Company Announcements

 

 

 

12 June 2025

Custodian Property Income REIT plc

(“the Company” or “Custodian Property Income REIT”)

 

Final results for the year ended 31 March 2025

 

Strong operational performance driving earnings growth and portfolio valuation uplift

 

Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income return by investing in a diversified portfolio of smaller regional properties with strong income characteristics across the UK, today announces its final results for the year ended 31 March 2025.

 

Commenting on the final results, Richard Shepherd-Cross, Managing Director of the Investment Manager, said: “The Company has delivered another strong year of operational performance. Our strategy of investing in smaller lot sized properties leased to institutional quality and household name occupiers has again led to our diversified portfolio delivering the income growth it is designed to achieve. Against challenging market conditions, we have delivered an average 29% rental increase at review, helping drive growth in like-for-like rent of 2.3%. This has led to a 4.9% increase in earnings per share and underpinned our fully covered dividend which offered an attractive yield of 7.9% at 31 March 2025.  With the portfolio’s estimated rental value 14% ahead of its current passing rent, there remains a clear opportunity to continue to grow income.

 

“Throughout the year we continued to make disposals, achieving an average 5% premium to the most recent valuation and 38% ahead of the assets’ pre-offer valuation, which both supports the portfolio valuation and allows us to continue to recycle capital and increase NAV.” 

 

Commenting on the final results, David MacLellan, Chairman of the Company, said:

 

“Custodian Property Income REIT remains one of only a few active and genuinely diversified property investment companies, and the Company’s differentiated property strategy positions it well to continue to deliver for long-term investors seeking an income focused opportunity.

 

“We have continued to look for ways to grow the portfolio in an environment where raising capital via the stock exchange remains challenging and last week were pleased to announce the acquisition of a meaningful commercial property portfolio that is highly complementary to our own, both in terms of geographical spread and sector diversity. The share based and net asset value (“NAV”)-for-NAV nature of this transaction allowed the vendor to resolve a succession issue and a potentially significant capital gains tax liability and, we believe, has provided a blueprint for other high net worth and family offices to follow, while helping the Company achieve its ambitions for growth.

 

“As short-term interest rates fall and investors reconnect with real estate investment for its attractive income credentials, the Company’s share price is well-placed to re-rate back towards NAV and enhance total returns. In addition, with asset prices showing signs of recovery and following the recent announcement of an all-share portfolio acquisition, the Board looks to the future with confidence.”

 

Highlights of the year:

 

• 4.9% growth in EPRA earnings per share to 6.1p (FY24: 5.8p) with a 3.5% increase in fully covered dividend per share to 6.0p reflecting a 7.9% dividend yield at 31 March 2025 (2024: 5.8p dividend, 7.2% yield)
• IFRS profit after tax increased to £38.2m (2024: £1.5m loss)
• 2.3% growth in like-for-like contractual rent to £43.9m
• Estimated rental value (“ERV”) grew 2.4%, with ERV 14% ahead of passing rent, providing a significant opportunity to unlock further rental growth through asset management and at lease events
• 15 rent reviews completed during the year across all sectors at an average 29% ahead of previous passing rent, with 64 new lettings, lease renewals and lease regears completed reflecting continued occupier demand
• Occupancy marginally decreased by 0.6% to 91.1% during the year (31 March 2024: 91.7%) but with lettings since the year end adding 0.4%
• Like-for-like valuation of the Company’s portfolio of 151 properties increased by 2.2% to £594.4m supporting a 2.9% NAV increase and contributing to a 9.5% NAV total return (2024: -0.4%). Encouragingly valuations have improved at an accelerating rate, quarter-on-quarter, as decreasing interest rates and real estate market sentiment started to be reflected
• £8.2m of capital investment during the year into the refurbishment of offices in Leeds and Manchester and industrial units in Livingston, Plymouth and Aberdeen, and solar panel installations
• £15.1m proceeds from selective disposals achieved at an aggregate 38% premium to pre-offer valuation, with a further £6.9m of disposals since year end at an aggregate 12% premium to pre-offer valuation
• Net gearing remains low at 27.9% (31 March 2024: 29.2%) with 80% at a fixed rate of interest.  Since the year end the Company’s RCF limit has been increased from £50m to £60m to maintain headroom following expected repayment of a £20m loan expiring in August 2025
• Post year end, the Company completed the purchase of a £22.1m portfolio via the all-share acquisition of a family property company. The ‘Merlin’ acquisition provides the Company with a £19.4m portfolio of 28 smaller lot-size regional UK investment properties which are highly complementary to the Company’s existing assets, as well as c. £2.7m of newly built housing stock, the ongoing sale of which is expected to conclude in the next few months, generating additional cash for the Company.

 

Further information:

 

Further information regarding the Company can be found at the Company's website custodianreit.com or please contact:

 

Custodian Capital Limited
Richard Shepherd-Cross – Managing Director Ed Moore – Finance Director Ian Mattioli MBE DL – Chairman	Tel: +44 (0)116 240 8740
	www.custodiancapital.com

 

Numis Securities Limited
Hugh Jonathan / George Shiel	Tel: +44 (0)20 7260 1000
	www.numis.com/funds

 

FTI Consulting
Richard Sunderland / Ellie Sweeney / Andrew Davis / Oliver Parsons	Tel: +44 (0)20 3727 1000
	custodianreit@fticonsulting.com

Custodian Property Income REIT plc Annual Report and Accounts for the year ended 31 March 2025

 

Custodian Property Income REIT is a UK real estate investment trust (“REIT”) which seeks to deliver an enhanced income return by investing in a diversified portfolio of smaller, regional properties with strong income characteristics let to predominantly institutional grade tenants across the UK.

 

Property highlights

	2025 £m	Comments
Portfolio value	594.4
Valuation increases[1]:	11.9	Investment property - £11.2m, representing a 2.2% like-for-like increase, explained further in the Investment Manager’s report Property, plant and equipment - £0.7m, relating to solar panels
Occupancy	91.1%	Occupancy rates have decreased from 91.7% to 91.1% due to lease expiries in Q4 but partially mitigated by new lettings since the year end
Capital investment	8.2	Primarily comprising: £2.6m extending and refurbishing an industrial unit in Livingston £1.8m completing refurbishment works at three office buildings in Leeds and Manchester £1.1m refurbishing industrial assets in Plymouth and Aberdeen £1.3m invested in solar panels across nine assets
Disposal proceeds	15.1	At an aggregate 38% premium to pre-offer valuation[2] comprising: £9.0m vacant industrial unit in Warrington £2.3m vacant former car showroom in Redhill £1.8m vacant offices in Castle Donington £0.6m industrial unit in Sheffield £1.4m vacant offices in Solihull
Disposal proceeds since the year end	6.9	At an aggregate 12% premium to pre-offer valuation comprising: £4.0m part-let offices in Cheadle £2.9m fully-let offices in Cheadle
Acquisitions since the year end	22.1	A portfolio of 28 smaller lot-sized investment properties through the corporate acquisition of Merlin Properties Limited (“Merlin”)

 

Financial highlights and performance summary

	2025	2024	Comments
Returns
*EPRA[3] earnings per share[4]	6.1p	5.8p	Increased by 4.9% due to rental growth and financing costs decreasing due to base rate reductions and property disposals
Basic and diluted earnings per share[5]	8.7p	(0.3p)	Profit resulting from a £11.2m investment property valuation increase (2024: £27.0m valuation loss)
Profit/(loss) before tax (£m)	38.2	(1.5)
Dividends per share[6]	6.0p	5.8p	Target dividend per share for the year ended 31 March 2026 of 6.0p
*Dividend cover[7]	101.3%	100.7%	In line with the Company’s policy of paying fully covered dividends
*NAV total return per share[8]	9.5%	(0.4%)	6.6% dividends paid (2024: 5.5%) and a 2.9% capital increase (2024: 5.9% capital decrease)
*Share price total return[9]	1.2%	(2.6%)	Share price decreased from 81.4p to 76.2p during the year.  Since the year-end share price has increased to 84p
Capital values
NAV and *EPRA NTA[10] (£m)	423.5	411.8	Increased due to £11.9m of valuation gains
NAV per share and *NTA per share	96.1	93.4
*Net gearing[11]	27.9%	29.2%	Reduced to 25.8% on a pro-forma basis following acquisitions and disposals since the year-end, broadly in line with the Company’s 25% target
*Weighted average cost of drawn debt facilities	3.9%	4.1%	Base rate (SONIA) decreased from 5.2% to 4.5% during the year.
Costs
*Ongoing charges ratio[12] (“OCR”)	2.48%	2.20%	Average quarterly NAV has decreased from £423.6m in FY24 to £414.8m in FY25
*OCR excluding direct property expenses[13]	1.30%	1.24%

 

Environmental
*Weighted average energy performance certificate (“EPC”) rating[14]	C (51)	C (53)	EPCs updated at certain units across 24 properties demonstrating continuing improvements in the environmental performance of the portfolio

 

*Alternative performance measures (“APMs”) - the Company reports APMs to assist stakeholders in assessing performance alongside the Company’s results on a statutory basis, set out above.  APMs are among the key performance indicators used by the Board to assess the Company’s performance and are used by research analysts covering the Company.  The Company uses APMs based upon the EPRA Best Practice Recommendations Reporting Framework which is widely recognised and used by public real estate companies.  Certain other APMs may not be directly comparable with other companies’ adjusted measures and APMs are not intended to be a substitute for, or superior to, any IFRS measures of performance.  Supporting calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out in Note 22.

Business model and strategy

 

Purpose

 

Custodian Property Income REIT offers investors access to a diversified portfolio of UK commercial real estate through a closed-ended fund.  The Company seeks to provide investors with an attractive level of income and the potential for capital growth from a portfolio with strong environmental credentials, becoming the REIT of choice for private and institutional investors seeking high and stable dividends from well-diversified UK real estate.

 

Stakeholder interests

 

The Board recognises the importance of all stakeholder interests, not just those of investors, and keeps these at the forefront of business and strategic decisions, ensuring the Company:

 

• Understands and meets the needs of its occupiers, owning fit for purpose properties with strong environmental credentials in the right locations which comply with regulations;

• Protects and improves its stable cash flows with long-term planning and decision making, implementing its policy of paying dividends fully covered by recurring earnings and securing the Company’s future; and

• Adopts a responsible approach to communities and the environment, actively seeking ways to minimise the Company’s impact on climate change and providing the real estate fabric of the economy, giving employers a place of business.

 

Investment Policy summary

 

The Company’s investment policy[15] is summarised below:

 

• To invest in a diverse portfolio of UK commercial real estate, principally characterised by smaller, regional, core/core-plus[16] properties that provide enhanced income;
• The property portfolio should be diversified by sector, location, tenant and lease term, with a maximum weighting by income to any one property sector or geographic region of 50%;
• To acquire modern buildings or those considered fit for purpose by occupiers, focusing on areas with:

• High residual values;
• Strong local economies; and
• An imbalance between supply and demand.

• No one tenant or property should account for more than 10% of the rent roll at the time of purchase, except for:

• Governmental bodies or departments; or
• Single tenants rated by Dun & Bradstreet as having a credit risk score worse than two[17], where exposure may not exceed 5% of the rent roll.

• Not to undertake speculative development, except for the refurbishment or redevelopment of existing holdings;
• To seek further growth, which may involve strategic property portfolio acquisitions and corporate consolidation; and
• The Company may use gearing provided that the maximum loan-to-value (“LTV”) shall not exceed 35%, with a medium-term net gearing target of 25% LTV.

 

The Board reviews the Company’s investment objectives at least annually to ensure they remain appropriate to the market in which the Company operates and in the best interests of shareholders.

 

Differentiated property strategy

 

The Company’s portfolio is focused on smaller, regional assets which helps achieve our target of high and stable dividends from well-diversified real estate by offering:

 

• An enhanced yield on acquisition – with no need to sacrifice quality of property, location, tenant or environmental performance for income and with a greater share of value in ‘bricks and mortar’ rather than the lease;
• Greater diversification – spreading risk across more assets, locations and tenants and offering more stable cash flows; and
• A higher income component of total return – driving out-performance with forecastable and predictable returns.

 

Success in achieving the Company’s performance and sustainability objectives is primarily measured by performance against key performance indicators set out in detail in the Financial review and ESG Committee reports respectively. The Principal risks and uncertainties section of the Strategic Report sets out potential risks in achieving the Company’s objectives.

 

Richard Shepherd-Cross, Managing Director of the Investment Manager, commented: "Our smaller-lot specialism has consistently delivered significantly higher yields with lower volatility without exposing shareholders to additional risk”.

 

Growth strategy

 

The Board is committed to seeking further growth in the Company to increase the liquidity of its shares and reduce ongoing charges. Our growth strategy involves:

 

• Strategic property portfolio acquisitions and corporate consolidation, in particular identifying portfolios held by family offices seeking a solution to succession and latent tax issues;
• Organic growth through share issuance at a premium to NAV;
• Broadening the Company’s shareholder base, particularly through further penetration into online platforms;
• Becoming the natural choice for private clients and wealth managers seeking to invest in UK real estate; and
• Taking investor market share from open-ended funds and peer group companies being wound down.

 

The Board ensures that property fundamentals are central to all decisions.

 

Diverse portfolio with institutional grade tenants

Sector Weighting by income 31 March 2025     Industrial 42% Retail warehouse 22% Office 16% Other 13% High street retail 7%

Location Weighting by income 31 March 2025     West Midlands 20% North-West 19% East Midlands 13% Scotland 13% South-East 11% South-West 10% North-East 9% Eastern 4% Wales 1%

 

Top 10 tenants	Asset locations	Annual passing rent (£m)	% portfolio income
Menzies Distribution	Aberdeen, Edinburgh, Glasgow, Ipswich, Norwich, Dundee, Swansea, York	1.7	3.9%
Wickes Building Supplies	Winnersh, Burton upon Trent, Southport, Nottingham, Leighton Buzzard	1.5	3.5%
B&M Retail	Swindon, Ashton-under-Lyne, Plymouth, Carlisle	1.4	3.1%
B&Q	Banbury, Weymouth	1.0	2.3%
Matalan	Leicester, Nottingham	1.0	2.2%
First Title (t/a Enact Conveyancing)	Leeds	0.9	2.1%
DFS	Droitwich, Measham	0.9	2.0%
Zavvi	Winsford	0.7	1.7%
Next	Evesham, Motherwell	0.7	1.6%
Nicwood Logistics	Burton upon Trent	0.6	1.5%

 

 

	Experian tenant risk rating
Sector	31 March 2025	31 March 2024
Government	1%	2%
Very low risk	62%	57%
Low risk	11%	8%
Below average risk	11%	13%
Above average risk	5%	8%
High risk	1%	2%
Other	9%	10%

 

Our environmental, social and governance (“ESG”) objectives

 

• Improving the energy performance of our buildings - investing in carbon-reducing technology, infrastructure and onsite renewables and ensuring redevelopments are completed to high environmental standards which are essential to the future leasing prospects and valuation of each property
• Reducing energy usage and emissions - liaising closely with our tenants to gather and analyse data on the environmental performance of our properties to identify areas for improvement
• Achieving positive social outcomes and supporting local communities - engaging constructively with tenants and local government to ensure we support the wider community through local economic and environmental plans and strategies and playing our part in providing the real estate fabric of the economy, giving employers safe places of business that promote tenant well-being
• Understanding environmental risks and opportunities - allowing the Board to maintain appropriate governance structures to ensure the Investment Manager is appropriately mitigating risks and maximising opportunities
• Complying with all requirements and reporting in line with best practice where appropriate - exposing the Company to public scrutiny and communicating our targets, activities and initiatives to stakeholders
• Governance - maintaining high standards of corporate governance and disclosure to ensure the effective operation of the Company and instil confidence amongst our stakeholders.  We aim to continually improve our levels of governance and disclosure to achieve industry best practice

 

 

Investment Manager

 

Custodian Capital Limited (“the Investment Manager”) is appointed under an investment management agreement (“IMA”) to provide property management and administrative services to the Company.  Richard Shepherd-Cross is Managing Director of the Investment Manager.  Richard has 30 years’ experience in commercial property, qualifying as a Chartered Surveyor in 1996 and until 2008 worked for JLL, latterly running its national portfolio investment team.

 

Richard established Custodian Capital Limited as the Property Fund Management subsidiary of Mattioli Woods Limited (“Mattioli Woods”) and in 2014 was instrumental in the launch of Custodian Property Income REIT from Mattioli Woods’ syndicated property portfolio and its 1,200 investors.  Following the successful IPO of the Company, Richard has overseen the growth of the Company to its current property portfolio of c. £600m.

 

Richard is supported by the Investment Manager’s other key personnel: Ed Moore - Finance Director and Alex Nix - Assistant Investment Manager, along with a team of five other surveyors and five accountants.
 

Chairman’s statement

 

A changing and more challenging global political landscape during the year has resulted in tensions and uncertainty running high in parts of the world.  In the UK, it is still early days for the new Labour government but uncertainty is never good for any economy, including the real estate sector.

 

While commercial property in the UK is showing signs of recovering value on the back of increased occupier activity and growing rents, the share prices of listed real estate companies do not yet reflect this recovery with many shares in these companies continuing to trade at discounts to net asset values.  As a result of these, in some cases, quite wide discounts there has been increased corporate activity in the listed real estate sector with mergers, take-privates and managed wind downs a feature of the last twelve months following the arrival of more activist shareholders.

 

In my Chairman’s statement last year, I reflected that the Company could soon be one of only a few active and genuinely diversified property investment companies available to investors in the listed sector.  It would appear that this reflection has proved prescient, however, as I note in the following paragraphs, the Company is well positioned with a diversified portfolio of performing real estate assets which are providing a strong yield from a fully covered dividend.

 

Performance

 

Custodian Property Income REIT’s strategy is to invest in a diversified portfolio which, at 31 March 2025, comprised 151 properties geographically spread throughout the UK and across a diverse range of sectors.  The year-end portfolio valuation reflected a net yield (“NIY”) of 6.6%[18] (31 March 2024: 6.6%).  With an average property value of c.£4m and no one tenant or property accounting for more than 3.9% or 1.75% of the Company’s rent roll respectively, property specific risk and tenant default risk are significantly mitigated.

 

The Company’s NAV increased by 2.9% during the year, contributing to a 9.5% NAV total return, and at an accelerating rate, quarter-on-quarter, as the impact of decreasing interest rates and real estate market sentiment started to be reflected in valuations.  However, this positive underlying property portfolio performance does not yet appear to be reflected in the share price performance and it is disappointing that the share price total return for the year is only 1.2% which lags the NAV total return of 9.5% (2.9% capital growth and 6.6% income).

 

One of the challenges of the performance for listed real estate over the last 12 months has been the rise in the 10-year gilt yield, which has always been correlated to listed real estate ratings.  The 10-year gilt yield rose from 4.0% in March 2024, to 4.9% in January 2025, and was 4.6% at the year end.  This historically high and volatile rate has had a direct impact on ratings, but set against Custodian Property Income REIT’s dividend yield as at 31 March 2025 of 7.9%, fully covered by earnings and supported by rental growth and a falling cost of variable rate debt, this appears to be a generous margin.

 

Custodian Property Income REIT employs sector expertise, with high quality asset management, covenant management and portfolio construction, to provide an institutional offering to shareholders in a diversified regional portfolio, that generates a superior income return.  Notwithstanding recent volatility in pricing and acknowledging that 2024 witnessed the bottom of a property valuation cycle, the Company can still look back over an average annual NAV total return of 5.6% in the 11 years since IPO, driven by strong recurring earnings with fully covered dividends.

