Industrials REIT: Preliminary Results

10th June 2022 | Industrials REIT

DEMAND DRIVEN RENTAL GROWTH DRIVES STRONG FULL YEAR RESULTS

Industrials REIT Limited (‘Industrials REIT’ or the ‘Company’ and, together with its subsidiaries, the ‘Group’), the specialist UK multi-let industrial (‘MLI’) business, announces results for the full year to 31 March 2022, which show continued robust rental growth driven by occupier demand.

Commenting on the results Paul Arenson, CEO of Industrials REIT, said:

“This financial year marks the end of our four-year transition strategy to a specialist MLI business. We now own and operate a portfolio of over seven million square feet of high-quality MLI assets, situated in and around towns and cities across the UK. The Company also benefits from a class leading digital-first operating platform, branded as Industrials Hive. With these two fundamental building blocks in place, we are pushing forward with delivering a differentiated customer experience, driven by operational excellence and efficiency.

“We are pleased to have delivered another strong operating performance, achieving like-for-like rental growth of 4.4% and like-for-like valuation growth of 20.8% across our MLI portfolio, resulting in a total accounting return for the year of 25.0%.

“A combination of land scarcity in urban areas and high build costs, even before the impact of the current high inflationary environment, continues to constrain the supply of new units. At a time when technology and e-commerce, coupled with a focus on supply chains and onshoring manufacturing, have increased the demand for flexible, quality MLI space, we have been able to grow and diversify our overall occupier base. This ongoing expansion and diversification of our customer base demonstrates the widespread appeal of our well-managed, affordable and high quality MLI space to companies across a multitude of traditional and new sectors. We believe that this will provide future income resilience through our lack of reliance on any one specific business sector; we currently have over 1,500 customers occupying our units who are very diversified in their business activities. Our largest single tenant exposure comprises less than 2% of our total rent roll.

“Despite the economic and geopolitical uncertainty at present, we remain confident that the strong fundamentals of the MLI sector should see us continue to achieve our 4% to 5% per annum rental growth rate target and our 10%+ total accounting return target over the coming years. We also continue to have ambitions to grow our business through further MLI acquisitions, allowing us to leverage the economies of scale and other efficiencies and benefits our technology-enabled platform affords.”

Operational highlights: Strong demand continues to drive rental growth

  • Like-for-like passing rent increased 4.4% (2021: 5.6%)
  • 265 new leases agreed, with Smart Lease transactions accounting for 53% of all new lettings and renewals, shortening void periods and reducing costs
  • Portfolio ERV increased 4.3% on a like-for-like basis (2021: 5.1%), creating a 12.6% premium to current passing rent on occupied units which is highly supportive of future rental growth
  • Occupancy across MLI portfolio steady at 93.6% (2021: 93.7%)
  • £97.6 million aggregate purchase price of 18 MLI assets (2021: £91.5 million across 14 assets) which grew the portfolio to 104 properties and helped increase MLI net rental income by 42% to £32.8 million over the year (2021: £23.1 million)
  • Sales of the final three wholly owned non-MLI assets completed in the year generating aggregate net sales proceeds of £46 million. Our share of the joint venture holding the German care homes portfolio is in a sales process
  • Rent collection levels are now nearing pre-Covid levels with 93% of invoices billed in FY22 paid, resulting in a reduction in the bad debt expense to £1.3 million (2021: £2.0 million)

Financial highlights: Profit doubled

  • Record total accounting return of 25.0% (2021: 11.4%) driven by a 20.4% increase in EPRA NTA per share to £1.77 (2021: £1.47)
  • Declared 6.85 pence per share covered total dividend for the year (2021: 6.75 pence)
  • IFRS profit before tax doubled to £107.5 million (2021: £53.0 million), driven by MLI valuation uplifts of £89.5 million compared with £26.9 million in the prior year
  • 20.8% like-for-like valuation growth along with new acquisitions helped increase total MLI portfolio valuation to £653.5 million. Including the share of the jointly owned care homes portfolio, the total portfolio valuation was £685.8 million at year end (2021: £582.3 million)
  • 96.7% increase in diluted IFRS EPS to 36.68 pence (2021: 18.57 pence) with adjusted EPS increasing to 6.88 pence per share (31 March 2021: 6.78 pence)
  • 20.3% increase in diluted IFRS net asset value per share to £1.78 (2021: £1.48)
  • Low loan-to-value of 25.6% (2021: 28.1%) with total debt of £196.2 million, including the share of joint venture debt, and unrestricted cash balances of £20.7 million at year end

News in full

Below is a link to the Year End Results Webinar

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