66.7)
(2.0) Occupational lease obligations 17 (1.5) (2.4)
(3.0) Provisions in respect of warranties on sold buildings (3.0) -
(530.2) (563.1) (679.4)
(587.0) Total liabilities (801.3) (736.7)
1,918.6 Net assets 1,647.1 2,008.1
Equity
38.7 Share capital 15 38.7 38.7
46.0 Share premium account 46.0 46.0
326.7 Capital redemption reserve 326.7 326.7
1,504.4 Retained earnings 1,233.0 1,593.9
2.8 Investment in own shares 18 2.7 2.8
1,918.6 Total equity 1,647.1 2,008.1
757p Diluted net assets per share 7 650p 794p
757p Diluted EPRA NTA per share 7 650p 794p
* Cash and cash equivalents and monies held in trade and other payables have
been restated as at 30 September 2022 following clarification by IFRIC on
classification of funds with externally imposed restrictions, see note 1 for
further details.
Condensed group statement of cash flows
For the six months ended 30 September
2023
Year to Notes Six months to * Restated Six months to
31 March
30 September
30 September
2023
2023
2022
Audited
Unaudited
Unaudited
£m
£m
£m
Operating activities
(158.5) Operating loss (249.0) (84.8)
175.1 Adjustments for non-cash items 20 258.4 95.0
5.3 (Increase)/decrease in receivables (13.7) 7.1
(6.1) Increase/(decrease) in payables 2.8 (7.5)
15.8 Cash generated by operations (1.5) 9.8
(17.6) Interest paid (10.2) (8.1)
0.1 Interest received - -
(1.7) Cash flow (used in)/from operating activities (11.7) 1.7
Investing activities
7.5 Distributions from joint ventures - 3.5
9.0 Repayment of loans by joint ventures 1.8 6.0
- Investment in joint ventures (0.1) -
(120.4) Purchase and development of investment property (173.2) (90.1)
(0.2) Purchase of plant and equipment (0.1) (0.1)
(0.7) Purchase of other investments (0.4) (0.5)
217.4 Sale of properties (0.5) 27.4
112.6 Cash flow (used in)/from investing activities (172.5) (53.8)
Financing activities
(387.0) Revolving credit facility repaid 14 (23.4) (160.0)
314.0 Revolving credit facility drawn 14 231.4 239.0
- Repayment of short-term interest-bearing loans and borrowings - (0.2)
(3.3) Payment of lease obligations (1.7) (1.7)
(31.9) Dividends paid 22 (18.1) (18.1)
(108.2) Cash flow from/(used in) financing activities 188.2 59.0
2.7 Net increase in cash and cash equivalents 4.0 6.9
16.7 Cash and cash equivalents at 1 April 19.4 16.7
19.4 Cash and cash equivalents at balance sheet date 23.4 23.6
* Cash and cash equivalents and payables in respect of customer deposits have
been restated as at 1 April 2022 and 30 September 2022 following clarification
by IFRIC on classification of funds with externally imposed restrictions. As a
result, the previously reported cash flows from operating activities for the
period ended 30 September 2022 decreased from £1.8 million to £1.7 million.
There was no impact on the other components of the statement of cash flows for
the period ended 30 September 2022. See note 1 for further details.
Condensed group statement of changes in equity
For the six months ended 30 September 2023 (unaudited)
Capital Retained Total
redemption
Share Share
reserve earnings Investment in own shares equity
£m
£m
capital premium account £m £m
£m £m
Total equity at 1 April 2023 38.7 46.0 326.7 1,504.4 2.8 1,918.6
Loss for the period - - - (253.4) - (253.4)
Actuarial gain on defined benefit scheme - - - - - -
Deferred tax on defined benefit scheme - - - - - -
Total comprehensive expense for the period - - - (253.4) - (253.4)
Employee share-based incentive charge - - - - 1.9 1.9
Transfer to retained earnings - - - 2.0 (2.0) -
Dividends to shareholders - - - (20.0) - (20.0)
Total equity at 30 September 2023 38.7 46.0 326.7 1,233.0 2.7 1,647.1
Condensed group statement of changes in equity
For the six months ended 30 September 2022 (unaudited)
Capital Retained Total
redemption
Share Share
reserve earnings Investment in own shares equity
£m
£m
capital premium account £m £m
£m £m
Total equity at 1 April 2022 38.7 46.0 326.7 1,697.9 3.6 2,112.9
Loss for the period - - - (86.6) - (86.6)
Actuarial gain on defined benefit scheme - - - 0.6 - 0.6
Deferred tax on defined benefit scheme - - - (0.1) - (0.1)
Total comprehensive expense for the period - - - (86.1) - (86.1)
Employee share-based incentive charge and other items - - - - 1.3 1.3
Transfer to retained earnings - - - 2.1 (2.1) -
Dividends to shareholders - - - (20.0) - (20.0)
Total equity at 30 September 2022 38.7 46.0 326.7 1,593.9 2.8 2,008.1
Condensed group statement of changes in equity
For the year ended 31 March 2023 (audited)
Capital Retained Total
redemption
Share Share
reserve earnings Investment in own shares equity
£m
£m
capital premium account £m £m
£m £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 - - - 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 share-based incentive charge - - - - 1.3 1.3
Transfer to retained earnings - - - 2.1 (2.1) -
Dividends to shareholders - - - (31.9) - (31.9)
Total equity at 31 March 2023 38.7 46.0 326.7 1,504.4 2.8 1,918.6
Condensed notes forming part of the half year results
1 Basis of preparation
The information for the year ended 31 March 2023 does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for that year has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report and did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The annual financial statements of Great Portland Estates plc will be prepared
in accordance with the requirements of the Companies Act 2006 and in
accordance with United Kingdom adopted International Financial Reporting
Standards (IFRSs). The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34 Interim Financial
Reporting and in accordance with the Disclosure, Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority. The accounting
policies and methods of computation applied are consistent with those applied
in the Group's latest annual audited financial statements. The nature of the
Critical Judgements and Key Sources of Estimation Uncertainty applied in the
condensed financial statements have remained consistent with those applied in
the Group's latest annual audited financial statements. The key source of
estimation uncertainty is the valuation of the property portfolio. There were
no critical judgements made in the preparation of the condensed financial
statements. The Group's performance is not subject to seasonal fluctuations.