 

The NAV of the Company at 31 March 2025 was £423.5m, approximately 96.1p per share:

 

	Pence per share	£m
NAV at 31 March 2024	93.4	411.8
Valuation increases and depreciation	2.7	11.7
Profit on disposal of investment property	0.1	0.4
Net gain on property portfolio	2.8	12.1
EPRA earnings	6.1	26.8
Quarterly dividends paid during the year[19]	(5.9)	(25.9)
	0.2	0.9
Special dividend paid during the year relating to FY24	(0.3)	(1.3)
NAV at 31 March 2025	96.1	423.5

 

Investment property and PPE valuations increased by £11.9m during the year, of which £10.4m was delivered in the second half, demonstrating the current upward trajectory and returning the Company a positive NAV total return per share of 9.5%.  A detailed property valuation commentary is given in the Investment Manager’s report.  The movement in NAV also reflects the payment of interim dividends during the year, but does not include any provision for the approved dividend of 1.5p per share relating to Q4 which was paid on Friday 30 May 2025.

 

Dividends

 

The Company’s commitment to a property strategy that supports a relatively high dividend, fully covered by EPRA earnings, remains a defining characteristic and in May 2024 the Board announced a 9% increase in the annual target dividend per share from 5.5p to 6.0p.  This dividend increase reflected the improving earnings characteristics of the Company’s portfolio through asset management initiatives crystallising rental growth and the profitable disposal of vacant properties increasing occupancy. 

 

Our Investment Manager continues to keep a tight control on costs, while the Company’s substantially fixed-rate debt profile is keeping borrowing costs below the current market rate.  Based on the current forward interest rate curve the Board expects that the ongoing cost of the Company’s revolving credit facility will fall during the next 12 months, tempering the impact of expiry of a £20m fixed-rate loan in August 2025. 

 

The Board’s objective remains to continue to grow the dividend at a rate which is fully covered by net rental income and does not inhibit the flexibility of the Company’s investment strategy.

 

Borrowings

 

The Company’s net gearing decreased from 29.2% LTV at 31 March 2024 to 27.9% during the year.  Property disposals and the acquisition of Merlin since the year end have reduced pro-forma net gearing to 25.8%, drawing the LTV closer to the Company’s 25% medium-term target.

 

The proportion of the Company’s drawn debt facilities with a fixed rate of interest was 80% at 31 March 2025 (2024: 78%), significantly mitigating interest rate risk for the Company and maintaining the accretive margin between the Company’s 3.9% (2024: 4.1%) weighted average cost of debt and property portfolio EPRA topped-up NIY[20] of 6.6% (2024: 6.6%). 

 

The Company’s debt is summarised in Note 16.

 

Acquisitions

 

On 30 May 2025 the Company acquired 100% of the ordinary share capital of Merlin Properties Limited for an initial consideration of 22.9m new ordinary shares in the Company (“the Transaction”).  A second tranche of consideration, expected to comprise c. 1.7m shares, will be payable within the next six months following approval of completion accounts drawn up to the acquisition date.  Aggregate consideration will be calculated on an ‘adjusted NAV-for-NAV basis’, with each company’s NAV being adjusted for respective acquisition costs and Merlin’s investment property portfolio valuation adjusted to the agreed purchase price of £19.4m. 

 

Merlin’s property portfolio is summarised below:

 

• Investment property portfolio value of £19.4m comprising 28 regional commercial properties, primarily located in the East Midlands, with sector splits by passing rent set out below:

 

Merlin portfolio sector splits
Industrial	47%
Retail warehouse	19%
Office	17%
High street retail	13%
Other	4%
	100%

 

• 10 newly built residential properties largely under offer to sell valued at c. £2.7m
• 74% of passing rent is generated from the 10 largest assets, with Halfords representing the largest tenant (5% of the £1.7m rent roll)

 

The Transaction provides us with a portfolio that is both a strong fit with our income-focused strategy and highly complementary to our existing property portfolio, augmenting our regional, industrial bias and adding further diversification by tenant.  The Merlin portfolio has a topped-up NIY of 8.1%, ahead of the Company’s equivalent of 6.6%, making it immediately earnings-accretive, and is ungeared so reduces the Company’s pro-forma net gearing by c. 1%.

 

Hubert Lynch, Founder Director of Merlin Properties Limited, said: “Operating the Merlin portfolio, which our family has compiled and managed over the last 40 years, had become increasingly demanding in today’s complex environment. We have undertaken the Transaction in a tax efficient manner to ensure our family’s continued exposure to property investment both currently and for future generations through a professionally managed fund with a strong track record.  As already significant, supportive shareholders of Custodian Property Income REIT we have a strong relationship with the Investment Management team which we look forward to continuing for many years.”

 

Custodian Property Income REIT remains committed to growth and over the first 11 years of trading the Company has grown, largely organically, but also via corporate acquisitions, with an over six-fold increase in the size of the portfolio from £90m of property assets at IPO to a pro-forma c. £610m following the Merlin acquisition and disposals since the year end.  This growth has improved shareholder liquidity and increased diversification, mitigating property specific and tenant risk while stabilising earnings.

 

Following the Merlin acquisition, the Board of Custodian Property Income REIT and the Investment Manager are actively exploring further opportunities to purchase complementary portfolios via mergers or corporate acquisitions.

 

Sustainability

 

The Company has made further progress in implementing its environmental policy during the year, improving its weighted average EPC score from C (53) to C (51) following further refurbishments within the portfolio.  The Company’s Asset Management and Sustainability report is available at: 

 

custodianreit.com/environmental-social-and-governance-esg/

 

This report contains details of the Company’s asset management initiatives with a clear focus on their impact on ESG, including case studies of recent positive steps taken to improve the environmental performance of the portfolio.

 

Cost disclosure exemption

 

We welcome the Financial Conduct Authority’s exemption of investment companies (including REITs) from the Packaged Retail and Insurance-based Investment Products (“PRIIPs”) and Markets in Financial Instruments Directive II (“MiFID II”) regulation.  Since 2018 this regulation has obliged wealth managers and platforms to make cost disclosures to clients that were ‘fundamentally misleading’[21] by being presented as being borne by investors despite actually being incurred by the Company and included within reported investment performance[22].

 

Exacerbated by more recent Consumer Duty regulations these cost disclosures, which also result in investment companies’ management costs appearing spuriously more expensive than alternative structures, are likely to have curtailed investment demand for the Company’s shares over the last six years. 

 

As the investment industry gradually adjusts to this change, we expect the Company’s competitive cost structure and high returns to be very attractive to new investors seeking strong returns from UK real estate.
 

Investment Manager

 

The performance of the Investment Manager is reviewed each year by the Management Engagement Committee.  During the year the fees charged by the Investment Manager were £3.9m (2024: £4.0m) in respect of annual management and administrative transaction fees, resulting in an ongoing charges ratio excluding direct property expenses of 1.30% (2024: 1.24%), which compares favourably to the peer group.  Further details of fees payable to the Investment Manager are set out in Note 19.

 

The Board continues to be pleased with the performance of the Investment Manager, noting particularly the successful acquisition of Merlin, continued positive asset management initiatives and capital improvements to the Company’s portfolio, with resulting valuation increases, enhanced environmental performance and maintained occupancy and income.  As a result the Board supports the continued appointment of the Investment Manager.

 

On 3 September 2024, 100% of the ordinary share capital of Mattioli Woods, the Investment Manager’s parent company, was acquired by Tiger Bidco Limited, a wholly-owned subsidiary of investment vehicles advised and managed by Pollen Street Capital Limited.  The Board is not expecting any operational changes to result from this transaction.

 

Board

 

On 6 November 2024 Ian Mattioli MBE DL stepped down from the Board to focus on capitalising on the market opportunity in UK wealth management in his role as Chief Executive Officer of Mattioli Woods, following its transition to private ownership.  On behalf of the Board and our shareholders I thank Ian for his invaluable support and contribution as Founder Director of the Company since IPO in 2014.  Ian and his family are expected to remain major, long-term shareholders in the Company and he will continue to serve a valuable role for the Company in his capacity as chair of the Investment Manager and as a member of its Investment Committee.

 

Also on 6 November 2024 Nathan Imlach, who is currently Chief Strategic Adviser to Mattioli Woods focusing on acquisitions and contributing to its future direction, was appointed to the Board for a transition period up until no later than the end of 2025.  Following that transition period the Company’s Board will become fully independent from the Company’s Investment Manager.

 

The Board is conscious of the importance stakeholders place on diversity and understands a diverse Board brings constructive challenge and fresh perspectives to discussions. The Company follows the AIC Corporate Governance Code and our policy on board diversity is summarised in the Nominations Committee report.  From the start of 2026, the Board expects to meet the FCA’s target for 40% female Board representation.  Custodian Property Income REIT is an investment company with no Executive Directors and a small Board compared to equivalent size listed trading companies. The Board welcomes the gender and ethnic diversity offered by the Investment Management team working with the Company.

 

At the Company’s AGM on 8 August 2024 the resolution to re-elect Elizabeth McMeikan as a Director of the Company (“the Resolution”) received votes against of 24.7% (2023: 23.7%), which comprised 6.8% (2023: 5.8%) of total shareholders.  Feedback from shareholders indicates that votes against the Resolution were primarily a result of perceived ‘over-boarding’, due to Elizabeth’s roles as Chair of Nichols plc and Non-Executive Director of Dalata Hotel Group plc and McBride plc.  These Directorships are within the number of ‘mandates’ permitted by Institutional Shareholder Services (“ISS”), a leading provider of corporate governance and responsible investment solutions to leading institutional investors, which supported the Resolution.  Votes against the Resolution were primarily from institutional shareholders applying stricter internal voting policies than ISS by allowing fewer ‘mandates’, and their voting policies do not acknowledge the generally lower time commitments as Directors of investment companies or companies of a relatively small size.

 

I believe additional roles offer Directors helpful insight and experience which benefits the Boards on which they sit and I do not intend to ask any fellow Directors to reduce their additional roles.  Along with all of the Directors, Elizabeth is a diligent and important member of the Board and I am grateful to all of them for their contributions and support.

 

Outlook

 

The Board appreciates the support of its wide range of shareholders with the majority classified as private client or discretionary wealth management investors.  Custodian Property Income REIT’s investment and dividend strategy, and diversified portfolio are well suited to investors looking for a close proxy to direct real estate investment but in a managed and liquid structure. 

 

The Board believes strongly in the benefits of diversification in mitigating property and sector specific risk, while delivering dividends that are fully covered by recurring earnings and generally higher than sector specialists.  The Board also remains firm in its belief that this strategy is well suited to long-term investors in real estate, allowing for the timely execution of acquisitions and disposals without the constraints of sector specificity, while setting the Company apart from the single sector, often higher risk funds.

 

The Company’s Investment Manager has curated a portfolio that focuses on long-term income and income growth, through careful stock selection and a balance between the main commercial property sectors, weighted to those that should offer the greatest rental growth potential.  This portfolio has supported growing earnings, fully covered by growing dividends, with 101.3% dividend cover for the year (2024: 100.7%).  Income and income growth are likely to form the greater component of total return over the next phase of the property cycle if long-term interest rates continue to stay high with persistent inflation.

 

However, as short-term interest rates fall and investors re-connect with real estate investment for its attractive income credentials, Custodian Property Income REIT’s share price is well-placed to re-rate and trend back towards NAV, enhancing the total return for all of our shareholders.  In addition, with asset prices showing signs of recovery and the recent announcement of the Merlin portfolio acquisition, the Board looks to the future with cautious confidence.

 

 

David MacLellan

Chairman

11 June 2025

 

Investment Manager’s report

 

The UK property market

 

At a property market level, it is encouraging that the evidence is once again supportive of a recovery in the fortunes of UK commercial real estate.  Transaction volumes have been increasing, albeit there has been a slight hiatus as the world reacts to US trade policy.  Of note is the increased investment in the office sector, with a focus on grade A city centre buildings.  The industrial and logistics sector continues to be popular and there is renewed focus on out-of-town retail/retail warehousing.  Since the middle of last year, we have seen a further stabilisation of valuations as well as some increases during recent quarters, driven mainly by rental growth but also through emerging yield compression.

 

The consistent thread in the story of UK commercial real estate is positive occupier activity, with declining vacancy rates in prime locations and increased leasing activity, particularly in the office sector, as companies finalise their return-to-office strategies.  While there is evidence of developments restarting and new planning applications increasing, the lack of development over the last two/three years is maintaining pressure on supply and supporting rental growth.

 

Post year-end, Custodian Property Income REIT’s share price experienced volatility in line with the wider stock market, but perhaps this reaction will settle into a more considered position for real estate.  It would not be unreasonable to expect that during periods of trade uncertainty, UK real estate can be seen as a safe haven, as investors seek stable income, with asset backing in established and secure jurisdictions.  This should be particularly true for the Company’s investment strategy that generally targets sub £10m, regional, UK assets, that principally serve a local and/or domestic market. 

 

The fully covered dividend per share for the year of 6.0p offered a dividend yield of 7.9% at the year end (2024: 5.8p dividend, 7.2% yield), as weak economic confidence pushed the share price to a discount to NAV of c.19%.  While we believe this fundamentally undervalues the security and quality of income offered through our fully covered dividend, and despite the fact that we continually demonstrate our ability to realise sales at premiums to book value, the discount remains less than the UK listed real estate market average discount of c. 28%.  This suggests that while investors value the income, they also still overplay the risk in UK real estate which should be set against a backdrop of falling interest rates, rising property prices, growing rents and falling vacancy rates which are normally associated with a reduction in risk.

 

No commentary on UK listed real estate would be complete without considering the corporate activity that has swept through the sector.  Comprising mergers, acquisitions, wind downs, strategic reviews and take-privates, the common theme is that private equity is seeing value in the sector.  Against the average market discount to NAV of c.28%, most corporate activity is pricing transactions at between a 0% and 12% discount to NAV, which highlights the disparity in perceptions of value.

 

As these perceptions of value merge, we should expect to see a recovery in ratings across the sector, which adds further support to our view that the sector is currently under-valued.

 

On a sectoral basis there has been positive news for all the main commercial property sectors.  Industrial and logistics continue to lead the way on rental growth, but we have also recorded rental growth in retail warehousing, offices and high street retail.

 

The table below shows the reversionary potential of the portfolio by sector, by comparing EPRA topped-up NIY to the equivalent yield, which factors in expected rental growth and the letting of vacant units.  Across the whole portfolio, valuers’ ERV are 14% (2024: 15%) ahead of passing rent and while part of the reversionary potential is due to vacancy, the balance is this latent rental growth which will be unlocked at rent review and lease renewal.

Sector	EPRA topped-up NIY 31 March 2025	Equivalent yield[23]  31 March 2025	EPRA topped-up NIY 31 March 2024	Equivalent yield  31 March 2024
Industrial	5.5%	6.9%	5.4%	6.7%
Retail warehouse	7.5%	7.6%	8.0%	7.4%
Other	7.7%	8.4%	7.1%	8.0%
Office	8.1%	11.1%	7.1%	9.8%
High street retail	9.4%	8.4%	9.9%	8.1%
	6.6%	7.8%	6.6%	7.5%

 

Prevailing property investment approach

 

Based on our assessment of the current market, our strategy to maintain a regionally focused diversified portfolio, as set out below, has proven resilient.  We expect to reinvest the proceeds from selective disposals in funding capital expenditure to improve the environmental credentials of the portfolio and to pay down variable rate debt.  Over the long-term we intend to focus on:

 

• Maintaining weighting to industrial and logistics – assets in this sector still have latent rental growth and strong occupier demand for small/’mid-box’ units;
• Retail warehousing let off low rents which are starting to show rental growth and supply side restrictions;
• Selective regional offices with a focus on strong city centre locations instead of out-of-town business parks;
• Drive-through expansion involving acquisition and development where rental growth is anticipated;
• Selective high street retail assets in the country’s strongest locations where rents have stabilised and there is potential for growth; and
• Refurbishment of existing property, maximising all opportunities to invest in the quality of our assets and support our ESG goals.

 

Sectoral view

 

Industrial and logistics

 

Rental growth remains strongest in the industrial and logistics sector which accounts for the largest share of the Company’s rent roll.  Lack of supply, and in some urban areas reducing supply, limited development of smaller and ‘mid-box’ industrial units and construction cost inflation have all combined to focus occupational demand and create low vacancy rates, driving rental growth for new-build regional industrial units and well specified, refurbished space.  The industrial sector is also providing the greatest opportunity for solar panels, generally referred to as photovoltaic (“PV”) installations, which is not only delivering on our environmental commitments but also growing revenue through the sale of the electricity generated to tenants via a power purchase agreement.  In the three months to 31 March 2025 the Company recorded income of £0.1m from 10 PV installations currently operational at industrial sites.  12 new installations are currently under consideration.

 

In summary:

 

• Occupational demand is robust
• Limited supply of modern, ‘low carbon’, buildings
• Latent rental growth potential
• Target sector for well-priced opportunities

 

Retail warehouse

 

Retail warehousing is the sector which the Investment Property Forum Consensus Forecast expects to record the highest total return, showing some rental growth but with strong capital performance.  Our preferred sub-sectors are food, homewares, DIY and the discounters.  Vacancy rates are very low and future rental growth appears affordable for occupiers. 

 

The combination of convenience, lower costs per square foot and the complementary offer to online retail has kept these assets trading strongly.  As the second largest sector in the Custodian Property Income REIT portfolio, the recovery in market sentiment towards out-of-town retail is positive and vacancy rates remain low.

 

In summary:

 

• Units let off low rents
• Lower costs of occupation
• Complementary to online

 

Offices

 

In the office sector, we have pursued a strategy of reducing exposure to business park assets, where we believe tenant demand is weaker and rental growth prospects are much more limited.  While only a small percentage of the portfolio, where we have retained offices, they have been city centre buildings that can be or have been brought up to modern occupier requirements and have low environmental impact standards.

 

In summary:

 

• Occupier demand is stronger in city centre locations
• Strong rental growth in select locations
• Valuations have stabilised

 

High street retail

 

We continue to see low vacancy rates in prime locations and occupier demand, from both retail and leisure operators, should be supportive of future rental growth.

 

In summary:

 

• Low vacancy rates in prime locations
• Rents are starting to show growth
• Rental yields support dividends

 

 

Other

 

Sub-sector of ‘Other’ sector assets	Weighting by income 31 March 2025	Weighting by income 31 March 2024
Gym	20%	18%
Drive-through	17%	17%
Motor trade	16%	17%
Pub and restaurant	15%	15%
Other, including day nursery and hotel	13%	13%
Leisure	12%	13%
Trade counter	7%	7%
	100%	100%

 

Property portfolio balance

 

Property portfolio summary

	2025	2024
Property portfolio value[24]	£594.4m	£589.1m
Separate tenancies	349	335
EPRA vacancy rate	8.9%	8.3%
Assets	151	155
Weighted average unexpired lease term to first break of expiry (“WAULT”)	5.0 years	4.9 years
EPRA topped-up NIY	6.6%	6.6%
Weighted average EPC rating	C (51)	C (53)

 

The property portfolio is split between the main commercial property sectors in line with the Company’s objective to maintain a suitably balanced investment portfolio.  The Company’s strategy since IPO has been a relatively low exposure to office and high street retail combined with a relatively high weighting to the industrial and alternative sectors, often referred to as ‘other’ in property market analysis.
 

