XLON:CREI ESEF Annual Report
CUSTODIAN PROPERTY INCOME REIT PLC (XLON:CREI)
ESEF Annual Report
2026-09-02
For: 2026-03-31
View Original
Added on
September 18, 2026
1
Custodian Property Income REIT plc Annual Report and Accounts for the year ended 31 March 2026
(“Custodian
Property Income
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.
For more information visit
custodianreit.com
.
Contents
Strategic report
[
]
Property highlights
[
]
Financial highlights and performance summary
[
]
Delivering maintainable income and value
[
]
Business model
[
]
Growth strategy
[
]
Chairman’s statement
[
]
Investment Manager’s report
[
]
Financial review
[
]
Principal risks and uncertainties
[
]
Section 172 statement and stakeholder relationships
Governance
[
]
Board of Directors and Investment Manager personnel
[
]
Governance report
[
]
ESG Committee report
[
]
[
]
Audit and Risk Committee report
Management Engagement Committee report
[
]
Nominations Committee report
[
]
Remuneration report
[
]
Directors’ report
[
]
Directors’ responsibilities statement
Financial statements
[
]
Independent auditor’s report
2
[
]
Consolidated statement of comprehensive income
[
]
Consolidated and Company statements of financial position
[
]
Consolidated and Company statements of cash flows
[
]
Consolidated and Company statements of changes in equity
[
]
Notes to the financial statements
[
]
Environmental disclosures
[
]
Historical performance summary
[
]
Company information
[
]
Investment Policy
[
]
Glossary
3
Property highlights
2026
£m
Comments
Portfolio value
669.3
31 March 2025: £594.4m
Valuation increases
1
21.5
•
£20.0m or a 2.7% like-for-like increase in
investment property valuation, as explained
further in the Investment Manager’s report
•
£1.5m property, plant and equipment
relating to solar panels
Property acquisitions
63.8
Three acquisitions of privately owned property
companies completed with portfolio prices of:
•
£35.9m - Grove Court Portfolio
•
£19.4m - Merlin Portfolio
•
£8.5m - Scorpion Portfolio
Capital investment
9.5
Primarily comprising:
•
£4.3m
refurbishing
industrial
assets
in
Plymouth, Biggleswade and Kettering
•
£1.6m
constructing
a
drive-through
restaurant at a retail park in Carlisle
•
£0.8m combining two units to facilitate a
letting at a retail warehouse in Southport
•
£0.8m acquiring the freehold interest of a
long-leasehold retail park in Weymouth
Disposal proceeds
19.9
Sales at an aggregate 23% premium to pre-offer
valuation
2
comprising:
•
£6.9m for two office buildings in Cheadle
•
£6.0m for offices in Glasgow
•
£4.8m for 12 smaller units in Leicestershire
acquired as part of the Merlin Portfolio
•
£1.6m for a vacant retail unit in Guildford
•
£0.6m retail unit in Portsmouth
EPRA
3
occupancy
4
92.4%
Occupancy has improved to 92.4% from 91.1%
due to new lettings during the year
1 Comprising unrealised gains on investment property and solar panels (included within property, plant and equipment), and excluding acquisition costs of £2.9m.
2 Latest external valuation prior to the disposal offer being reflected in subsequent valuations.
3
The European Public Real Estate Association (“EPRA”).
4
E
stimated rental values (“ERV”)
of let property divided by total portfolio ERV.
4
Financial highlights and performance summary
2026
2025
Comments
Returns
*EPRA earnings per share
5
6.3p
6.1p
Increased by 3.3% due to rental growth
and
receiving
a
£1.0m
surrender
premium
Basic and diluted earnings per share
6
10.4p
8.7p
Increased profit resulting from a £20.0m
investment property valuation increase
(2025: £11.2m)
Profit before tax (£m)
48.3
38.2
Dividends per share
7
6.0p
6.0p
Target dividend per share for the year
ended 31 March 2027 of 6.0p
*Dividend cover
8
104.8%
101.3%
In line with the Company’s policy of
paying fully covered dividends
*NAV total return per share
9
10.0%
9.5%
6.3% dividends paid (2025: 6.6%) and a
3.7% capital increase (2025: 2.9%)
*Share price total return
10
12.7%
1.2%
Share price increased from 76.2p to
79.9p during the year.
