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HIBERNIA REIT PLC HALF YEARLY FINANCIAL REPORT

Directive transparence : information réglementée

18/11/2021 08:00

Hibernia REIT plc (HBRN)
HALF YEARLY FINANCIAL REPORT

18-Nov-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


HALF YEARLY FINANCIAL REPORT

For the six months ended 30 September 2021

 

18 November 2021    

 

Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces results for the six months ended
30 September 2021 (the "period"). Highlights include: 
 

Good progress with strategic priorities of asset clustering and ESG excellence

  • Completion of 2 Cumberland Place and 50 City Quay schemes, delivering 62,500 sq. ft. of new office space
  • Sale of Dockland Central, one of our less energy efficient properties, for €152.3m in Oct-21 (post period end), with the proceeds expected to be recycled into the delivery of the Clanwilliam Quarter and Harcourt Square
  • In advanced discussions regarding a substantial pre-let to KPMG of the 337,000 sq. ft. Harcourt Square development
  • Neil Menzies promoted to Director of Sustainability and Net Zero Carbon Pathway published in Jun-21
  • Four stars achieved in the 2021 GRESB assessment (2020: four stars)

 

Continued high rent collection rates and increased contracted rent in the period from letting activity

  • 99% of rent due for the six months ended Sep-21 received or on agreed payment terms
  • Similar rates observed for the quarter ended Dec-21
  • Annual contracted rent of €68.2m at Sep-21, up 1.5% (+€1.1m) since Mar-21, and office WAULT of 5.5yrs, down 3.9%
    • New lettings plus uplift in residential rents added €0.7m, net of expiries, breaks and surrenders
    • Acquisitions added €0.4m of new rent
  • Factoring in activity since period end proforma contracted rent would be €60.8m, down 9.4% since Mar-21
  • Office vacancy rate increased 4pp since Mar-21 to 11%, following completion of developments: this is expected
    to reduce in the near-term

 

Robust financial position and performance: interim dividend maintained at FY21 level

As at

 

30 September 2021

31 March 2021

Movement

Portfolio value

 

€1,450.4m

€1,427.4m

+0.4%[1]

Net debt[2]

 

€291.7m

€278.8m

 4.6%

Group LTV 2

 

20.1%

19.5%

+0.6pp

IFRS NAVPS2

 

173.5c

173.6c

(0.1)%

EPRA NTAPS2

 

172.5c

172.7c

(0.1)%

Financial period ended

 

30 September 2021

30 September 2020

Movement

Net rental income

 

€31.4m

€32.0m

(2.1)%

Profit/(loss) after tax

 

€21.2m

 (€34.2m)

+161.9%

EPRA earnings2

 

€20.9m

 €22.4m

(6.8)%

Diluted IFRS EPS

 

3.2c

(5.0c)

+163.9%

EPRA EPS2

 

3.2c

3.3c

(3.7)%

Interim DPS2

 

2.0c

2.0c

-

  • Periodic valuer rotation undertaken: Savills appointed, with first valuation of portfolio at Sep-21
  • Portfolio value increased €23.0m in the period or 0.4%1 to €1.45bn (Sep-20: -3.8%1)
    • Our prime offices and future developments outperformed our older offices, residential and industrial/other assets
    • €4.1m in development expenditure, including completion of 2 Cumberland and 50 City Quay (Sep-20: €8.4m)
    • €18.4m invested in two bolt-on property acquisitions (Sep-20: €3.8m)
  • Modest decrease in net rental income due to planned lease expiries at Clanwilliam Court and Marine House
  • Six-month Total Property Return[3] of 2.2% vs MSCI Ireland Property All Assets Index (excl. Hibernia) of 2.4%
    (Sep-20: -1.7% vs Index excl. Hibernia -1.6%)

Balance sheet strength further increased by debt issuance and sale of Dockland Central

  • Issue of €125m of 10- and 12-year US private placement notes in Jul-21 resulted in weighted average debt maturity of 4.8 years at Sep-21 (Mar-21: 3.4 years)
  • Net debt at Sep-21 of €141.3m and LTV2 of 10.9%, factoring in the Dockland Central sale
  • Cash and undrawn facilities net of development and acquisition commitments of €214m, or €365m pro-forma sale of Dockland Central (Mar-21: €110m)


 

Kevin Nowlan, Chief Executive Officer of Hibernia, said:

"We are making good progress with our strategic priorities of asset clustering and ESG excellence, with the key achievements since March 2021 being the completion of the 2 Cumberland Place and 50 City Quay developments and the sale of Dockland Central. We are also in advanced discussions with KPMG regarding a significant pre-let at Harcourt Square.

"Our business continues to perform well, with strong rent collection, a stable portfolio valuation and new lettings agreed supporting an interim dividend of 2.0 cent per share, the same as last year.

"It has been pleasing to see the pick-up in activity in the Dublin office market since we reported in May, with particular interest in prime, ESG-efficient, city centre space. While the Government's decision this week to advise a temporary return to working from home is likely to impact activity in the near-term, with our clear strategy, an exciting development pipeline ready to start in 2022 and the team and funding in place to deliver it, we remain optimistic about our longer-term prospects."

 

Contacts:

Hibernia REIT plc          +353 (0)1 536 9100

Kevin Nowlan, Chief Executive Officer
Tom Edwards-Moss, Chief Financial Officer

Murray Consultants

Doug Keatinge: +353 86 037 4163, dkeatinge@murraygroup.ie 
Andrew Smith: +353 83 076 5717, asmith@murraygroup.ie 

About Hibernia REIT plc  

Hibernia REIT plc is an Irish Real Estate Investment Trust ("REIT"), listed on Euronext Dublin and the London Stock Exchange. Hibernia owns and develops property and specialises in Dublin city centre offices.

Results presentation details

There will be a results presentation at 10.00 a.m. Dublin time, today, 18 November 2021. If you think you will want to ask a question at the end, please register for the phone call as you will not be able to do this from the webcast.

Webcast URL: https://www.investis-live.com/hibernia-reit/618000441bc06e0d000d02b8/hrird


Participants  ̶  Call pre-registration

 

 

Log-in instructions

To pre-register for this call, please go to the following link:

https://www.incommglobalevents.com/registration/client/9196/hibernia-reit-2021-interim-results/

You will receive your access details via email.

 

During the presentation

     

 

What to expect

 

Your line will be muted as you join the call.

You will have the opportunity to ask a question. To register, press *1 on your telephone keypad. To remove the question, press *2. The operator will prompt you when to speak.

   
           

 

Disclaimer
This announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Group or the industry in which it operates to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements speak only as at the date of this announcement. The Group will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.

Market review

General economy

Despite Ireland having had some of the most stringent pandemic restrictions in the world (source: Oxford Coronavirus Government Response Tracker), the Irish economy has performed remarkably strongly throughout. In 2020, Irish GDP grew 5.9%, helped by the contribution of the multinational-dominated sectors such as technology and pharmaceuticals. Since the phased easing of restrictions was announced in April 2021, economic momentum has accelerated and Irish GDP is currently projected to grow by 15.6% in 2021 and by 5.0% in 2022 (source: Department of Finance "DoF").  Modified Gross National Income, a more appropriate gauge of the domestic economy that strips out distortions caused by the multinational sector, is projected to grow by 4.7% in 2021 and 5.2% in 2022 (2020: -3.5%), primarily driven by a rebound in Modified Domestic Demand (source: DoF).

Significant improvements in Irish labour market metrics are also being seen: the standard measure of monthly unemployment was 5.2% in October 2021 (compared to 7.9% in March 2021 and 5.0% in March 2020), while the COVID-19 adjusted measure of unemployment was 7.9%, if all claimants of the Pandemic Unemployment Payment were classified as unemployed, compared to 25.6% at March 2021. The number of persons in employment in Ireland is expected to return to pre-pandemic levels by the end of 2022 (source: Davy), helped by continued job creation from foreign direct investment ("FDI"): in the ten months to October 10,900 new jobs have been created by FDI, more than double the same period in prior year and up 26% on the same period in 2019. The recovery of the Irish economy has been supported by a highly successful vaccine rollout. Ireland has the highest rate of full vaccination amongst persons aged 18+ in the EU at 92.5% (source: European Centre for Disease Prevention and Control), though this week the Irish Government started to reimpose some restrictions following a rise in COVID cases.

While Ireland is expected to benefit from the global rebound in economic activity, it faces a number of potential risks. According to the Central Bank of Ireland (the "CBI"), "the persistence of supply bottlenecks, higher input costs and insufficient labour supply could drive a wider gap between real and nominal growth.resulting in higher inflation than currently anticipated". There is a risk of central bank policy error: i.e. that interest rate rises are not implemented in an appropriate manner, leading to economic volatility. The news of the Irish government signing up to the OECD agreement on international corporate tax changes, which included a commitment to a 15% global minimum corporate tax rate, is encouraging, though important details of the agreement still need to be finalised and the deal must be approved by various countries. Nonetheless, it is better than might have been feared given calls from various commentators for higher rates. It is expected that the new regime will come into play in 2023 at the earliest (source: Goodbody). In addition, there is a risk of economic impact if further health restrictions have to be imposed in Ireland in the coming months.

Irish property market overview

The Irish property market has shown more resilience during the pandemic than in previous downturns, helped by greater institutional ownership, significantly less debt, relatively controlled levels of speculative development and lower vacancy rates than in previous cycles. Emerging trends, which have also been seen elsewhere, include a bifurcation in the performance of prime and secondary assets and an increasing focus by both occupiers and investors on ESG credentials. CBRE notes that September and October 2021 have been busy months in the Irish property market although negotiations have been protracted and thus the extent of current activity is probably not fully apparent at present.

Irish property investment market

Investment volumes in the first nine months of 2021 were €3.6bn, approximately double the volumes in the same period in 2020 (€1.8bn) and comparing favourably to the first nine months of 2019 (€3.0bn). The private residential sector ("PRS") and office sector remained dominant, together accounting for 78% of transaction volumes (9mth 2020: 82%). Irish investors (excluding Irish REITs) accounted for 35% of purchases in the nine-month period (9mth 2020: 17%) and there was also continued interest from European investors (30%) and American investors (23%) despite restrictions on mobility and international travel during the first half of 2021 (source: Knight Frank). There are several investment transactions active at present, with 2021 total investment volumes expected to reach €4.5bn, a marked increase on the 2020 outturn of €3.0bn.

Top 5 office investment transactions (9 months to September 2021)

Building

Price

Capital value

Buyer

Buyer nationality

Project Tolka Portfolio, D2/4

€290m

€994psf

Blackstone

American

70 Sir John Rogerson's Quay, D2

€164m

€1,225psf

Deka Immobilien

German

76 Sir John Rogerson's Quay, D2

€95m

€1,026psf

AM Alpha

German

Block 1, Ballsbridge Park, D4

€32m

€865psf

Core Capital

Irish

Blocks A&B, Parkgate Business Centre, D8

€24m

€590psf

Union Investments

German

Top 5 total

€605m

 

 

 

Source: Knight Frank

The main agents consider that prime Dublin office yields are stable at 4.00% (March 2021: 4.00%). Knight Frank reports that a significant weight of capital is chasing opportunities in Dublin, with new properties with strong covenant and ESG credentials in the best locations particularly sought after and potentially commanding yields tighter than 4.00%. However, yields on secondary assets have softened leading to the bifurcation in values of prime and secondary assets identified earlier: at 30 September 2020 yields on secondary office assets in prime locations were 4.75% and this yield had increased by 50bps at 30 September 2021 to 5.25% (source: Knight Frank).

In the first nine months of 2021, the PRS comprised 54% of overall investment (9mth 2020: 35%) (source: Knight Frank). In its Autumn 2021 yield matrix, Cushman & Wakefield reported that PRS yields for prime Dublin properties are 3.65%-4.25%, compressing by 10bps at the lower end of the range compared to their Spring 2021 matrix. CBRE notes that investors are taking time to interpret the consequences of recent regulatory changes in the residential market, including measures to limit residential rental growth in rental pressure zones to the lesser of 2% or inflation rather than the previous cap of 4% per annum.

Top 5 PRS (residential) investment transactions (9 months to September 2021)

Building

Price

Price per unit

Buyer

Buyer nationality

Confidential Portfolio, Dublin/Kildare

€450m

Confidential

Ardstone

Irish

8th Lock, Royal Canal Park, D15

€200m

€460k

Union Investments

German

Dwyer Nolan Portfolio, North Dublin

€181m

€451k

Ardstone

Irish

Griffith Wood, Drumcondra, D9

€177m

€518k

Greystar

American

Clay Farm, Leopardstown, D18

€127m

€431k

BlackRock

American

Top 5 total

€1,135m

 

 

 

Source: Knight Frank

In the six months to 30 September 2021, the MSCI Ireland Property All Assets Index (the "Index") delivered a total return of 2.4%, excluding Hibernia (September 2020: -1.6%). Over this period the Industrial sector was the top performer in the Index with a total return of 13.5%, followed by the Office sector at 2.4% (September 2020: 2.6% and 0.5%, respectively). Hibernia's total property return over the same period was 2.2% (September 2020: -1.7%), underperforming the Index (and the Index excluding Hibernia) by 0.2 percentage points.