New standards, amendments and interpretations are in issue and effective for
the Group's financial year ended 31 March 2023, but they do not have a
material impact on the interim financial statements. There were no new or
revised IFRSs, amendments or interpretations in issue but not yet effective
that are potentially material for the Group and which have not yet been
applied.
The Group has assessed the impact of the IFRS Interpretation Committee's
recent agenda decision in respect of Demand Deposits with Restrictions on Use
arising from a Contract with a Third Party (IAS 7). The Group holds customer
deposits in separate designated bank accounts where the use of the monies is
restricted and defined in the lease agreements; however, the access to these
monies by the Group is not restricted. Following the clarification by IFRIC,
these customer deposits are judged to meet the definition of 'cash' under IAS
7. The Group comparative balances have been restated to reflect this change in
classification, which resulted in £16.6 million of customer deposits as at 30
September 2022 being reclassified and presented gross as cash and cash
equivalents and payables with no impact on net assets or the income statement.
Going concern
The directors have considered the appropriateness of adopting the going
concern basis in preparing the financial statements for the period ended 30
September 2023, with particular focus on the impact of geopolitical tensions
and high inflation on the macro-economic conditions in which the Group is
operating. The directors also considered the Group's net current liability
position as at 30 September 2023, which is driven by the maturity in May 2024
of a £175 million private placement (see note 14). The directors' assessment
is based on the next 12 months of the Group's financial forecasts, including a
going concern scenario which included the following key assumptions:
- a 20% decline in the valuation of the property portfolio from 30 September
2023;
- an 8% annual reduction in rental income; and
- an overall decrease of around 77% in EPRA earnings.
The going concern scenario demonstrates that the Group over a period of at
least 12 months:
- has significant liquidity to fund its ongoing operations, including the
drawdown in October 2023 of a new £250 million Term Loan;
- has sufficient funds to repay its £175 million Private Placement Notes in
May 2024 when they mature;
- is operating with significant headroom above its Group debt financing
covenants;
- property values would have to fall by a further 11% before breach (or 38%
from 30 September 2023 values);
- the Group does not project any breaches of ICR, with minimum coverage of
1.69x (vs 1.35x covenant) throughout the going concern period; and
- has no debt maturities other than set out above.
Based on these considerations, together with extensive stress testing,
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 period ended 30
September 2023.
2 Revenue
Year to Six months to 30 September 2023 £m Six months to 30 September 2022 £m
31 March
2023
£m
66.6 Gross rental income 32.0 32.8
5.9 Spreading of lease incentives 3.4 2.5
12.5 Service charge income 8.9 5.1
2.4 Joint venture fee income 0.6 1.5
3.7 Fully Managed services income 2.7 1.4
0.1 Trading property revenue - 0.2
91.2 47.6 43.5
The table below sets out the Group's gross rental income split between types
of space provided:
Year to Six months to Six months to 30 September
31 March
30 September
2022
2023
2023
£m
£m
£m
42.4 Ready to fit 17.8 21.1
11.1 Retail 6.1 5.9
3.8 Fitted 2.7 1.6
4.1 Fully Managed 2.6 1.9
5.2 Flex Partnerships 2.8 2.3
66.6 32.0 32.8
The table below sets out the Group's net rental income, please see note 7 for the Group's alternative performance measures:
Year to Six months to 30 September Six months to 30 September
31 March
2023
2022
2023
£m
£m
£m
66.6 Gross rental income 32.0 32.8
(0.6) Expected credit losses (0.1) (1.1)
66.0 Rental income 31.9 31.7
5.9 Spreading of lease incentives 3.4 2.5
(1.0) Ground rent (0.3) (0.5)
70.9 35.0 33.7
3 Cost of sales
Year to Six months to 30 September 2023 £m Six months to 30 September 2022 £m
31 March
2023
£m
18.2 Service charge expenses (including Fully Managed service costs) 12.9 7.8
13.0 Other property expenses 3.1 5.9
1.0 Ground rent 0.3 0.5
32.2 16.3 14.2
The table below sets out the Group's property costs, please see note 7 for the
Group's alternative performance measures:
Year to Six months to Six months to 30 September
31 March
30 September
2022
2023
2023
£m
£m
£m
(12.5) Service charge income (8.9) (5.1)
(3.7) Fully Managed services income (2.7) (1.4)
18.2 Service charge expenses (including Fully Managed service costs) 12.9 7.8
13.0 Other property expenses 3.1 5.9
0.2 Expected credit losses - 0.1
15.2 4.4 7.3
4 Finance income
Year to Six months to Six months to 30 September
31 March
30 September
2022
2023
2023
£m
£m
£m
5.9 Interest income on joint venture balances 2.9 3.1