The current sector weightings are:

Sector	Valuation 31 March 2025  £m	Weighting by income[25] 31 March 2025	Valuation 31 March 2024  £m	Weighting by income 31 March 2024	Valuation movement £m	Weighting by value 31 March 2025	Weighting by value 31 March 2024
Industrial	298.3	42%	291.4	40%	11.6	50%	49%
Retail warehouse	127.3	22%	122.7	23%	4.4	21%	21%
Other	78.2	13%	78.8	13%	0.5	13%	13%
Office	57.7	16%	63.9	16%	(5.7)	10%	11%
High street retail	32.9	7%	32.3	8%	0.4	6%	6%
Total	594.4	100%	589.1	100%	11.2	100%	100%

 

For details of all properties in the portfolio please see custodianreit.com/property/portfolio.

 

Disposals

 

Owning the right properties at the right time is a key element of effective property portfolio management, which necessarily involves periodically selling properties to balance the property portfolio.  Custodian Property Income REIT is not a trading company but identifying opportunities to dispose of assets significantly ahead of valuation or that no longer fit within the Company’s investment strategy is important.

 

The Company sold the following properties during the year for an aggregate £15.1m, 5% ahead of the most recent valuation and 38% ahead of their pre-offer valuation:

 

• A vacant industrial unit in Warrington for £9.0m to a developer;
• A vacant former car showroom in Redhill for £2.35m to a developer;
• Vacant offices in Castle Donington for £1.75m to a flexible office provider;
• Vacant offices in Solihull for £1.4m to an owner-occupier; and
• One unit of a two-unit industrial asset in Sheffield to an owner-occupier for £0.55m.

 

Since the year end the Company has sold:

 

• Part-let offices in Cheadle for £4.0m; and
• Fully-let offices in Cheadle for £2.9m.

 

Asset management

 

During the year we have remained focused on active asset management, completing 15 rent reviews at an aggregate 29% increase in annual rent from £2.5m to £3.2m, along with 64 new lettings, lease renewals and lease regears, with rental levels remaining affordable to our occupiers. 

 

During the year we deployed £8.2m on property refurbishments including £1.3m installing solar panels.  £2.6m of this capital expenditure related to the pre-let extension of an industrial building in Livingston, allowing the occupier to expand and achieve its plans for growth.  The extension achieved practical completion in May 2025, increasing annual rent by c.£0.2m.

 

ESG

 

The sustainability credentials of both the building and the location have become ever more important for occupiers and investors.  As Investment Manager we are absolutely committed to achieving the Company’s challenging goals in relation to ESG and believe the real estate sector should be a leader in this field.

 

The weighted average EPC across the portfolio is following a positive trajectory towards an average B rating (equivalent to a score of between 25 and 50).  With energy efficiency a core tenet of the Company’s asset management strategy and with tenant requirements aligning with our energy efficiency goals we see this as an opportunity to secure greater tenant engagement and higher rents. 

 

During the year the Company has updated EPCs at 35 units across 24 properties where existing EPCs had expired or where works had been completed, improving the weighted average EPC rating from C (53) at 31 March 2024 to C (51). 

 

 

Richard Shepherd-Cross

Managing Director

for and on behalf of Custodian Capital Limited

Investment Manager

11 June 2025

 

Financial review

 

A summary of the Company’s financial performance for the year is shown below:

 

 

Revenue

 

Rental revenue increased by 1.5% compared to the year ended 31 March 2024 with year-end contractual passing rent increasing by 1.9% from £43.1m to £43.9m during the year (a 2.3% like-for-like increase).  The £0.4m impact on year-end passing rent from an overall 0.6% decrease in occupancy was more than offset by annual rental growth of £1.2m, of which £1.1m was from the industrial sector.

 

During the year we deployed £1.3m on PV installations at nine assets (2024: £2.1m) and associated ‘other’ revenues have increased by 144% as a result.  We expect PV revenues to continue to grow as recent installations go live and we continue to roll-out PV via our pipeline of anticipated refurbishments.

 

Finance costs

 

During the year we deployed £8.2m (2024: £19.0m) of variable rate debt on property refurbishments and installing solar panels.  This capital expenditure was funded by £15.1m of disposal proceeds with the balance used to pay down the Company’s variable rate revolving credit facility (“RCF”) facility.  With a net decrease in the drawn RCF balance and base rate (SONIA) decreasing from c.5.2% to c.4.5% during the year, net finance costs decreased by £0.7m.

 

Earnings

 

These positive movements in rent and finance costs increased EPRA earnings per share to 6.1p (2024: 5.8p).  This increase in recurring earnings demonstrates the robust nature of the Company’s diverse property portfolio.

 

During the year sentiment towards real estate improved despite concerns over high long-term gilt rates and the outlook for medium-term earnings.  Like-for-like valuation increases were 2.2% following two years of previous decreases and over the year these outlook improvements resulted in an £11.2m valuation increase (2024: £27.0m decrease) and an associated profit before tax of £38.2m (2024: £1.5m loss).

 

Dividends

 

The Board acknowledges the importance of income for shareholders and during the year its policy was to pay dividends at a rate fully covered by net rental income which does not inhibit the flexibility of the Company’s investment strategy.

 

The Company paid dividends totalling 6.175p per share during the year (£27.2m) comprising a fourth interim dividend relating to the year ended 31 March 2024 of 1.375p, a special dividend relating to FY24 of 0.3p, and three quarterly interim dividends of 1.5p per share relating to the year ended 31 March 2025.

 

On Friday 30 May 2025 the Company paid a fourth quarterly interim dividend per share of 1.5p for the quarter ended 31 March 2025 of £6.6m.  Dividends relating to the year ended 31 March 2025 of 6.0p (2024: 5.8p) were 101.3% (2024: 100.7%) covered by EPRA earnings of £26.8m (2024: £25.7m), as calculated in Note 22.

 

Debt financing

 

The Company operates with a conservative level of net gearing, with target borrowings over the medium-term of 25% of the aggregate market value of all properties at the time of drawdown.  The Company’s net gearing decreased from 29.2% LTV last year to 27.9% at the year-end primarily due to £11.9m of valuation increases and a net £6.9m receipt from disposals and capital deployment.

 

On 23 January 2025 the Company and Lloyds Bank plc (“Lloyds”) agreed to extend the term of the RCF by one year to expire on 10 November 2027.  An option remains in place to extend the term by a further year to 2028, subject to Lloyds’ consent.  The RCF includes an ‘accordion’ option, with the facility limit increased from £50m to £60m since the year end, which can be increased up to £75m subject to Lloyds’ agreement. 

 

At the year end the Company had the following facilities available:

 

• A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA, determined by reference to the prevailing LTV ratio of a discrete security pool of assets, and expiring on 10 November 2027 (with an extension option to 2028).  The facility limit can be increased to £75m with Lloyds’ approval;
• A £20m term loan facility with Scottish Widows Limited (“SWIP”) repayable in August 2025, with fixed annual interest of 3.935%;

• A £45m term loan facility with SWIP repayable in June 2028, with fixed annual interest of 2.987%; and
• A £75m term loan facility with Aviva Real Estate Investors (“Aviva”) comprising:

• A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
• A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
• A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.

 

Each facility has a discrete security pool, comprising a number of the Company’s individual properties, over which the relevant lender has security and the following covenants:

 

• The maximum LTV of each discrete security pool is either 45% or 50%, with an overarching covenant on the Company’s property portfolio of a maximum of either 35% or 40% LTV; and
• Historical interest cover, requiring net rental income from each discrete security pool, over the preceding three months, to exceed either 200% or 250% of the facility’s quarterly interest liability.

 

At the year end the Company had £103.5m (17% of the property portfolio) of unencumbered assets which could be charged to the security pools to enhance the LTV on the individual loans.   A £1.9m unencumbered industrial asset in Dundee is in the process of being charged to the Aviva loan pool.

 

The weighted average cost of the Company’s drawn debt facilities at 31 March 2025 was 3.9% (2024: 4.1%), with a weighted average maturity of 4.5 years (2024: 5.3 years).  At 31 March 2025 the Company had £35.0m (2024: £39.0m) drawn under its Lloyds RCF, meaning 80% (2024: 78%) of the Company’s drawn debt facilities were at fixed rates of interest. 

 

This high proportion of fixed rate debt significantly mitigates long-term interest rate risk for the Company and provides shareholders with a beneficial margin between the fixed cost of debt and income returns from the property portfolio.

 

The Board intends to utilise the Company’s variable rate RCF to repay the £20m fixed rate loan with SWIP due to expire in August 2025 and since the year end has increased the RCF facility limit from £50m to £60m to provide headroom.  The Board intends to consider longer-term options once financial markets are more stable.

 

Key performance indicators

 

The Board reviews the Company’s quarterly performance against a number of key financial and non-financial measures:

 

• EPS and EPRA EPS – reflect the Company’s ability to generate recurring earnings from the property portfolio which underpin dividends;
• Dividends per share and dividend cover - to provide an attractive level of income to shareholders, fully covered from net rental income.  The Board reviews target dividends in conjunction with detailed financial forecasts to ensure that target dividends are being met and are maintainable;
• Target dividend per share – an expectation of the Company’s ability to deliver an income stream to shareholders for the forthcoming year;
• NAV per share total return – reflects both the NAV growth of the Company and dividends payable to shareholders.  The Board assesses NAV per share total return over various time periods and compares the Company's returns to those of its peer group of listed, closed-ended property investment funds;
• Share price total return – reflects the movement in share price and dividends payable to shareholders, giving returns that were available to shareholders during the year;
• NAV/NTA per share, share price and market capitalisation – reflect various measures of shareholder value at a point in time;
• Net gearing – measures the Company’s borrowings as a proportion of its investment property, balancing the additional returns available from utilising debt with the need to effectively manage risk;
• Weighted average cost of debt – measures the cost of the Company’s borrowings based on amounts drawn and base rate at the year end;
• OCR – measures the annual running costs of the Company and indicates the Board’s ability to operate the Company efficiently, keeping costs low to maximise earnings from which to pay fully covered dividends; and
• Weighted average EPC rating – measures the overall environmental performance of the Company’s property portfolio.

 

The Board considers the key performance measures over various time periods and against similar funds.  A record of these measures is disclosed in the Financial highlights and performance summary, the Chairman's statement and the Investment Manager's report.

 

EPRA performance measures

 

EPRA Best Practice Recommendations, which are APMs, have been disclosed to facilitate comparison with the Company’s peers through consistent reporting of key real estate specific performance measures.

	2025	2024
EPRA EPS (p)	6.1	5.8
EPRA Net Tangible Assets (“NTA”) and Net Reinstatement Value (“NRV”) per share (p)	96.1	93.4
EPRA Net Disposal Value (“NDV”) per share (p)	99.9	97.3
EPRA NIY	6.2%	6.3%
EPRA ‘topped-up’ NIY	6.6%	6.6%
EPRA vacancy rate	8.9%	8.3%
EPRA cost ratio (including direct vacancy costs)	24.0%	22.0%
EPRA cost ratio (excluding direct vacancy costs)	19.7%	17.7%
EPRA LTV	28.7%	29.6%
EPRA capital expenditure (£m)	6.8	17.0
EPRA like-for-like annual rent (£m)	42.3	41.0

 

• EPRA EPS – a key measure of the Company’s underlying operating results and an indication of the extent to which current dividend payments are supported by earnings
• EPRA NAV per share metrics – make adjustments to the NAV per the IFRS financial statements to provide stakeholders with information on the fair value of the assets and liabilities of a real estate investment company, under different scenarios.  EPRA NTA - assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax. EPRA NDV – includes an adjustment for the fair value of fixed rate debt.
• EPRA NIY and ‘topped-up’ NIY – alternative measures of property portfolio valuation based on cash passing rents at the reporting date and once lease incentive periods have expired, net of vacant property operating costs
• EPRA vacancy rate – expected rental value (“ERV”) of vacant space as a percentage of the ERV of the whole property portfolio and offers insight into the additional rent generating capacity of the portfolio.
• EPRA cost ratios – alternative measures of ongoing charges based on expenses, excluding operating expenses of rental property recharged to tenants, but including increases in the doubtful debt provision, compared to gross rental income
• EPRA LTV – a measure of gearing including all payables and receivables
• EPRA capital expenditure - capital expenditure incurred on the Company’s property portfolio during the year
• EPRA like-for-like rental growth - a measure of passing rent of the property portfolio, excluding acquisitions and disposals
• EPRA Sustainability Best Practice Recommendations – environmental performance measures focusing on emissions and resource consumption which create transparency to potential investors by enabling a comparison against peers and set a direction towards improving the integration of ESG into the management of the Company’s property portfolio.

 

Outlook

 

The Company’s business model has remained resilient during the year and we have further mitigated against refinancing risk by renewing the Company’s RCF.  We have a scalable cost structure and flexible capital structure to be on the front foot when opportunities present themselves to raise new equity and exploit acquisition opportunities. 

 

 

Ed Moore

Finance Director

for and on behalf of Custodian Capital Limited

Investment Manager

11 June 2025

 

Principal risks and uncertainties

 

The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is operated by the Investment Manager.  During the year the Board has performed a robust assessment of the principal and emerging risks facing the Company through a periodic review of, and updates to, its risk register.  The Company’s risk management process is designed to identify, evaluate and mitigate the significant risks the Company faces in line with its risk appetite.  At least annually, the Board undertakes a risk review, with the assistance of the Audit and Risk Committee, to assess the effectiveness of the Investment Manager’s risk management and internal control systems.  During this review, no significant failings or weaknesses were identified in respect of risk management, internal control and related financial and business reporting.  Further information on the risk governance and risk management processes are included in the Internal control and risk management section of the Governance report.

 

The Company holds a portfolio of high quality property let predominantly to institutional grade tenants and is primarily financed by fixed rate debt.  It does not undertake speculative development.

 

There are a number of potential risks and uncertainties which could have a material impact on the Company's performance over the forthcoming financial year and could cause actual results to differ materially from expected and historical results.  The Directors have assessed the risks facing the Company, including risks that would threaten the business model, future performance, solvency or liquidity.  The table below outlines the principal risks identified, but does not purport to be exhaustive as there may be additional risks that materialise over time that the Company has not yet identified or has deemed not likely to have a potentially material adverse effect on the business.

 

Risk on business and causes	Likelihood and impact	Overall change in risk from last year	Mitigating factors	Appetite
Loss of revenue An increasing number of tenants exercising contractual breaks or not renewing at lease expiry Unable to re-let void units promptly Tenant default due to a cessation or curtailment of trade Enforced reduction in contractual rents through CVAs Property environmental performance insufficient to attract tenants or maintain rents More frequent and longer periods of property refurbishment delaying re-letting  Decreases in rental rates due to general economic conditions or sector/property specific factors Expiries or breaks concentrated in a specific year Low UK economic growth impacting the occupational property market	Likelihood: Moderate   Impact: High   Loss of revenue has an immediate impact on earnings and dividend capacity.  There is also an increased risk of breaching interest cover covenants on borrowings, detailed in Note 16, which could ultimately lead to default.	No change   Discussed further in the Investment Manager’s report	Diverse property portfolio covering all key sectors and geographical areas The Company has over 300 individual tenancies with the largest tenant accounting for 3.9% of the rent roll Investment policy limits the Company’s rent roll to no more than 10% from a single tenant and 50% from a single sector Primarily institutional grade tenants Focused on established business locations for investment Active management of lease expiry profile considered in forming acquisition and disposal decisions Building specifications typically not tailored to one user Strong tenant relationships Significant focus and proactive investment in asset-by-asset environmental performance to maintain or improve rental levels	The Board relies on the Investment Manager’s processes regarding due diligence on lettings.  A degree of tenant covenant risk and short WAULTs are accepted due to the nature of the business
Decreases in property portfolio valuation Reduced property market sentiment and investor demand affecting market pricing Decreases in sector-specific ERVs Change in demand for space Property environmental performance insufficient to attract tenants Property obsolescence requiring increasing levels of capital expenditure to maintain rental tone Refurbishment or repair work cost over-runs not reflected in valuations Properties concentrated in a specific geographical location or sector Lack of transactional evidence Decreases in occupancy	Likelihood: Low   Impact: Moderate   Valuation decreases increase the risks of:   Non-compliance with LTV covenants on borrowings, detailed in Note 16, which could ultimately lead to default; and The Company realising its investments at lower values.   The Company’s sensitivity to valuation decreases is considered further in Going concern and longer-term viability below	Decreased –valuations have stabilised during the year due to decreasing interest rates and continued robust occupational demand   Discussed further in the Chairman’s statement and Investment Manager’s report	Occupational demand has been resilient during the year despite economic headwinds Active property portfolio diversification between office, industrial (distribution, manufacturing and warehousing), retail warehousing, high street retail and other Investment policy limits the Company’s property portfolio to no more than 50% in any specific sector or geographical region Smaller lot-size business model limits exposure to individual asset values High quality assets in good locations should remain popular with investors Significant focus on asset-by-asset ESG performance and proactively investing in environmental performance to maintain or improve demand	There is no certainty that property values will be realised. This is an inherent risk of property investment. The Investment Manager aims to minimise this risk through its asset selection and active asset management initiatives.
Reduced availability or increased cost of debt financing Breach of financial and non-financial borrowing covenants Over-reliance on an individual lender Significant increases in interest rates LTV increasing above target Refinancing risk from upcoming expiries	Likelihood: Low   Impact: High   Increases in interest rates in the short-term reduce earnings and dividend capacity to the extent the Company has drawn balances on its variable rate RCF.  Lack of availability of financing would have a significant impact on property strategy if properties needed to be sold to repay loans.	Decreased – valuations have stabilised during the year and are starting to increase, with variable interest rates decreasing	The Company has three lenders The Company’s weighted average maturity on its debt is c. five years Target net gearing of 25% LTV on property portfolio 80% of drawn debt facilities at the year end at a fixed rate of interest Significant unencumbered properties available to cure any potential breaches of LTV covenants Ongoing monitoring and management of the forecast liquidity and covenant position RCF limit increased from £50m to £60m since the year end to provide RCF headroom ahead of repaying the £20m SWIP loan expiring in August 2025	The Board and Investment Manager focus on having funding in place to take advantage of opportunities as they arise. The Board’s aim is to minimise this risk to the extent possible through arranging longer-term facilities.
Inadequate operational performance Inadequate performance, controls or systems operated by the Investment Manager Over-reliance on key investment manager personnel or other third party service providers	Likelihood: Moderate   Impact: High   Increased risk of sub-optimal returns impacting earnings and dividend capacity, ineffective risk or threat management or decisions made on inaccurate information. Inability to retain or recruit staff of an appropriate calibre	Increased – a member of key Investment Manager personnel left during the year	Ongoing review of key service provider performance by the Management Engagement Committee Outsourced internal audit function reporting directly to the Audit and Risk Committee External depositary with responsibility for safeguarding assets and performing cash monitoring The Investment Management Agreement contains key personnel provisions designed to mitigate the potential impact of key individuals leaving A satisfactory appointment has been made by the Investment Manager to replace its key member of personnel who left during the year	The Board relies on the Investment Manager’s processes. Its appetite for such risk is low
Regulatory, legal and governance Adverse impact of new or revised legislation or regulations, or by changes in the interpretation or enforcement of existing government policy, laws and regulations Non-compliance with the REIT regime[26] or changes to the Company’s tax status Properties aren’t compliant with prevailing fire safety legislation Conflicts of interest with the Investment Manager Non-compliance with the Company’s Articles of Association	Likelihood: Low   Impact: High   Reputational damage could impact demand for shares.  Earnings and dividend capacity would decrease with penalties/fines for non-compliance or through an increased tax charge Remedial costs or claims for non-compliance could be substantial Conflicts of interest could lead to operational issues or reputational damage	No change	Strong compliance culture, with an independent Management Engagement Committee overseeing the Investment Manager relationship External professional advisers are engaged to review and advise upon control environment, ensure regulatory compliance and advise on the impact of changes Business model and culture embraces FCA principles REIT regime compliance is considered by the Board in assessing the Company’s financial position and setting dividends and by the Investment Manager in making operational decisions Fire safety policy goes over and above minimum requirements	The Board has no appetite for non-compliance
Business interruption Cyber-attack results in the Investment Manager being unable to use its IT systems and/or losing data Terrorism or pandemics interrupt the Company’s operations through impact on either the Investment Manager or the Company’s assets or tenants	Likelihood: Moderate   Impact: High   Reputational damage from not being able to communicate with shareholders on a timely and accurate basis.  Loss of earnings and dividend capacity if contractual rents not invoiced. Fines and penalties from non-compliance with reporting requirements.	No change	Data is regularly backed up and replicated and the Investment Manager’s IT systems are protected by anti-virus software and firewalls that are regularly updated Fire protection and access/security procedures are in place at all of the Company’s managed properties Comprehensive property damage and business interruption insurance is held, including three years’ lost rent and terrorism At least annually, a fire risk assessment and health and safety inspection is performed for each property in the Company’s managed portfolio	The Board relies on the Investment Manager’s processes.  It has no appetite for such risk
Environmental Failure to appropriately manage the environmental performance of the property portfolio, resulting in it not meeting the required standards of environmental legislation and making properties unlettable or unsellable ESG policies and targets being insufficient to meet the required standards of stakeholders Non-compliance with environmental reporting requirements Insufficient electricity supply to maintain tenant requirements for clean energy due to inadequate infrastructure Unsuccessful investment in new technology Physical risk to properties due to environmental factors and extreme weather	Likelihood: Moderate   Impact: Moderate   Risk of reputational damage, suboptimal returns for shareholders, decreased asset liquidity, reduced access to debt and capital markets and poor relationships with stakeholders	No change   Discussed further in the ESG Committee report	The Company has engaged specialist environmental consultants to advise the Board on compliance with requirements and adopting best practice where possible The Company has a published ESG policy which seeks to improve energy efficiency and reduce emissions The ESG Committee ensures compliance with environmental requirements, the ESG policy and environmental KPIs At a property level an environmental assessment is undertaken which influences decisions regarding acquisitions, refurbishments and asset management initiatives Upgrading power supplies where availability permits All investments are scrutinised by the Investment Manager’s Investment Committee.  Investment Committee reports include a dedicated ESG rationale. Carbon reducing technology is a key part of the carbon-reduction strategy but is not invested in speculatively and only established products are considered.	The Board is averse to non-compliance risk, in particular when it may adversely impact reputation, stakeholder sentiment or asset liquidity.
Acquisition due diligence Unidentified risk and liabilities associated with the acquisition of new properties (whether acquired directly or via a corporate structure)	Likelihood: Low   Impact: Moderate   Decrease in profitability or NAV and loss of shareholder value	No change	Comprehensive due diligence is undertaken in conjunction with professional advisers and the provision of insured warranties and indemnities are sought from vendors where appropriate Acquired companies’ trade and assets are hived-up into Custodian Property Income REIT plc and the acquired entities are subsequently liquidated	The Board accepts risk with such transactions with the mitigations opposite used to manage risk where possible