Since the year-
end share price has increased to 88p
Capital values
NAV and *EPRA NTA
11
(£m)
486.7
423.5
Increased due to £21.5m of property
and solar panel valuation gains (2025:
£11.9m)
NAV per share and *NTA per share
99.7
96.1
*Net gearing
12
25.9%
27.9%
Decreasing towards the Company’s
25% target
*Weighted average cost of drawn debt
facilities at year end
4.1%
3.9%
£30m of variable rate debt deployed
during the year (5.5% rate) to refinance
£20m fixed rate loan expiry in August
2025
(3.9%)
and
fund
corporate
acquisitions.
Base
rate
(SONIA)
decreased from 4.5% to 3.75% during
the year.
5 Profit after tax, excluding depreciation and net gains on investment property, divided by weighted average number of shares in issue
(excluding treasury shares).
6
Profit after tax divided by weighted average number of shares in issue.
7 Dividends paid and approved for the year.
8 Profit after tax, excluding depreciation and net gains on investment property, divided by dividends paid and approved for the year.
9
Net Asset Value (“NAV”)
per share movement including dividends per share paid during the year on shares in issue at 31 March 2025.
10 Share price movement including dividends paid during the year.
11
EPRA net tangible assets (“NTA”
) does not differ from
the Company’s IFRS NAV
or EPRA NAV.
12 Gross borrowings less cash (excluding restricted cash) divided by investment
property portfolio and solar panel value.
5
Costs
*Ongoing charges ratio
13
(“OCR”)
2.62%
2.48%
Average quarterly NAV has increased
from £414.8m in FY25 to £454.7m in
FY26
*OCR excluding direct property
expenses
14
1.28%
1.30%
Environmental
*Weighted
average
energy
performance
certificate
(“EPC”)
rating
15
B (48)
C (51)
EPCs updated at 44 units across 24
properties
demonstrating
continued
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.
13 Expenses (excluding depreciation, the cost of sold houses and operating expenses of rental property recharged to tenants) divided by average quarterly NAV.
14 Expenses (excluding depreciation, the cost of sold houses and operating expenses of rental property) divided by average quarterly NAV.
15
Weighted by floor area.
For properties in Scotland, English equivalent EPC ratings have been obtained.
6
Delivering maintainable income and value
Active asset management
•
Nine rent reviews at an aggregate
6% increase in annual rent from
£2.2m to £2.3m and 7% ahead of
estimated rental value (“ERV”)
•
53 new lettings, lease renewals and
lease re-gears, with rental levels
remaining
affordable
to
our
occupiers.
•
EPRA
occupancy
improved
to
92.4% (31 Mar 2025: 91.1%)
Rental
growth
and
maintainable income
•
FY26 dividends of 6.0p
are 105% covered by
recurring income
•
3.3% like-for-like growth
in the portfolio ERV
•
13%
further
income
growth
already
embedded within ERV of
£55.6m exceeding the
current £49.2m passing
rent
Capital recycling and reinvestment
•
Disposal proceeds of £19.9m
during the year, representing an
aggregate 23% premium to pre-
offer valuation
•
£9.5m of capital expenditure,
invested in value and income-
accretive
property
refurbishments
•
£1.5m valuation increase on
solar panels installed during
FY25
Differentiated property strategy
The Company
’s portfolio of smaller, regional core/core
-plus assets 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.
7
Source: Knight Frank LLP
Richard Shepherd-Cross,
Managing Director of the Company’s discretionary investment manager
, commented:
"Our smaller-lot specialism has consistently delivered significantly higher yields
16
with lower volatility without
exposing shareholders to additional risk.
We believe the recent narrowing of the margin between lot-sizes is in
large part due to a smaller sample set of transactions, as investment volumes are down, disproportionately
impacted by a number of large, higher yielding office and shopping centre assets.”