0.1 Interest on cash deposits - -
6.0 2.9 3.1
5 Finance costs
Year to Six months to Six months to 30 September
31 March
30 September
2022
2023
2023
£m
£m
£m
5.7 Interest on revolving credit facilities 4.3 2.2
10.9 Interest on private placement notes 5.5 5.5
1.2 Interest on debenture stock 0.6 0.6
2.4 Interest on obligations under head leases 1.2 1.2
0.1 Interest on obligations under occupational leases - 0.1
20.3 Gross finance costs 11.6 9.6
(8.8) Less: capitalised interest at an average interest cost of 3.7% (2022: 2.9%) (4.3) (4.6)
11.5 7.3 5.0
6 Tax
Year to Six months to Six months to 30 September
31 March
30 September
2022
2023
2023
£m
£m
£m
Current tax
- UK corporation tax - current period - -
- UK corporation tax - prior periods - -
- Total current tax - -
(0.1) Deferred tax - (0.1)
(0.1) Tax credit for the period - (0.1)
The difference between the standard rate of tax and the effective rate of tax
arises from the items set out below:
Year to Six months to Six months to
31 March
30 September
30 September
2023
2023
2022
£m
£m
£m
(164.0) Loss before tax (253.4) (86.7)
(31.2) Tax credit on loss at standard rate of 25% (2022: 19%) (63.4) (16.5)
35.1 Changes in the fair value of properties not subject to tax 66.2 18.8
(7.1) REIT tax-exempt rental profits and gains (4.2) (3.1)
2.0 Difference between accounting profit and tax profit on disposal - -
1.1 Other 1.4 0.7
(0.1) Tax credit for the period - (0.1)
During the period, deferred tax of £nil was debited directly to equity (2022:
£0.1 million debited). The Group recognised a net deferred tax asset at 30
September 2023 of £nil (2022: £nil). This consists of deferred tax assets of
£1.2 million (2022: £0.9 million) and deferred tax liabilities of £1.2
million (2022: £0.9 million).
Movement in deferred tax:
At 1 April Recognised in the income statement Recognised in equity At 30 September 2023
2023
£m
£m
£m £m
Net deferred tax asset/(liability) in respect of other temporary differences - - - -
A deferred tax asset of £6.8 million (2022: £4.5 million), mainly relating
to revenue losses and contingent share awards, was not recognised because it
is uncertain whether future taxable profit will arise against which this asset
can be utilised.
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.
In order to ensure that the Group is able to both retain its status as a REIT
and to 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.
7 Earnings per share, alternative performance measures and EPRA metrics
Adjusted earnings and net assets per share are calculated in accordance with the Best Practice Recommendations issued by the European Public Real Estate Association (EPRA). The recommendations are designed to make the financial statements of public real estate companies clearer and more comparable across Europe, enhancing the transparency and coherence of the sector. The directors consider these standard metrics to be the most appropriate method of reporting the value and performance of the business. The reconciliations between these measures and the equivalent IFRS figures are shown in the tables below.
Earnings per share:
Weighted average number of ordinary shares
Year to Six months to Six months to
31 March
30 September
30 September
2023
2023
2022
No. of shares
No. of shares
No. of shares
253,867,911 Issued ordinary share capital at 1 April 253,867,911 253,867,911
(941,432) Investment in own shares (887,159) (964,408)
252,926,479 Weighted average number of ordinary shares - basic 252,980,752 252,903,503
Basic and diluted earnings per share
Year to31 March Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September
2023
2023
2023
2023
2022
2022
2022
Loss
Loss after tax
No. of
Loss
Loss after tax
No. of
Loss
per share
£m
shares
per share
£m
shares
per share
pence
million
pence
million
pence
(64.8) Basic (253.4) 253.0 (100.1) (86.6) 252.9 (34.3)
- Dilutive effect of LTIP shares - 0.1 - - - -
(64.8) Diluted (253.4) 253.1 (100.1) (86.6) 252.9 (34.3)
EPRA Earnings per share
Year to Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September
2023
2023
2023
2022
2022
2022
31 March
Profit/(loss) after tax
No. of
Earnings/ (expense)
Profit/(loss) after tax
No. of
Earnings/ (expense)
2023
£m
shares
per share
£m
shares
per share
(Loss)/ Earnings
million
pence
million
pence
per share
pence
(64.8) Basic (253.4) 253.0 (100.1) (86.6) 252.9 (34.3)
57.3 Deficit from investment property (note 8) 219.7 - 86.8 80.6 - 31.9
17.1 Deficit from joint venture investment property (note 9) 45.5 - 18.0 17.7 - 7.0
- Trading property revenue - - - (0.2) - (0.1)
(0.1) Deferred tax (note 6) - - - (0.1) - -
9.5 Basic EPRA earnings 11.8 253.0 4.7 11.4 252.9 4.5
- Dilutive effect of LTIP shares - 0.1 - - - -
9.5 Diluted EPRA earnings 11.8 253.1 4.7 11.4 252.9 4.5
Net assets per share:
In accordance with EPRA, we report 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 net asset value alongside IFRS net asset value.