Emerging risks

 

The following risks have been added to the Company’s risk register during the year:

 

• Increases in yields of long-term fixed-rate government bonds impacting demand for the Company’s shares; and
• Shareholder activists in the Investment Company sector not acting in the best interests of all shareholders.

 

The Company’s share price has been materially impacted by increases in gilt yields during the year, and since the year end by the escalating global impact of US trade policy.  The Board accepts inherent risk associated with operating a closed-ended investment structure. The Investment Manager and the Company’s broker and Distribution Agent maintain strong lines of communication with shareholders

 

The impact of geo-political risk relating to the ongoing conflicts in Ukraine and Gaza, tensions between the USA and its trading partners and its volatile political climate, and UK specific factors including apparent declining health of public markets and a ‘cost of living crisis’ also add to uncertainty over the prevailing macroeconomic outlook.  However, these factors are not considered direct emerging risks because of the Company’s diverse property portfolio covering all sectors and geographical areas in the UK with over 300 individual tenancies.

 

Going concern and longer-term viability

 

The Board assesses the Company’s prospects over the long-term, taking into account rental growth expectations, climate related risks, longer-term debt strategy, expectations around capital investment in the portfolio and the UK’s long-term economic outlook.  At quarterly Board meetings, the Board reviews summaries of the Company’s liquidity position and compliance with loan covenants, as well as forecast financial performance and cash flows.

 

Forecast

 

The Investment Manager maintains a detailed forecast model projecting the financial performance of the Company over a period of three years, which provides a reasonable level of accuracy regarding projected lease renewals, asset-by-asset capital expenditure, property acquisitions and disposals, rental growth, interest rate changes, cost inflation and refinancing of the Company’s debt facilities ahead of expiry.  The detailed forecast model allows robust sensitivity analysis to be conducted and over the three year forecast period included the following assumptions:

 

• 1% annual loss of contractual revenue through CVA or tenant default;
• 70% tenant retention rate at lease break or expiry with vacated assets followed by an appropriate period of void;
• Rental growth, captured at the earlier of rent review or lease expiry, based on current ERVs adjusted for consensus forecast changes;
• Portfolio valuation movements based on consensus forecast changes;
• Completing a programme of asset disposals;
• The Company’s capital expenditure programme to invest in its existing assets continues as expected;
• The £20m SWIP loan is repaid using the RCF on its expiry in August 2025; and
• Interest rates follow the prevailing forward curve.

 

The Directors have assessed the Company’s prospects and longer-term viability over this three-year period in accordance with Provision 36 of the AIC Code, and the Company’s prospects as a going concern over a period of 12 months from the date of approval of the Annual Report, using the same forecast model and assessing the risks against each of these assumptions.

 

The Directors note that the Company has performed strongly during the year despite economic headwinds with like-for-like rents increasing over the last 12 months.

 

Sensitivities

 

Sensitivity analysis involves flexing the assumptions listed above, taking into account the principal risks and uncertainties and emerging risks detailed in the Strategic Report.  This analysis includes stress testing the point at which covenants would breach through rent losses and property valuation movements, and assessing their impact on the following areas:

 

Covenant compliance

 

The Company operates the loan facilities summarised in Note 16.  At 31 March 2025 the Company had sufficient headroom on lender covenants at a portfolio level with:

 

• Net gearing of 27.9% compared to a maximum LTV covenant of 35% on its Aviva facilities and 40% on its Lloyds and SWIP facilities, with £103.5m (17% of the property portfolio) unencumbered by the Company’s borrowings; and
• 117% minimum headroom on interest cover covenants for the quarter ended 31 March 2025.

 

Over the one and three year assessment periods the Company’s forecast model projects a small increase in net gearing and an increase in headroom on interest cover covenants.  Reverse stress testing has been undertaken to understand what circumstances would result in potential breaches of financial covenants over these periods.  While the assumptions applied in these scenarios are possible, they do not represent the Board’s view of the likely outturn, but the results help inform the Directors’ assessment of the viability of the Company.  The testing indicated that:

 

• The rate of loss of contractual rent on the borrowing facility with least headroom would need to deteriorate by 17% (for the going concern assessment period) to breach its interest cover covenant from the levels included in the Company’s prudent base case forecasts, assuming no unencumbered properties were charged; or
• To risk breaching the applicable covenant for both assessment periods, property valuations would have to decrease from the 31 March 2025 position by:
  • 20% at a portfolio level; or
  • 13% at an individual charge pool level, assuming no further properties were charged

Note 10 details the expected movements in the valuation of investment properties if the equivalent yield at 31 March 2025 is increased or decreased by 0.25% and if the ERV is increased or decreased by 5.0%, which the Board believes are reasonable sensitivities to apply given historical changes.

 

The Board notes that the latest IPF Forecasts for UK Commercial Property Investment survey suggests an average 2.8% increase in rents during 2025 with capital value increases of 3.7%.  The Board believes that the valuation of the Company’s property portfolio will prove resilient due to its higher weighting to industrial assets and overall diverse and high-quality asset and tenant base comprising c.150 assets and over 300 typically 'institutional grade' tenants across all commercial sectors.

 

Liquidity

 

At 31 March 2025 the Company had £7.9m of unrestricted cash and £15.0m undrawn RCF, with gross borrowings of £175.0m resulting in net gearing of 27.9%.  As detailed in Note 16, the Company’s £20m loan with SWIP expires in August 2025 which the Company intends to repay using its RCF facility. 

 

The Company increased its RCF limit from £50m to £60m in June 2025 ahead of the August 2025 expiry to maintain headroom, with the Company’s forecast model projecting it will have at least £10.8m of undrawn RCF facility over the next 12 months to continue its programme of discretionary capital investment, pay its target dividends and its expense and interest liabilities over the one and three year assessment periods. 

 

Results of the assessments

 

Based on the prudent assumptions within the Company’s forecasts regarding the factors set out above, the Directors expect that over the one-year and three-year periods of their assessment:

 

• The Company has surplus cash to continue in operation and meet its liabilities as they fall due;
• Borrowing covenants are complied with; and
• REIT tests are complied with.

 

Section 172 statement and stakeholder relationships

 

The Directors consider that in conducting the business of the Company over the course of the year they have complied with Section 172(1) of the Companies Act 2006 (“the Act”) by fulfilling their duty to promote the success of the Company and act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.

 

Issues, factors and stakeholders

 

The Board has direct engagement with the Company’s shareholders and seeks a rounded and balanced understanding of the broader impact of its decisions through regular engagement with its stakeholder groups (detailed below) to understand their views, typically through feedback from the Investment Manager, the Company’s broker and the distribution agent, which is regularly communicated to the Board via quarterly meetings.  Stakeholder engagement also ensures the Board is kept aware of any significant changes in the market, including the identification of emerging trends and risks, which in turn can be factored into its strategy discussions.

 

Management of the Company’s day-to-day operations has been delegated to the Investment Manager, Custodian Capital Limited, and the Company has no employees.  This externally managed structure allows the Board and the Investment Manager to have due regard to the impact of decisions on the following matters specified in Section 172 (1) of the Act:

 

Section 172(1) factor	Approach taken
Likely consequences of any decision in the long-term	The business model and strategy of the Company is set out within the Strategic Report.  Any deviation from or amendment to that strategy is subject to Board and, if necessary, shareholder approval.  The Company’s Management Engagement Committee ensures that the Investment Manager is operating within the scope of the Company’s investment objectives.   At least annually, the Board considers a budget for the delivery of its strategic objectives based on a three year forecast model.  The Investment Manager reports non-financial and financial key performance indicators to the Board, set out in detail in the Business model and strategy section of the Strategic report, at least quarterly which are used to assess the outcome of decisions made.   The Board’s commitment to keeping in mind the long-term consequences of its decisions underlies its focus on risk, including risks to the long-term success of the business.    The investment strategy of the Company is focused on medium to long-term returns and minimising the Company’s impact on communities and the environment and as such the long-term is firmly within the sights of the Board when all material decisions are made. The Board gains an understanding of the views of the Company’s key stakeholders from the Investment Manager, broker, distribution agents and Management Engagement Committee, and considers those stakeholders’ interests and views in board discussions and long-term decision-making.
The interests of the Company’s employees	The Company has no employees as a result of its external management structure, but the Directors have regard to the interests of the individuals responsible for delivery of the property management and administration services to the Company to the extent that they are able to.   The Company’s Nominations Committee is responsible for applying the diversity policy set out in the Nominations Committee report to Board recruitment.
The need to foster the Company’s business relationships with suppliers, customers and others	Business relationships with suppliers, tenants and other counterparties are managed by the Investment Manager.  Suppliers and other counterparties are typically professional firms such as lenders, property agents and other property professionals, accounting firms and legal firms and tenants with which the Investment Manager often has a longstanding relationship.  Where material counterparties are new to the business, checks, including anti money laundering checks where appropriate, are conducted prior to transacting any business to ensure that no reputational or legal issues would arise from engaging with that counterparty.  The Company also periodically reviews the compliance of all material counterparties with relevant laws and regulations such as the Modern Slavery Act 2015 and environmental practices.  The Company pays suppliers in accordance with pre-agreed terms.  The Management Engagement Committee engages directly with the Company’s key service providers where necessary providing a direct line of communication for receiving feedback and resolving issues.   The Investment Manager has open lines of communication with tenants and can understand and resolve any issues promptly.
The impact of the Company’s operations on the community and the environment	The Board recognises the importance of supporting local communities where the Company’s assets are located and seeks to invest in properties which will be fit for future purpose and which align with ESG targets.  The Company also seeks to benefit local communities by creating social value through employment, viewing its properties as a key part of the fabric of the local economy.    The Board takes overall responsibility for the Company’s impact on the community and the environment and its ESG policies are set out in the ESG Committee report.    The Company’s approach to preventing bribery, money laundering, slavery and human trafficking is disclosed in the Governance report.
The desirability of the Company maintaining a reputation for high standards of business conduct	The Board believes that the ability of the Company to conduct its investment business and finance its activities depends in part on the reputation of the Board and Investment Manager’s team.  The risk of falling short of the high standards expected and thereby risking its business reputation is included in the Board’s review of the Company’s risk register, which is conducted periodically.  The principal risks and uncertainties facing the business are set out in that section of the Strategic Report.  The Company’s requirements for a high standard of conduct and business ethics are set out in the Governance report.
The need to act fairly as between members of the Company	The Company’s shareholders are a very important stakeholder group.  The Board oversees the Investment Manager’s investor relations programme which involves the Investment Manager engaging routinely with the Company’s shareholders.  The programme is managed by the Company’s broker and distribution agents and the Board receives prompt feedback on the outcomes of meetings and presentations.  The Board and Investment Manager aim to be open with shareholders and available to them, subject to compliance with relevant securities laws.  The Chairman of the Company and other Non-Executive Directors make themselves available for meetings as appropriate and attend the Company’s AGM.    The investor relations programme is designed to promote formal engagement with investors and is typically conducted after each half-yearly results announcement.  The Investment Manager also engages with existing investors who may request meetings and with potential new investors on an ad hoc basis throughout the year, including where prompted by Company announcements.  Shareholder presentations are made available on the Company’s website.  The Company has a single class of share in issue with all members of the Company having equal rights.

 

Methods used by the Board

 

The main methods used by the Directors to perform their duties include:

 

• Board Strategy meetings are held typically annually to review all aspects of the Company’s business model and strategy and assess the long-term success of the Company and its impact on key stakeholders;
• The Management Engagement Committee assesses the Company’s engagements with its key service providers.  The Investment Manager reports on their performance to the Committee which in turn reports key issues to the Board.  The responsibilities of the Management Engagement Committee are detailed in the Management Engagement Committee report;
• The Board is ultimately responsible for the Company’s ESG activities set out in the ESG Committee report, which it believes are a key part of benefitting the local communities where the Company’s assets are located;
• The Board’s risk management procedures set out in the Governance report identify the potential consequences of decisions in the short, medium and long-term so that mitigation plans can be put in place to prevent, reduce or eliminate risks to the Company and wider stakeholders;
• The Board sets the Company’s purpose, values and strategy, detailed in the Business model and strategy section of the Strategic report, and the Investment Manager ensures they align with its culture;
• The Board carries out direct shareholder engagement via the AGM and Directors attend shareholder meetings on an ad hoc basis;
• External assurance is received through internal and external audits and reports from brokers and advisers;
• Specific training for existing Directors and induction for new Directors as set out in the Governance report; and
• Ad hoc meetings to consider corporate acquisition opportunities.

 

Principal decisions in the year

 

The Board has delegated operational functions to the Investment Manager and other key service providers.  In particular, responsibility for management of the Company’s property portfolio has been delegated to the Investment Manager.  The Board retains responsibility for reviewing the engagement of the Investment Manager and exercising overall control of the Company, reserving certain key matters as set out in the Governance report.  The principal non-routine decisions taken by the Board during the year, and its rationale on how the decision was made, were:

 

Decision	How decision was made
Setting target dividends at 6.0pps for the year ending 31 March 2026.	In line with the Board’s dividend policy of paying a high, fully covered level of dividend which maximises shareholder returns without negatively influencing property strategy.
Extending the RCF by one year to move expiry from November 2026 to 2027.	To mitigate refinancing risk and secure the existing competitive margin for a further year.
Appointing a new Director as detailed in the Chairman’s statement.	The Board believes Nathan Imlach brings a wealth of experience which will benefit shareholders.
Acquiring Merlin Properties Limited in an all-paper transaction on an adjusted NAV-for-NAV basis.	The Company has undertaken property, legal, financial and tax due diligence work on Merlin and the Investment Manager modelled the combined entity to understand the projected short and medium-term impact of the Acquisition on the combined portfolio and its earnings.  The Board constituted an Acquisition Committee comprising Malcolm Cooper and Chris Ireland which held regular meetings to understand and oversee progress and any issues arising to remain in position to make decisions as they arose.  The key challenges faced by the Acquisition Committee and Board focused on ensuring forecasts and potential risks were accurately identified to ensure the transaction was in the best long-term interests of all stakeholders by increasing long-term earnings within the Company’s stated investment policy.

 

Due to the nature of these decisions, a variety of stakeholders had to be factored into the Board’s discussions.  Each decision was announced at the time, so that all stakeholders were aware of the decisions. 

 

Stakeholders

 

The Board recognises the importance of stakeholder engagement to deliver its strategic objectives and believes its stakeholders are vital to the continued success of the Company.  The Board is mindful of stakeholder interests and keeps these at the forefront of business and strategic decisions.  Regular engagement with stakeholders is fundamental to understanding their views.  The below section highlights how the Company engages with its key stakeholders, why they are important and the impact they have on the Company and therefore its long-term success, which the Board believes helps demonstrate the successful discharge of its duties under s172(1) of the Act.  The Board assesses the effectiveness of stakeholder engagement through discussion with the Investment Manager and the Company’s broker and distribution agent.

