Industrials REIT has published its financial results for the year ended March 2022, achieving like-for-like rental growth of 4.4% and like-for-like valuation growth of 20.8% across its multi-let portfolio, resulting in a total accounting return for the year of 25% (FY2021: 11.4%).
“This financial year marks the end of our four-year transition strategy to a specialist MLI business. We now own and operate a portfolio of over seven million square feet (+-650 000m2) of high-quality MLI assets, situated in and around towns and cities across the UK. The company also benefits from a class leading digital-first operating platform, branded as Industrials Hive. With these two fundamental building blocks in place, we are pushing forward with delivering a differentiated customer experience, driven by operational excellence and efficiency”, commented Paul Arenson, CEO of Industrials REIT.
“A combination of land scarcity in urban areas and high build costs, even before the impact of the current high inflationary environment, continues to constrain the supply of new units. At a time when technology and e-commerce, coupled with a focus on supply chains and onshoring manufacturing, have increased the demand for flexible, quality MLI space, we have been able to grow and diversify our overall occupier base”, he said.
“This ongoing expansion and diversification of our customer base demonstrates the widespread appeal of our well-managed, affordable, and high quality MLI space to companies across a multitude of traditional and new sectors. We believe that this will provide future income resilience through our lack of reliance on any one specific business sector; we currently have over 1 500 customers occupying our units who are very diversified in their business activities. Our largest single tenant exposure comprises less than 2% of our total rent roll”.
“Despite the economic and geopolitical uncertainty at present, we remain confident that the strong fundamentals of the MLI sector should see us continue to achieve our 4% to 5% per annum rental growth rate target and our 10% total accounting return target over the coming years. We also continue to have ambitions to grow our business through further MLI acquisitions, allowing us to leverage the economies of scale and other efficiencies and benefits our technology-enabled platform affords”.
Operational performance: strong demand continues to drive rental growth
The company’s like-for-like passing rent increased 4.4% (FY2021: 5.6%). With 265 new leases agreed, the Smart Leases transactions accounted for 53% of all new lettings and renewal, shortening void periods and reducing costs.
Its portfolio ERV increased 4.3% on a like-for-like basis (FY2021: 5.1%), creating a 12.6% premium to current passing rent on occupied units which is highly supportive of future rental growth. Occupancy across its MLI portfolio remained steady at 93.6% (FY2021: 93.7%).
The company’s rental collection levels are now nearing pre-Covid levels with 93% of invoices billed in FY22 paid, resulting in a reduction in the bad debt expense to £1.3 million (FY2021: £2 million).
Financial performance: profit doubled
IFRS profit before tax doubled to £107.5 million (FY2021: £53 million), driven by MLI valuation uplifts of £89.5 million compared with £26.9 million in the prior year.
The REIT reported a 20.8% like-for-like valuation growth along with new acquisitions which helped increase its total MLI portfolio valuation to £653.5 million. Including the share of the jointly-owned care homes portfolio, its total portfolio valuation was £685.8 million at year end (FY2021: £582.3 million) with a 96.7% increase in diluted IFRS EPS to 36.68 pence (FY2021: 18.57 pence) with adjusted EPS increasing to 6.88 pence per share (31 March 2021: 6.78 pence). The company reported a 20.3% increase in diluted IFRS net asset value per share to £1.78 (FY2021: £1.48).
Its loan-to-value (LTV) currently sits at 25.6% (FY2021: 28.1%) with total debt of £196.2 million, including the share of joint venture debt, and unrestricted cash balances of £20.7 million at yearend.
The REIT’s board declared a total dividend for the year of 6.85 pence per share (2021: 6.75 pence).