Diverse portfolio with institutional grade tenants
Sector
Weighting by
income
31 March
2026
Industrial
42%
Retail warehouse
22%
Other
15%
Office
14%
High street retail
7%
Location
Weighting
by income
31 March 2026
West Midlands
18%
North-West
16%
South-East
16%
East Midlands
15%
Scotland
12%
South-West
9%
North-East
9%
Eastern
4%
Wales
1%
16
Benchmarked against the EPRA NAREIT UK Index
.
8
Top 10 tenants
Asset locations
Annual
passing rent
(£m)
% portfolio
income
InPost Distribution (formerly
Menzies Distribution)
Aberdeen, Edinburgh, Glasgow,
Ipswich, Norwich, Dundee,
Swansea, York
1.7
3.5%
Wickes
Winnersh, Burton upon Trent,
Southport, Nottingham
1.4
2.9%
B&M
Swindon, Ashton-under-Lyne,
Plymouth, Carlisle
1.4
2.8%
B&Q
Banbury, Weymouth
1.0
2.0%
Matalan
Leicester, Nottingham
1.0
2.0%
First Title (t/a Enact Conveyancing)
Leeds
0.9
1.9%
DFS
Droitwich, Measham
0.9
1.8%
Romac Logistics
Motherwell
0.8
1.7%
Zavvi
Winsford
0.7
1.5%
Vertu Motors (t/a Mercedes of
Beaconsfield)
Beaconsfield
0.7
1.5%
Next
Evesham, Motherwell
0.7
1.4%
Experian tenant risk rating
Sector
31 March
2026
31 March
2025
Government
1%
1%
Very low risk
57%
62%
Low risk
10%
11%
Below average risk
14%
11%
Above average risk
6%
5%
High risk
1%
1%
Other
11%
9%
9
Business model
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, with a focus on improving the environmental credentials of the portfolio, to become the
REIT of choice for private and institutional investors seeking high and stable dividends from well-diversified UK
real estate.
Business model
17
What we invest in
A diverse portfolio of UK
commercial
real
estate,
principally characterised by
smaller,
regional,
core/core-plus
18
properties
that
provide
enhanced
income
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.
How we manage risk
A portfolio diversified by
sector, location, tenant and
lease
term,
with
a
maximum
weighting
by
income to any one property
sector
or
geographic
region of 50%, and a
maximum exposure to non-
governmental tenants of
5%
How we grow
Focus on the refurbishment
or
redevelopment
of
existing
holdings,
rather
than
speculative
development.
Seek further growth, which
may
involve
strategic
property
portfolio
acquisitions and corporate
consolidation
Outcome
EPRA EPS:
•
FY26
–
6.3p
•
FY25
–
6.1p
•
FY24
–
5.8p
•
FY23
–
5.6p
•
FY22
–
5.9p
ERV
like-for-like
growth:
•
FY26
–
3.3%
•
FY25
–
3.9%
•
FY24
–
3.6%
•
FY23
–
4.1%
•
FY22
–
3.8%
17
A full version of the Company’s Investment Policy is shown in the Investment Policy section of this Annual Report
.
18
‘
Core
’
real estate is generally understood to offer the lowest risk and target returns, requiring little asset management and fully let on long leases. Core-plus real estate is generally
understood to offer low-to-moderate risk and target returns, typically high-quality and well-occupied properties but also providing asset management opportunities.
10
Stakeholder interests
The Board recognises the importance of all stakeholder interests 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 maintainable
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.
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 continue to focus on
our levels of governance and disclosure to maintain industry best practice
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.
11
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 over 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. £670m.
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 seven other surveyors and seven accountants.
12
Growth strategy
The Board is committed to seeking further growth in the Company to increase the liquidity of its shares and reduce
the ongoing charges ratio.
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 peer group companies being wound down.
The Board ensures that property fundamentals are central to all decisions.