Stakeholder	Stakeholder interests	Stakeholder engagement
Tenants The Investment Manager understands the businesses occupying the Company’s assets and seeks to create long-term partnerships and understand their needs to deliver fit for purpose real estate and develop asset management opportunities to underpin long-term maintainable income growth and maximise occupier satisfaction	High quality assets Profitability Efficient operations Knowledgeable and committed landlord Flexibility to adapt to the changing UK commercial landscape Buildings with strong environmental credentials	Regular dialogue Review published data, such as accounts, trading updates and analysts’ reports Ensured buildings comply with safety regulations and insurance requirements Certain tenants contacted to request environmental performance data and offer an engagement programme on their premises’ environmental performance Occupancy has remained above 90% during the year
The Investment Manager and its employees As an externally managed fund the Company’s key service provider is the Investment Manager and its employees are a key stakeholder.  The Investment Manager’s culture aligns with that of the Company and its long-standing reputation of operating in the smaller lot-size market is key when representing the Company	Long-term viability of the Company Long-term relationship with the Company Well-being of the Investment Manager’s employees Being able to attract and retain high-calibre staff Maintaining a positive and transparent relationship with the Board	Board and Committee meetings Face-to-face and video-conference meetings with the Chairman and other Board Directors Quarterly KPI reporting to the Board Board evaluation, including feedback from key Investment Manager personnel Ad hoc meetings and calls
Suppliers A collaborative relationship with our suppliers, including those to whom key services are outsourced, ensures that we receive high quality services to help deliver strategic and investment objectives	Collaborative and transparent working relationships Responsive communication Being able to deliver service level agreements	Board and Committee meetings which certain key suppliers attend One-to-one meetings Annual review of key service provider engagements by the Management Engagement Committee, which includes appropriateness of internal policies and payment practices
Shareholders Building a strong investor base through clear and transparent communication is vital to building a successful business and generating long-term growth	Maintainable growth Attractive level of income returns Strong Corporate Governance and environmental credentials Transparent reporting framework	Annual and half year presentations AGM Market announcements and corporate website Regular investor feedback received from the Company’s broker, distribution agents and PR adviser as well as seeking feedback from face-to-face meetings On-going dialogue with analysts
Lenders Our lenders play an important role in our business.  The Investment Manager maintains close and supportive relationships with this group of long-term stakeholders, characterised by openness, transparency and mutual understanding	Stable cash flows Stronger covenants Being able to meet interest payments Maintaining agreed gearing ratios Regular financial reporting Proactive notification of issues or changes	Quarterly covenant reporting Regular catch-up calls
Government, local authorities and communities As a responsible corporate citizen the Company is committed to engaging constructively with central and local government and ensuring we support the wider community	Openness and transparency Proactive compliance with new legislation Proactive engagement Support for local economic and environmental plans and strategies Playing its part in providing the real estate fabric of the economy, giving employers a place of business	Engagement with local authorities where we operate Two way dialogue with regulators and HMRC when required

 

Approval of Strategic report

 

The Strategic report, (incorporating the Business model and strategy, Chairman’s statement, Investment Manager’s report, Financial report, Principal risks and uncertainties and Section 172 statement and stakeholder relationships) was approved by the Board of Directors and signed on its behalf by:

 

 

David MacLellan

Chairman

11 June 2025

Board of Directors and Investment Manager personnel

 

The Board comprises six non-executive directors.  A short biography of each director is set out below:

 

David MacLellan - Independent Chairman

 

David was appointed to the Board on 9 May 2023 and took over the Chairman role on 8 August 2023.

 

He has over 35 years’ experience in private equity and fund management and an established track record as Chairman and Non-Executive director of public and private companies.  During his executive career David was an Executive Director of Aberdeen Asset Management plc following its purchase of Murray Johnstone Limited (“MJ”) in 2000.  At the time of the purchase he was Group Managing Director of MJ, a Glasgow based fund manager managing inter alia closed and open ended funds, having joined MJ’s venture capital team in 1984.  Prior to joining MJ he qualified as a Chartered Accountant at Arthur Young McLelland Moores (now EY).

 

David is currently Chairman and Managing Partner of RJD Partners, a private equity business; Non-Executive Director and Audit Committee Chairman of Lindsell Train Investment Trust plc, a closed-ended equity investment fund; Non-Executive Director and Audit Committee Chair of J&J Denholm Limited, a family owned business involved in shipping, logistics, seafoods and industrial services; and Non-Executive Director and Audit Committee Chair of Aquila Renewables plc, an investment trust.

 

David is former Chairman and Senior Independent Director (“SID”) of John Laing Infrastructure Fund, a FTSE 250 investment company, former Chairman of Stone Technologies Limited, former Chairman of Havelock Europa plc and former Non-Executive Director of Maven Income & Growth VCT 2 plc.  He was also Chairman of Britannic UK Income Fund for 12 years until 2013 as well as a director of a number of private equity backed businesses.

 

David’s other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge his responsibilities effectively. 

 

Elizabeth McMeikan – Senior Independent Director

 

Elizabeth’s substantive career was with Tesco plc, where she was a Stores Board Director before embarking on a non-executive career in 2005. 

 

Elizabeth is currently Chair of Nichols plc, the AIM listed diversified soft drinks group.  She is SID and Remuneration Committee Chair at both Dalata Hotel Group plc, the largest hotel group in Ireland, and at McBride plc, Europe’s leading manufacturer of cleaning and hygiene products.  She is also Non-Executive Director of Fresca Group Limited, a fruit and vegetable grower and importer. 

 

Previously Elizabeth was SID and Remuneration Committee Chair at both The Unite Group plc and at Flybe plc, SID at J D Wetherspoon plc and Chair of Moat Homes Limited.

 

Elizabeth’s other roles are not considered to impact her ability to allocate sufficient time to the Company to discharge her responsibilities effectively. 

 

Hazel Adam - Independent Director

 

Hazel was an investment analyst with Scottish Life until 1996 and then joined Standard Life Investments.  As a fund manager she specialised in UK and then Emerging Market equities.  In 2005 Hazel joined Goldman Sachs International as an executive director on the new markets equity sales desk before moving to HSBC in 2012, holding a similar equity sales role until 2016.

 

Hazel was an independent non-executive director of Aberdeen Latin American Income Fund Limited until June 2023 and holds the CFA Level 4 certificate in ESG Investing and the Financial Times Non-Executive Directors Diploma.

 

Chris Ireland FRICS - Independent Director

 

Chris joined international property consultancy King Sturge in 1979 as a graduate and has worked his whole career across the UK investment property market.  He ran the investment teams at King Sturge before becoming Joint Managing Partner and subsequently Joint Senior Partner prior to its merger with JLL in 2011.

 

Chris was Chief Executive Officer of JLL UK between 2016 and 2021 and subsequently its Chair from 2021 until retiring in March 2023.

 

Chris is a former Chair of the Investment Property Forum and is a Non-Executive Director of Le Masurier, a Jersey based family trust with assets across the UK, Germany and Jersey.  Chris is also a keen supporter of the UK homelessness charity Crisis.

 

Chris’ other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge his responsibilities effectively. 

 

Malcolm Cooper FCCA FCT - Independent Director

 

Malcolm is a qualified accountant and an experienced FTSE 250 company Audit Committee Chair with an extensive background in corporate finance and a wide experience in infrastructure and property. 

 

Malcolm worked with Arthur Andersen and British Gas/BG Group/Lattice before spending 15 years with National Grid with roles including Managing Director of National Grid Property and Global Tax and Treasury Director, and culminated in the successful sale of a majority stake in National Grid’s gas distribution business, now known as Cadent Gas.

 

Malcolm is currently Chair of MORhomes plc, SID and Audit Committee Chair at Southern Water Services Limited and Non-Executive Director and Audit and Risk Committee Chair at Local Pensions Partnership Investment.

 

Malcolm was previously: a Non-Executive Director of Morgan Sindall Group plc, a FTSE 250 UK construction and regeneration business, Chairing its Audit and Responsible Business Committees; SID and Audit Committee Chair at CLS Holdings plc; a Non-Executive Director of St William Homes LLP; President of the Association of Corporate Treasurers and a member of the Financial Conduct Authority’s Listing Authority Advisory Panel.

 

Malcolm’s other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge his responsibilities effectively. 

 

Nathan Imlach CA FCSI CF - Director

 

Nathan was appointed to the Board on 6 November 2024 for a transition period up until no later than the end of 2025 following Ian Mattioli stepping down as a Company Director to focus on his role as Chief Executive Officer of Mattioli Woods following its recent transition to private ownership.  Nathan is currently Chief Strategic Adviser to Mattioli Woods with a focus on acquisitions and contributing to its future direction. 

 

Nathan is also currently SID of Mortgage Advice Bureau (Holdings) plc and is a patron and former trustee of Leicester Grammar School Trust.  He is a chartered accountant, holds the ICAEW’s Corporate Finance qualification and is a Chartered Fellow of the Chartered Institute for Securities and Investment.  From 2005 to 2020 Nathan was Chief Financial Officer of Mattioli Woods, Company Secretary of Custodian Property Income REIT and a director of Custodian Capital Limited.  Before this, Nathan gained over 15 years’ experience as a corporate finance adviser to directors of leading organisations in both the private and public sectors, gaining international experience across a wide range of transactions throughout Europe, North America and Australia.

 

Nathan is a non-independent Director of the Company due to his role with Mattioli Woods and is viewed by the Board as representative of Mattioli Woods’ client shareholders which represent approximately 65% of the Company’s shareholders.

 

Nathan’s other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge his responsibilities effectively.

 

Investment Manager personnel

 

Short biographies of the Investment Manager’s key personnel and senior members of its property team are set out below:

 

Richard Shepherd-Cross MRICS - Managing Director

 

Richard qualified as a Chartered Surveyor in 1996 and until 2008 worked for JLL, latterly running its national portfolio investment team.

 

Since joining Mattioli Woods in 2009, Richard established Custodian Capital as the Property Fund Management subsidiary to Mattioli Woods and in 2014 was instrumental in the establishment of Custodian Property Income REIT from Mattioli Woods’ syndicated property portfolio and its 1,200 investors.  Following the successful IPO of the Company, Richard has overseen the growth of the Company to its current property portfolio of over £0.6bn.

 

Ed Moore FCA – Finance Director

 

Ed qualified as a Chartered Accountant in 2003 with Grant Thornton, specialising in audit, financial reporting and internal controls across its Midlands practice.  He is Finance Director of Custodian Capital with responsibility for all day-to-day financial aspects of its operations. 

 

Since IPO in 2014 Ed has overseen the Company raising over £300m of new equity, arranging or refinancing eight loan facilities and completing four corporate acquisitions, including leading on the acquisition of DRUM in 2021.  Ed’s key responsibilities for Custodian Property Income REIT are accurate external and internal financial reporting, ongoing regulatory compliance and maintaining a robust control environment.  Ed is Company Secretary of Custodian Property Income REIT and is a member of the Investment Manager’s Investment Committee.  Ed is also responsible for the Investment Manager’s environmental initiatives, attending Custodian Property Income REIT ESG Committee meetings and co-leading the Investment Manager’s ESG working group. 

 

Ian Mattioli MBE - Founder and Chair

 

With nearly 40 years’ experience in financial services, wealth management and property businesses, Ian is responsible for the vision and operational management of Mattioli Woods. With this experience he instigated the development of Mattioli Woods’ investment proposition, including the syndicated property initiative that developed the seed portfolio for the launch of Custodian Property Income REIT plc in 2014. 

 

Outside of work, Ian has many personal achievements, including winning the London Stock Exchange AIM Entrepreneur of the Year award and CEO of the Year in the 2018 City of London Wealth Management Awards. He was also awarded an MBE in the Queen’s 2017 New Year’s Honours lists for services to business and the community in Leicestershire. More locally, Ian was awarded an honorary degree (Doctor of Laws) by the University of Leicester and was appointed High Sheriff of Leicestershire for 2021/22.

 

Ian and his close family own 6.4m shares in the Company.

 

Alex Nix MRICS – Assistant Investment Manager

 

Alex graduated from Nottingham Trent University with a degree in Real Estate Management before joining Lambert Smith Hampton, where he spent eight years and qualified as a Chartered Surveyor in 2006.

 

Alex is Assistant Investment Manager to Custodian Property Income REIT having joined Custodian Capital in 2012.  Alex heads the Company’s property management and asset management initiatives, assists in sourcing and executing new investments and is a member of the Investment Manager’s Investment Committee.

 

James Hunt MRICS – Portfolio Manager

 

James joined Custodian as Portfolio Manager in January 2025 bringing 15 years of commercial real estate experience from previous consultancy and client-side roles, most recently with the portfolio management team at St Modwen Logistics.  James previously studied Real Estate Management at Nottingham Trent University and qualified as a Chartered Surveyor in 2014.

 

As Portfolio Manager, James manages Custodian’s properties predominantly in the Midlands and Scotland.

 

Eoin Greenwood MRICS – Portfolio Manager

 

Eoin joined Custodian in 2018 where he successfully graduated from The University College of Estate Management with a remote learning degree in Real Estate Management.  After five years Eoin joined Buccleuch Property, managing a £130m mixed use UK commercial portfolio for the Buccleuch family office before returning to Custodian Capital in 2024 where he recently qualified as a Charted Surveyor.

 

As Portfolio Manager, Eoin now manages Custodian’s properties predominantly in the South-west and South-east of England.

 

Javed Sattar MRICS – Portfolio Manager

 

Javed joined Custodian Capital in 2011 after graduating from Birmingham City University with a degree in Estate Management Practice.  Whilst working as a trainee surveyor on Custodian Property Income REIT’s property portfolio for Custodian Capital he completed a PGDip in Surveying via The College of Estate Management and qualified as a Chartered Surveyor in 2017.

 

Javed operates as Portfolio Manager managing properties predominantly located in the North-West of England.

 

Consolidated statement of comprehensive income

For the year ended 31 March 2025

		Year ended 31 March 2025	Year ended 31 March 2024
	Note	£000	£000
Revenue	4	47,997	46,243
Investment management fees		(3,417)	(3,451)
Operating expenses of rental property rechargeable to tenants		(3,562)	(3,280)
directly incurred		(4,891)	(3,899)
Professional fees		(823)	(791)
Directors’ fees		(345)	(349)
Other expenses		(814)	(683)
Depreciation		(285)	(133)
Expenses		(14,137)	(12,586)
Abortive acquisition costs		-	(1,557)
Operating profit before gains/(losses) on investment property and financing		33,860	32,100
Unrealised profit/(loss) on revaluation of investment property: relating to property revaluations	10	11,211	(26,972)
relating to costs of acquisition	10	(1)	-
Valuation increase/(decrease)		11,210	(26,972)
Profit on disposal of investment property		444	1,418
Net gain/(loss) on investment property		11,654	(25,554)
Operating profit		45,514	6,546

 

Finance income	6	127	78
Finance costs	7	(7,486)	(8,126)
Net finance costs		(7,359)	(8,048)
Profit/(loss) before tax		38,155	(1,502)
Income tax expense	8	-	-
Profit/(loss) for the year, net of tax		38,155	(1,502)
Other comprehensive income	11	714	-
Total comprehensive income/(loss) for the year, net of tax		38,869	(1,502)
Earnings per ordinary share:
Basic and diluted (p)	3	8.7	(0.3)
Basic and diluted EPRA (p)	3	6.1	5.8

 

The profit/(loss) for the year and total comprehensive income/(loss) for the year arise from continuing operations and is all attributable to owners of the Company.  Other comprehensive income represents items that will not be subsequently reclassified to profit or loss.

Consolidated and Company statement of financial position

As at 31 March 2025

Registered number: 08863271

 

Group and Company				Note	31 March 2025 £000	31 March 2024 £000
Non–current assets
Investment property				10	594,364	578,122
Property, plant and equipment				11	4,711	2,957
Investments				12	-	-
Total non-current assets					599,075	581,079
Current assets
Assets held for sale				10	-	11,000
Trade and other receivables				13	5,201	3,330
Cash and cash equivalents				15	10,118	9,714
Total current assets					15,319	24,044
Total assets					614,394	605,123
Equity
Issued capital				17	4,409	4,409
Share premium				17	250,970	250,970
Merger reserve				17	18,931	18,931
Retained earnings				17	148,442	137,510
Revaluation reserve				17	714	-
Total equity attributable to equity holders of the Company					423,466	411,820
Non-current liabilities
Borrowings				16	153,641	177,290
Other payables				14	2,087	569
Total non-current liabilities					155,728	177,859
Current liabilities
Borrowings				16	19,989	-
Trade and other payables				14	7,029	8,083
Deferred income					8,182	7,361
Total current liabilities					35,200	15,444
Total liabilities					190,928	193,303
Total equity and liabilities					614,394	605,123

 

The parent Company’s profit for the year was £38,155,000 (2024: loss of £1,502,000).

 

These consolidated and Company financial statements of Custodian Property Income REIT plc, company number 08863271, were approved and authorised for issue by the Board of Directors on 11 June 2025 and are signed on its behalf by:

 

 

David MacLellan

Chairman

Consolidated and Company statements of cash flows

For the year ended 31 March 2025

 

Group and Company		Year ended 31 March 2025	Year  ended 31 March 2024
	Note	£000	£000
Operating activities
Profit/(loss) for the year		38,155	(1,502)
Net finance costs		7,359	8,048
Valuation (increase)/decrease of investment property	10	(11,211)	26,972
Impact of lease incentives	10	(1,470)	(2,105)
Amortisation of right-of-use asset		7	7
Profit on disposal of investment property		(444)	(1,418)
Depreciation		285	133
Cash flows from operating activities before changes in working capital and provisions		32,681	30,135
(Increase)/decrease in trade and other receivables		(1,871)	418
Increase in trade and other payables and deferred income		1,286	357
Cash generated from operations		32,096	30,910
Interest and other finance charges	7	(7,068)	(7,694)
Net cash inflows from operating activities		25,028	23,216
Investing activities
Capital expenditure on investment property	10	(6,843)	(17,034)
Purchase of property, plant and equipment	11	(1,326)	(1,977)
Disposal of investment property and assets held-for-sale		15,050	18,176
Costs of disposal of investment property		(331)	(134)
Interest and finance income received	6	127	78
Net cash inflows/(outflows) from investing activities		6,677	(891)
Financing activities
New borrowings	16	-	5,500
Repayment of borrowings and origination costs	16	(4,078)	(744)
Dividends paid	9	(27,223)	(24,247)
Net cash outflow from financing activities		(31,301)	(19,491)
Net increase in cash and cash equivalents		404	2,834
Cash and cash equivalents at start of the year		9,714	6,880
Cash and cash equivalents at end of the year		10,118	9,714

 

Consolidated and Company statement of changes in equity

For the year ended 31 March 2025

 

	Note	Issued capital £000	Merger reserve £000	Share premium £000	Revaluation reserve £000	Retained earnings £000	Total equity £000
Group and Company
As at 31 March 2023		4,409	18,931	250,970	-	163,259	437,569
Loss for the year		-	-	-	-	(1,502)	(1,502)
Total comprehensive loss for year		-	-	-	-	(1,502)	(1,502)
Transactions with owners of the Company, recognised directly in equity
Dividends	9	-	-	-	-	(24,247)	(24,247)
As at 31 March 2024		4,409	18,931	250,970	-	137,510	411,820
Profit for the year		-	-	-	-	38,155	38,155
Revaluation of property, plant and equipment	11	-	-	-	714	-	714
Total comprehensive profit for year		-	-	-	714	38,155	38,869
Transactions with owners of the Company, recognised directly in equity
Dividends	9	-	-	-	-	(27,223)	(27,223)
As at 31 March 2025		4,409	18,931	250,970	714	148,442	423,466

 

Notes to the financial statements for the year ended 31 March 2025

 

1. Corporate information

 

The Company is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the London Stock Exchange plc’s main market for listed securities.  The consolidated and parent company financial statements have been prepared on a historical cost basis, except for the revaluation of investment property, and are presented in pounds sterling with all values rounded to the nearest thousand pounds (£000), except when otherwise indicated.  The consolidated financial statements were authorised for issue in accordance with a resolution of the Directors on 11 June 2025.

 

2. Basis of preparation and accounting policies

 

1.       Basis of preparation

 

The consolidated financial statements and the separate financial statements of the parent company have been prepared in accordance with United Kingdom adopted international accounting standards and International Financial Reporting Standards (IFRSs).

 

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own statement of comprehensive income.

 

Certain statements in this report are forward looking statements.  By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements.  Forward looking statements regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future.  Accordingly, undue reliance should not be placed on forward looking statements.

 

2.       Basis of consolidation

 

The consolidated financial statements consolidate those of the parent company and its subsidiaries.  The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.  Custodian Real Estate Limited has a reporting date in line with the Company.  All transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions between group companies.  Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective.  Amounts reported in the financial statements of the subsidiary are adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.  Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date the Company gains control up to the effective date when the Company ceases to control the subsidiary.

 

Change in accounting policy

 

The Company has changed its accounting policy for PV from cost less accumulated depreciation to fair value, as determined by the Company’s independent valuers, with effect from 31 March 2025.  This change in policy has been made because at 31 March 2025 certain of the Company’s PV arrays have been fully operational[27] for at least 12 months, providing accurate annual revenue and cost data which incorporates:

 

• Energy production per panel;
• The import/export ratio (based on tenant usage and all metering being operational); and
• Seasonal/local changes in both of the above (hours of daylight, tenant seasonality, panel maintenance).