Number of ordinary shares
31 March 30 September 30 September
2023
2023
2022
No. of shares
No. of shares
No. of shares
253,867,911 Issued ordinary share capital 253,867,911 253,867,911
(887,159) Investment in own shares (887,159) (1,025,440)
252,980,752 Number of shares - basic 252,980,752 252,842,471
326,340 Dilutive effect of LTIP shares 479,867 -
253,307,092 Number of shares - diluted 253,460,619 252,842,471
EPRA net assets per share
31 March 30 September 30 September 30 September 30 September 30 September
2023
2023
2023
2023
2023
2022
EPRA NTA £m
IFRS
EPRA NTA £m
EPRA NDV £m
EPRA NRV £m
EPRA NTA £m
£m
1,918.6 IFRS basic and diluted net assets 1,647.1 1,647.1 1,647.1 1,647.1 2,008.1
- Fair value of financial liabilities - - 76.4 - -
- Real estate transfer tax - - - 168.0 -
1,918.6 Net assets used in per share calculations 1,647.1 1,647.1 1,723.5 1,815.1 2,008.1
31 March 30 September 30 September 30 September 30 September 30 September
2023
2023
2023
2023
2023
2022
EPRA NTA pence
IFRS pence
EPRA NTA pence
EPRA NDV pence
EPRA NRV pence
EPRA NTA pence
758 Net assets per share 651 651 681 717 794
757 Diluted net assets per share 650 650 680 716 794
Total Accounting return
Year to Six months to 30 September Six months to 30 September
2023
2022
31 March per share
per share
2023
per share pence pence
pence
835.0 Opening EPRA NTA (A) 757.0 835.0
757.0 Closing EPRA NTA 650.0 794.0
(78.0) Decrease in EPRA NTA (107.0) (41.0)
12.6 Ordinary dividend paid in period 7.9 7.9
(65.4) Total return (B) (99.1) (33.1)
(7.8%) Total accounting return (B/A) (13.1%) (4.0%)
Cash earnings per share
Year to Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September Six months to 30 September
2023
2023
2023
2022
2022
2022
31 March
Profit after tax
No. of
Earnings
Profit after tax
No. of
Earnings
2023
£m
shares
per share
£m
shares
per share
Earnings
million
pence
million
pence
per share
pence
9.5 Diluted EPRA earnings 11.8 253.1 4.7 11.4 252.9 4.5
(3.5) Capitalised interest (4.3) - (1.7) (4.6) - (1.8)
(2.3) Spreading of tenant lease incentives (3.4) - (1.3) (2.5) - (1.0)
(2.8) Spreading of tenant lease incentives in joint ventures (2.3) - (0.9) (3.3) - (1.3)
0.5 Employee share-based incentive charge and other items 1.9 - 0.7 1.3 - 0.5
1.4 Cash earnings per share 3.7 253.1 1.5 2.3 252.9 0.9
EPRA loan-to-property value and net debt
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
21.9 £21.9 million 5.625% debenture stock 2029 21.9 21.9
14.0 £450.0 million revolving credit facility 222.0 166.0
425.0 Private placement notes 425.0 425.0
(3.2) Less: cash balances (unrestricted) (5.6) (7.0)
457.7 Group net debt 663.3 605.9
27.8 Net payables (excluding customer rent deposits) 19.0 26.7
485.5 Group net debt including net payables 682.3 632.6
3.4 Joint venture net payables (at share) 8.5 7.5
(17.7) Joint venture cash balances (at share) (25.3) (24.0)
471.2 Net debt including joint ventures (A) 665.5 616.1
1,855.5 Group properties at market value 1,819.1 2,069.0
524.5 Joint venture properties at market value (at share) 483.6 545.0
2,380.0 Property portfolio at market value including joint ventures (B) 2,302.7 2,614.0
19.8% EPRA Loan-to-property value (A/B) 28.9% 23.6%
Net gearing
31 March 30 September 30 September
2023
2023
2022
£m £m
£m
460.9 Nominal value of interest-bearing loans and borrowings 668.9 612.9
2.0 Obligations under occupational leases 1.5 2.4
(3.2) Less: cash balances (unrestricted) (5.6) (7.0)
459.7 Adjusted net debt (A) 664.8 608.3
1,918.6 Net assets 1,647.1 2,008.1
(4.1) Pension scheme asset (4.4) (4.3)
1,914.5 Adjusted net equity (B) 1,642.7 2,003.8
24.0% Net gearing (A/B) 40.5% 30.4%
8 Investment property
Investment property
Freehold Leasehold Total
£m
£m
£m
Book value at 1 April 2023 883.5 925.0 1,808.5
Costs capitalised 9.5 25.7 35.2
Movement in lease incentives 4.7 (0.2) 4.5
Interest capitalised - 1.0 1.0
Acquisitions 128.9 - 128.9
Transfer to investment property under development - (38.0) (38.0)
Transfer to investment property held for sale (5.8) - (5.8)
Net valuation deficit (97.0) (86.0) (183.0)
Book value at 30 September 2023 923.8 827.5 1,751.3
Investment property under development
Freehold Leasehold Total
£m
£m
£m
Book value at 1 April 2023 - 113.7 113.7
Costs capitalised - 9.9 9.9
Interest capitalised - 3.3 3.3
Transfer from investment property - 38.0 38.0
Net valuation deficit - (35.4) (35.4)
Book value at 30 September 2023 - 129.5 129.5
Book value of investment property at 30 September 2023 923.8 957.0 1,880.8
Investment property held for sale - current asset
Freehold Leasehold Total
£m
£m
£m
Book value at 1 April 2023 - - -
Transfer from investment property - exchanged for sale 5.8 - 5.8
Net valuation deficit (0.8) - (0.8)
Book value at 30 September 2023 5.0 - 5.0
Book value of total investment property at 30 September 2023 928.8 957.0 1,885.8
Book value of total investment property at 31 March 2023 883.5 1,038.7 1,922.2
Deficit from investment property
Year to Six months to Six months to 30 September
30 September
2022
31 March
2023
£m
2023
£m
£m
(141.7) Net valuation deficit on investment property (219.2) (81.0)
(3.3) (Loss)/profit on sale of investment properties (0.5) 0.4
(145.0) Deficit from investment property (219.7) (80.6)
The book value of investment property includes £66.7 million (31 March 2023:
£66.7 million) in respect of the present value of future ground rents. The
market value of the portfolio (excluding these amounts) is £1,819.1 million
(31 March 2023: £1,855.5 million). The total portfolio value including joint
venture properties of £483.6 million (31 March 2023: £524.5 million) (see
note 9) was £2,302.7 million (31 March 2023: £2,380.0 million). At 30
September 2023, property with a carrying value of £104.5 million (31 March
2023: £111.0 million) was secured under the first mortgage debenture stock
(see note 14). 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 November 2023.