Corporate acquisitions
The Company has completed three corporate acquisitions during the year (the “Transactions”). For each
transaction, the Company acquired 100% of the
acquirees’
ordinary share capital, with aggregate consideration
calculated on an
‘adjusted NAV
-for-NAV basis
’
, with
each company’s NAV
being adjusted for respective
acquisition costs and the acquiree investment property portfolio valuation adjusted to the agreed purchase price.
13
A summary of the Transactions is shown below:
Transaction
Merlin
Grove Court
Scorpion
Completion date
30 May 2025
13 February 2026
2 March 2026
Acquiree
Merlin Properties Limited
Grove Court Properties
(Holdings) Limited
19
Scorpion Properties
Limited
Number of properties
28
7
5
Portfolio primary location
East Midlands
Buckinghamshire
South Midlands
Consideration
Cash consideration
20
-
£9.3m
£3.4m
Adjusted equity
consideration
21
£19.4m
£26.6m
£5.1m
Portfolio price
£19.4m
£35.9m
£8.5m
Other assets acquired
10 newly built residential
properties for £2.7m
None
None
Largest tenant
Halfords
Vertu Motors (t/a
Mercedes of
Beaconsfield)
Steer Automotive
Portfolio topped-up net initial
yield
8.1%
6.8%
6.8%
Net gearing on acquisition
None
25%
38%
Sector (% income)
-
Industrial
47%
-
100%
-
Retail warehouse
19%
-
-
-
Office
17%
37%
-
-
High street retail
13%
17%
-
-
Other
4%
46%*
-
100%
100%
100%
*comprises 24% motor trade, 19% residential, 3% leisure
The Transactions provide us with portfolios that are both a strong fit with our income-focused strategy and highly
complementary to our existing property portfolio, augmenting our regional coverage and adding further
diversification by tenant.
19 Plus its subsidiaries Grove Court Properties (Beaconsfield) Limited and Gerrards House Limited.
20
Including cash paid to shareholders on acquisition, cash settlement of debt on acquisition and expected cash settled overage, and excluding acquisition costs.
21 Including final expected equity consideration on settlement of deferred consideration and overage at adjusted NAV, less working capital acquired. Equity consideration represents
the number of shares issued or expected to be issued at the contractual subscription share price per the SPA, which does not represent the fair value share price on actual issue
date.
14
Hubert Lynch, outgoing Founder Director of Merlin Properties, 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 t
ransaction 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.
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.”
Dan Pilling, outgoing Director of Grove Court Properties, said
: “
This transaction has provided us with a tax
efficient solution and simplified ownership structure that ensures our family can continue to benefit from our
property investments but within a larger, more diversified portfolio through a fund with a strong track record of
income returns.
We have built an excellent working relationship with the Custodian team and we look forward to
continuing this in the fut
ure.”
15
Chairman
’s statement
During the year, the Board demonstrated its commitment to further scale the Company through strategic corporate
acquisitions and disciplined consolidation, with the purchase of three separate privately-owned property
companies with a combined portfolio price of £63.8m.
At the same time the Company has delivered another strong
operational performance from its existing portfolio.
The resultant growth in the Company’s portfolio has further diversified the
tenant base, while increasing rental
income and profit, all of which supports the fully covered dividend we consistently deliver to shareholders.
The acquisitions were funded in part through the issue of new shares to the vendors providing an additional benefit
of both expanding the
Company’s
share register and further increasing
liquidity in the Company’s shares
. We
intend to continue
growing the Company’s
portfolio through similar acquisitions and believe that Custodian
Property Income REIT’s
income focused and differentiated strategy of investing in a diversified portfolio of smaller
regional properties, coupled with the
Company’s REIT tax status and dividend policy
, is particularly well-suited for
families seeking a tax efficient solution, while achieving their goal of retaining investment exposure to UK property.
Demand for UK listed real estate has shown signs of recovery during the year, although the recent UK political
instability and geopolitical events have once again unsettled confidence in the UK economy as well as the bond
markets,
and by extension the nascent recovery in the Company’s share price.
Nevertheless, the Company has
made progress throughout the year with positive asset management activity and rental growth performance, as
well as the successful and continued delivery of our growth strategy.