 

The fair value of PV arrays with less than 12 months of operational data is considered to be cost less accumulated depreciation. The Board believes that fair valuing PV, using reliable data that has become available this year, better reflects the Company’s investment in PV assets within its net asset value.  The impact of this change in accounting policy on the current financial year is:

	31 March 2025 £000
Consolidated statement of comprehensive income Increase in profit for the financial year	-
Consolidated and Company statements of financial position Increase in net assets	714

 

In subsequent years, this revaluation surplus will be depreciated thus ultimately recognised within profit or loss.  Independent valuations of the Company’s PV portfolio were not available at 31 March 2024 so this change in accounting policy has been applied with effect from 31 March 2025, with no changes made to comparative numbers as allowed by IAS 16 – ‘Property, plant and equipment’.

 

3.       Business combinations

 

Where property is acquired, via corporate acquisitions or otherwise, the substance of the assets and activities of the acquired entity are considered in determining whether the acquisition represents a business combination or an asset purchase under IFRS 3 - Business Combinations.

 

A business combination is a transaction or event in which an acquirer obtains control of one or more businesses.  A business is defined in IFRS 3 as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.  To assist in determining whether a purchase of investment property via corporate acquisition or otherwise meets the definition of a business or is the purchase of a group of assets, the group will apply the optional concentration test in IFRS 3 to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.  If the concentration test is not met the group applies judgement to assess whether acquired set of activities and assets includes, at a minimum, an input and a substantive process by applying IFRS 3:B8 to B12D.  Where such acquisitions are not judged to be a business combination, due to the asset or group of assets not meeting the definition of a business, they are accounted for as asset acquisitions and the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.  Accordingly no goodwill or additional deferred taxation arises.

 

Under the acquisition accounting method, the identifiable assets, liabilities and contingent liabilities acquired are measured at fair value at the acquisition date. The consideration transferred is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree.

 

4.       Application of new and revised International Financial Reporting Standards

 

During the year the Company adopted the following new standards with no impact on reported financial performance or position:

 

• Amendments to IAS 1 - ‘Presentation of Financial Statements’ clarifies that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period and not expectations of, or actual events after, the reporting date.
• Amendments to IFRS 16 - ‘Lease Liability in a Sale and Leaseback’ specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains.

 

The following new and revised accounting standards not yet effective:

 

• IFRS 18 - ‘Presentation and Disclosures in Financial Statements’.  This standard on presentation and disclosure replaces IAS 1, with a focus on updates to the statement of profit or loss.
• IFRS 19 – ‘Subsidiaries without Public Accountability: Disclosures’.  This reduces disclosure requirements that an eligible subsidiary entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards.
• Amendments to IFRS 9 – ‘Financial Instruments’ and IFRS 7 – ‘Financial Instruments: Disclosures’.  The amendments provide clarity on the date of recognition and derecognition of certain financial instruments and amends/updates the disclosure required for some financial instruments.

 

The Directors have yet to assess the full outcome of these new standards, amendments and interpretations; however, with the exception of IFRS 18, these other new standards, amendments and interpretations are not expected to have a significant impact on the Group’s financial statements.

 

5.       Material accounting policies

 

The material accounting policies adopted by the Group and Company and applied to these financial statements are set out below.

 

Going concern

 

The Directors believe the Company is well placed to manage its business risks successfully and the Company’s projections show that it should be able to operate within the level of its current financing arrangements for at least the 12 months from the date of approval of these financial statements, set out in more detail in the Directors’ report and Principal risks and uncertainties section of the Strategic report.  Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements.

 

Income recognition

 

Contractual revenues are allocated to each performance obligation of a contract and revenue is recognised on a basis consistent with the transfer of control of goods or services.  Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duties.

 

Rental income from operating leases on properties owned by the Company is accounted for on a straight-line basis over the term of the lease.  Rental income excludes service charges and other costs directly recoverable from tenants which are recognised within ‘income from recharges to tenants’.

 

Amounts received from occupiers to terminate leases or to compensate for dilapidation work not carried out by the occupier is recognised in the statement of comprehensive income when the right to receive them arises, typically at the cessation of the lease.

 

Lease incentives are recognised on a straight-line basis over the lease term. The initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis.

 

Revenue and profits on the sale of properties are recognised on the completion of contracts.  The amount of profit recognised is the difference between the sale proceeds and the carrying amount and costs of disposal.

 

Finance income relates to bank interest receivable and amounts receivable on ongoing development funding contracts.

 

Taxation

 

The Group operates as a REIT and hence profits and gains from the property rental business are normally expected to be exempt from corporation tax.  The tax expense represents the sum of the tax currently payable and deferred tax relating to the residual (non-property rental) business.  The tax currently payable is based on taxable profit for the year.  Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

 

Investment property

 

Investment property is held to earn rentals and/or for capital appreciation and is initially recognised at cost including direct transaction costs.  Investment property is subsequently valued externally on a market basis at the reporting date and recorded at valuation.  Any surplus or deficit arising on revaluing investment property is recognised in profit or loss in the year in which it arises.  Any ultimate gains or shortfalls are measured by reference to previously published valuations and recognised in profit or loss, offset against any directly corresponding movement in fair value of the investment properties to which they relate.

 

Held-for-sale assets

 

Non-current assets are classified as held-for-sale if their carrying amount will be recovered through a sale transaction rather than through continuing use.  This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, generally considered to be on unconditional exchange of contracts.  Non-current assets classified as held for sale are valued externally on a market basis at the reporting date and recorded at valuation.

 

Group undertakings

 

Investments are included in the Company only statement of financial position at cost less any provision for impairment. 

 

Property, plant and equipment

 

Electric vehicle chargers are stated at cost less accumulated depreciation and accumulated impairment loss.

 

PV is valued under the revaluation model of IAS 16 – ‘Property, plant and equipment.  After initial recognition PV arrays whose fair value can be reliably established, assumed to be once an array has been operational for at least 12 months, are held at the fair value at the time of the revaluation less any subsequent accumulated depreciation and impairment losses. Fair value is determined by independent valuers and based on assumptions including future net income, capital expenditure and appropriate discount rates (yield).  The fair value of assets which have not yet been operational for 12 months is considered equivalent to historical cost less accumulated depreciation (“Net Book Value” or “NBV”).

 

Valuation movements:

 

• Above NBV will be recognised directly within equity (revaluation reserve); and
• Below NBV will be recognised in profit or loss.

 

Depreciation is recognised so as to write off the carrying value of assets (less their residual values) over their useful lives, using the straight-line method, on the following bases:

 

EV chargers	10 years
PV	30 years

 

The depreciation charge for PV is:

 

• Included within profit or loss (classified as property operating expenditure) where depreciating historical cost; or
• Offset against the revaluation reserve where depreciating the revalued amount.

 

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.  The useful lives of PV cells have been reassessed at 1 April 2024 from 20 years to 30 years based on industry evidence.

 

Cash and cash equivalents

 

Cash and cash equivalents include cash in hand and on-demand deposits, and other short-term highly liquid investments that are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes and are readily convertible into a known amount of cash and are subject to an insignificant risk of changes in value.

 

Other financial assets

 

Financial assets and financial liabilities are recognised in the balance sheet when the Company becomes a party to the contractual terms of the instrument.

 

The Company’s financial assets include cash and cash equivalents and trade and other receivables.  Interest resulting from holding financial assets is recognised in profit or loss on an accruals basis.

 

Trade receivables are initially recognised at their transaction price and subsequently measured at amortised cost as the business model is to collect the contractual cash flows due from tenants. An impairment provision is created based on expected credit losses, which reflect the Company’s historical credit loss experience and an assessment of current and forecast economic conditions at the reporting date.

 

Financial liabilities and equity

 

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.  An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.  Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

 

Share capital represents the nominal value of equity shares issued.  Share premium represents the excess over nominal value of the fair value of the consideration received for equity shares, net of direct issue costs. 

 

Retained earnings include all current and prior year results as disclosed in profit or loss.  Retained earnings include realised and unrealised profits.  Profits are considered unrealised where they arise from movements in the fair value of investment properties that are considered to be temporary rather than permanent.

 

Revaluation reserve represents the unrealised fair value of PV assets in excess of their historical cost less accumulated depreciation.

 

Borrowings

 

Interest-bearing bank loans and overdrafts are recorded at the fair value of proceeds received, net of direct issue costs.  Finance charges, including premiums payable on settlements or redemption and direct issue costs, are accounted for on an accruals basis in profit or loss using the effective interest rate method and are included in accruals to the extent that they are not settled in the period in which they arise.

 

Trade payables

 

Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

 

Leases

 

Where an investment property is held under a leasehold interest, the headlease is initially recognised as an asset at cost plus the present value of minimum ground rent payments. The corresponding rental liability to the head leaseholder is included in the balance sheet as a liability.  Lease payments are apportioned between the finance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of interest on the remaining lease liability.

 

Segmental reporting

 

An operating segment is a distinguishable component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company’s chief operating decision maker (the Board) to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.  As the chief operating decision maker reviews financial information for, and makes decisions about the Company’s investment properties as a portfolio, the Directors have identified a single operating segment, that of investment in commercial properties.

 

6.       Key sources of judgements and estimation uncertainty

 

The preparation of the financial statements requires the Company to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities.  If in the future such estimates and assumptions, which are based on the Directors’ best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

 

Judgements

 

No significant judgements have been made in the process of applying the Group’s and parent company's accounting policies, other than those involving estimations, that have had a significant effect on the amounts recognised within the financial statements.

 

Estimates

 

The accounting estimate with a significant risk of a material change to the carrying values of assets and liabilities within the next year relates to the valuation of investment property.  Investment property is valued at the reporting date at fair value.  Where an investment property is being redeveloped the property continues to be treated as an investment property.  Surpluses and deficits attributable to the Company arising from revaluation are recognised in profit or loss.  Valuation surpluses reflected in retained earnings are not distributable until realised on sale.  In making its judgement over the valuation of properties, the Company considers valuations performed by the independent valuers in determining the fair value of its investment properties.  The valuers make reference to market evidence of transaction prices for similar properties.  The valuations are based upon assumptions including future rental income, anticipated capital expenditure and maintenance costs (particularly in the context of mitigating the impact of climate change) and appropriate discount rates (ie property yields).  The key sources of estimation uncertainty within these inputs above are future rental income and property yields.  Reasonably possible changes to these inputs across the portfolio would have a material impact on its valuation.  The valuers have considered

the impact of climate change which has not had a material impact on the valuation.  Further detail on the Company’s climate related risks are set out in the Asset Management and Sustainability report.

 

The sensitivity analysis in Note 10 details the expected movements in the valuation of investment properties and PV if the equivalent yield at 31 March 2024 is increased or decreased by 0.25% and if the ERV is increased or decreased by 5.0%, which the Board believes are reasonable sensitivities to apply given historical changes.

 

3. Earnings per ordinary share

 

Basic EPS amounts are calculated by dividing net profit for the year by the weighted average number of ordinary shares outstanding during the year.

 

Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.  There are no dilutive instruments in issue.  Any shares issued after the year end are disclosed in Note 21.

 

The Company is a FTSE EPRA/NAREIT index series constituent and EPRA performance measures have been disclosed to facilitate comparability with the Company’s peers through consistent reporting of key performance measures.  EPRA has issued recommended bases for the calculation of EPS as alternative indicators of performance.

 

Group		Year ended 31 March 2025	Year ended 31 March 2024
Net profit/(loss) for the year (£000)		38,155	(1,502)
Net (gains)/losses on investment property and depreciation (£000)		(11,369)	25,687
Abortive acquisition costs		-	1,557
EPRA net profit attributable to equity holders of the Company (£000)		26,786	25,742
Weighted average number of ordinary shares:
Issued ordinary shares at start of the year (thousands)		440,850	440,850
Effect of shares issued during the year (thousands)		-	-
Basic and diluted weighted average number of shares (thousands)		440,850	440,850
Basic and diluted EPS (p)		8.7	(0.3)
Basic and diluted EPRA EPS (p)		6.1	5.8

 

4. Revenue

 

	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Gross rental income from investment property	42,828	42,194
Income from recharges to tenants	3,562	3,280
Income from dilapidations	1,131	574
Other income	476	195
	47,997	46,243

 

5. Operating profit

 

Operating profit is stated after (crediting)/charging:

	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Profit on disposal of investment property	(444)	(1,418)
Investment property valuation (increase)/decrease	(11,211)	26,972
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual financial statements	171	163
Fees payable to the Company’s auditor and its associates for the interim review	39	37
Administrative fee payable to the Investment Manager	494	511
Directly incurred operating expenses of vacant rental property	1,886	1,968
Directly incurred operating expenses of let rental property	2,081	1,124
Amortisation of right-of-use asset	7	7

 

Fees payable to the Company’s auditor, Deloitte, are further detailed in the Audit and Risk Committee report.

 

6. Finance income

	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Bank interest	127	78
	127	78

 

7. Finance costs

	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Amortisation of arrangement fees on debt facilities	418	432
Other finance costs	443	113
Bank interest	6,625	7,581
	7,486	8,126

 

8. Income tax

 

The tax charge assessed for the year is lower than the standard rate of corporation tax in the UK during the year of 25.0% (2024: 25.0%).  The differences are explained below:

 

	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Profit/(loss) before income tax	38,155	(1,502)
Tax charge on profit at a standard rate of 25.0%	9,539	(376)
Effects of:
REIT tax exempt rental profits and gains	(9,539)	376
Income tax expense	-	-
Effective income tax rate	0.0%	0.0%

 

 

The Company operates as a REIT and hence profits and gains from the property rental business are normally exempt from corporation tax.

 

9. Dividends

Group and Company	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Interim dividends paid on ordinary shares relating to the quarter ended:   Prior year
- 31 March 2024: 1.375p	6,062	6,062
Special equity dividends paid on ordinary shares relating to the year ended:
- 31 March 2024: 0.3p	1,322	-
Current year
- 30 June 2024: 1.5p (2023: 1.375p)	6,613	6,061
- 30 September 2024: 1.5p (2023: 1.375p)	6,613	6,062
- 31 December 2024: 1.5p (2023: 1.375p)	6,613	6,062
	27,223	24,247

 

The Company paid a fourth interim dividend relating to the quarter ended 31 March 2025 of 1.5p per ordinary share (£6.6m) on Friday 30 May 2025 which has not been included as liabilities in these financial statements.

 

10. Investment property and assets held for sale

 

Assets held-for-sale

 

Group and Company			At 31 March 2025 £000	At 31 March 2024 £000
Balance at the start of the year			11,000	-
Disposals			(11,000)	-
Reclassification from investment property			-	11,000
Balance at the end of the year			-	11,000

 

Investment property

 

		Company
		£000
Group and Company
At 31 March 2023		613,587
Impact of lease incentives and lease costs		2,105
Amortisation of right-of-use asset		(7)
Capital expenditure		17,034
Disposals		(16,625)
Valuation decrease		(26,972)
Reclassification as held-for-sale		(11,000)
At 31 March 2024		578,122
Impact of lease incentives and lease costs		1,470
Amortisation of right-of-use asset		(7)
Capital expenditure		6,843
Disposals		(3,275)
Valuation increase		11,211
At 31 March 2025		594,364

 

£490.9m (2024: £486.8m) of investment property was charged as security against the Company’s borrowings at the year end. £0.6m (2024: £0.6m) of investment property comprises right-of-use assets.

 

The carrying value of investment property at 31 March 2025 comprises £506.5m freehold (2024: £493.0m) and £87.9m leasehold property (2024: £85.1m).  The aggregate historical cost of investment property and assets held-for-sale was £629.8m (2024: £637.6m).

 

Investment property is stated at the Directors’ estimate of its 31 March 2025 fair value.  Savills (UK) Limited (“Savills”) and Knight Frank LLP (“KF”), professionally qualified independent valuers, each valued approximately half of the property portfolio as at 31 March 2025 in accordance with the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors (“RICS”).  Savills and KF have recent experience in the relevant locations and categories of the property being valued.

 

Investment property has been valued using the investment method which involves applying a yield to rental income streams.  Inputs include yield, current rent and ERV.  For the year end valuation, the following inputs were used:

 

Sector	Valuation 31 March 2025 £000	Weighted average passing rent (£ per sq ft)	Weighted average ERV range (£ per sq ft)	Equivalent yield	Topped-up NIY
Industrial	298.3	6.1	4.75 – 14.9	6.9%	5.5%
Retail warehouse	127.3	11.6	6.1 – 22.4	7.6%	7.5%
Other	78.2	11.3	2.7 – 80.0*	8.4%	7.7%
Office	57.7	16.8	8.5 – 38.0	11.1%	8.1%
High street retail	32.9	19.3	3.7 – 67.0	8.4%	9.4%

 

*Drive-through restaurants’ ERV per sq ft are based on building floor area rather than area inclusive of drive-through lanes.

 

Valuation reports are based on both information provided by the Company eg current rents and lease terms, which are derived from the Company’s financial and property management systems and are subject to the Company’s overall control environment, and assumptions applied by the valuers eg ERVs, expected capital expenditure and yields.  These assumptions are based on market observation and the valuers’ professional judgement.  In estimating the fair value of each property, the highest and best use of the properties is their current use. 

 

All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of investment property, and an increase in the current or estimated future rental stream would have the effect of increasing capital value, and vice versa.  There are interrelationships between unobservable inputs which are partially determined by market conditions, which could impact on these changes, but the table below presents the sensitivity of the investment property valuations to changes in the most significant assumptions underlying their valuation, being equivalent yield and ERV. The Board believes these are reasonable sensitivities given historical changes.

 

Group and Company
	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Increase in equivalent yield of 0.25%	34,941	21,627
Decrease in equivalent yield of 0.25%	(30,975)	(20,134)
Increase of 5% in ERV	1,864	1,807
Decrease of 5% in ERV	(1,834)	(1,754)

 

11. Property, plant and equipment

 

 

Group and Company	PV cells £000	EV chargers £000	Total £000
Cost/valuation
At 31 March 2024	2,076	1,126	3,202
Additions	1,326	-	1,326
Valuation increase net of depreciation eliminated on revaluation	406	-	406
At 31 March 2025	3,808	1,126	4,934
Depreciation
At 31 March 2024	(123)	(122)	(245)
Depreciation	(185)	(100)	(285)
Eliminated on revaluation	308	(1)	307
Accumulated at 31 March 2025	-	(223)	(223)
Net book value at 31 March 2025	3,808	903	4,711

 

 

 

Group and Company	PV cells £000	EV chargers £000	Total £000
Cost
At 31 March 2023	-	-	-
Additions	2,076	1,126	3,202
At 31 March 2024	2,076	1,126	3,202
Depreciation
At 31 March 2023	-	-	-
Depreciation	(123)	(122)	(245)
Accumulated at 31 March 2024	(123)	(122)	(245)
Net book value at 31 March 2024	1,953	1,004	2,957

 

12. Investments

 

Shares in subsidiaries

Company     Name	Company number	Country of registration and incorporation	Principal activity	Ordinary shares held	31 March 2025 £000	31 March 2024 £000
Custodian REIT Limited	08882372	England and Wales	Non-trading	100%	-	-
					-	-

 

The Company’s non-trading UK subsidiary has claimed the audit exemption available under Section 480 of the Companies Act 2006.  The Company’s registered office is also the registered office of each UK subsidiary.