Dublin office occupational market

Following very limited take-up in the second half of 2020 and first quarter of 2021, momentum is building again in the Dublin office letting market. In the nine months to September 2021 take-up of 0.6m sq. ft. was recorded, with 0.03m sq. ft. in Q1, 0.17m sq. ft. in Q2 and 0.44m sq. ft. in Q3. Whilst take-up in the first nine months remained approximately 30% of the corresponding take-up in 2019, it is encouraging to note that take-up for the most recent two quarters (Q2 and Q3 2021) was 58% higher than for the preceding two quarters (Q4 2020 and Q1 2021) (source: Knight Frank) and CBRE notes that the level of leasing activity in Q3 2021 was broadly on par with the volume of transactions recorded in Dublin in Q3 2019. No single sector dominated letting volumes in the first nine months of the year, with TMT accounting for 28% of take-up, professional services 21% and finance 17%. This is a change from recent years, with TMT accounting for 53% of take-up since Q1 2017 (source: Knight Frank). The city centre continues to be occupiers' preferred location. Knight Frank expects take-up to trend stronger again in Q4 2021 and estimates that annual take-up for 2021 is likely to reach 1.5m sq. ft. in total.

Top 10 office lettings (9 months to September 2021)

Occupier

Industry

Building

Area (sq. ft.)

Total take-up

BNP Paribas

Finance

Termini, 3 Arkle Road, D18

44K

7%

Accenture

Professional services

Building 10, Cherrywood Business Park, D18

37K

6%

DLA Piper

Professional services

40 Molesworth Street, D2

30k

5%

Bord Bia

State

140 Pembroke Road, D4

28k

4%

OPW

State

6-13 Pembroke Row, D2

28k

4%

Market Star

TMT

Block G, One Central Park, D18

26k

4%

2K

TMT

One Park Place, D2

26k

4%

Wix

TMT

The Reflector, D2

23k

4%

ResMed

Medical

Termini, 3 Arkle Road, D18

22k

3%

Philip Lee Solicitors

Professional Services

Connaught House, D4

19k

3%

Top 10 total

 

 

283k

44%

Source: Knight Frank

In March 2021 we reported that the first signs of a recovery in active demand were beginning to emerge following a c.30% fall between February 2020 and December 2020. Our active demand tracker, run in conjunction with Cushman & Wakefield, stood at 2.7m sq. ft. at the end of March 2021. Since then, active demand has risen as restrictions eased, reaching 3.5m sq. ft. at the end of August 2021. At the end of September 2021, active demand had fallen back to 3.0m sq. ft., mainly due to a number of larger requirements being satisfied. 79% of active demand is focused on the city centre, which is broadly comparable to demand patterns immediately before the pandemic (source: Cushman & Wakefield). Although the intensity of requirements (i.e. how soon the occupiers want the space) remains relatively low, it is encouraging to note that CBRE and Knight Frank are reporting approximately 1.1m sq. ft. of reserved office space at the end of September 2021, which bodes well for take-up in coming quarters.

The overall Dublin office vacancy rate (which includes "shadow" or "grey" space that is available for immediate use) increased to 10.5% at the end of September 2021, up from 9.9% in March 2021 and 8.9% in September 2020. Notably, the September 2021 vacancy rate was 10 basis points below the vacancy rate recorded in June 2021, marking the first quarterly reduction since the onset of the pandemic. The Grade A vacancy rate in the city centre, where all of Hibernia's office portfolio is located, was 11.1%, up from 9.8% in March 2021 and 9.1% in September 2020 (source: Knight Frank). Of the 10.5% overall Dublin office vacancy at 30 September 2021, 4.4pp related to un-let new buildings and 3.7pp related to grey space.

The main agents marked down their headline prime Dublin office rent assumptions by 7-10% in 2020 and also suggested increased occupier incentives in some cases. There have been no further declines reported since the end of 2020 and prime office rents in Dublin currently stand at around €57.50psf. The gap between rents for prime and secondary buildings continues to widen, as occupiers increasingly favour more modern and sustainable buildings over secondary alternatives.

Office development pipeline

We currently expect 7.3m sq. ft. of gross new space to be delivered between 2021 and 2024 for the whole of Dublin (0.7m sq. ft. already completed), of which 82% will be in the city centre. 42% of office stock under construction in Dublin has been pre-let or reserved (43% in the city centre), meaning there is 3.1m sq. ft. under construction but not yet let (2.6m sq. ft. in the city centre) (source: Knight Frank/Hibernia). Since we last reported in May 2021, the expected supply between 2021 and 2024 is broadly flat in the city centre and for the whole of Dublin.

Year

Dublin city centre supply

All Dublin supply

2021f

1.4m sq. ft. (86% pre-let)

1.5m sq. ft. (77% pre-let)

2022f

1.6m sq. ft. (45% pre-let)

2.0m sq. ft. (48% pre-let)

2023f

1.8m sq. ft. (25% pre-let)

2.0m sq. ft. (22% pre-let)

2024f

1.3m sq. ft. (22% pre-let)

1.8m sq. ft. (16% pre-let)

Total 2021-24

6.1m sq. ft. (43% pre-let)

7.3m sq. ft. (39% pre-let)

Source: Knight Frank/Hibernia 
*Note: City centre office completions in 2021 YTD are 0.6m sq. ft. and in all Dublin they are 0.7m sq. ft.

Residential sector

There were approximately 13,500 new home completions in Ireland in the first nine months of 2021, up 3% on the same period in 2020 but down 8% on 2019 levels, with the Greater Dublin Area accounting for just under half of delivery (source: CSO). Housing commencements in the past 12 months reached 30,500, up 40% year-on-year (source: Department of Housing). The apartment share of housing output stood at 22% in the 12 months to September 2021, the highest in the available 10-year data series for Ireland, and in Dublin apartments accounted for 55% of delivery (source: CSO, Goodbody). Goodbody expects over 21,000 units to be completed in 2021, c. 27,000 in 2022 and over 30,000 in 2023. While expected completions are increasing, these are still behind the estimated natural demographic demand for at least 34,000 units per annum (source: CBI). In September 2021, the Irish Government announced its "Housing for All" policy which sets out how it intends to increase supply to 300,000 units over the next nine years. The plan outlines that this will be achieved through a combination of incentives for home ownership, policies to mobilise the use of land for residential development and a significant increase in the scale of public investment in housing (source: Goodbody). Knight Frank estimates that there is €3.5bn of capital looking to deploy into the PRS sector in Ireland (March 2021: €3.0bn), with several new entrants amongst the many European investors already focussing on investing in the Irish PRS market at present. This is likely to keep prime yields in the sector stable at 3.65-4.25% for the foreseeable future.

The latest data from the Residential Tenancies Board for Q2 2021 show that nationally rents grew by 7.0% year-on-year and that the standardised average rent stood at €1,352 per month. Rents grew faster outside of Dublin than within: Dublin rents grew by 4.4% year-on-year while the Greater Dublin Area ("GDA") excluding Dublin grew by 8.7% and other regions outside the GDA grew by 10.8% year-on-year.

 

Business review

Progress against strategic objectives for FY22

We are making good progress with the strategic objectives set out in the 2021 Annual Report, as summarised in the table below.

Strategic objective

Key targets

Progress in six months to September 2021

  1. Maintain a balanced portfolio with clusters of assets
  • Make acquisitions to enhance the future value of the portfolio
  • Dispose of assets which do not meet our risk-adjusted forward returns expectations
  • Complete our developments at 2 Cumberland Place and 50 City Quay
  • De-risk future development pipeline by securing pre-lets
  • Enhance and progress possible future development schemes within the portfolio
  • €18.4m invested in two bolt-on acquisitions
  • Dockland Central sold for €152.3m (slightly ahead of carrying value) in Oct-21
  • 2 Cumberland Place and 50 City Quay completed
  • In advanced discussions regarding a substantial pre-let at Harcourt Square
  • Planning application submitted for future redevelopment scheme at Hardwicke House & Montague House
  1. Grow recurring income over time
  • Reduce in-place office (excluding Clanwilliam Court and Marine House) vacancy rate from 7% at 31 March 2021
  • Let remaining space in 2 Cumberland Place and 50 City Quay
  • Extend income through lease renewals and regears
  • Secure pre-lets for future development schemes
  • Contracted rent +1.5% to €68.2m at Sep-21
  • In-place office vacancy of 11%, up from 7% at Mar-21 due to completion of 2 Cumberland Place and 50 City Quay
  • Of remaining 38,500 sq. ft. available in
    2 Cumberland and 50 City Quay at Mar-21, 5,500 sq. ft. was let in period and a further 10,000 sq. ft. was let since period end
  • Office WAULT decreased 3.9% to 5.5 years
  • In advanced discussions regarding a substantial pre-let at Harcourt Square
  1. Operate and develop our buildings responsibly
  • Publish pathway to achieve our net zero carbon target by 2030
  • Set internal carbon pricing model
  • Achieve reductions in energy intensity and greenhouse gas ("GHG") emissions per unit area vs 2019 baseline
  • Achieve LEED Platinum in 2 Cumberland Place
  • Net zero carbon pathway published (see website for further details)
  • Internal price of carbon set at €75 per tonne for embodied carbon and proceeds will be used to fund Carbon Reduction Fund
  • Assessments being undertaken to set carbon reduction plans for individual buildings
  • LEED Platinum expected to be achieved in
    2 Cumberland Place
  1. Maintain a strong, flexible funding structure
  • Maintain sufficient financial capacity for investment opportunities (including developments)
  • Maintain substantial headroom against all financial covenants
  • Explore 'green' funding opportunities
  • At Sep-21 cash and undrawn facilities were €214m net of committed expenditure and this increased to €365m following sale of Dockland Central in Oct-21
  • The Group has significant headroom on all its financial covenants (please see Financial Review for further details)
  • Have commenced initial discussions with lenders regarding future green facilities
  1. Attract, motivate, develop and retain a talented team
  • Conduct next employee survey
  • Hold team social events including an away day (health restrictions permitting)
  • Continue to support employees working from home
  • Ensure greater inclusion of ESG objectives/measures in remuneration schemes
  • Employee surveys on returning to the office conducted
  • All-staff events are not yet permitted
  • We continue to support staff both in home and office working and follow prevailing Government guidance
  • ESG objectives included in all staff objectives. An ESG measure is expected to be included in the 2022 LTIP targets when set

 

 

Disposals and acquisitions

We made no disposals in the period (September 2020: none) and invested €18.4m in two acquisitions, both of which are adjacent to existing Hibernia assets and are "bolt-on" in nature (September 2020: €3.8m). In early October 2021, we exchanged contracts and simultaneously completed the sale of Dockland Central for €152.3m, a price marginally ahead of the property's March 2021 carrying value, equating to a net initial yield of c. 4.75% and a capital value of €1,032 per sq. ft. for the office accommodation. We expect to reinvest the proceeds in our substantial near-term development pipeline (see developments and refurbishments section below for more details). We continue to review both acquisition and disposal opportunities.

Portfolio overview

At 30 September 2021, the investment property portfolio consisted of 40 assets valued at €1,450.4m (March 2021: 39 assets valued at €1,427.4m) which can be categorised as follows: 

 

Value as at

30 September 2021

(all assets)

% of portfolio

Equivalent yield1

Passing rent

Contracted rent

ERV

 

1. Dublin CBD offices

Traditional Core

€492m

34%

4.6%2

€22.5m

€24.3m

€25.4m

 

IFSC3

€181m

13%

4.8%4

€8.5m

€8.5m

€10.7m

 

South Docks5

€552m

38%

4.3%

€26.9m

€26.8m

€26.9m

 

Total Dublin CBD offices

€1,225m

85%

4.5%2,4

€57.9m

€59.6m

€62.9m

 

2. Dublin CBD office developments6

-

-

-

-

-

-

 

3. Dublin residential7

€178m

12%

3.8%8

€6.8m8

€6.8m8

€7.1m8

 

4. Industrial/ other

€48m

3%

4.3%

€1.5m

€1.7m

€2.4m

 

Total

€1,450m

100%

4.4%2,4,8

€66.2m8

€68.2m8

€72.4m8

 
               
  1. Yields as per Savills' valuation report, on unsmoothed values and excluding the adjustment for 1WML owner-occupied space
  2. Harcourt Square, Clanwilliam Court and Marine House yields are calculated as the passing rent over the total value (after costs) which includes residual land value. Excludes Iconic Offices in Clanwilliam Court
  3. Includes Dockland Central as this property was still in the portfolio at 30 Sep-21
  4. The equivalent yield reported by Savills for the IFSC does not take into account the cost of potential future capex on The Forum. If this capex is taken into account, the equivalent yields for the IFSC, Dublin CBD Offices and Total Investment Portfolio would reduce modestly
  5. Excludes the value of space occupied by Hibernia in 1WML
  6. 2 Cumberland Place and 50 City Quay reached practical completion during the period. These properties have been transferred to the Traditional Core and South Docks categories respectively
  7. Includes 1WML residential element (Hanover Mills)
  8. Residential income on net basis assuming Hibernia cost where asset is stabilised and 80% net-to-gross otherwise

Note: differences in summation of totals in above table are due to rounding

 

The key statistics of our office portfolio, which comprised 84% of our overall property portfolio by value at 30 September 2021 and 88% by contracted rent (March 2021: 84% and 89%, respectively), are set out below. The WAULT to break/expiry of our completed office developments (the majority of our office income) is 7.8 years.  Our acquired office assets have a WAULT to break or expiry of just under three years, with those assets in our near-term development pipeline (Marine House, Clanwilliam Court and Harcourt Square) having a WAULT of less than one year: this is to facilitate future redevelopment activity.   