The Group's investment properties, including those held in joint ventures
(note 9), were valued on the basis of Fair Value by CBRE Limited (CBRE),
external valuers, as at 30 September 2023. The valuations have been prepared
in accordance with the current version of the RICS Valuation - Global
Standards (incorporating the International Valuation Standards) and the UK
national supplement (the Red Book) and have been primarily derived using
comparable recent market transactions on arm's length terms.
Real estate valuations are complex and derived using comparable market
transactions, which are not publicly available and involve an element of
judgement and estimation. 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 period. 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.
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 £245.1
million, whilst a 50 basis point increase (the actual movement was 43 basis
points for the current period) would reduce the fair value by £202.1 million.
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. 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.
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, and we estimate that the investment required to upgrade
our existing buildings to the new minimum EPC B rating by 2030 is less than
£15 million (including share of joint ventures).
Key inputs to the valuation (by building and location) at 30 September 2023
ERV True equivalent yield
Average Range Average Range
£ per sq ft
£ per sq ft
%
%
North of Oxford Street Office 97 54 - 174 5.1 4.6 - 7.3
Retail 66 34 - 107 5.1 4.5 - 8.9
Rest of West End Office 99 57 - 167 5.5 3.3 - 7.0
Retail 101 15 - 266 4.8 3.2 - 6.7
City, Midtown and Southwark Office 77 47 - 170 5.5 5.1 - 6.7
Retail 24 24 - 27 5.8 5.2 - 6.4
Key inputs to the valuation (by building and location) at 31 March 2023
ERV True equivalent yield
Average Range Average Range
£ per sq ft
£ per sq ft
%
%
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
During the period, the Group capitalised £0.7 million (2022: £0.7 million)
of employee costs in respect of its development team into investment
properties under development. At 30 September 2023, the Group had capital
commitments of £394.8 million (2022: £16.0 million).
9 Investment in joint ventures
Equity Balances with partners £m Total
£m
£m
At 1 April 2023 324.4 214.4 538.8
Movement on joint venture balances - 1.1 1.1
Additions 0.1 - 0.1
Share of profit of joint ventures 5.9 - 5.9
Share of revaluation deficit of joint ventures (45.5) - (45.5)
Share of results of joint ventures (39.6) - (39.6)
At 30 September 2023 284.9 215.5 500.4
The investments in joint ventures comprise the following:
Ownership Country of Incorporation/registration Ownership Ownership
31 March 30 30 September
2023
2022
September
2023
50% The GHS Limited Partnership Jersey 50% 50%
50% The Great Ropemaker Partnership United Kingdom 50% 50%
50% The Great Victoria Partnerships United Kingdom 50% 50%
The investment properties include £5.1 million (2022: £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 £483.6
million. At 30 September 2023, the Group's share of joint venture capital
commitments was £nil million (2022: £1.4 million).
Transactions during the period between the Group and its joint ventures, who
are related parties, are set out below:
Year to Six months to Six months to
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
3.1 Movement on joint venture balances during the period (1.1) 3.0
(214.4) Balances receivable at the period end from joint ventures (215.5) (214.5)
5.9 Interest on balances with partners 2.9 3.1
7.5 Distributions - 3.5
2.4 Joint venture fees paid 0.6 1.5
The joint venture balances are repayable on demand and bear interest as
follows: the GHS Limited Partnership at 4.0% p.a. and the Great Ropemaker
Partnership at 2.0% p.a. 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.