 

13. Trade and other receivables

 

Group and Company				31 March 2025 £000	31 March 2024 £000
Falling due in less than one year:
Trade receivables before expected credit loss provision				4,387	1,911
Expected credit loss provision				(627)	(855)
				3,760	1,056
Other receivables				1,146	2,081
Prepayments and accrued income				295	193
				5,201	3,330

 

The Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk, for example a deterioration in a tenant’s or sector’s outlook or rent payment performance, and revises them as appropriate to ensure that the criteria are capable of identifying significant increases in credit risk before amounts become past due.

 

Tenant rent deposits of £1.6m (2024: £1.7m) are held as collateral against certain trade receivable balances.

 

The Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable:

 

• When there is a breach of financial covenants by the debtor; or
• Available information indicates the debtor is unlikely to pay its creditors.

 

Such balances are provided for in full.  For remaining balances the Company has applied an expected credit loss (“ECL”) matrix based on its experience of collecting rent arrears.  The majority of tenants are invoiced for rental income quarterly in advance and are issued with invoices before the relevant quarter starts.  Invoices become due on the first day of the rent quarter and are considered past due if payment is not received by this date. Other receivables are considered past due when the given terms of credit expire.

 

 

Group and Company   Expected credit loss provision			31 March 2025 £000	31 March 2024 £000
Opening balance			855	1,143
Increase/(decrease) in provision relating to trade receivables that are credit-impaired			196	(241)
Utilisation of provisions			(424)	(47)
Closing balance			627	855

 

The ageing of receivables considered credit impaired is as follows:

 

Group and Company			31 March 2025 £000	31 March 2024 £000
0 to 3 months			106	288
3 – 6 months			40	-
Over 6 months			551	567
Closing balance			697	855

 

14. Trade and other payables

Group and Company			31 March 2025 £000	31 March 2024 £000
Falling due in less than one year:
Trade and other payables			2,603	1,442
Social security and other taxes			760	830
Accruals			3,601	4,079
Rental deposits			65	1,732
			7,029	8,083
Falling due in more than one year:
Rental deposits			1,521	-
Other creditors			566	569
			2,151	569

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.  Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.  For most suppliers interest is charged if payment is not made within the required terms.  Thereafter, interest is chargeable on the outstanding balances at various rates.  The Company has financial risk management policies in place to ensure that all payables are paid within the credit timescale.  The ageing of rental deposits has been reassessed in the year to align with underlying lease agreements.

 

15. Cash and cash equivalents

 

Group and Company
			31 March 2025 £000	31 March 2024 £000
Cash and cash equivalents			10,118	9,714

 

Cash and cash equivalents at 31 March 2025 include £2.2m (2024: £2.5m) of restricted cash comprising: £1.6m (2024: £1.7m) rental deposits held on behalf of tenants, £0.6m (2024: £0.6m) retentions held in respect of development fundings and £nil (2024: £0.2m) disposal deposit.

 

16. Borrowings

 

The table below sets out changes in liabilities arising from financing activities during the year.

Group and Company   Falling due within one year:				Borrowings £000	Costs incurred in the arrangement of borrowings £000	Total £000
At 31 March 2023				-	-	-
Repayment of borrowings				-	-	-
Amortisation of arrangement fees				-	-	-
At 31 March 2024				-	-	-
Reclassification				20,000	(11)	19,989
Repayment of borrowings				-	-	-
Amortisation of arrangement fees				-	-	-
At 31 March 2025				20,000	(11)	19,989

 

Falling due in more than one year:
At 31 March 2023				173,500		(1,398)	172,102
Additional borrowings				5,500		-	5,500
Arrangement fees incurred				-		(744)	(744)
Amortisation of arrangement fees				-		432	432
At 31 March 2024				179,000		(1,710)	177,290
Reclassification				(20,000)		11	(19,989)
Repayment of borrowings				(4,000)		-	(4,000)
Arrangement fees incurred				-		(78)	(78)
Amortisation of arrangement fees				-	418		418
At 31 March 2025				155,000		(1,359)	153,641

 

On 23 January 2025, the Company and Lloyds agreed to extend the term of the RCF by one year to expire on 10 November 2027.  An option remains in place to extend the term by a further year to 2028, subject to Lloyds’ consent. 

 

At the year end the Company had the following facilities available:

 

• A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA and is repayable on 10 November 2027.  The RCF limit can be increased to £75m with Lloyds’ consent, with £39m drawn at the year end.  Since the year end, the RCF limit has been increased to £60m;
• A £20m term loan with Scottish Widows plc with interest fixed at 3.935% and is repayable on 13 August 2025;
• A £45m term loan with Scottish Widows plc with interest fixed at 2.987% and is repayable on 5 June 2028; and

• A £75m term loan facility with Aviva comprising:

• A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
• A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
• A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.

 

Each facility has a discrete security pool, comprising a number of the Company’s individual properties, over which the relevant lender has security and covenants:

 

• The maximum LTV of each discrete security pool is either 45% and 50%, with an overarching covenant on the Company’s property portfolio of a maximum of either 35% or 40% LTV; and
• Historical interest cover, requiring net rental income from each discrete security pool, over the preceding three months, to exceed either 200% or 250% of the facility’s quarterly interest liability.

 

The Company’s debt facilities contain market-standard cross-guarantees such that a default on an individual facility will result in all facilities falling into default.
 

17. Share capital

 

Group and Company   Issued and fully paid share capital		Ordinary shares  of 1p	£000
At 1 April 2023, 31 March 2024 and 31 March 2025		440,850,398	4,409

 

Rights, preferences and restrictions on shares

 

All ordinary shares carry equal rights and no privileges are attached to any shares in the Company.  All the shares are freely transferable, except as otherwise provided by law.  The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.  All shares rank equally with regard to the Company’s residual assets.

 

At the AGM of the Company held on 8 August 2024, the Board was given authority to issue up to 146,950,133 shares, pursuant to section 551 of the Companies Act 2006 (“the Authority”).  The Authority is intended to satisfy market demand for the ordinary shares and raise further monies for investment in accordance with the Company’s investment policy.  The Authority expires on the earlier of 15 months from 8 August 2024 and the subsequent AGM, due to take place on 9 September 2025. Since 8 August 2024, 22.9m ordinary shares have been issued in connection with the acquisition of Merlin.

 

In addition, the Company was granted authority to make market purchases of up to 44,085,039 ordinary shares under section 701 of the Companies Act 2006.  No market purchases of ordinary shares have been made.

 

	Group and Company
Other reserves	Retained earnings £000	Revaluation reserve £000	Share premium account £000	Merger reserve £000
At 1 April 2023	163,259	-	250,970	18,931
Loss for the year	(1,502)	-	-	-
Dividends paid	(24,247)	-	-	-
At 31 March 2024	137,510	-	250,970	18,931
Revaluation of PPE	-	714	-	-
Profit for the year	38,155	-		-
Dividends paid	(27,223)		-	-
At 31 March 2025	148,442	714	250,970	18,931

 

The nature and purpose of each reserve within equity are:

 

• Share premium - amounts subscribed for share capital in excess of nominal value less any associated issue costs that have been capitalised.
• Revaluation reserve - the unrealised fair value of PV assets in excess of their historical cost less accumulated depreciation.
• Retained earnings - all other net gains and losses and transactions with owners (eg dividends) not recognised elsewhere.
• Merger reserve - a non-statutory reserve that is credited instead of a company's share premium account in circumstances where merger relief under section 612 of the Companies Act 2006 is obtained.

 

18. Commitments and contingencies

 

Company as lessor

 

Operating leases, in which the Company is the lessor, relate to investment property owned by the Company with lease terms of between 0 and 21 years.  The aggregated future minimum rentals receivable under all non-cancellable operating leases are:

 

Group and Company			31 March 2025 £000	31 March 2024 £000
Not later than one year			38,406	39,751
Year 2			35,206	34,984
Year 3			29,810	31,620
Year 4			24,353	26,113
Year 5			19,380	19,946
Later than five years			77,434	74,059
			224,589	226,473

 

The following table presents rent amounts reported in revenue:

 

Group and Company			31 March 2025 £000	31 March 2024 £000
Lease income on operating leases			42,587	41,926
Therein lease income relating to variable lease payments that do not depend on an index or rate			241	268
			42,828	42,194

 

19. Related party transactions

 

Save for transactions described below, the Company is not a party to, nor had any interest in, any other related party transaction during the year.

 

Transactions with directors

 

Each of the directors is engaged under a letter of appointment with the Company and does not have a service contract with the Company.  During the year, the terms of the Directors’ appointments were amended such that each director is required to retire by rotation and seek re-election annually (2024: at least every three years).  Each director’s appointment under their respective letter of appointment is terminable immediately by either party (the Company or the director) giving written notice and no compensation or benefits are payable upon termination of office as a director of the Company becoming effective.

 

Nathan Imlach is Chief Strategic Adviser of Mattioli Woods, the parent company of the Investment Manager.  As a result, Nathan Imlach is not independent.  The Company Secretary, Ed Moore, is also a director of the Investment Manager.

 

Compensation paid to the directors, who are also considered ‘key management personnel’ in addition to the key Investment Manager personnel, is disclosed in the Remuneration report.  The directors' remuneration report also satisfies the disclosure requirements of paragraph 1 of Schedule 5 to the Accounting Regulations.

 

Project Merlin

 

Since the year end the Company has acquired Merlin and as part of this transaction the Company is due to pay Mattioli Woods an introducer’s fee of £0.2m and Custodian Capital a transaction fee of £0.06m.  The vendors of Merlin are advised clients of Mattioli Woods. 

 

Investment Management Agreement

 

The Investment Manager is engaged as AIFM under an IMA with responsibility for the management of the Company’s assets, subject to the overall supervision of the Directors.  The Investment Manager manages the Company’s investments in accordance with the policies laid down by the Board and the investment restrictions referred to in the IMA.  The Investment Manager also provides day-to-day administration of the Company and acts as secretary to the Company, including maintenance of accounting records and preparing the annual and interim financial statements of the Company.

 

Annual management fees payable to the Investment Manager under the IMA are:

 

• 0.9% of the NAV of the Company as at the relevant quarter day which is less than or equal to £200m divided by 4;
• 0.75% of the NAV of the Company as at the relevant quarter day which is in excess of £200m but below £500m divided by 4;
• 0.65% of the NAV of the Company as at the relevant quarter day which is in excess of £500m but below £750m divided by 4; plus
• 0.55% of the NAV of the Company as at the relevant quarter day which is in excess of £750m divided by 4.

 

Administrative fees payable to the Investment Manager under the IMA are:

 

• 0.125% of the NAV of the Company as at the relevant quarter day which is less than or equal to £200m divided by 4;
• 0.115% of the NAV of the Company as at the relevant quarter day which is in excess of £200m but below £500m divided by 4;
• 0.02% of the NAV of the Company as at the relevant quarter day which is in excess of £500m but below £750m divided by 4; plus
• 0.015% of the NAV of the Company as at the relevant quarter day which is in excess of £750m divided by 4.

 

The IMA is terminable by either party by giving not less than 12 months’ prior written notice to the other.  The IMA may also be terminated on the occurrence of an insolvency event in relation to either party, if the Investment Manager is fraudulent, grossly negligent or commits a material breach which, if capable of remedy, is not remedied within three months, or on a force majeure event continuing for more than 90 days.

 

The Investment Manager receives a marketing fee of 0.25% (2024: 0.25%) of the aggregate gross proceeds from any issue of new shares in consideration of the marketing services it provides to the Company. 

 

During the year the Investment Manager charged the Company £3.9m (2024: £4.0m) comprising £3.4m (2024: £3.5m) in respect of annual management fees and £0.5m (2024: £0.5m) in respect of administrative fees. 

 

During the year the Company appointed Maven, a subsidiary of Mattioli Woods, as Company Secretarial Adviser, which charges the Company an annual fee of £0.02m for Company Secretarial Services.

 

Mattioli Woods arranges insurance on behalf of the Company’s tenants through an insurance broker and the Investment Manager is paid a commission by the Company’s tenants for administering the policy.

 

On 4 September 2024 100% of the share capital of Mattioli Woods was acquired Tiger Bidco Limited, a wholly-owned subsidiary of vehicles advised and managed by Pollen Street Capital Limited.

 

20. Financial risk management

 

Capital risk management

 

The Company manages its capital to ensure it can continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance within the parameters of its investment policy.  The capital structure of the Company consists of debt, which includes the borrowings disclosed below, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued ordinary share capital, share premium and retained earnings.

 

Net gearing

 

The Board reviews the capital structure of the Company on a regular basis.  As part of this review, the Board considers the cost of capital and the risks associated with it.  The Company has a medium-term target net gearing ratio of 25% determined as the proportion of debt (net of unrestricted cash) to its property.  The net gearing ratio at the year-end was 27.9% (2024: 29.2%).

 

Externally imposed capital requirements

 

The Company is not subject to externally imposed capital requirements, although there are restrictions on the level of interest that can be paid due to conditions imposed on REITs.

 

Financial risk management

 

The Company seeks to minimise the effects of interest rate risk, credit risk, liquidity risk and cash flow risk by using fixed and floating rate debt instruments with varying maturity profiles, at low levels of net gearing.

 

Interest rate risk management

 

The Company’s activities expose it primarily to the financial risks of increases in interest rates, as it borrows funds at floating interest rates.  The risk is managed by maintaining:

 

• An appropriate balance between fixed and floating rate borrowings;
• A low level of net gearing; and
• An RCF whose flexibility allows the Company to manage the risk of changes in interest rates by paying down variable borrowings using the proceeds of equity issuance, property sales or arranging fixed-rate debt.

 

The Board periodically considers the availability and cost of hedging instruments to assess whether their use is appropriate and also considers the maturity profile of the Company’s borrowings.

 

Interest rate sensitivity analysis

 

Interest rate risk arises on interest payable on the RCF only, as interest on all other debt facilities is payable on a fixed rate basis.  At 31 March 2025, the RCF was drawn at £35m (2024: £39m).  Assuming this amount was outstanding for the whole year and based on the exposure to interest rates at the reporting date, if SONIA had been 1.0% higher/lower and all other variables were constant, the Company’s profit for the year ended 31 March 2025 would decrease/increase by £0.4m (2024: £0.4m).

 

Market risk management

 

The Company manages its exposure to market risk by holding a portfolio of investment property diversified by sector, location and tenant.

 

Market risk sensitivity

 

Market risk arises on the valuation of the Company’s property portfolio in complying with its bank loan covenants (Note 16). The valuation of the Company’s property portfolio would have to fall by 20% (2024: 17%) for the Company to breach its overall borrowing covenant.

 

Credit risk management

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company.  The Company’s credit risk is primarily attributable to its trade receivables and cash balances.  The amounts included in the statement of financial position are net of allowances for bad and doubtful debts.  An allowance for impairment is made where a debtor is in breach of its financial covenants, available information indicates a debtor can’t pay or where balances are significantly past due.

 

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.  The maximum credit risk on financial assets at 31 March 2025, which comprise trade receivables plus unrestricted cash, was £11.7m (2024: £8.3m).

 

The Company has no significant concentration of credit risk, with exposure spread over a large number of tenants covering a wide variety of business types.  Further detail on the Company’s credit risk management process is included within the Strategic report.

 

Cash of £10.1m (2024: £9.7m) is held with Lloyds Bank plc which has a credit rating of A1[28].

 

Liquidity risk management

 

Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements.  The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profile of financial assets and liabilities.

 

The following tables detail the Company’s contractual maturity for its financial liabilities.  The table has been drawn up based on undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. 

 

The table includes both interest and principal cash flows.

 

Group and Company	Interest rate %	31 March 2025 0-3 months £000	31 March 2025 3 months – 1 year £000	31 March 2025 1-5 years £000	31 March 2025 5 years + £000
Trade and other payables	N/a	7,790	-	151	416
Borrowings:
Variable rate	6.080	532	1,596	42,696	-
Fixed rate	3.935	197	20,295	-	-
Fixed rate	2.987	336	1,008	47,939	-
Fixed rate	3.020	264	793	4,228	37,134
Fixed rate	3.260	122	367	1,956	16,271
Fixed rate	4.100	154	461	2,460	26,599
		9,395	24,520	99,430	80,420

 

Group and Company	Interest rate %	31 March 2024 0-3 months £000	31 March 2024 3 months – 1 year £000	31 March 2024 1-5 years £000	31 March 2024 5 years + £000
Trade and other payables	N/a	5,922	-	151	420
Borrowings:
Variable rate	6.9	673	2,018	46,041	-
Fixed rate	3.935	197	590	20,295	-
Fixed rate	2.987	336	1,008	49,283	-
Fixed rate	3.020	264	793	4,228	38,191
Fixed rate	3.260	122	367	1,956	16,760
Fixed rate	4.100	154	461	2,460	27,214
		7,668	5,237	124,414	82,585

 

 

Fair values

 

The fair values of financial assets and liabilities are not materially different from their carrying values in the financial statements.  The fair value hierarchy levels are as follows:

 

• Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 – inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

 

There have been no transfers between Levels 1, 2 and 3 during the year.  The main methods and assumptions used in estimating the fair values of financial instruments and investment property are detailed below.

 

Investment property and assets held-for-sale – level 3

 

Fair value of PV is based on valuations provided by independent firms of valuers, which use the inputs set out in Note 10.  These values were determined after having taken into consideration recent market transactions for similar properties in similar locations to the investment properties held by the Company.  The fair value hierarchy of investment property is level 3.  At 31 March 2024, the fair value of the Company’s investment properties and assets held-for-sale was £594.4m (2024: £589.1m).

 

PV – level 3

Fair value is based on valuations provided by independent firms of chartered surveyors and registered appraisers, which use the inputs set out in Note 11.  These values were determined after having taken into consideration an appropriate yield and the net income from each array.  The fair value hierarchy of PV is level 3.  At 31 March 2025, the fair value of the Company’s PV was £3.8m (2024: £2.0m).

 

Interest bearing loans and borrowings – level 3

 

At 31 March 2025 the gross value of the Company’s loans with Lloyds, SWIP and Aviva all held at amortised cost was £175.0m (2024: £179.0m).  The difference between the carrying value of Company’s loans and their fair value is detailed in Note 22.

 

Trade and other receivables/payables – level 3

 

The carrying amount of all receivables and payables deemed to be due within one year are considered to reflect their fair value.

 

21. Events after the reporting date

 

Dividends

 

On Friday 30 May 2025 the Company paid a fourth quarterly interim dividend per share of 1.5p.

 

Property disposals

 

Since the year end the Company has sold:

 

• Part-let offices in Cheadle for £4.0m; and
• Fully-let offices in Cheadle for £2.9m.

 

Acquisitions

 

On 30 May 2025 the Company completed the corporate acquisition of Merlin Properties Limited for initial consideration of 22.9m new ordinary shares in the Company.  Based on the nature of the acquisition it does not fall within the scope of IFRS 3 Business Combinations and the assets acquired were purchased at fair value.  The transaction was financed by way of a share for share exchange.

 

22. Alternative performance measures

 

NAV per share total return

 

An alternative measure of performance taking into account both capital returns and dividends by assuming dividends declared are reinvested at NAV at the time the shares are quoted ex-dividend, shown as a percentage change from the start of the year.

 

Group	Calculation	Year ended 31 March 2025	Year ended 31 March 2024
Net assets (£000)		423,466	411,820
Shares in issue at 31 March (thousands)		440,850	440,850
NAV per share at the start of the year (p)	A	93.4	99.3
Dividends per share paid during the year (p)	B	6.175	5.5
NAV per share at the end of the year (p)	C	96.1	93.4
NAV per share total return	(C-A+B)/A	9.5%	(0.4%)

 

Share price total return

 

An alternative measure of performance taking into account both share price returns and dividends by assuming dividends declared are reinvested at the ex-dividend share price, shown as a percentage change from the start of the year.