At 30 September 2021

Contracted rent

ERV

WAULT to review1

WAULT to break/expiry

% of rent upwards only

% of next rent review cap & collar

% of rent MTM2 at next lease event

1. Acquired in-place office portfolio

 

€26.5m (€48psf)

€26.0m (€47psf)

1.7yrs

2.7yrs

8%

-

92%

Near-term development pipeline assets3

€9.5m

(€42psf)

€9.5m

(€42psf)

0.9yrs

0.9yrs

-

-

100%

Investment assets

 

€17.0m

(€52psf)

€16.5m

(€50psf)

2.2yrs

3.8yrs

13%

-

87%

2. Completed office developments4

€33.2m (€55psf)

€31.4m (€52psf)

1.8yrs

7.8yrs

-

27%

73%

Whole in-place office portfolio

€59.6m (€51psf)

€57.4m (€49psf)

1.8yrs

5.5yrs

4%

15%

81%

3. Committed office-let5

-

-

-

-

-

-

-

Total office portfolio

€59.6m

(€51psf)

€57.4m

(€49psf)

1.8yrs

5.5yrs

4%

15%

81%

4. Vacant in-place office

-

€5.5m6

(€49psf)

-

-

-

-

-

5. Committed office-unlet5

-

-

-

-

-

-

-

Whole in-place office portfolio (after vacancy)

-

€62.9m (€49psf)

-

-

-

-

-

  1. To earlier of review or expiry
  2. Mark-to-market
  3. Hibernia assumption that ERV of near-term development pipeline is equal to current contracted rent
  4. 1 Cumberland Place, 2 Cumberland Place, SOBO Works, Dockland Central, 1WML, 2WML, 1SJRQ, 50 City Quay
  5. 2 Cumberland Place and 50 City Quay were moved to the Completed office development segment following both reaching practical completion
  6. Includes parking and retail in office buildings

Since 31 March 2021, Group contracted rent has increased by 1.5% to €68.2m, with the main drivers being a new lease agreed in 2 Cumberland Place, an increase in income from our residential assets and acquisitions, which outweighed the loss of income from the expiry of some leases in Clanwilliam Court. The rental impact of the three rent reviews completed and two lease variations was net neutral. The vacancy rate of the in-place office portfolio, which was 7% by lettable area in March 2021, increased to 11% at 30 September 2021, primarily as a result of the completion of 2 Cumberland Place and 50 City Quay, both of which have space available. For further details, please refer to the asset management section below.

At 30 September 2021, our 10 largest occupiers, all of which are large, multinational companies or state entities, accounted for 54% of our Group contracted rent of €68.2m. By sector, technology and state entities accounted for 58% of contracted rent (please see the selected portfolio information below). Factoring in the sale of Dockland Central post period end, our 10 largest occupiers represented 54% of our Group contracted rent of €60.2m and technology and state entities accounted for 56% of contracted rent, with the contribution of our largest occupier, HubSpot, reducing from 16% to 11%.

 

 

Portfolio performance

In the six months ended 30 September 2021 the portfolio value increased 0.4% on a like-for-like basis. In the prior financial year ended 31 March 2021, the portfolio value decreased 4.4% on a like-for-like basis, with the first six months seeing a 3.8% decline on a like-for-like basis. Please see details of the performance of our portfolio in the period by segment in the table below:

 

Value at March 2021

 

Capex

Acquis-itions 1

Transfer4

H1 Revaluation

Value at September 2021

Like-for-like change

Traditional Core

€415m

€3.8m

-

€59.0m

€13.8m

€492m

€14m

2.9%

IFSC2

€178m

€0.2m

-

-

€2.5m

€181m

€3m

1.4%

South Docks3

€546m

€0.3m

-

€3.0m

€3.2m

€552

€3m

0.6%

1. Total Dublin CBD offices

€1,139m

€4.3m

-

€62.0m

€19.5m

€1,225m

€20m

1.6%

2. Dublin CBD office developments

€62m

-

-

(€62.0m)

-

-

-

-

3. Dublin residential

€168m

-

€18.4m

-

(€7.9m)

€178m

(€2m)

(1.3%)

4. Industrial/other

€59m

€0.2m

-

-

(€11.5m)

€48m

(€11m)

(19.4%)

Total

€1,427m

€4.5m

€18.4m

-

€0.1m

€1,450m

€6m

0.4%

  1. Including acquisition costs
  2. Includes Dockland Central as this property was still in the portfolio as at 30 Sep-21
  3. Excludes the value of space occupied by Hibernia in 1WML
  4. At Mar-21 2 Cumberland Place and 50 City Quay were within the CBD Office Development segment. At Sep-21 both properties had reached practical completion - 2 Cumberland Place was moved to the Traditional Core segment and 50 City Quay was moved to the South Docks segment

Note: differences in summation of totals in above table are due to rounding

The table below shows the performance in the period of the office portfolio by building type, rather than building location:

 

 

Value at March 2021

Capex

Acquis-itions 1

Transfer4

H1 Revaluation

Value at September 2021

Like-for-like change

Acquired income-producing offices

€319m

€0.7m

-

 

(€10.4m)

€309m

(€10m)

(3.2%)

Completed office developments2,3

€655m

€1.1m

-

€62.0m

€18.8m

€737m

€19m

2.6%

Near-term development pipeline

€165m

€2.5m

-

 

€11.2m

€178m

€11m

6.7%

Total Dublin CBD offices

€1,139m

€4.3m

-

€62.0m

€19.5m

€1,225m

€20m

1.6%

Note: Footnotes as per table above

The portfolio valuation remained broadly flat in both quarters of the financial period, with the key movements being:

  • CBD offices: 1.6% increase in value, largely due to positive valuation movements in our prime office portfolio, where Savills assumed tighter yields at Sep-21 than Cushman & Wakefield at Mar-21, although this was offset by Savills assuming lower ERVs than Cushman & Wakefield. Achieving practical completion and positive letting progress on our office developments at 2 Cumberland Place and 50 City Quay delivered a positive valuation movement of c.12% on these assets. Beyond our prime office assets, Savills assumed lower ERVs / longer void periods than Cushman & Wakefield at Mar-21, but valuation losses in this segment were moderated as Savills assumed slightly tighter yields on these assets. The value of our near-term office developments increased in the period, with Harcourt Square delivering the majority of the gain. Value gains were moderated by increased projected costs to deliver these development projects given inflationary pressures.
  • Residential: 1.3% decrease in value, mainly due to Savills taking a more conservative approach than Cushman & Wakefield at Mar-21 on ERVs, yields and the natural vacancy rate on our main residential assets at Wyckham Point, Dundrum View and Cannon Place.
  • Industrial/other: 19.4% decrease in value, primarily due to lower values per acre applied to our land at Newlands. However, the industrial portfolio of buildings located in Dublin Industrial Estate and Malahide Road Industrial Estate increased in value by 7.2% due to asset management initiatives and lower yields/higher market rents applied by Savills compared to Cushman & Wakefield at Mar-21.

 

Developments and refurbishments

Capital expenditure on developments in the period was €4.1m (September 2020: €8.4m) and related to work at 2 Cumberland Place and 50 City Quay, both of which completed in the period, as well as work on preparing our pipeline of future development projects. At present we have no active schemes and our focus is on our substantial near-term pipeline, comprising the Clanwilliam Quarter (Clanwilliam Court and Marine House), which we can start in early 2022, and Harcourt Square, which we can start in early 2023.   

Completed development schemes

2 Cumberland Place and 50 City Quay were completed in July, delivering 62,500 sq. ft. of office space, 51% of which was let at 30 September 2021 and 63% of which is let at the date of this half year report. The eventual completion dates were delayed by COVID-19 restrictions, most notably the closure of construction sites in Ireland from early January to early May 2021, but both schemes were delivered within budget, achieving an aggregate profit on cost of over 85% and an expected yield on cost of c. 9.5% once fully let. 50 City Quay forms part of our Windmill Quarter cluster which totals c. 400,000 sq. ft. of offices and 2 Cumberland Place brings the office accommodation on the Cumberland Place site to c. 190,000 sq. ft.: both properties are highly energy efficient, with BERs of B2 and A3 expected, and will improve the average performance of our portfolio. In addition, 2 Cumberland Place is expected to achieve LEED Platinum certification.

Please see further details on the schemes below:

 

Total area post completion (sq. ft.)

Full purchase price

Capex

Total cost (incl. land)

ERV1

Office ERV1

Practical completion ("PC") date

Expected yield on cost1

2 Cumberland Place, D2

58k office

1k retail/café

€0m2

€35m

€598psf3

€3.4m

€57.89psf

Jul-21

9.9%

50 City Quay, D2

4.5k

€3m

€1m

€924psf

€0.3m

€53.95psf

Jul-21

5.8%

Total

62.5k office

€3m2

€36m

€622psf

€3.6m

€57.60psf

 

9.5%

 

1k retail/café

  1. Per Savills headline office ERV at Sep-21
  2. Including acquisition costs. The site forms part of Cumberland Place and at the time of acquisition of Cumberland House no value was ascribed to it
  3. Office demise only

Development pipeline

Based on current planning approvals, the near-term development pipeline, comprising Clanwilliam Quarter (Clanwilliam Court and Marine House) and Harcourt Square, can deliver 539,000 sq. ft. of Grade A office space in Dublin's Traditional Core, a net increase of 283,000 sq. ft. and a 23% increase in the size of our current in-place office portfolio. The valuations of the properties at 30 September 2021 (which include the present value of the income remaining on the leases) equated to aggregate capital values of €331[4] per buildable sq. ft. and the estimated capital expenditure required to deliver the schemes was €584 per buildable sq. ft., an all-in cost of €915[5] per buildable sq. ft.: both schemes should be profitable under most market conditions. The leases of all occupiers in the Clanwilliam Quarter expire by early 2022, enabling a redevelopment to commence from then on. At Harcourt Square, we are in advanced discussions with KPMG regarding a pre-let of the majority of the 337,000 sq. ft. scheme, which would substantially de-risk the project.  We expect to commence work on site once the existing occupier vacates the property upon expiry of its lease in December 2022.

We also continue to assess the longer-term redevelopment potential of certain other assets within the portfolio and in October 2021 we submitted a planning application for an extensive refurbishment and expansion of Hardwicke House and Montague House, which we have now added to our longer-term pipeline. We also continue to hold 155.2 acres of land with potential for mixed-use development schemes in the longer term: re-zoning will be necessary and consequently the timing of any future developments is uncertain at present.

Office

Sector

Current area

Area post completion

Full purchase price1

Comments

(sq. ft.)

(sq. ft.)

Marine House (Clanwilliam Quarter)

Office

41k

50k

€30m

Remaining leases expire during Dec-21

Full planning for refurbishment and extension of Marine House in place

Clanwilliam Court (Clanwilliam Quarter)

Office

93k

141k office

11k ancillary

€56m2

Final leases expire in Jan-22

Planning in place for redevelopment

 

 

Harcourt Square

Office

122k

337k office

 

€78m

Leased to OPW until Dec-22

 

Planning in place for 337k sq. ft. of offices

In advanced discussions with KPMG regarding a substantial pre-let

 

Total near- term office & ancillary

 

256k

539k

€164m

 

Hardwicke & Montague

Office

88k

140k

€65m

 

Total office & ancillary

 

 

344k

 

679k

€229m

 

Mixed-use

Sector

Current area

(sq. ft.)

Area post completion

(sq. ft.)

Full purchase price1

Comments

Newlands (Gateway)

Industrial/ other

143.7 acres

n/a

€48m3

Strategic transport location

Potential for future mixed-use redevelopment subject to re-zoning

Dublin Industrial Estate

Industrial

128k on

7.7 acres

n/a

€12m

Strategic transport location

Potential for future mixed-use development subject to re-zoning 

Malahide Road Industrial Park

Industrial

66k warehouse & 17k office on 3.8 acres

n/a

€8m

Potential for future mixed-use development subject to re-zoning

Total mixed-use

 

 

155.2 acres

 

n/a

€68m

 

  1. Including transaction costs and capex spent to date
  2. Clanwilliam Court Blocks 1,2 and 5 only
  3. Initial consideration

Asset management

Net capital expenditure on maintenance in the period amounted to €0.4m (September 2020: €0.6m or €0.4m net of refunds).

Contracted rent increased by 1.5% to €68.2m at 30 September 2021 (March 2021: €67.1m) as a result of:

  • New lettings in our commercial portfolio, together with improved performance by our residential properties, adding €1.2m;
  • Acquisitions adding €0.4m;
  • Lease expiries, breaks, surrenders and adjustments reducing contracted rent by €0.5m; and
  • Commercial rent reviews concluded and lease variations agreed were net neutral for contracted rent.