Performance
Custodian Property Income REIT’s strategy is to invest in a diversified portfolio which,
as at 31 March 2026,
comprised 174 properties diversified by UK geographical spread and across a range of sectors. The year-end
portfolio valuation reflected a net yield
(“NIY”)
of 6.4%
22
(2025: 6.6%). With an average property value of c.£4m,
and no one tenant or property accounting for more than 3.5%, or 1.7%,
respectively of the Company’s rent roll,
property specific risk and tenant default risk are significantly mitigated.
The Company’s NAV
per share increased by 3.7% during the year, supported by a c. 3% like-for-like portfolio
valuation uplift and contributing to a 10.0% NAV total return per share. However, we believe the conflict in the
Middle East is likely to slow this positive valuation trajectory as investors pause to wait and see whether the Bank
of England reacts to upward pressure on interest rates from persistent inflation. This positive underlying property
22
EPRA topped-up net initial yield.
16
portfolio performance was reflected in the share price performance with a share price total return for the year of
12.7%.
One of the ongoing challenges for listed real estate has been the increasingly strong correlation between share
prices and long-term gilt yields, which have been volatile over the last 12 months. 30-year gilt rates recently
reached a 28-year high of 5.8%, with 10-year gilts at an 18 year high. These rates have an inversely proportional
impact on
Custodian Property Income REIT’s dividend yield
, as illustrated below. As at 31 March 2026, the
Company’s dividend yield was
7.5%, fully covered by earnings and supported by rental growth, and the Board
believes this represents a compelling opportunity for investors, even before considering the potential for future
portfolio valuation growth as the market recovers.
Source: Marketwatch.com
Custodian Property Income REIT combines sector expertise with high quality asset management, tenant covenant
management and portfolio construction, to provide an institutional offering to shareholders in a diversified regional
portfolio, that has a long track record of generating a superior income return. Notwithstanding recent volatility in
pricing, and acknowledging our belief that 2024 witnessed the bottom of a property valuation cycle, the Company
has delivered an average annual NAV total return per share of 6.2% in the 12 years since IPO, driven by strong
recurring earnings with a fully covered dividend.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Mar 25
Apr 25
May 25
Jun 25
Jul 25
Aug 25
Sep 25
Oct 25
Nov 25
Dec 25
Jan 26
Feb 26
Mar 26
10yr Gilt
CREI
17
0
1
2
3
4
5
6
7
8
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
EPS
Dividend pps
0
10
20
30
40
50
60
70
80
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Mar-25
Mar-26
Pence
NAV Total Return per Share
18
The NAV of the Company at 31 March 2026 was £486.7m, approximately 99.7p per share:
Pence per
share
£m
NAV at 31 March 2025
96.1
423.5
Share buybacks
0.2
(4.8)
Share issuance
(0.3)
49.7
Valuation increases
23
and depreciation
3.5
17.0
Profit on disposal of investment property
0.5
2.6
Acquisition costs
(0.6)
(2.9)
Net gain on property portfolio
3.4
16.7
EPRA earnings
5.9
29.0
Quarterly dividends paid during the year
24
(5.6)
(27.4)
0.3
1.6
NAV at 31 March 2026
99.7
486.7
The movement in NAV reflects the payment of interim dividends during the year, but does not include any provision
for the dividend of 1.5p per share relating to Q4 which was paid on Friday 29 May 2026.
Dividends
The Company’s dividend objective is to deliver a property strategy that maintains a relatively high dividend, fully
covered by EPRA earnings.
Dividends relating to the year ended 31 March 2026 were 6.0p (2025: 6.0p), 104.8% covered by recurring (EPRA)
earnings (2025: 101.3%).
Our Investment Manager continues to keep a tight control on costs, while the Company’s
majority fixed-rate debt profile is keeping borrowing costs below the current market rate.
The Board’s ambition remains to grow the dividend at a rate which is fully
covered by net recurring income and does
not inhibit the flexibility of the Company’s investment strategy.