Summarised balance sheets
Year to The GHS Limited Partnership £m The Great The Great Six months Six months to 30 September Six months to 30 September
Ropemaker
Victoria
2023
2022
31 March
Partnership
Partnerships to 30 September
At share
At share
2023
2023
£m
£m
At share £m £m
Total
£m
£m
529.6 Investment property 641.0 262.8 73.6 977.4 488.7 550.1
3.6 Current assets 2.2 2.8 0.6 5.6 2.8 2.2
17.7 Cash and cash equivalents 11.0 21.0 18.5 50.5 25.3 24.0
(214.4) Balances from partners (227.4) (130.5) (73.1) (431.0) (215.5) (214.5)
(7.0) Current liabilities (9.9) (12.0) (0.7) (22.6) (11.3) (9.7)
(5.1) Obligations under head leases - (10.2) - (10.2) (5.1) (5.1)
324.4 Net assets 416.9 133.9 18.9 569.7 284.9 347.0
Summarised income statements
31 March The GHS Limited Partnership £m The Great The Great 30 September 30 September 30 September
2023
Ropemaker
Victoria
2023
2023
2022
At share
Partnership
Partnerships
Total
At share
At share
£m
£m
£m
£m
£m £m
18.2 Net rental income 10.0 7.6 2.4 20.0 10.0 8.4
(2.2) Property and administration costs (0.9) (0.9) (0.4) (2.2) (1.1) (2.3)
(6.2) Net finance costs (4.6) (1.5) - (6.1) (3.0) (3.2)
9.8 Share of profit of joint ventures 4.5 5.2 2.0 11.7 5.9 2.9
(43.2) Revaluation of investment property (27.5) (53.9) (9.5) (90.9) (45.5) (17.7)
(33.4) Results of joint ventures (23.0) (48.7) (7.5) (79.2) (39.6) (14.8)
10 Property, plant and equipment
Right of use asset for occupational leases Leasehold Fixtures and Total
improvements
fittings/other
£m
£m
£m
£m
Cost or valuation
At 1 April 2023 4.9 5.6 2.1 12.6
Additions - - 0.1 0.1
At 30 September 2023 4.9 5.6 2.2 12.7
Accumulated depreciation
At 1 April 2023 3.3 3.9 1.9 9.1
Charge for the period 0.4 0.4 0.1 0.9
At 30 September 2023 3.7 4.3 2.0 10.0
Carrying amount at 30 September 2023 1.2 1.3 0.2 2.7
Carrying amount at 31 March 2023 1.6 1.7 0.2 3.5
11 Other investments
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
1.0 At 1 April 1.8 1.0
0.7 Acquisitions 0.4 0.5
0.1 Surplus on revaluation - -
1.8 2.2 1.5
In January 2020, the Group entered into a commitment of up to £5 million to
invest in Pi Labs European PropTech venture capital fund. At 30 September
2023, the Group had made net investments of £2.2 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. Key areas of focus for the fund include sustainability, the
future of work, the future of retail, commercial real estate technologies,
construction technology and smart cities.
12 Trade and other receivables
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
8.3 Trade receivables 7.8 8.7
(1.7) Expected credit loss allowance (0.3) (3.8)
6.6 7.5 4.9
4.4 Prepayments and accrued income 1.1 2.2
- Other taxes 8.3 0.1
4.8 Other trade receivables 12.6 6.8
15.8 29.5 14.0
Trade receivables consist of rent and service charge monies, which are due on
the quarter day with no credit period. Interest is charged on trade
receivables in accordance with the terms of the occupier'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 occupier's circumstance. This assessment reviews
the outstanding balances of each individual occupier 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.
Year to 31 March Six months to Six months to 30 September
2023
2022
£m 30 September
£m
2023
£m
Movements in expected credit loss allowance
(6.0) Balance at 1 April (1.7) (6.0)
(1.0) Expected credit loss allowance during the period (see below) (0.1) (1.4)
0.8 Expected credit loss allowance in respect of future periods - 0.8
4.5 Amounts written-off as uncollectible 1.5 2.8
(1.7) (0.3) (3.8)
The expected credit loss for the period comprises:
Gross Net of VAT Gross Net of VAT
30 September 30 September
30 September 30 September
2022 2022
2023 2023
£m
£m
£m £m
Expected credit loss allowance for the period
Group 0.1 0.1 1.4 1.2
Joint ventures (at share) - - (0.1) (0.1)
Total 0.1 0.1 1.3 1.1
13 Trade and other payables
31 March 30 September * Restated
2023
2023
£m
£m 30 September
2022
£m
15.1 Rents received in advance 16.5 14.2
5.9 Accrued capital expenditure 9.5 7.9
16.2 Payables in respect of customer rent deposits (see note 1) 17.8 16.6
15.2 Other accruals 14.2 16.7
0.7 Other taxes - -
3.7 Other payables 5.0 1.9
56.8 63.0 57.3
*The 2022 comparatives have been restated to reflect the IFRIC Decision on Deposits. Amounts held in respect of customer rent deposits have been recorded as cash and cash equivalents, with a corresponding liability recorded within trade and other payables of £16.6 million.
14 Interest-bearing loans and borrowings
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
Current liabilities at amortised cost
Unsecured
- £175.0 million 2.15% private placement notes 2024 174.9 -
Non-current liabilities at amortised cost
Secured
22.0 £21.9 million 5.625% debenture stock 2029 22.0 22.0
Unsecured
12.8 £450.0 million revolving credit facility 220.9 164.6
174.8 £175.0 million 2.15% private placement notes 2024 - 174.8
39.9 £40.0 million 2.70% private placement notes 2028 40.0 39.9
29.9 £30.0 million 2.79% private placement notes 2030 29.9 29.9
29.9 £30.0 million 2.93% private placement notes 2033 29.9 29.9
24.9 £25.0 million 2.75% private placement notes 2032 24.9 24.9
124.3 £125.0 million 2.77% private placement notes 2035 124.3 124.3
458.5 666.8 610.3
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 which was reduced to 90.0 basis
points over SONIA (plus or minus 2.5 basis points subject to a number of ESG
linked targets). At 30 September 2023, the Group had £228 million (2022:
£284 million) of undrawn committed credit facilities.