Factoring in activity since period end, proforma contracted rent at 30 September 2021 was €60.8m, a decrease of 9.4% since 31 March 2021. The main contributors since period end were:

  • Three further lettings adding €0.6m; and
  • The sale of Dockland Central reducing contracted rent by €8.0m.

Some other key statistics at 30 September 2021:

  • The office portfolio amounted to 1.2m sq. ft., an increase of 62,500 sq. ft. (or 5.5%) following the completion of 2 Cumberland and 50 City Quay. Since period end this has reduced to 1.1m sq. ft. with the sale of Dockland Central;
  • The vacancy rate of the in-place office portfolio was 11% based on lettable area (March 2021: 7%) and this available space had an ERV of €5.0m, excluding retail and parking (March 2021: €3.1m);
  • Average rent across the in-place office portfolio was €51psf (March 2021: €51psf) and the ERV, per Savills, was €49psf (March 2021: €51psf, per C&W);
  • Five office rent reviews were active over 158,000 sq. ft. of office space, with no material change in contracted rent expected (March 2021: three rent reviews active over 60,000 sq. ft. with a <€1m uplift expected); and
  • Please see the Financial Review for rent collection statistics, which remain strong.

Summary of letting activity in the period 

Office:

  • Two new office leases agreed over 8,500 sq. ft., adding €0.4m per annum of gross new rent. Net of expiries, breaks, surrenders and adjustments on let space, the total incremental new rent was €0.1m per annum. The term certain of the new leases is 4.1 years.
  • Three rent reviews were concluded over 60,000 sq. ft. and two lease variations agreed over 17,000 sq. ft., extending their term certain by 10 years: overall contracted rent remained unchanged.

Industrial:

  • One new lease agreed over 25,500 sq. ft., adding €0.2m per annum to contracted rent.  The term certain is 3.9 years.

Residential:

  • The number of units in the portfolio at 30 September 2021 was 367 (March 2021: 334).
  • As a result of the units added and due to a 5pp decrease in the vacancy rate on our residential units to 3%, net contracted rent increased by €0.9m per annum.
  • All let units are subject to the rental cap regulations.

Summary of lease activity since period end 

Office:

  • Three new leases agreed over 10,000 sq. ft., adding €0.6m per annum of gross new rent. The term certain of the leases is 9.4 years.
  • The sale of Dockland Central in October 2021 reduced contracted rent by €8.0m

Key asset management transactions by property

  • Blackwater Road, Dublin Industrial Estate: In August 2021, we leased the entire 25,500 sq. ft. to Begley's on a <5-year lease adding c.€0.2m to contracted rent.
  • Central Quay, South Docks: In July 2021, we executed two deeds of variation on 17,000 sq. ft., removing a break option to extend the term certain by 10 years and resulting in a reduction in contracted rent of €0.3m per annum.
  • Marine House & Clanwilliam Court, Traditional Core: Some leases expired during the period with the loss of €0.2m per annum of contracted rent. The 134,000 sq. ft. of office accommodation is currently 75% occupied, producing contracted rent of €3.4m per annum (plus some further income from the Brickhouse joint arrangement). All leases expire before the end of January 2022 to enable the redevelopment of the site.
  • 2 Cumberland Place, Traditional Core: The 58,000 sq. ft. office development completed in July 2021 and 3M Digital Science Community Ltd's long lease on 24,000 sq. ft. commenced shortly thereafter. In August 2021 we leased 5,500 sq. ft. to Invesco, which is moving from Central Quay, on a 10-year lease. In November 2021, we leased 9,000 sq. ft. to Electroroute on a 15-year lease. The property now has contracted rent of €2.3m per annum and there is 20,000 sq. ft. of remaining available space, in which we are seeing good interest from potential occupiers.
  • Dockland Central, IFSC: In May and June 2021, three rent reviews over 60,000 sq. ft. were agreed, adding €0.2m to contracted rent. In early October 2021, the property was sold marginally ahead of March 2021 carrying value.
  • Harcourt Square, Traditional Core: We are in advanced discussions with KPMG regarding a pre-let of the majority of the 337,000 sq. ft. development scheme.

Key in-place office properties with vacancy at period end

As noted above, the in-place office portfolio vacancy rate at 30 September 2021 rose to 11% (March 2021: 7%), largely as a result of the completion of 2 Cumberland Place and 50 City Quay. The main office investment assets with vacancy were:

  • Central Quay, South Docks: 11,000 sq. ft. of office accommodation available to lease;
  • 2 Cumberland Place, Traditional Core: 29,000 sq. ft. of office accommodation available to lease;
  • The Forum, IFSC: all 47,000 sq. ft. of office accommodation and 50 car parking spaces are available to lease; and
  • Other: 16,000 sq. ft. of available space.

Current occupier utilisation of office space

With the phased return to the workplace permitted in Ireland from 20 September 2021, we have seen a gradual increase in the utilisation of our leased offices to its current level of around 20% of pre-pandemic levels. There are substantial variations between difference occupiers, with professional services firms tending to have increased their utilisation more quickly than technology occupiers, a number of which are not planning to return until 2022.  Following the news this week that the Irish Government has requested a temporary return to working from home we are likely to see this utilisation rate reduce in the near-term.

Future rent reviews, break options and lease expiries

The table below summarises upcoming rent reviews and lease expiries by financial year, as well as setting out the ERVs for this space, at 30 September 2021. As noted in the footnote below, only a relatively small amount of income, €3.4m, is subject to break options over the next four years.

 

Current income

 

ERV @ Sep-21

 FY

Expiries for near- term development

All other lease expiries

Rent review

 

Expiries for near- term development

All other lease expiries

Rent review

Mar-22

€3.5m

€0.8m

€11.6m

 

€3.5m

€0.7m

€11.3m

Mar-23

€6.0m

€0.9m

€7.6m

 

€6.0m

€0.6m

€7.2m

Mar-24

-

€3.3m

€4.8m

 

-

€3.1m

€4.7m

Mar-25

-

€4.6m

€11.4m

 

-

€4.5m

€10.7m

Total

€9.5m

€9.6m

€35.4m1

 

€9.5m

€8.9m

€33.9m1

Note: The table above shows upcoming rent reviews and expiries: break options amount to an additional €3.4m over the period to Mar-25 as follows :€0.3m in FY22, €1.6m in FY23, €1.3m in FY24 and €0.2m in FY25

1.  €9.0m of this income is capped & collared at next review and a further €1.3m is subject to upward only rent review provisions.

Sustainability/ESG

In June 2021, we promoted Neil Menzies to the position of Director of Sustainability and published our Net Zero Carbon Pathway (www.hiberniareit.com/sustainability), which provides detail on the measures we are taking to meet our commitment to become a net zero carbon business by 2030.  We are developing individual building carbon reduction plans to help ensure we meet our net zero carbon target. We are also undertaking a quantitative and qualitative climate change scenario analysis as part of our work to fully align our business strategy and disclosures with the recommendations of the TCFD by the end of 2022. In October 2021 we received a four-star rating for our 2021 GRESB submission, the second year we have received a four-star rating and with an improved overall score from 2020.

Shown in the table below is a comparison of the Building Energy Ratings ("BERs") of Hibernia's office portfolio (by value) versus all Irish office properties (by number) at 30 September 2021.  Unfortunately, BER data on the Dublin office market is not yet available. While data for Dublin offices alone might be expected to show higher average BERs than for the whole of Ireland, with our relatively new portfolio, much of which we have delivered ourselves, we would expect our portfolio to be above average. It is also worth noting that much of our stock with BERs of C or lower at September 2021 is expected to be redeveloped in the near-term (i.e. Clanwilliam Quarter and Harcourt Square) or has since been sold (i.e. Dockland Central, which has a C1 rating).

 

BER grade at Sep-21

 

Hibernia office buildings

Irish office buildings

A1-A3

 

37%

2%

B1-B3

 

12%

10%

C1-C3

 

31%

 29%

D1-D2

 

8%

24%

E1-E2

 

12%

13%

F

 

-

8%

G

 

-

14%

Total

 

100%

100%

Source: Company data, CSO

Financial review

As at

 

30 September 2021

31 March 2021

Movement

Portfolio value

 

€1,450.4m

€1,427.4m

+0.4%1

Net debt2

 

€291.7m

€278.8m

 +4.6%

Group LTV2

 

20.1%

19.5%

+0.6pp

IFRS NAVPS2

 

173.5c

173.6c

(0.1)%

EPRA NTAPS2

 

172.5c

172.7c

(0.1)%

Financial period ended

 

30 September 2021

30 September 2020

Movement

Net rental income

 

€31.4m

€32.0m

(2.1)%

Profit/(loss) after tax

 

€21.2m

 (€34.2m)

+161.9%

EPRA earnings2

 

€20.9m

 €22.4m

(6.8)%

Diluted IFRS EPS

 

3.2c

(5.0c)

+163.9%

EPRA EPS2

 

3.2c

3.3c

(3.7)%

Interim DPS2

 

2.0c

2.0c

-

  1. Like-for-like change (incl. finance costs) on Investment Property and excluding assets acquired and disposed of during the period
  2. An alternative performance measure ("APM"). The Group uses a number of such financial measures to describe its performance, which are not defined under IFRS and which are therefore considered APMs. In particular, measures defined by EPRA are a way for investors to compare similar real estate companies. For further information see Supplementary Information at the end of this report

EPRA NTA per share was broadly flat in the six months to 30 September 2021, reflecting the stable portfolio valuation. The key underlying movements in NTA per share were a 3.2 cent per share increase from EPRA earnings and the payment of the FY21 final dividend which reduced NTA by 3.4 cent per share.

EPRA earnings were €20.9m, down €1.5m (6.8%) compared with the first six months of the prior financial year, mainly on account of a €1.3m increase in costs due to a larger drawn debt position increasing finance costs (+€0.4m), higher professional fees resulting from the issuance of €125m of new private placement notes in the period (+€0.2m), greater letting and maintenance costs (+€0.4m), and an increase in remuneration expense (+€0.3m), the prior period remuneration expense being impacted by the reduction in investment property values in H1 FY21 due the onset of the pandemic. 

The Group recorded an after-tax profit of €21.2m in the financial period, an increase of 161.9% over the loss after tax of €34.2m in the same period last year. The profit in the period was due to rental profits, with the investment property portfolio valuation moving just €0.1m (2020: revaluation loss of €56.9m).

Funding position

Group leverage target: our through-cycle target remains a loan to value ratio of 20-30%.

The Group's debt is fully unsecured and comprises a revolving credit facility ("RCF") and private placement notes. In July 2021, the Group issued €125m of new private placement notes to five institutional investors. The new notes will help finance the Group's development pipeline and provide long-term, low-cost funding. The weighted average maturity of the Group's debt funding at 30 September 2021 was 4.8 years (March 2021: 3.4 years), with no repayments due before December 2023.

Funding

Quantum

Maturity

Interest cost

Security

Revolving credit facility (five year)

€320m

December 2023

2.0% over EURIBOR on drawn funds

0.8% undrawn commitment fee (fixed)

Unsecured

Private placement notes (seven year)

€37.5m

January 2026

2.36% coupon (fixed)

Unsecured

Private placement notes (ten year)

€37.5m

January 2029

2.69% coupon (fixed)

Unsecured

Total at 31 March 2021

€395m

3.4 years

 

 

Private placement notes (ten year)

€62.5m

July 2031

1.88% coupon (fixed)

Unsecured

Private placement notes (twelve year)

€62.5m

July 2033

1.92% coupon (fixed)

Unsecured

Total at 30 September 2021

€520m

4.8 years

 

 

At 30 September 2021, net debt was €291.7m (March 2021: €278.8m), equating to an LTV of 20.1% (March 2021: 19.5%). The main capital expenditure items driving the increase in net debt in the period were expenditure on investment properties (including development) of €4.1m and acquisition expenditure of €8.8m. Cash and undrawn facilities at 31 September 2021 amounted to €228m or €214m net of committed expenditure (March 2021: €116m and €110m, respectively).  In early October 2021, the Group disposed of Dockland Central. Taking into account this disposal, proforma cash and undrawn facilities at 30 September 2021 would have amounted to €379m or €365m, net of committed expenditure, and the LTV of the Group would have been 10.9%.

The Group has significant headroom on the financial covenants on its borrowings: the table below outlines the principal financial covenants and the headroom above each at 30 September 2021.

Key covenant

Calculation

Requirement

At 30 September 21

Headroom to covenant limit

Loan to value

Gross debt/(portfolio value + cash)

<50%

21.8%1

Portfolio value would have to fall 56% before breach (March 2021: 59%)

Interest cover ratio

Underlying EBIT/total finance costs

>1.5x

6.7x2

Underlying EBIT would have to fall 78% before breach (March 2021: 77%)

Net worth

Net Asset Value

>€400m

€1,148m

Net Asset Value would have to fall 65% before breach (March 2021: 69%)

  1. Reported LTV is calculated as net debt/portfolio value, giving a ratio of 20.1%
  2. Based on 12-month historic interest cover at 30 September 2021

Interest rate hedging

Group hedging policy: to ensure the majority of the interest rate risk on drawn debt balances is fixed or hedged.

At 30 September 2021, the Group had €200m of fixed coupon private placement notes (March 2021: €75m) and the interest rate risk on the RCF drawings of €115m (March 2021: €227m) was mitigated by hedging instruments covering €325m of notional exposure. Hedging instruments on €125m of notional debt are expected to expire in December 2021. Please see the table below for further details on the Group's hedging instruments.

