Half year report
20 July 2023
Ground Rents Income Fund plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2023
Ground Rents Income Fund plc (the 'Company') announces its unaudited interim results for the six months ended 31 March 2023, which are available on the Company's website, www.groundrentsincomefund.com.
Barry Gilbertson, the Company's Chair, commented:
"The significant activity carried out by the Board and Schroders over the past several years means there is a clear strategy to address the complex headwinds relating to Building Safety and Leasehold Reform, and thereby to optimise value for shareholders, whilst demonstrating best-in-class residential asset management. We will continue to provide a high level of transparency on progress implementing our strategy."
Financial Highlights:
· Portfolio value increased £1.9 million, or 1.7%, to £110.9 million (30 September 2022: £109.0 million), with 16% (30 September 2022: 21%) of the portfolio by value subject to the same Material Uncertainty Clause ('MUC') as in the 2022 Annual Report relating to assets impacted by building safety related defects. These impacted assets were subject to a negative valuation adjustment of £9.3 million (30 September 2022: negative £11.4 million).
· Progress made understanding the practical and financial impact of the Building Safety Act 2022 on the portfolio, with a further reduction in the asset value impacted by the MUC to 15% post period end. Despite this progress, from discussion with the Company's Auditors, the uncertainty that led to the Modified Auditor's Report within the 2022 Annual Report remains unchanged.
· NAV of £90.2 million, or 94.3 pence per share ('pps'), an increase of £1.7 million, or 1.8 pps (30 September 2022: £88.5 million, or 92.5 pps).
· Positive NAV total return of 3.3% (year to 30 September 2022: negative 7.4%).
· Group Loan to Value ('LTV') of 18.9% with £21 million of drawn debt, and an effective interest rate of 3.3%.
· Following the launch of a consultation in December 2022, an EGM was held in April 2023, with all proposals passed including a Continuation Vote in December 2024 and a new Investment Policy focussed on optimising value through a controlled and orderly asset realisation, together with a continued focus on delivering best-in class residential asset management.
· Dividends paid over the period of £1.2 million or 1.25 pps. New dividend policy approved by shareholders with dividends to be paid on a semi-annual basis moving forward. As set out in the 2022 Annual Report, while the Modified Auditor's Report remains in place, all future dividend payments must be withheld, despite the Company having significant distributable reserves, cash available to pay dividends, and good visibility on earnings.
Market context:
· The six month period continued to be a challenging period due to the complex issues arising from the introduction of the Building Safety Act 2022 (the 'BSA'), the most significant regulatory reform to the UK's built environment in almost 40 years.
· Under the so-called 'Polluter Pays' principle, the Government has introduced a legally binding pledge ('Pledge') that obliges residential developers to remediate, at their own cost, all life-critical fire-safety defects of buildings 11 metres and over in height that they developed or refurbished in England over the last 30 years. This includes reimbursing public funds where relevant. To-date, 49 developers, including the top ten largest house builders in the UK, have signed the Pledge. At the time of writing, seven of these developers are relevant to the Company's portfolio across 11 of the 23 currently affected assets. The Government has also enhanced protections available to landlords who did not develop their assets, such as the Company, from defective building practices.
Enquiries:
Schroder Real Estate Investment Management Limited
Nick Montgomery / Matthew Riley / Chris Leek
020 7658 6000
FTI Consulting
Richard Gotla / Dido Laurimore
0203 727 1000 / Schroderrealestate@fticonsulting.com
Singer Capital Markets (Broker)
James Maxwell / Alaina Wong (Investment Banking)
Sam Greatrex (Sales)
020 7496 3000
Appleby Securities (Channel Islands) Limited (Sponsor)
Andrew Weaver / Michael Davies
01534 888 777
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