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 loan was drawn on 9 October 2023, increasing our committed cash
and undrawn credit facilities to £508 million. 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 interest rate cap was effective from 9 October 2023.
At 30 September 2023, properties with a carrying value of £104.5 million (31
March 2023: £111.0 million) were secured under the Group's debenture stock.
Fair value of financial liabilities
31 March 31 March Items not carried at fair value 30 September 30 September 30 September 30 September
2023
2023
2023
2023
2022
2022
Book value
Fair value
Book value
Fair value
Book value
Fair value
£m
£m
£m
£m
£m
£m
22.0 22.4 £21.9 million 5.625% debenture stock 2029 22.0 21.5 22.0 21.4
423.7 339.9 Private placement notes 423.9 348.0 423.7 332.8
12.8 12.8 £450.0 million revolving credit facility 220.9 220.9 164.6 164.6
458.5 375.1 666.8 590.4 610.3 518.8
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 fair values of the Group's private
placement notes and debenture stock were determined by comparing the
discounted future cash flows using the contracted yields with those of the
reference gilts plus the implied margins.
15 Share capital
Year to Year to Six months to Six months to Six months to Six months to
31 March
31 March
30 September
30 September
30 September
30 September
2023
2023
2023
2023
2022
2022
Number
£m
Number
£m
Number
£m
Allotted, called up and fully paid
253,867,911 38.7 At the beginning and end of the period 253,867,911 38.7 253,867,911 38.7
At 30 September 2023, the Company had 253,867,911 ordinary shares with a
nominal value of 15(5)⁄(19) pence each.
16 Head lease obligations
Head lease obligations in respect of the Group's leasehold properties are
payable as follows:
Minimum Impact of discounting Present value of minimum lease payments Minimum Impact of discounting Present value of minimum lease payments
30 September 2023
lease 30 September 2023
lease 30 September 2022 30 September
£m
payments £m payments £m 2022
30 September 2023 30 September £m
£m 2022
£m
Less than one year 2.4 (2.4) - 2.4 (2.4) -
Between two and five years 9.7 (9.5) 0.2 9.7 (9.5) 0.2
More than five years 302.2 (235.7) 66.5 302.8 (236.3) 66.5
314.3 (247.6) 66.7 314.9 (248.2) 66.7
17 Occupational lease obligations
Obligations in respect of the Group's occupational leases for its head office
are payable as follows:
Minimum Impact of discounting Present value of minimum lease payments Minimum Impact of discounting 30 September Present value of minimum lease payments
30 September 2023
lease 30 September 2023
lease 2022 30 September
£m
payments £m payments £m 2022
30 September 2023 30 September £m
£m 2022
£m
Less than one year 1.0 - 1.0 1.0 - 1.0
Between two and five years 0.5 - 0.5 1.5 (0.1) 1.4
1.5 - 1.5 2.5 (0.1) 2.4
18 Investment in own shares
Year to Six months to Six months to
31 March
30 September
30 September
2023
2023
2022
£m
£m
£m
(3.6) At the beginning of the period (2.8) (3.6)
(1.3) Employee share-based inventive charge (1.9) (1.2)
2.1 Transfer to retained earnings 2.0 2.1
- Other - (0.1)
(2.8) At the end of the period (2.7) (2.8)
The investment in the Company's own shares is held at cost and comprises
887,159 shares (31 March 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 period, no shares (2022: no shares) were awarded to directors and
senior employees in respect of the 2019 LTIP award. The fair value of shares
awarded and outstanding at 30 September 2023 was £11.1 million (31 March
2023: £8.4 million).
19 Cash and cash equivalents
31 March 30 September *Restated
2023
2023
30 September
£m
£m
2022
£m
3.2 Cash held at bank (unrestricted) 5.6 7.0
16.2 Amounts held in respect of customer rent deposits (restricted) 17.8 16.6
19.4 23.4 23.6
* The 2022 comparatives have been restated to reflect the IFRIC Decision on
Deposits. Amounts held in respect of customer rent deposits have been recorded
as cash and cash and equivalents, with a corresponding liability recorded
within trade and other payables of £16.6 million.
20 Notes to the group statement of cash flow
Adjustment for non-cash items
Year to Six months to Six months to
31 March
30 September
30 September
2023
2023
2022
£m
£m
£m
145.0 Deficit from investment property 219.7 80.6
(0.1) Surplus on revaluation of other investments - -
1.3 Employee share-based incentive charge and other items 1.9 1.3
(5.9) Spreading of tenant lease incentives (3.4) (2.5)
33.4 Share of results from joint ventures 39.6 14.8
1.7 Depreciation 0.9 0.9
(0.3) Other (0.3) (0.1)
175.1 Adjustments for non-cash items 258.4 95.0
21 Lease receivables
Future aggregate minimum rents receivable under non-cancellable leases are:
31 March 30 September 30 September
2023
2023
2022
£m
£m
£m
The Group as a lessor
58.3 Less than one year 61.4 60.1
129.9 Between one and five years 137.7 145.6
66.7 More than five years 63.4 75.3
254.9 262.5 281.0
The Group leases its investment properties. The weighted average length of
lease at 30 September 2023 was 3.3 years (2022: 3.4 years). All investment
properties, except those under development or being prepared for development,
generated rental income and no contingent rents were recognised in the period
(2022: £nil).