Instrument

Notional

Strike rate

Exercise date

Effective date

Termination date

Cap

€125m

0.75%

n/a

February 2019

December 2021

Swaption

€125m

0.75%

December 2021

December 2021

December 2023

Cap

€200m

0.25%

n/a

December 2020

December 2025

At 30 September 2021, 283% of the interest rate risk on the RCF drawings was hedged (March 2021: 143%) and 167% of the Group's overall interest rate risk on its debt was fixed or hedged (March 2021: 132%). Since the instruments used are interest rate caps, the "over-hedged" position at 30 September 2021 results in no additional financial risk to the Group. In October 2021, the disposal proceeds from the sale of Dockland Central were used to temporarily repay the outstanding balance on the RCF. The current over-hedging is likely to be eliminated in due course as the revolving credit facility is redrawn to fund the delivery of the Clanwilliam Quarter and Harcourt Square.

Rent collection

Our rent collection rates in the current financial year have averaged 99% across our commercial and residential properties (FY21: 99%, HY21: 99%).

Commercial occupiers[1]

As shown in the table below, our commercial rent collection has remained strong since the start of the pandemic.

Commercial rent

Quarter ending

Dec-21 (Q3 FY22)

Six months ending

Sep-21 (H1 FY22)

FY21

Rent received

Within seven days

 

89%

 

87%

 

89%

Within 14 days

93%

93%

91%

Within 30 days

97%

95%

94%

Within 60 days

98%

99%

99%

Rent received at 16 November 2021

98%

99%

99%

Rent on payment plans

Monthly rent not yet due

 

1.5%

 

-

 

-

Rent deferred

-

<0.5%

<0.5%

Rent on payment plans at 16 November 2021

1.5%

<0.5%

<0.5%

Rent unpaid

Rent due

 

0.5%

 

<0.5%

 

<0.5%

Rent waived

-

<0.5%

0.5%

Rent unpaid at 16 November 2021

0.5%

<1%

<1%

Residential occupiers[2]

At close of business on 16 November 2021, 95% of the rent due for the month of November had been received and the occupancy rate in our residential units was over 99%. At the same point in October, 96% of that month's contracted rent had been received and the occupancy rate was over 99%. We have now received 99% of the October rent due. Across the six months to 30 September 2021, we have now received over 99% of rent due and the occupancy rate of our residential units averaged 97%.

Dividend

Group dividend policy: to distribute 85-90% of rental profits via dividends each financial year, in compliance with the requirement of the Irish REIT legislation to distribute at least 85%. The interim dividend in a financial year will usually be 30-50% of the total ordinary dividends paid in respect of the prior financial year.

The Board has declared an interim dividend of 2.0 cent per share, unchanged from the prior year, representing 62.5% of EPRA EPS for the period and 37% of the total dividend paid in respect of the prior financial year of 5.4 cent per share. The interim dividend will be a Property Income Distribution in respect of the Group's property rental business, as defined under the Irish REIT legislation, and will be paid on 27 January 2022 to shareholders on the register on 7 January 2022. 

 

 

Selected portfolio information

1.  Summary EPRA measures

EPRA performance measure

Unit

Six months ended

30 September 2021

Six months ended

30 September 2020

EPRA earnings

€'000

20,911

22,439

EPRA EPS

cent

3.2

3.3

Diluted EPRA EPS

cent

3.1

 3.3

EPRA cost ratio - including direct vacancy costs

%

24.0%

21.3%

EPRA cost ratio - excluding direct vacancy costs

%

22.5%

19.9%

EPRA performance measure

Unit

 As at 30 September 2021

As at 31 March 2021

EPRA Net Initial Yield ("NIY")

%

4.1%

4.4%

EPRA "topped-up" NIY

%

4.2%

4.4%

IFRS NAV

€'000

1,148,003

1,148,638

IFRS NAV per share

cent

173.5

173.6

EPRA Net Reinstatement Value ("EPRA NRV")

cent

193.0

192.7

EPRA Net Tangible Assets ("EPRA NTA")

cent

172.5

172.7

EPRA Net Disposal Value ("EPRA NDV")

cent

164.0

171.2

EPRA vacancy rate

%

9.9%

8.5%

Adjusted EPRA vacancy rate

%

8.8%

7.3%

Note: These EPRA measures are APMs. Please see Supplementary Information at the end of this report for further details.

 

2.  Top 10 occupiers by contracted rent and percentage of contracted rent roll1

 

Top 10 occupiers

€m

 

%

Sector

1

HubSpot Ireland Limited2

10.6

 

16%

Technology

2

OPW

6.0

 

9%

State entity

3

Twitter International Company

5.1

 

7%

Technology

4

Zalando

2.9

 

4%

Technology

5

Autodesk Ireland Operations

2.8

 

4%

Technology

6

Informatica Ireland EMEA

2.1

 

3%

Technology

7

Riot Games

2.0

 

3%

Technology

8

Travelport Digital Limited

1.8

 

3%

Technology

9

BNY Mellon Fund Services

1.8

 

3%

Banking and capital markets

10

Deloitte

1.7

 

2%

Professional services

 

Top 10 occupiers

36.7

 

54%

 

 

Remaining occupiers

31.4

 

46%

 

 

Whole portfolio

68.2

 

100%

 

  1. Includes net residential rents and excludes income from joint arrangement with Iconic Offices in Clanwilliam Court
  2. Excluding Dockland Central, HubSpot proportion of contracted rent would be 11%

3.  Contracted rent by occupier type

Sector

€m

%

Technology

29.1

43%

State entities

9.9

15%

Insurance & investment management

7.7

11%

Professional services

4.0

6%

Other

2.3

3%

Media & telecommunications

2.3

3%

Banking & capital markets

1.6

2%

Aviation

0.9

1%

Retail & Leisure

0.6

1%

Car Parking

0.6

1%

Serviced offices

0.5

1%

Energy

0.1

<1%

Industrial assets

1.7

2%

Residential assets

6.8

10%

Total

68.2

100%

 

 

 

4.  In-place office contracted rent and WAULT progression

 

Sep-20

Movement

Mar-21

Movement

Sep-21

 

 

to Mar-21

 

to Sep-21

 

All office contracted rent1,5

€58.2m

+3%

€59.7m

-0.1%

€59.6m

In-place office contracted rent1,5

€56.7m

+3%

€58.2m

+2%

€59.6m

In-place office WAULT2,5

6.1yrs

-8%

5.6yrs

-2%

5.5yrs

In-place office vacancy3

7%

-

7%4

+4pp

11%4

  1. Excl. arrangement with Iconic Offices at Block 1, Clanwilliam Court.
  2. To earlier of break or expiry.
  3. By net lettable office area. Office area only (i.e. excl. retail, basement, gym, Townhall etc.)
  4. Excluding vacancy in near-term development properties - i.e. Marine House and Clanwilliam Court.  Including these the vacancy rate would also be 11%
  5. Including Dockland Central which was sold post period end with contracted rent of €8.0m. Excluding Dockland Central contracted rent would be €51.7m and WAULT to break would be 5.3yrs

PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of risks and uncertainties which could have a significant impact on the Group's performance and may cause actual results to differ materially from expected results. These risks are reviewed and updated regularly and mitigated through a combination of internal controls, risk management and insurance cover. The Group's risk management framework is described on pages 40 to 46 of its 2021 Annual Report while the principal risks and uncertainties for the Group are set out on pages 47 to 53. These are largely unchanged since the publication of the 2021 Annual Report and the Group does not expect any significant changes for the remaining six months of this financial year. These risks and uncertainties are summarised, together with a short update where relevant, below.

Failure to anticipate or react to market trends resulting in inappropriate business strategy 
Our view, as expressed in the 2021 Annual Report, is that the COVID-19 pandemic has accelerated pre-existing changes in working patterns, such as more remote working, a greater focus on collaborative workspace within offices and increased importance being placed on employee wellness and buildings' sustainability credentials. We continue to be positive about the long-term prospects for well-configured, prime offices in Dublin's city centre and our strategy remains centred on the delivery and ownership of such offices, especially in clusters. We consider strategic risks to be in line with those at March 2021 and do not expect any change in the second half of this financial year.

Uncertain recovery from the COVID-19 pandemic

While Ireland has enjoyed a rapid economic recovery from the pandemic so far in 2021, following a successful vaccine rollout, there is no certainty this will continue, and new strains of the virus or increases in infection rates could result in further disruption and a slowing or reversal of recovery. In the week commencing 15 November 2021, the Irish Government started to reimpose some restrictions in response to an increase in COVID-19 cases and the risk of further restrictions that materially impact on economic activity has increased.

Ireland's attractiveness is negatively impacted

Ireland's economy is highly dependent on international trade and foreign direct investment. Regulatory or tax changes, either domestic or international (e.g. BEPS, US tax developments), could result in Ireland becoming less attractive versus other jurisdictions. This in turn could reduce demand for Dublin offices from occupiers and investors. While there are still details to be finalised over the coming months, the fact that the OECD global minimum tax rate has been agreed at 15%, and Ireland has committed to increasing its minimum tax rate to 15% for large multinationals, appears to be a reasonable outcome for Ireland compared to what was initially feared, and a relatively modest step up from Ireland's existing 12.5% tax rate for impacted companies. Domestically, Budget 2022, released in October 2021, introduced few tax changes and the risks, primarily politically-driven, are likely to remain unchanged for this financial year.              

Failure to respond appropriately and sufficiently to climate change 
These risks are unchanged and are expected to remain so for the rest of this financial year. As expected, in October 2021 the Government announced an increase in carbon taxes in Budget 2022. Improving the Group's sustainability performance is one of our key strategic priorities and we have made good progress in the period to 30 September 2021.  

Risk of occupier default

Our rent collection statistics remain strong and, as noted on page 15, the economic recovery in Ireland and internationally continues: as such the risk of occupier default has probably marginally reduced since March 2021. In addition, with the sale of Dockland Central in early October 2021, our largest occupier has reduced from being 15.2% of our contracted rent roll to 10.9% (March 2021: 15.4%) and our top 10 occupiers have marginally increased from 52.7% of our contracted rent roll to 52.9% (March 2021: 53.4%).

Poor or mistimed execution of development projects

At 30 September 2021 we had no active schemes, following the completion of 2 Cumberland Place and 50 City Quay during the summer (March 2021: two committed schemes, totalling 62,500 sq. ft. of offices of which 24,000 sq. ft. was pre-let). The Group's development pipeline is flexible and plans for individual properties can be changed to reflect prevailing economic circumstances. We expect to commence the development of the Clanwilliam Quarter (over 200,000 sq. ft. of offices) in 2022, so this risk is likely to increase in the near term, particularly given inflationary pressures and potential shortage of skilled labourers.

Failure to motivate and retain team resulting in failure to execute the Group's business plan 
With employee incentive structures consistent with prior years and with only one team member leaving during the period, this risk remains largely unchanged.

Disruption from external threat/event, cyber-attack or fraud 
No significant incidents have occurred since the start of the period and no material change in these risks is expected for the rest of this financial year. Cyber security continues to be a major focus given continued remote working and the increased incidents of cyber-attacks generally during the COVID-19 pandemic.

Inappropriate capital structure or lack of funds for investment

The Group has modest borrowings and significant financial capacity. At 30 September 2021 the LTV was 20.1% (March 2021: 19.5%) and the Group had available cash and undrawn facilities totalling €214m net of committed expenditure, following the issue of €125m of 10- and 12-year unsecured US private placement notes in July 2021 (March 2021: cash and undrawn facilities net of committed expenditure of €110m). In early October 2021 we sold Dockland Central for €152.3m: had this taken place prior to the period end the LTV at 30 September 2021 would have been 10.9% and the Group would have had cash and undrawn facilities net of committed expenditure of €365m. The Group's weighted average debt maturity at 30 September 2021 was 4.8 years (March 2021: 3.4 years) and the Group has no debt maturities until December 2023. We expect to deploy some of the Group's significant financial capacity in the development of the Clanwilliam Quarter and Harcourt Square office clusters in the next few financial years.

Directors' Responsibilities Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with International Accounting Standard 34 ("IAS 34") Interim Financial Reporting as issued by the IASB and adopted by the European Union ("EU"); the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

Each of the Directors, whose names appear on page 56 of this Half Yearly Financial Report, confirms that, to the best of his/her knowledge, the condensed consolidated financial statements in the Half Yearly Financial Report have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the half yearly management report herein contains a fair review of the information required by:

  • Regulation 8(2) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the period from 1 April 2021 to 30 September 2021 and their impact on the Half Yearly Financial Report, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
  • Regulation 8(3) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007 being:
    • A fair review of related party transactions that have taken place during the period from 1 April 2021 to 30 September 2021 and that have materially affected the financial position or performance during the period; and
    • any changes in the related party transactions described in the 2021 Annual Report that could have a material impact on the financial position or performance of the Group in the first six months of the financial year.