23
Excluding £4.5m IFRS valuation increases arising from issuing shares as consideration for acquisitions at adjusted NAV which exceeded the prevailing share price on issue,
which is included within share issuance.
24 Quarterly interim dividends totalling 6.0p per share (1.5p relating to the prior year and 4.5p relating to the year) were paid on shares in issue throughout the year.
19
Borrowings
During the year, the Company further reduced net gearing to 25.9% loan-to-
value (“
LTV
”)
from 27.9% as at 31
March 2025, driven primarily by the £19.9m of proceeds from property disposals exceeding capital expenditure of
£9.5m and the all-share acquisition of the ungeared Merlin Portfolio,
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 65% at 31 March 2026
(2025: 80%), significantly mitigating interest rate risk for the Company and maintaining the accretive margin
between the
Company’s
4.1% (2025: 3.9%) weighted average cost of debt and property portfolio EPRA topped-
up NIY
25
of 6.4% (2025: 6.6%).
The Company’s debt is summarised in Note 1
6.
Acquisitions
Custodian Property Income REIT remains committed to growth and over the first 12 years of trading the Company
has scaled, largely organically, but also through the acquisition of private property portfolios, with the portfolio
increasing from £90m at IPO to £660m at 31 March 2026.
This growth has improved shareholder liquidity and
increased diversification, mitigating property specific and tenant risk while stabilising earnings.
Following completion of the Transactions summarised in the Growth strategy section, the Board of Custodian
Property Income REIT and the Investment Manager are actively exploring further opportunities to acquire similar
complementary privately owned property portfolios.
Sustainability
The Company has made further progress in implementing its environmental policy during the year, improving its
weighted average EPC score from C (51) to B (48), following further sustainability-led refurbishments within the
portfolio. The
Company’s
Asset Management and Sustainability report is available at:
custodianreit.com/environmental-social-and-governance-esg/
25
Annualised cash rents at the year-end date, adjusted for the expiration of lease incentives, less estimated non-recoverable property operating expenses (excluding letting and rent
review fees), divided by
property valuation plus estimated purchaser’s costs.
Considered an APM.
20
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.
Investment Manager
The performance of the Investment Manager is reviewed each year by the Management Engagement Committee,
which noted the successful completion of the Transactions, 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 believes the continued appointment
of the Investment Manager is in the best interest of shareholders.
During the year the fees charged by the Investment Manager resulted in an ongoing charges ratio excluding direct
property expenses of 1.28% (2025: 1.30%), which compares favourably to the peer group
26
.
Details of fees
payable to the Investment Manager are set out in Note 19.
Board
As planned Nathan Imlach, formerly Chief Strategic Adviser to Mattioli Woods, stepped down from the Board on
31 December 2025 resulting in the Board becoming
fully independent from the Company’s Investment Manager.
On behalf of the Board and our shareholders I thank Nathan for his support and contribution to the Company.
Share buyback programme
In July 2025, the Company implemented a share buyback programme with a maximum aggregate consideration
of £5.0m
(“the Buyback Programme”)
. During the recent higher interest rate environment, the Company prioritised
re-investment of proceeds from selective disposals in funding capital expenditure to improve the quality and
environmental credentials of its existing portfolio, as well as paying down variable rate debt, aligning with the
Company’s strategy of providing shareholders with strong income returns. The Board believes the current share
price materially undervalues the Company and its portfolio, including the security and quality of income offered
through the fully covered dividend. Under the Buyback Programme, shares will only be purchased if the Directors
believe this would result in an increase in earnings per share and/or an increased NAV per share for remaining
shareholders. At the current share price, and given the latest expectations for future interest rates, the Directors
believe the Buyback Programme is an attractive use of property disposal proceeds that will create value for
shareholders.
26 Source: Deutsche Numis.
21
To date the Company has purchased 6.0m shares under the Buyback Programme, which are held in treasury.
Aggregate consideration for these buybacks was £4.8m at a weighted average cost per share of 79.1p,
representing an average 17.7% discount to prevailing dividend adjusted NAV per share.