22 Dividends
The declared interim dividend of 4.7 pence per share (2022: 4.7 pence per
share) was approved by the Board on 15 November 2023 and is payable on 4
January 2024 to shareholders on the register on 24 November 2023. The dividend
is not recognised as a liability in the Half Year Results.
23 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
15(5)⁄(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 buy-back 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 share based
incentives less accounting charges.
Directors' responsibility statement
The Directors confirm that the condensed interim financial statements have
been prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting", and that the Interim
Results includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
• an indication of important events that have occurred during the
period and their impact on the interim condensed financial statements, and a
description of the principal risks and uncertainties for the remainder of the
financial year; and
• material related party transactions in the period and any
material changes in the related party transactions described in the last
annual report.
By the order of the Board
Toby Courtauld Nick Sanderson
Chief Executive Chief Financial & Operating Officer
15 November 2023 15 November 2023
Independent review report to Great Portland Estates PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Great Portland Estates PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the Half Year
Results of Great Portland Estates PLC for the 6 month period ended
30 September 2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed group balance sheet as at 30 September 2023;
· the Condensed group income statement and Condensed group statement of
comprehensive income for the period then ended;
· the Condensed group statement of cash flows for the period then
ended;
· the Condensed group statement of changes in equity for the period
then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Great
Portland Estates PLC have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 November 2023
Directors and shareholders' information
Directors
Richard Mully Mark Anderson
Chair, Non-Executive Non-Executive Director
Toby Courtauld Nick Hampton
Chief Executive Non-Executive Director
Nick Sanderson Emma Woods
Chief Financial & Operating Officer Non-Executive Director
Dan Nicholson Champa Magesh
Executive Director Non-Executive Director
Shareholders' information
Financial calendar 2023
Ex-dividend date for interim dividend
23 November
Registration qualifying date for interim dividend 24 November
2024
Interim dividend payable 4 January
Announcement of full year results 22 May*
Annual General Meeting 4 July*
Final dividend payable 8 July*
*Provisional.
Shareholder enquiries Dividend payments
All enquiries relating to holdings of shares, bonds or debentures in GPE,
As a REIT, dividend payments must be split between PIDs and non-PIDs.
including notification of change of address, queries regarding Information in respect of the tax consequences for shareholders of receiving
dividend/interest payments or the loss of a certificate, should be addressed dividends can be found on the Company's website at
to the Company's registrars: www.gpe.co.uk/investors/shareholder-information/reits
(http://www.gpe.co.uk/investors/shareholder-information/reits)
Equiniti Limited
Aspect House Company Secretary
Spencer Road
Lancing Darren Lennark
West Sussex
BN99 6DA Registered office:
33 Cavendish Square
London W1G 0PW
Tel: +44 (0) 371 384 2030 (Lines are open 8.30am-5.30pm Monday to Friday)
Tel: 020 7647 3000
Fax: 020 7016 5500
Registered Number: 596137
E-mail: customer@equiniti.com (mailto:customer@equiniti.com)
See www.shareview.co.uk (http://www.shareview.co.uk) for further information
Website: www.gpe.co.uk (http://www.gpe.co.uk)
The Company's corporate website holds, amongst other information, a copy of
our latest annual report and accounts, a list of properties held by the Group
and press announcements.
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 non-cash items: tenant 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 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 Company's
valuers at each balance sheet date.
Fair value - investment property
The amount as estimated by the Company'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
Offices 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 running of the workplace in one monthly bill.
Flex partnerships
Revenue share agreements with flexible space operators, these are typically structured via lease arrangements with the revenue share recognised within rental income.
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 portfolio
The element of the portfolio that has been held for the whole of the period of
account.
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).
Net assets per share or Net Asset Value (NAV)
Equity shareholders' funds divided by the number of ordinary shares at the
balance sheet date presented on a diluted and undiluted basis.
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 (including the convertible bonds at nominal value) less
short-term deposits and cash as a percentage of equity shareholders' funds,
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 purchaser's costs.
Non-PIDs
Dividends from profits of the Group's taxable residual business.
PMI
Purchasing Managers Index.
Property Income Distributions (PIDs)
Dividends from profits of the Group's tax-exempt property rental business.
REIT
UK Real Estate Investment Trust.
Rent roll
The annual contracted rental income.
Return on shareholders' equity
The growth in the EPRA diluted net assets per share plus dividends per share
for the period expressed as a percentage of the EPRA net assets per share at
the beginning of the period.
Reversionary or under-rented
The percentage by which ERV exceeds rent roll on let space.
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 purchaser's costs and contracted
uplifts from tenant incentives.
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 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 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 as calculated by MSCI.
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.
Triple net asset value (NNNAV)
NAV adjusted to include the fair value of the Group's financial liabilities
and deferred tax on a diluted basis.
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 purchaser's 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.
Vacancy rate
The element of a property which is unoccupied but available for letting,
expressed as the ERV of the vacant space divided by the ERV of the total
portfolio.
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.
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