 

Signed on behalf of the Board

 

Kevin Nowlan        Thomas Edwards-Moss

Chief Executive Officer      Chief Financial Officer

17 November 2021

INDEPENDENT REVIEW REPORT TO HIBERNIA REIT PLC

We have been engaged by Hibernia plc ("the company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2021 which comprises the condensed consolidated statement of financial position as at 30 September 2021 and the related condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows, and the related notes for the six-month period then ended ("interim financial information"). We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company pursuant to International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council ("ISRE 2410"). Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standard 34 as adopted by the European Union, the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review pursuant to ISRE 2410. A review of interim financial information consists of making inquiries, 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 (Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union, the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

 

 

 

Christian MacManus

For and on behalf of Deloitte Ireland LLP

Chartered Accountants and Statutory Audit Firm

Deloitte & Touche House, Earlsfort Terrace, Dublin 2

17 November 2021

Condensed consolidated income statement

For the six months ended 30 September 2021

 

 

Six months ended

30 September 2021 unaudited

Six months ended

30 September 2020 unaudited

 Financial year ended 31 March 2021 audited

 

Notes

 €'000

 €'000

 €'000

Revenue

5

36,601

36,672

72,712

Rental income

5

32,988

33,263

66,487

Property operating expenses

5

(1,637)

(1,243)

(3,181)

Net rental and related income

5

31,351

32,020

63,306

Operating expenses

 

 

 

 

Administrative expenses

 7

(6,248)

(5,671)

(13,062)

Expected credit losses on financial assets

 

(91)

(213)

(423)

Total operating expenses

 

(6,339)

(5,884)

(13,485)

Operating profit before gains and losses

 

25,012

26,136

49,821

Gains/(losses) on investment property

10

116

(56,891)

(67,581)

Other gains

 

14

15

81

Operating profit/(loss)

 

25,142

(30,740)

(17,679)

Finance income

 

 -  

 -  

1

Finance expense

 

(4,115)

(3,712)

(7,723)

Profit/(loss) before income tax

 

21,027

(34,452)

(25,401)

Income tax credit

 

165

208

188

Profit/(loss) for the period attributable to owners of the Parent

 

 

21,192

(34,244)

(25,213)

 

 

 

 

 

EPRA earnings for the period

8

20,911

22,439

42,223

Earnings per share

 

 

 

 

Basic earnings per share

8

3.2c

(5.0)c

(3.7)c

Diluted earnings per share

8

3.2c

(5.0)c

(3.7)c

EPRA earnings per share

8

3.2c

3.3c

6.3c

Diluted EPRA earnings per share

8

3.1c

3.3c

6.2c

 

Condensed consolidated statement of comprehensive income

For the six months ended 30 September 2021

 

 

Six months ended

30 September 2021 unaudited

Six months ended

 30 September 2020 unaudited

 Financial year ended 31 March 2021 audited

 

 

 €'000

 €'000

 €'000

Profit/(loss) for the period attributable to owners of the Parent

 

21,192

(34,244)

(25,213)

Other comprehensive income, net of income tax

 

 

 

 

Items that will not be reclassified subsequently to profit or loss:

 

 

 

 

Gain/(loss) on revaluation of land and buildings                                                                                              

 

163

(307)

(304)

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Net fair value (loss)/gain on hedging instruments entered into for cashflow hedges

 

(62)

47

676

Total other comprehensive income

 

101

(260)

372

Total comprehensive income for the period attributable to owners of the Parent

 

21,293

(34,504)

(24,841)

 

 

Condensed consolidated statement of financial position

As at 30 September 2021

 

 

30 September 2021 unaudited

31 March 2021 audited

 

Notes

 €'000

 €'000

Assets

 

 

 

Non-current assets

 

 

 

Investment property

10

1,450,437

1,427,413

Property, plant and equipment

 

7,777

7,858

Derivatives at fair value

 

854

972

Trade and other receivables

 

9,600

9,210

Total non-current assets

 

1,468,668

1,445,453

Current assets

 

 

 

Trade and other receivables

 

2,455

3,970

Cash and cash equivalents

 

30,976

31,634

Total current assets

 

33,431

35,604

Total assets

 

1,502,099

1,481,057

Equity and liabilities

 

 

 

Capital and reserves

 

 

 

Share capital

11

66,181

66,166

Share premium

11

580,639

580,444

Capital redemption reserve fund

11

4,070

4,070

Other reserves

 

7,043

6,638

Retained earnings

12

490,070

491,320

Total equity

 

1,148,003

1,148,638

Non-current liabilities

 

 

 

Financial liabilities

13

312,918

299,956

Deferred tax liabilities

 

41

206

Total non-current liabilities

 

312,959

300,162

Current liabilities

 

 

 

Financial liabilities

13

919

485

Trade and other payables

14

36,810

27,997

Contract liabilities

 

3,408

3,775

Total current liabilities

 

41,137

32,257

Total equity and liabilities

 

1,502,099

1,481,057

IFRS NAV per share

9

173.5c

173.6c

Diluted IFRS NAV per share

9

172.6c

172.7c

EPRA NTA per share

9

172.5c

172.7c

 

 

Condensed consolidated statement of cash flows

For the six months ended 30 September 2021

 

 

Six months ended

30 September 2021 unaudited

Six months ended

30 September 2020 unaudited

 Financial year ended

31 March 2021

 audited

 

Notes

 €'000

 €'000

 €'000

Cash flows from operating activities

 

 

 

 

Rents received

 

32,948

31,390

70,775

Other property income

 

2,135

2,881

7,160

Property expenses paid

 

(2,618)

(4,550)

(9,291)

Cash paid to and on behalf of employees

 

(4,415)

(4,389)

(6,554)

Other administrative expenses paid

 

(2,595)

(1,910)

(3,818)

Interest received

 

-  

-  

1

Other income

 

14

19

13

Income tax refund

 

-  

1

-  

Net cash from operating activities

 

25,469

23,442

58,286

Cash flows from investing activities

 

 

 

 

Purchase of investment property

15

(8,796)

(4,621)

(7,978)

Cash expenditure on investment property

15

(4,105)

(10,492)

(20,316)

Cash received from sales of investment property                   

 

-  

-  

136

Purchase of property, plant and equipment                        

 

(4)

(53)

(61)

Net cash (absorbed) by investing activities

 

(12,905)

(15,166)

(28,219)

Cash flow from financing activities

 

 

 

 

Dividends paid                                                  

12

(22,502)

(20,544)

(33,777)

Cash expended on share buy-back

 

-  

(8,978)

(25,035)

Borrowings drawn      

 

130,000

25,600

42,100

Borrowings repaid                     

 

(117,000)

-  

(2,500)

Finance expenses paid

 

(3,720)

(3,453)

(7,100)

Purchase of derivative hedges

 

-  

-  

(561)

Share issue costs

 

-  

(14)

(14)

Net cash (outflow) from financing activities

 

(13,222)

(7,389)

(26,887)

Net (decrease)/increase in cash and cash equivalents

 

(658)

887

3,180

Cash and cash equivalents start of period

 

31,634

28,454

28,454

(Decrease)/increase in cash and cash equivalents

 

(658)

887

3,180

Cash and cash equivalents at end of period

 

30,976

29,341

31,634

 

 

 

Condensed consolidated statement of changes in equity

For the six months ended 30 September 2021

 

 

Share capital

Share premium

Capital redemption fund

Property revaluation reserve

Cashflow hedge reserve

Share-based payment reserve

Retained earnings

Total

 

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

 

Balance at 1 April 2020

68,466

630,276

1,757

3,547

(234)

2,066

525,271

1,231,149

Loss for the period

 -  

 -  

 -  

 -  

 -  

 -  

(34,244)

(34,244)

Other comprehensive income for the period

 -  

 -  

 -  

(307)

47

 -  

 -  

(260)

Balance before transactions with shareholders

68,466

630,276

1,757

3,240

(187)

2,066

491,027

1,196,645

Capital reorganisation

 -  

(50,000)

 -  

 -  

 -  

 -  

50,000

 -  

Issue of share capital

13

168

 -  

 -  

 -  

(181)

(14)

(14)

Own shares acquired and cancelled in the period

(811)

 -  

811

 -  

 -  

 -  

(8,978)

(8,978)

Dividends paid

 -  

 -  

 -  

 -  

 -  

 -  

(20,544)

(20,544)

Share-based payments

 -  

 -  

 -  

 -  

 -  

(137)

89

(48)

Balance at 30 September 2020 (unaudited)

67,668

580,444

2,568

3,240

(187)

1,748

511,580

1,167,061

Profit for the period

 -  

 -  

 -  

 -  

 -  

 -  

9,031

9,031

Other comprehensive income for the period

 -  

 -  

 -  

3

629

 -  

 -  

632

Balance before transactions with shareholders

67,668

580,444

2,568

3,243

442

1,748

520,611

1,176,724

Own shares acquired and cancelled in the period

(1,502)

 -  

1,502

 -  

 -  

 -  

(16,057)

(16,057)

Dividends paid

 -  

 -  

 -  

 -  

 -  

 -  

(13,233)

(13,233)

Share-based payments

 -  

 -  

 -  

 -  

 -  

1,205

(1)

1,204

Balance at 31 March 2021 (audited)

66,166

580,444

4,070

3,243

442

2,953

491,320

1,148,638

Profit for the period

-

-

-

-

-

-

21,192

21,192

Other comprehensive income for the period

 -

 -

 -

163

(62)

-

 -  

101

Balance before transactions with shareholders

66,166

580,444

4,070

3,406

380

2,953

512,512

1,169,931

Issue of share capital

15

195

 -  

 -  

 -  

(210)

 -  

 -  

Dividends paid

 -  

 -

 -  

 -  

 -  

 -  

(22,502)

(22,502)

Share-based payments

-

-

-

-

-

514

60

574

Balance at 30 September 2021 (unaudited)

66,181

580,639

4,070

3,406

380

3,257

490,070

1,148,003

                                 

 

 

 

 

Notes to the condensed consolidated financial statements

Section 1 - General

The accounting conventions and accounting policies employed in the preparation of these condensed consolidated financial statements are consistent with those employed in the preparation of the most recent annual consolidated financial statements in respect of the year ended 31 March 2021 as described in the 2021 Annual Report and referenced in this document as appropriate.

  1. General Information

Hibernia REIT plc (the "Company"), registered number 531267, together with its subsidiaries and associated undertakings (the "Group"), is engaged in property investment and development (primarily office) in the Dublin market with a view to maximising its shareholders' returns.

The Company is a public limited company and is incorporated and domiciled in Ireland. The address of the Company's registered office is 1WML, Windmill Lane, Dublin, D02 F206, Ireland.

The ordinary shares of the Company are listed on the primary listing segment of the Official List of Euronext Dublin (formerly the Irish Stock Exchange) (the "Irish Official List") and the premium listing segment of the Official List of the UK Listing Authority (the "UK Official List" and, together with the Irish Official List, the "Official Lists") and are traded on the regulated markets for listed securities of Euronext Dublin and the London Stock Exchange plc.

  1. Basis of preparation

2.a  Statement of compliance and basis of preparation

The consolidated annual financial statements of the Hibernia REIT plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU and with IFRS as issued by the International Accounting Standards Board ("IASB"). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007, and the Central Bank (Investment Market Conduct) Rules 2019.

The interim figures for the six months ended 30 September 2021 are unaudited but have been reviewed by the independent auditor, Deloitte Ireland LLP , whose report is set out on page 19 of this Half Yearly Financial Report. The summary financial statements for the year ended 31 March 2021 that are presented in the condensed consolidated financial statements represent an abbreviated version of the full financial statements for that year on which the independent auditor, Deloitte Ireland LLP, issued an unqualified audit report which did not include a reference to any matters to which they drew attention by way of emphasis without qualifying the report. The half yearly financial statements herein are non-statutory financial statements for the purposes of the Companies Act 2014.

IASB amendments have been adopted but with no material impact on the Group's accounting policies as presented in the 2021 Annual Report nor has the Group early adopted any forthcoming IASB standards (note 3).

The consolidated financial statements of the Group for the year ended 31 March 2021 ("the 2021 Annual Report") are available upon request from the Company Secretary or from www.hiberniareit.com. The financial statements for the financial year ended 31 March 2021 have been filed in the Companies Registration Office.

These condensed consolidated financial statements were approved for issue by the Board of Directors on 17 November 2021.

2.b Alternative performance measures

The Group uses alternative performance measures to assist in the presentation of certain aspects of its performance. These are explained and, where appropriate, reconciled to equivalent IFRS measures in the 'Supplementary Information section (unaudited)' at the end of this document. The main APMs used are those issued by the European Public Real Estate Association ("EPRA"), which is the representative body of the listed European real estate industry. EPRA issues guidelines and benchmarks for reporting both financial and sustainability measures. These allow investors to compare and measure the performance of real estate companies across Europe on a consistent basis. EPRA earnings and EPRA Net Tangible Assets ("NTA") are presented within the condensed consolidated financial statements and are fully reconciled to IFRS as these two measures are among the key performance indicators for the Group's business.

2.c  Functional and presentation currency

These condensed consolidated financial statements are presented in euro, which is the Company's functional currency and the Group's presentation currency.