 

Group	Calculation	Year ended 31 March 2025	Year ended 31 March 2024
Share price at the start of the year (p)	A	81.4	89.2
Dividends per share paid during the year (p)	B	6.175	5.5
Share price at the end of the year (p)	C	76.2	81.4
Share price total return	(C-A+B)/A	1.2%	(2.6%)

 

Dividend cover

 

The extent to which dividends relating to the year are supported by recurring net income.

 

Group		Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Dividends paid relating to the year		19,838	18,185
Dividends approved relating to the year		6,613	7,384
Dividends relating to the year		26,451	25,569
Profit/(loss) after tax		38,155	(1,502)
One-off costs		-	1,557
Net (gains)/losses on investment property and depreciation		(11,369)	25,687
Recurring net income		26,786	25,742
Dividend cover		101.3%	100.7%

 

Weighted average cost of debt

 

The interest rate payable on bank borrowings at the year end weighted by the amount of borrowings at that rate as a proportion of total borrowings.

 

31 March 2025	Amount drawn £m	Interest rate	Weighting
RCF	35.0	6.080%	1.22%
Total variable rate	35.0
SWIP £20m loan	20.0	3.935%	0.77%
SWIP £45m loan	45.0	2.987%	0.45%
Aviva
£35m tranche	35.0	3.020%	0.60%
£15m tranche	15.0	3.260%	0.28%
£25m tranche	25.0	4.100%	0.59%
Total fixed rate	140.0
Weighted average drawn facilities	175.0		3.91%

 

31 March 2024	Amount drawn £m	Interest rate	Weighting
RCF	39.0	6.900%	1.50%
Total variable rate	39.0
SWIP £20m loan	20.0	3.935%	0.44%
SWIP £45m loan	45.0	2.987%	0.75%
Aviva
£35m tranche	35.0	3.020%	0.59%
£15m tranche	15.0	3.260%	0.27%
£25m tranche	25.0	4.100%	0.57%
Total fixed rate	140.0
Weighted average rate on drawn facilities	179.0		4.13%

 

Net gearing

 

Gross borrowings less cash (excluding restricted cash), divided by portfolio[29] value.  This ratio indicates whether the Company is meeting its investment objectives to target 25% loan-to-value in the medium-term with a maximum permitted level of 35%, to balance enhancing shareholder returns without facing excessive financial risk.

 

Group	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Gross borrowings	175,000	179,000
Cash	(10,118)	(9,714)
Restricted cash	2,188	2,502
Net borrowings	167,070	171,788
Investment property	594,364	589,122
PV	3,808	-*
	598,172	589,122
Net gearing	27.9%	29.2%

 

*PV was not included in the net gearing calculation in the prior year.

Ongoing charges

 

A measure of the regular, recurring costs of running an investment company expressed as a percentage of average NAV, and indicates how effectively costs are controlled in comparison to other property investment companies.

Group	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Average quarterly NAV for the year	414,786	423,622
Expenses (excluding depreciation)	13,852	12,586*
Operating expenses of rental property rechargeable to tenants	(3,562)	(3,280)
Ongoing charges	10,290	9,306
Operating expenses of rental property directly incurred	(4,891)	(4,032)
One-off costs	-	-
Ongoing charges excluding direct property expenses	5,399	5,274
OCR	2.48%	2.20%
OCR excluding direct property expenses	1.30%	1.24%

 

*depreciation was not deducted from total expenses in the prior year calculation.

 

EPRA performance measures

 

The Company uses EPRA alternative performance measures based on its Best Practice Recommendations to supplement IFRS measures, in line with best practice in the sector.  The measures defined by EPRA are designed to enhance transparency and comparability across the European real estate sector.  The Board supports EPRA’s drive to bring parity to the comparability and quality of information provided in this report to investors and other key stakeholders.  EPRA alternative performance measures are adopted throughout this report and are considered by the directors to be key business metrics.

 

EPRA earnings per share

 

A measure of the Company’s operating results excluding capital gains or losses, giving an alternative indication of performance compared to basic EPS which sets out the extent to which dividends relating to the year are supported by recurring net income.

Group	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Profit/(loss) for the year after taxation	38,155	(1,502)
Net (gains)/losses on investment property and depreciation	(11,369)	25,687
Abortive acquisition costs	-	1,557
EPRA earnings	26,786	25,742
Weighted average number of shares in issue (thousands)	440,850	440,850
EPRA earnings per share (p)	6.1	5.8

 

EPRA NAV per share metrics

 

EPRA NAV metrics make adjustments to the IFRS NAV to provide stakeholders with additional information on the fair value of the assets and liabilities of a real estate investment company, under different scenarios.

 

EPRA Net Reinstatement Value (“NRV”)

 

NRV assumes the Company never sells its assets and aims to represent the value required to rebuild the entity.

 

Group	31 March 2025 £000	31 March 2024 £000
IFRS NAV	423,466	411,820
Fair value of financial instruments	-	-
Deferred tax	-	-
EPRA NRV	423,466	411,820
Number of shares in issue (thousands)	440,850	440,850
EPRA NRV per share (p)	96.1	93.4

 

EPRA Net Tangible Assets (“NTA”)

 

Assumes that the Company buys and sells assets for short-term capital gains, thereby crystallising certain deferred tax balances.

Group	31 March 2025 £000	31 March 2024 £000
IFRS NAV	423,466	411,820
Fair value of financial instruments	-	-
Deferred tax	-	-
Intangibles	-	-
EPRA NTA	423,466	411,820
Number of shares in issue (thousands)	440,850	440,850
EPRA NTA per share (p)	96.1	93.4

 

EPRA Net Disposal Value (“NDV”)

 

Represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.

 

Group	31 March 2025 £000	31 March 2024 £000
IFRS NAV	423,466	411,820
Fair value of fixed rate debt below book value	16,754	16,926
Deferred tax	-	-
EPRA NDV	440,220	428,746
Number of shares in issue (thousands)	440,850	440,850
EPRA NDV per share (p)	99.9	97.3

 

At 31 March 2025 the Company’s gross debt included in the balance sheet at amortised cost was £175.0m (2024: £179.0m) and its fair value is considered to be £158.2m (2024: £160.4m). This fair value has been calculated based on prevailing mark-to-market valuations provided by the Company’s lenders, and excludes ‘break’ costs chargeable should the Company settle loans ahead of their contractual expiry.

 

EPRA NIY and EPRA ‘topped-up’ NIY

 

EPRA NIY represents annualised rental income based on cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the property valuation plus estimated purchaser’s costs.  The EPRA ‘topped-up’ NIY is calculated by making an adjustment to the EPRA NIY in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent periods and stepped rents).  These measures offer comparability between the rent generating capacity of portfolios.

 

Group	31 March 2025 £000	31 March 2024 £000
Investment property[30]	594,364	589,122
Allowance for estimated purchasers’ costs[31]	38,634	38,293
Gross-up property portfolio valuation	632,998	627,415
Annualised cash passing rental income[32]	41,135	41,732
Property outgoings[33]	(2,122)	(1,931)
Annualised net rental income	39,013	39,801
Impact of expiry of current lease incentives[34]	2,780	1,408
Annualised net rental income on expiry of lease incentives	41,793	41,209
EPRA NIY	6.2%	6.3%
EPRA ‘topped-up’ NIY	6.6%	6.6%

 

EPRA vacancy rate

 

EPRA vacancy rate is the ERV of vacant space as a percentage of the ERV of the whole property portfolio and offers insight into the additional rent generating capacity of the portfolio.

Group	31 March 2025 £000	31 March 2024 £000
Annualised potential rental value of vacant premises	4,467	4,743
Annualised potential rental value for the property portfolio	50,194	48,976
EPRA vacancy rate	8.9%	9.7%

 

EPRA cost ratios

 

EPRA cost ratios reflect overheads and operating costs as a percentage of gross rental income and indicate how effectively costs are controlled in comparison to other property investment companies.

Group	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Directly incurred operating expenses and other expenses, excluding depreciation	10,290	9,306*
Ground rent costs	(38)	(38)
EPRA costs (including direct vacancy costs)	10,252	9,268
Property void costs	(1,806)	(1,807)
EPRA costs (excluding direct vacancy costs)	8,446	7,461
Gross rental income	42,828	42,194
Ground rent costs	(38)	(38)
Rental income net of ground rent costs	42,790	42,156
EPRA cost ratio (including direct vacancy costs)	24.0%	22.0%
EPRA cost ratio (excluding direct vacancy costs)	19.7%	17.7%

 

*depreciation was not deducted from total expenses in the prior year calculation.

EPRA LTV

 

An alternative measure of gearing including all payables and receivables.  This ratio indicates whether the Company is complying with its investment objective to target 25% loan-to-value in the medium-term to balance enhancing shareholder returns without facing excessive financial risk.

Group	Year ended 31 March 2025 £000	Year ended 31 March 2024 £000
Gross borrowings	175,000	179,000
Trade and other receivables	5,201	3,330
Trade and other payables	(8,550)	(8,083)
Deferred income	(8,181)	(7,361)
Cash	10,118	9,714
Restricted cash	(2,188)	(2,502)
Net borrowings	171,400	174,098
Investment property and PV	598,172	589,122
EPRA LTV	28.7%	29.6%

 

EPRA capital expenditure

 

Capital expenditure incurred on the Company’s property portfolio during the year. This ratio offers insight into the proportion of cash deployment relating to acquisitions compared to the like-for-like portfolio.

 

Group	31 March 2025 £000	31 March 2024 £000
Acquisitions	-	-
Development	4,843	3,567
Like-for-like portfolio	2,000	13,467
Total capital expenditure	6,843	17,034

 

EPRA like-for-like annual rent

 

Like-for-like rental growth of the property portfolio by sector which offers an alternative view on the ‘run-rate’ of revenues at the year end.

	31 March 2025
Group	Industrial £000	Retail warehouse £000	Retail £000	Other £000	Office £000	Total £000
Like-for-like rent	17,688	9,711	3,270	6,310	5,351	42,330
Acquired properties	-	-	-	-	-	-
Sold properties	390	-	-	-	108	498
	18,078	9,711	3,270	6,310	5,459	42,828

 

		31 March 2024
Group	Industrial £000		Retail warehouse £000	Retail £000	Other £000	Office £000	Total £000
Like-for-like rent	16,357		3,679	9,785	5,807	5,415	41,043
Acquired properties	-		-	-	-	-	-
Sold properties	918		14	-	28	191	1,151
	17,275		3,693	9,785	5,835	5,606	42,194

 

Investment policy

 

 

The Company's investment objective is to provide Shareholders with an attractive level of income together with the potential for capital growth from investing in a diversified portfolio of commercial real estate properties in the UK.

 

The Company's investment policy is:

 

1. To invest in a diversified portfolio of UK commercial real estate principally characterised by smaller, regional, core/core-plus properties that provide enhanced income returns. Core real estate generally offers the lowest risk and target returns, requiring little asset management and fully let on long leases. Core-plus real estate generally offers low to moderate risk and target returns, typically high-quality and well-occupied properties but also providing asset management opportunities.
2. The property portfolio should not exceed a maximum weighting to any one property sector, or to any geographic region, of greater than 50%.
3. To focus on areas with high residual values, strong local economies and an imbalance between supply and demand. Within these locations the objective is to acquire modern buildings or those that are considered fit for purpose by occupiers.
4. No one tenant or property should account for more than 10% of the total rent roll of the Company's portfolio at the time of purchase, except:

1. in the case of a single tenant which is a governmental body or department for which no percentage limit to proportion of the total rent roll shall apply; or
2. in the case of a single tenant rated by Dun & Bradstreet with a credit risk score higher than 2, in which case the exposure to such single tenant may not exceed 5% of the total rent roll (a risk score of 2 represents “lower than average risk”).

5. The Company will not undertake speculative development (that is, development of property which has not been leased or pre-leased), save for redevelopment and refurbishment of existing holdings, but may invest in forward funding agreements or forward commitments (these being, arrangements by which the Company may acquire pre-development land under a structure designed to provide the Company with investment rather than development risk) of pre-let developments where the Company intends to own the completed development. Substantial redevelopments and refurbishments of existing properties which expose the Company to development risk would not exceed 10% of the Company’s gross assets.
6. For the avoidance of doubt, the Company is committed to seeking further growth in the Company, which may involve strategic property portfolio acquisitions and corporate consolidation, such transactions potentially including public and private companies, holding companies and special purpose vehicles.
7. The Company may use gearing, including to fund the acquisition of property and cash flow requirements, provided that the maximum gearing shall not exceed 35% of the aggregate market value of all the properties of the Company at the time of borrowing. Over the medium-term the Company is expected to target borrowings of 25% of the aggregate market value of all the properties of the Company at the time of borrowing.
8. The Company reserves the right to use efficient portfolio management techniques, such as interest rate hedging and credit default swaps, to mitigate market volatility.
9. Uninvested cash or surplus capital or assets may be invested on a temporary basis in:

(i) cash or cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a single-A (or equivalent) or higher credit rating as determined by an internationally recognised rating agency; or

   (ii) any "government and public securities" as defined for the purposes of the FCA rules.

10. Gearing, calculated as borrowings as a percentage of the aggregate market value of all the properties of the Company and its subsidiaries, may not exceed 35% at the time such borrowings are incurred.

 

Glossary of terms

 

Term	Explanation
2019 AIC Corporate Governance Code for Investment Companies (AIC Code)	The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code, as well as setting out additional provisions on issues that are of specific relevance to the Company and provide more relevant information to shareholders.
Alternative Investment Fund Manager (AIFM)	External investment manager with appropriate FCA permissions to manage an ‘alternative investment fund’
Alternative performance measures (APMs)	Assess Company performance alongside IFRS measures
Building Research Establishment Environmental Assessment Method (BREEAM)	A set of assessment methods and tools designed to help understand and mitigate the environmental impacts of developments
Carbon Risk Real Estate Monitor (CRREM)	A project focused on carbon risk assessment for the European real estate industry’s push to decarbonise, building a methodology to empirically quantify the different scenarios and their impact on the investor portfolios and identify which properties will be at risk of stranding due to the expected increase in the stringent building codes, regulation, and carbon prices. It also enables an analysis of the effects of refurbishing single properties on the total carbon performance of a company
Core real estate	Generally understood to offer the lowest risk and target returns, requiring little asset management and fully let on long leases.
Core-plus real estate	Generally understood to offer low-to-moderate risk and target returns, typically high-quality and well-occupied properties but also providing asset management opportunities.
Dividend cover	EPRA earnings divided by dividends paid and approved for the year
Earnings per share (EPS)	Net profit/(loss) divided by number of shares in issue
Energy performance certificate (EPC)	Required certificate whenever a property is built, sold or rented. An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient). An EPC contains information about a property’s energy use and typical energy costs, and recommendations about how to reduce energy use and save money
EPRA earnings per share	Profit after tax, excluding net loss on property portfolio, divided by weighted average number of shares in issue
EPRA occupancy	ERV of occupied space as a percentage of the ERV of the whole property portfolio
EPRA (Sustainability) Best Practice Recommendations (BPR), (sBPR)	EPRA BPR and sBPR facilitate comparison with the Company’s peers through consistent reporting of key real estate specific and environmental performance measures
EPRA topped-up net initial yield	Annualised cash rents at the year-end date, adjusted for the expiration of lease incentives (rent free periods or other lease incentives such as discounted rent periods and stepped rents), less non-recoverable vacant property operating expenses and ground rent costs, divided by property valuation plus estimated purchaser’s costs
Estimated rental value (ERV)	The external valuers’ opinion of the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property
Equivalent yield	Weighted average of annualised cash rents at the year-end date and ERV, less estimated non-recoverable property operating expenses, divided by property valuation plus estimated purchaser’s costs
Expected credit loss (ECL)	Unbiased, probability-weighted amount of doubtful debt provision, using reasonable and supportable information that is available without undue cost or effort at the reporting date
Global Real Estate Sustainability Benchmark (GRESB)	GRESB independently benchmarks ESG data to provide financial markets with actionable insights, ESG data and benchmarks
Greenhouse gas (GHG)	Gasses in the earth’s atmosphere which trap heat and lead directly to climate change
Institutional grade tenants	Tenants with strong credit ratings and financial stability, with a proven track record which are more highly sought after by institutional investors
Investment management agreement (IMA)	The Investment Manager is engaged under an IMA to manage the Company’s assets, subject to the overall supervision of the Directors
Investment policy	Published, FCA approved policy that contains information about the policies which the Company will follow relating to asset allocation, risk diversification, and gearing, and that includes maximum exposures.  This is a requirement of Listing Rule 15
Key performance indicator (KPI)	The Company’s environmental and performance targets are measured by KPIs which provide a strategic way to assess its success towards achieving its objectives
Like-for-like	Comparisons adjusted to exclude assets bought or sold during the current or prior year
Market Abuse Regulation (MAR)	Regulations to which the Company’s code for directors’ share dealings is aligned
Minimum Energy Efficiency Standards (MEES)	MEES regulations set a minimum energy efficiency level for rented properties.
Net asset value (NAV)	Equity attributable to owners of the Company
NAV per share total return	The movement in EPRA Net Tangible Assets per share plus the dividend paid during the period expressed as a percentage of the EPRA net tangible assets per share at the beginning of the period
Net gearing / loan-to-value (LTV)	Gross borrowings less cash (excluding restricted cash), divided by property portfolio and solar panel value
Net initial yield (NIY)	Annualised cash rents at the year-end date, adjusted for the expiration of lease incentives, divided by property valuation plus estimated purchaser’s costs
Net rental income	Annualised cash rents at the year-end date, adjusted for the expiration of lease incentives, less estimated non-recoverable property operating expenses including void costs and net service charge expenses
Net tangible assets (NTA)	NAV adjusted to reflect the fair value of trading properties and derivatives and to exclude deferred taxation on revaluations
Ongoing charges ratio (OCR)	Expenses (excluding operating expenses of rental property recharged to tenants) divided by average quarterly NAV, representing the Annual running costs of the Company
Passing rent	Annualised cash rents at the year-end date, adjusted for the expiration of lease incentives
Real Estate Investment Trust (REIT)	A property company which qualifies for and has elected into a tax regime which is exempt from corporation tax on profits from property rental income and UK capital gains on the sale of investment properties
Revolving credit facility (RCF)	Variable rate loan which can be drawn down or repaid periodically during the term of the facility
Reversionary potential	Expected future increase in rents once reset to market rate
Share price total return	Share price movement including dividends paid during the year
Sterling Overnight Index Average (SONIA)	Base rate payable on variable rate bank borrowings before the bank’s margin
Streamlined Energy and Carbon Report (SECR)	SECR requirements aim to put green credentials into the public domain and help organisations achieve the benefits of environmental reporting
Weighted average cost of drawn debt facilities	The total loan interest cost per annum, based on prevailing rates on variable rate debt, divided by the total debt in issue
Weighted average unexpired lease term to first break or expiry (WAULT)	Average unexpired lease term across the investment portfolio weighted by contracted rent

 

Distribution of the Annual Report and accounts to members

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2025 or 2024, but is derived from those accounts. Statutory accounts for 2024 have been delivered to the Registrar of Companies and those for 2025 will be delivered following the Company's AGM.  The auditor has reported on the 2025 accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006.  The Annual Report and accounts will be posted to shareholders in due course, and will be available on our website (custodianreit.com) and for inspection by the public at the Company’s registered office address: 1 New Walk Place, Leicester LE1 6RU during normal business hours on any weekday.  Further copies will be available on request.

 

- Ends -