In May 2026 the Board approved a further £2.0m aggregate consideration of the Buyback Programme.
Outlook
The Company’s Investment Manager
has curated a diversified portfolio that focuses on long-term income,
delivering earnings enhancement through careful stock selection and increased exposure to higher growth sectors
with the greatest potential for rental growth. As a result the portfolio has supported growing earnings and a fully
covered dividend, with 105% dividend cover for the year. 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 remain elevated for
the foreseeable future with persistent inflation.
The Board is grateful for the support of its wide range of shareholders, with the majority classified as private client
or discretionary wealth management investors, and also extends a warm welcome to the families joining the share
register as a result of the three private property portfolio acquisitions this financial year.
David MacLellan
Chairman
10 June 2026
22
Investment Manager’s report
The UK property market
The advent of the conflict in the Middle East, and its impact on inflation and interest rate expectations as well as
supply chain pressures, created volatility at a time of renewed confidence in UK commercial real estate.
Listed
real estate share prices suffered a sharp decrease in late 2022, as interest rates rose, with associated weak
valuations continuing throughout 2023 and into 2024.
By mid-2024 we could see the bottom of the valuation cycle
in most property sectors, yet investor confidence was weighed down by uncertainty over longer-term interest rates
and more recently the November 2025 Budget.
In the three months between the Budget and the start of the
conflict in Iran, Custodian Property Income REIT enjoyed a 12.3% recovery in share price, consistent with most
listed real estate.
What followed was sharp volatility, with those gains reversing by 31 March 2026, but
subsequently recovering some of the lost ground.
We believe the underlying positivity towards listed real estate
can be explained by the structural forces supporting a rental growth story which will support long-term total returns.
Valuations across the C
ompany’s portfolio have been recoverin
g since Q3 2024, largely through positive asset
management, securing lease renewals and rental growth or from delivering modern, energy efficient buildings
through refurbishment.
This theme has been widespread across the market with a strong focus from occupiers
on good quality buildings.
Subject to further negative news from the Middle East or elsewhere, we expect this
steady valuation recovery to continue, however, unlike in previous cycles we do not expect this to derive from
significant yield shift
27
supported by falling long-term gilt rates, but from primarily asset management led rental
growth.
A key support to the current delivery of positive asset management outcomes is the limited supply of modern or
refurbished buildings.
Supply has been restricted by limited development since 2022 in all but a few property sub-
sectors, with an acute reduction in speculative development projects more recently.
In the two largest sectors of
the Company
’s portfolio,
industrial and retail warehousing, which account for 42% and 22% of income respectively,
the supply side effect has had the greatest impact, supporting refurbishment projects and rental growth.
Over the
last 12 months the portfolio has recorded like-for-like growth in estimated rental value of 4.1% in industrial and
2.7% in retail warehousing.
In addition to supply/demand dynamics, rental growth in commercial property is also driven by inflation which has
been, and will likely continue to be, a feature of the economy.
Build cost and labour cost inflation requires rents
to grow to support refurbishment and new development.
Without higher rents cost inflation will restrict supply,
which will in turn put pressure on rents to grow.
In short, commercial property should perform relatively well in an
inflationary environment as investors are naturally drawn to real assets.
It has certainly been the case that the
27
Yield shift refers to a change in the percentage return (yield) an investor receives on a property due to movement in its capital value due to investor market sentiment rather than
movement in rental expectations.
23
high inflation we experienced over the last few years has been met with higher rental levels across most sectors
of real estate.
Unlike in 2018-2023 when rental growth was focused principally on logistics assets, which brought forward
significant investment and development capital, the market is now much flatter with rental growth potential a
feature of all sectors, as seen in the Custodian Property Income REIT portfolio in the year to 31 March 2026.
Investors appear less focused on single sector investing and more attracted to the diversified portfolios than
previously.
On a sectoral basis there has been positive news for all the main commercial property sectors.
Industrial continues
to lead the way on rental growth, but we have also recorded rental growth in retail warehousing, office and high
street retail.