2.d  Basis of consolidation

These condensed consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). The accounting policies of all consolidated entities are consistent with the Group's accounting policies. The financial statements of subsidiaries are included in the condensed consolidated financial statements from the date on which control commences until the date on which control ceases. The Group controls an entity when it has power over the entity or exposure, or rights, to variable returns from its involvement with the entity, and the ability to use its power over the entity to affect the returns. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

2.e  Assessment of going concern

These condensed consolidated financial statements have been prepared on a going concern basis.

The Board has assessed going concern over a three and a half-year period to March 2025. It is satisfied that a forward-looking assessment of the Group for this period is sufficient to enable it to opine on the appropriateness of the going concern basis of preparation of the financial statements. This assessment considers the Group's current position and the principal and emerging risks that it faces (see pages 17 and 18 and pages 48 to 53 of the 2021 Annual Report for further detail). All of these risks are considered to be material in the assessment of going concern and viability.

An analysis of revenue and a disaggregation of income is outlined in notes 4, 5 and 6. Due to the nature of rental collections, a significant portion of revenue is collected in advance of its due date and 89% of commercial rent for the quarter ended 31 December 2021 had been collected within seven days of the gale date rising to 98% as at 16 November 2021. 95% of the residential rent due for the month of November 2021 had been collected by the date of this Half Yearly Financial Report. Information on the Group's financial assets and approach to credit risk is contained in note 16 of these condensed consolidated financial statements and in the 2021 Annual Report: Section IV: introduction, note 20 and note 29.d. Sustainability is of increasing importance to investors and this is discussed on page 13.

Detail on the financial performance and financial position of the Group is provided in the condensed consolidated financial statements. In particular, note 16 includes details on the Group's financial risk management and exposures.

At 30 September 2021, the balance sheet shows net current liabilities of €8m (March 2021: net current assets of €3m). The increase in trade payables of €8m for this period over March 2021 arises from the purchase of investment property which had not been settled at the period end but has since done so. As described below the Group has significant resources of funds available to cover such temporary deficits.

The Group has a cash balance as at 30 September 2021 of €31m (March 2021: €32m), is generating positive operating cash flows and, as discussed in note 13, has in place debt facilities with average maturity of 4.8 years, no debt maturities until December 2023, and an undrawn balance of €205m at 30 September 2021 (March 2021: €93m). In addition, the Group sold Dockland Central for €152m on 5 October 2021. The Group's capital commitments at 30 September 2021 were €1m (March 2021: €3m). These commitments relate to the developments recently completed and do not include the pipeline of developments which are discussed on pages 10 and 11 as these projects have not yet been committed to. Funding for these developments is managed over the period of the projects. As at 30 September 2021, the Group's low leverage (LTV 20.1% or 10.9% proforma the sale of Dockland Central) means it could withstand a 56% decline in its portfolio value and a 78% decline in earnings before interest and tax (59% decline in rental income) without breaching debt covenants at that date. The weighted average unexpired lease term ("WAULT") is 5.5 years (March 2021: 5.8 years) for the office portfolio. There are no reasons to expect that the Group will not be able to meet its liabilities as they fall due for the foreseeable future.

Therefore, the Directors have concluded that the going concern assumption remains appropriate.

2.f  Significant judgements

These are judgements apart from estimates with the most significant effect on the amounts in the financial statements.

Not all of the Group's accounting policies require the Directors to make difficult, subjective or complex judgements. Any judgements made are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The following are the most significant judgements used in preparing these consolidated financial statements:

Net asset value of the Group

The Company's shares are trading at a significant discount to the net asset value per share reported in these condensed consolidated financial statements. At 30 September 2021, the closing share price was €1.168 and the discount to both the IFRS NAV per share and EPRA NTA per share at 30 September 2021 was 33%. As at close of business on 16 November 2021, being the last day before the approval of the Half Yearly Report, the share price was €1.286 and the discount to both was 26%. The Group's main assets are its investment properties, which comprise 97% of total assets or 126% of net asset value. These are independently valued at the period end and are measured at fair value in line with IFRS 13. More information on the valuation of the Group's investment properties can be found below and in note 10 to these condensed consolidated financial statements. The Group's property, plant and equipment is mainly its head office in 1WML, which is also carried at fair value and independently valued at 30 September 2021. The balance of assets, mainly financial in nature, are assessed for impairment under a simplified expected credit loss model. The Group carries no intangible assets or goodwill. As outlined above, the Group has sufficient headroom above its debt covenants to ensure that its financing remains in place. It is therefore the opinion of the Directors that no impairment on the net asset value of the Group is indicated, despite the discount to NAV/NTA at which its shares currently trade.

Valuation of investment property

Valuer rotation

In accordance with the Group's policy of rotating its independent Valuer every four years or sooner, the Directors undertook a tender process and appointed Savills Advisory Services (Ireland) Ltd ("Savills", the "Valuer") as independent Valuer. Savills replaces Cushman & Wakefield ("C&W") which has come to the end of its term. Savills' first valuation of the Group's property portfolio was as at 30 September 2021. Savills has made some changes in the valuation approach to individual buildings or categories, but the valuation techniques as described in note 10 remain the same. The Directors have reviewed the valuations at the period end, the approach to individual properties and the results of Savills' estimations, as well as the differences in approach between Savills and C&W. They have determined that none of the changes in approach that Savills has implemented result in a material impact on valuations, rather they reflect the subjectivity of real estate valuations and differing expert approaches.

The independent Valuer is appointed to perform valuations of the Group's property portfolio, including the owner occupied property, and report to the Directors on its opinion as to the fair value of these properties. The valuation of the Group's property portfolio is a key element of the Group's net asset value as well as impacting executive and employee variable remuneration. However, the nature of the valuation process is inherently subjective and values are derived using comparable market transactions and the Valuer's assessment of market sentiment. The valuations therefore represent a significant judgement. Details on the approach and methodologies adopted in completing these valuations can be found in note 10.

The Directors have reviewed the valuation process undertaken, changes in market conditions, recent transactions in the market, valuation movements on individual buildings and the Valuer's opinion in relation to estimated rental values ("ERVs") and yields. With the continued market uncertainty as a result of the pandemic and other international developments, the Directors have also considered the extent to which this has been impacting the property investment and occupational markets in relation to both liquidity and activity. The Directors have concluded that the valuation is suitable for inclusion in the Group's consolidated financial statements at 30 September 2021, unadjusted save for the amendment for income spreading as discussed in note 2.g.

Valuation basis of investment property

The valuation approach for each property, while generally similar, differs based on the physical and investment and/or development attributes of the property. A judgement must be made to decide on the valuation premise appropriate for each asset to give its 'highest and best use'. This judgement impacts on the valuation technique that is appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the property. All valuations are at Level 3 in the fair value hierarchy.

'Highest and best use'

All investment properties in the Group's portfolio are valued in accordance with their current use, which is also the highest and best use except for:

  • Harcourt Square, Marine House and Clanwilliam Court Blocks 1, 2 and 5 where, in accordance with IFRS 13:27, the valuations take into account the redevelopment potential upon expiry of the current leases, which reflects the highest and best use. It is the Directors' intention to pursue the redevelopment of these properties when the leases expire. Planning permission is in place for these developments. These properties are valued on a combination of an investment basis until the end of the leases and on a residual basis thereafter. The Valuers also take account of comparable land sales when assessing the value of these properties.
  • Newlands (excluding Gateway) has been valued on a price per acre basis as early stage plans are in place to redevelop this property in future and this approach reflects the highest and best use of this property.
  • A disused building which is valued as a potential site.

2.g  Analysis of sources of estimation uncertainty

Valuation of investment property

Although valuations are based on the Directors' best knowledge of the amounts, events or actions, actual results may differ from those estimates. The Group's investment properties are held at fair value and were valued at 30 September 2021 by the Valuer on the basis described in 2.f above. Further information on the valuations and the sensitivities around the inputs used is given in note 10.

The Board conducts a detailed review of each property valuation to ensure that appropriate assumptions have been applied. The most significant estimates affecting the valuation include yields and estimated rental values ("ERVs"). For development projects, other assumptions including costs to complete and risk premium assumptions are also factored into the valuation. In accordance with the Group's policy on revenue recognition from leases, the valuation provided by Savills has been adjusted only by the fair value of the income accruals ensuing from the recognition of lease incentives and the deferral of lease costs. The total reduction in the Valuer's investment property valuation in respect of these adjustments was €8.5m (September 2020: €9.1m; March 2021: €8.7m).

Apart from the estimates used in arriving at the fair value of investment property, there are no other sources of estimation uncertainty that could lead to a material change in assets or liabilities in the next 6 months.

  1. Application of new and revised International Financial Reporting Standards ("IFRS")

Changes in accounting standards

As set out below, a limited number of changes to IFRS became effective for periods commencing on or after 1 January 2021. Although these changes do not amend the disclosure requirements of IAS 34, they may impact the underlying accounting applied during the period.

Having assessed the amendments below, none had, nor is expected to have, a material impact on the Group's accounting.

 

IASB mandatory effective date (periods commencing on or after)

EU endorsed mandatory effective date (periods commencing on or after)

Newly applied IFRS

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2

1 January 2021

1 January 2021

Amendments to IFRS 4: Insurance Contracts deferral of IFRS19

1 January 2021

1 January 2021

New amended IFRS which are not yet applied

COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

1 April 2021

1 April 2021

Annual improvements cycle 2018-2020

1 January 2022

TBC

Amendments to IFRS 3: Reference to the conceptual framework

1 January 2022

TBC

Amendments to IAS 16: Property, plant and equipment - proceeds before intended use

1 January 2022

TBC

Amendments to IAS 37: Onerous contracts - cost of fulfilling a contract

1 January 2022

TBC

Amendment to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date

1 January 2023

TBC

Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies

1 January 2023

TBC

Amendments to IAS 8: Definition of Accounting Estimates

1 January 2023

TBC

Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction

1 January 2023

TBC

IFRS 17: Insurance contracts

1 January 2023

TBC

Amendments to IFRS 17

1 January 2023

TBC

 

Section 2 - Performance

This section includes notes relating to the performance of the Group for the period, including segmental reporting, earnings per share and net assets per share as well as specific elements of the condensed consolidated statement of income.

  1. Operating segments

4.a Basis for segmentation

The Group is organised into five business segments, against which the Group reports its segmental information, representing different investment property classes. The Group has divided its business in this manner as the various asset segments differ in their character and risk/return profiles depending on market conditions and reflect the strategic objectives that the Group has targeted. There were no amendments to the segments used during the period and a full description together with further information can be found on page 148 of the 2021 Annual Report.

4.b  Information about reportable segments

The Group's key measure of underlying performance of a segment is total income after revaluation gains and losses, which comprises revenue (rental and service charge income), property outgoings, revaluation of investment properties and other gains and losses. Total income after revaluation gains and losses includes rental income, which is used as the basis to report measures such as EPRA Net Initial Yield ("NIY") and EPRA "topped-up" NIY. These alternative performance measures ("APMs") (detailed on pages 206 to 207 of the 2021 Annual Report and in the supplementary section on pages 49 to 55 of this Half Yearly Financial Report) measure the cash passing rent returns on market value of investment properties before and after an adjustment for the expiry of a rent-free period or other lease incentives, respectively.

Two developments, 2 Cumberland Place and 50 City Quay, completed during the period and moved from the office development assets to office assets segment.

An overview of the reportable segments is set out below:

For the six months ended 30 September 2021 (unaudited)

 

Office assets

Office development assets

Residential assets

Industrial/other assets

Central assets and costs

Total position

 

€'000

€'000

€'000

€'000

€'000

€'000

Total revenue

32,043

 -  

3,802

756

 -  

36,601

Rental income

28,430

 -  

3,802

756

 -  

32,988

Property operating expenses

(790)

 -  

(695)

(152)

 -  

(1,637)

Net rental and related income

27,640

 -  

3,107

604

 -  

31,351

Operating expenses

 

 

 

 

 

 

Administration expenses

 -  

 -  

 -  

 -  

(6,001)

(6,001)

Expected credit losses on financial assets

(93)

 -  

 -  

2

 -  

(91)

Depreciation

 -  

 -  

 -  

 -  

(247)

(247)

Total operating expenses

(93)

 -  

 -  

2

(6,248)

(6,339)

Operating profit/(loss) before gains and losses

27,547

 -  

3,107

606

(6,248)

25,012

Gains and (losses) on investment property

18,888

655

(7,947)

(11,480)

 -  

116

Other gains

 -  

 -  

 -  

14

 -  

14

Operating profit/(loss)

46,435

655

(4,840)

(10,860)

(6,248)

25,142

Finance expense

 -  

 -  

 -  

 -  

(4,115)

(4,115)

Profit/(loss) before income tax

46,435

655

(4,840)

(10,860)

(10,363)

21,027

Income tax

 -  

 -  

 -  

165

 -  

165

Profit/(loss) for the period attributable to owners of the parent

46,435

655

(4,840)

(10,695)

(10,363)

21,192

Total segment assets

1,237,474

 -  

178,537

48,137

37,951

1,502,099

Investment property

1,224,696

 -  

178,180

47,561

 -  

1,450,437

For the six months ended 30 September 2020 (unaudited)

 

Office assets

Office development assets

Residential assets

Industrial/

other assets

Other assets

Central assets and costs

Total position

   

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

 

 Total revenue

32,197 

 -  

3,596 

879 

 -  

 -  

36,672 

Rental income

28,788

 -  

3,596 

879 

 -  

 -  

33,263

Property operating expenses

(615)

- 

(592)

(36)

 -  

 -  

(1,243)

Net rental and related income

28,173

- 

3,004 

843 

 -  

 -  

32,020 

Operating expenses

 

 

 

 

 

 

 

Administrative expenses

 -  

 -  

 -  

 -  

 -  

(5,416)

(5,416)

Net impairment losses on financial and contract assets

(210)  

 -  

 -  

(3)  

 -  

-

(213)

Depreciation

 -  

 -  

 -  

 -  

 -  

(255)

(255)

Total operating expenses

(210)  

 -  

 -  

 (3) 

 -  

(5,671)

(5,884)

Operating profit/(loss) before gains and losses

27,963

- 

3,004 

840

 -  

(5,671)

26,136

Gains and (losses) on investment property

(53,119)

(2,796)

4,122 

(5,098)

 -  

 -  

(56,891)

Other gains

 -  

 -  

 -  

 -  

15

 -  

15

Operating profit/(loss)

(25,156)

(2,796)

7,126

(4,258)

15 

(5,671)

(30,740)

Finance expense

(1,370)  

 -  

 -  

 -  

 -  

(2,342)

(3,712)

Profit/(loss) before income tax

(26,526)

(2,796)

7,126

(4,258)

15 

(8,013)

(34,452)

Income tax

 -  

 -  

 -  

208  

 -  

-

208  

Profit/(loss) for the period attributable to owners of the parent

(26,526)

(2,796)

7,126

(4,050)

15 

(8,013)

(34,244)

Total segment assets

1,159,412

56,134

165,161 

55,702

534 

37,909

1,474,852

Investment property

1,145,019 

56,106 

164,059 

55,702 

 -  

 -  

1,420,886 

                                   

4.c  Geographic information

All of the Group's assets, revenue and costs are based in the Greater Dublin Area and mainly in central Dublin.

4.d Major customers

The Group uses information on its top 10 occupiers to monitor its major customers. There is one occupier that accounted for more than 10% of the Group's income in the period (March 2021: one). 

  1. Revenue and net rental and related income

Accounting policy

See note 5 of the 2021 Annual Report.

Revenue can be analysed as follows:

 

Six months ended

30 September 2021 unaudited

Six months ended

30 September 2020

unaudited

 Financial year ended

31 March 2021

audited

 

 €'000

 €'000

 €'000

Gross rental income

33,557

32,555

66,157

Rental incentives and surrender fees

(569)

708

330

Rental income

32,988

33,263

66,487

Revenue from contracts with customers1

3,613

3,409

6,225

Total revenue

36,601

36,672

72,712

1.  Revenue from contracts with customers is service charge income

Net rental and related income

 

Six months ended

30 September 2021 unaudited

Six months ended

30 September 2020 unaudited

 Financial year ended

 31 March 2021

 audited

 

 €'000

 €'000

 €'000

Total revenue

36,601

36,672

72,712

Cost of goods and services1

(3,381)

(3,242)

(6,150)

Property expenses

(1,869)

(1,410)

(3,256)

Net rental and related income

31,351

32,020

63,306

1.  Costs of goods and services are service charge expenses

Further information on the sources and characteristics of revenue and rental income is provided in note 6.

Included in property expenses is an amount of €0.5m (September 2020: €0.4m) relating to void costs on office properties, i.e. costs relating to office properties which were not occupied and income-generating during the financial period. Increases in property costs over September 2020 relate mainly to agency and letting fees.

Property operating expenses

 

Six months ended

30 September 2021 unaudited

Six months ended

30 September 2020 unaudited

 Financial year ended

 31 March 2021

audited

 

 €'000

 €'000

 €'000

Service charge income

3,613

3,409

6,225

Service charge expenses

(3,381)

(3,242)

(6,150)

Property expenses

(1,869)

(1,410)

(3,256)

Property operating expenses

(1,637)

(1,243)

(3,181)

  1. Disaggregation of revenue and rental income

A full description of the basis of the disaggregation of the Group's income can be found in note 6 of the 2021 Annual Report. 

Total revenue by duration of lease contract (based on next break date or expiry)

Service charge income is included within the one year or less segment as these arrangements, while provided for under the lease contracts, are negotiated on an annual basis.

Six months ended 30 September 2021 (unaudited)

Lease contracts:

One year or less

Between one and five years

Greater than five years

Total

 

€'000

€'000

€'000

€'000

Office assets

5,436

9,831

16,776

32,043

Office development assets

-  

-  

-  

-  

Residential assets

3,588

214

-  

3,802

Industrial/other assets

541

215

-  

756

Total segmented revenue

9,565

10,260

16,776

36,601

 

Six months ended 30 September 2020 (unaudited)

Lease contracts:

 

One year or less
€'000

Between one and five years
€'000

Greater than five years
€'000

Total
€'000

Office assets

 5,360

 10,719

 16,117

32,196

Office development assets

 -  

 -  

 -  

-

Residential assets

 3,457

 139

 -  

3,596

Industrial/other assets

 619

 48

 213

 880

Total segmented revenue

 9,436

 10,906

 16,330

 36,672

Rental income by occupier industry sector

 

Six months ended

30 September 2021

unaudited

Six months ended

30 September 2020

 unaudited

Financial year ended

31 March 2021

audited

 

€'000

 %

€'000

 %

€'000

 %

Technology

14,197

43.1

14,372

 43.2

28,588

43.1

State entities

4,411

13.5

5,027

 15.1

9,797

14.8

Insurance and investment management

3,903

11.8

3,323

 10.0

6,748

10.1

Residential

3,802

11.5

3,596

 10.8

7,164

10.8

Professional services

2,045

6.2

2,036

 6.1

4,473

6.7

Media

1,125

3.4

1,018

 3.1

2,203

3.3

Banking and capital markets

696

2.1

677

 2.0

829

1.2

Industrial assets

665

2.0

825

 2.5

1,680

2.5

Aviation

542

1.6

629

 1.9

1,189

1.8

Serviced offices

329

1.0

702

 2.1

1,342

2.0

Real estate

303

0.9

327

 1.0

1,049

1.6

Car parking

297

0.9

340

 1.0

680

1.0

Retail

243

0.7

255

 0.8

555

0.8

Other

430

1.3

136

 0.4

190

0.3

Total

32,988

100.0

33,263

 100.0

66,487

100.0

 

  1. Administrative expenses

Accounting policy

Administration expenses are recognised on an accruals basis in the consolidated income statement.

Operating profit for the period has been stated after charging:

 

Six months ended

30 September 2021 unaudited

 Six months ended

30 September 2020 unaudited

 Financial year ended 31 March 2021

audited

 

 €'000

 €'000

 €'000

Non-Executive Directors' costs

208

318

612 

Staff costs

3,428

3,049

7,325 

Professional fees property

421

423

688 

Professional fees corporate

1,072

483

2,073 

Independent Valuer's fees

159

152

346 

Depository fees

118

157

283 

Depreciation

247

255

510 

Other administration expenses

595

834

1,225 

Administration expenses

6,248

5,671

13,062 

  1. Earnings per share

There are no convertible instruments, options or warrants on ordinary shares in issue as at 30 September 2021 other than those arrangements relating to share-based payments. The Company has established a reserve of €3.3m (September 2020: €1.7m, March 2021: €3.0m) which is mainly for the issue of ordinary shares relating to the Group's bonus schemes. It is estimated that a maximum of approximately 3.5m ordinary shares (September 2020: 2.2m; March 2021: 3.4m shares) may be issued under the share-based performance award schemes, 2.6m (September 2020: 1.3m; March 2021: 2.3m) of which are provided for at 30 September 2021 and a further 0.9m (September 2020: 0.9m; March 2021: 1.1m) of which may be recognised over the next three years, depending on performance and various service conditions. The dilutive effect of these shares is disclosed below.

The calculations are as follows:

 

 

Six months ended

 30 September 2021 unaudited

Six months ended

 30 September 2020

 unaudited

 Financial year ended

 31 March 2021

 audited

 

Notes

 '000

 '000

 '000

Issued share capital at beginning of the period

 

661,657

684,657

684,657

Shares cancelled during the period

 

-  

(8,106)

(23,125)

Shares issued during the period

 

154

125

125

Shares in issue at the period end

11

661,811

676,676

661,657

Weighted average number of shares

 

661,792

683,737

673,618

Number of shares to be issued under share-based schemes

 

3,475

2,168

3,372

Diluted number of shares

 

665,267

685,905

676,990

 

 

 

Six months ended

30 September 2021

unaudited

Six months ended

 30 September 2020 unaudited

 Financial year ended

31 March 2021

 audited

 

 

 '000

 '000

 '000

Number of shares due to issue under share-based schemes recognised at period end 

2,583

1,306

2,298

Number of shares due to issue under share-based schemes not recognised at period end1

892

862

1,074

Number of shares to be issued under share-based schemes 

 

3,475

2,168

3,372

1. Included here are all amounts from share-based payments which are granted but which have not been recognised at the period end but will be recognised over the next two to three years

 

Six months ended

30 September 2021

 unaudited

Six months ended 30 September 2020

 unaudited

 Financial year ended

31 March 2021

audited

 

 €'000

 €'000

 €'000

Profit/(loss) for the period attributable to the owners of the Parent

21,192

(34,244)

(25,213)

 

 '000

 '000

 '000

Weighted average number of ordinary shares (basic)

661,792

683,737

673,618

Weighted average number of ordinary shares (diluted)

665,267

685,905

676,910

Basic earnings per share

3.2c

(5.0)c

(3.7)c

Diluted earnings per share

3.2c

(5.0)c

(3.7)c

EPRA earnings and EPRA earnings per share, alternative performance measures, are presented below as they illustrate for investors the extent to which dividends are supported by recurring income and quantify the Group's income from its REIT property activities. As a REIT, the Company is required to distribute at least 85% of this property income and so these measures are helpful for investors and are key performance indicators for the Group.

 

 

Six months ended 30 September 2021 unaudited

Six months ended 30 September 2020

 unaudited

 Financial year ended 31 March 2021 audited

 

 EPRA earnings

Note

 €'000

 €'000

 €'000

 

Profit/(loss) for the period

 

21,192

(34,244)

(25,213)

 

Less:

 

 

 

 

 

Losses and (gains) on investment property

10

(116)

56,891

67,581

 

Profit or loss on disposals of other assets

 

-  

-  

(69)

 

Deferred tax in respect of EPRA adjustments

 

(165)

(208)

(188)

 

Changes in fair value of financial instruments and associated close-out costs

 

-  

-  

112

 

EPRA earnings

 

20,911

22,439

42,223

 

 

 

 

 

 

 

EPRA earnings per share and diluted EPRA earnings per share 

 

 '000

 '000

 '000

Weighted average number of ordinary shares (basic)

661,792

683,737

673,618

 

Weighted average number of ordinary shares (diluted)

665,267

685,905

676,990

 

EPRA earnings per share (cent)

 

3.2c

3.3c

6.3c

 

Diluted EPRA earnings per share (cent)

 

3.1c

3.3c

6.2c

 
                 
  1. NAV per share, EPRA NTA per share and Total Accounting Return ("TAR")

The IFRS NAV is calculated as the value of the Group's assets less the value of its liabilities based on IFRS measures.

 

As at 30 September 2021 unaudited

As at 31 March 2021 audited

 

€'000

€'000

IFRS net assets at end of period (€'000)

1,148,003

1,148,638

Ordinary shares in issue ('000)

661,811

661,657

IFRS NAV per share

173.5c

173.6c

 

 

 

 

'000

'000

Ordinary shares in issue

661,811

661,657

Number of shares to be issued under share-based schemes (see note 8)

3,475

3,372

Diluted number of shares

665,286

665,029

 

 

 

Diluted IFRS NAV per share

172.6c

172.7c

EPRA NAV measures (which are APMs) are calculated in accordance with the European Public Real Estate Association ("EPRA") Best Practice Recommendations: October 2019 and are set out on pages 49 to 55 of this Half Yearly Financial Report.

Total accounting return ("TAR")

Total Accounting Return, a key performance indicator and alternative performance measure, is calculated as the increase in EPRA Net Tangible Assets ("NTA") per share for the period over the previous period-end EPRA NTA per share and adding back dividends per share paid during the period, expressed as a percentage of opening EPRA NTA per share.

EPRA NTA

As at 30 September 2021 unaudited

As at 31 March 2021 audited

 

€'000

€'000

IFRS NAV

1,148,003

1,148,638

Include:

 

 

Revaluation of other non-current investments

-  

-  

Diluted NAV at fair value

1,148,003

1,148,638

Exclude:

 

 

Fair value of financial instruments

(380)

(442)

EPRA NTA

1,147,623

1,148,196

Diluted number of shares at period end

665,286

665,029

EPRA NTA per share at period end

172.5c

172.7c

 

TAR

As at 30 September 2021

unaudited

As at 31 March 2021 audited

 

€'000

€'000

Opening EPRA NTA per share

172.7c

179.2c

Closing EPRA NTA per share

172.5c

172.7c

(Decrease) in EPRA NTA per share

(0.2)c

(6.5)c

Dividends per share paid in period

3.4c

5.0c

Total return per share