Like-for-like ERV growth by sector is shown below:
Sector
31 March 2026
Industrial
4.1%
Other
3.7%
Retail warehouse
2.7%
Office
1.6%
Retail
1.3%
24
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 13% (2025: 14%) 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 2026
Equivalent
yield
28
31 March 2026
EPRA topped-up
NIY
31 March 2025
Equivalent yield
31 March 2025
Industrial
5.6%
7.1%
5.5%
6.9%
Retail warehouse
7.3%
7.6%
7.5%
7.6%
Other
7.6%
7.9%
7.7%
8.4%
Office
7.8%
11.4%
8.1%
11.1%
High street retail
9.2%
8.1%
9.4%
8.4%
Whole portfolio
6.4%
7.8%
6.6%
7.8%
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 lo
cations 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.
28 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. Source: Knight Frank.
25
Sectoral view
Industrial
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 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 in our portfolio which the Investment Property Forum Consensus Forecast expects
to record the highest total return in 2026, 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
26
Office
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 despite acquisitions during the year, our offices are typically 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
27
Other
Sub-
sector of ‘Other’ sector assets
Weighting
by income
31 March 2026
Weighting
by income
31 March 2025
Motor trade
23%
16%
Gym
17%
20%
Drive-through
15%
17%
Pub and restaurant
12%
15%
Other, including day nursery and hotel
10%
13%
Leisure
10%
12%
Residential
7%
-
Trade counter
6%
7%
100%
100%
Property portfolio balance
Property portfolio summary
2026
2025
Property portfolio value
29
£669.3m
£594.4m
Number of separate tenancies
470
349
EPRA vacancy rate
7.6%
8.9%
Number of assets
174
151
Weighted average unexpired lease term to first break of expiry
(“
WAULT
”)
5.1 years
5.0 years
EPRA topped-up NIY
6.4%
6.6%
Weighted average EPC rating
B (48)
C (51)
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, retail warehouse
and alternative sectors,
often referred to as ‘other’ in property market analysis.
29
2026 includes £nil
of assets sold since the year end classified as ‘held
-for-
sale’
(2025: £11.0m).
28
The current sector weightings are:
Sector
Valuation
31 March
2026
£m
Weighting by
income
30
31 March
2026
Valuation
31 March
2025
£m
Weighting by
income
31 March
2025
Valuation
movement
31
£m
Weighting by
value 31
March 2026
Weighting by
value 31
March 2025
Industrial
332.2
42%
298.3
42%
11.7
50%
50%
Retail
warehouse
138.8
22%
127.3
22%
2.6
21%
21%
Other
100.7
15%
78.2
13%
2.1
15%
13%
Office
59.5
14%
57.7
16%
(1.2)
8%
10%
High street retail
38.1
7%
32.9
7%
0.3
6%
6%
Total
669.3
100%
594.4
100%
15.5
100%
100%
For details of all properties in the portfolio please see
custodianreit.com/property/portfolio
.
Portfolio acquisitions undertaken during the year are detailed in the Growth strategy section.
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 do not
fit within the Company’s
longer-term investment strategy is important.
The Company sold the following properties during the year for an aggregate £19.9m, 23% ahead of pre-offer
valuation:
•
Single-let offices in Glasgow for £6.0m at a 24% premium to the 30 September 2025 valuation;
•
12 primarily retail units in Leicestershire for £4.8m, with certain assets sold to special purchasers, resulting in
an aggregate 52% premium to purchase price allocation as part of the Merlin Portfolio;
•
Offices at 5500 Lakeside, Cheadle, which were 66% let, for £4.0m in line with valuation;
•
Offices at Wienerberger House, Cheadle which were fully let, for £2.9m, a 29% premium to valuation;
•
Retail unit in Guildford for £1.6m, £0.1m ahead of valuation; and
•
Retail unit in Portsmouth for £0.6m, in line with valuation.
30 Current passing rent plus ERV of vacant properties.
31
Excluding £4.5m IFRS valuation increases arising from issuing shares as consideration for acquisitions at adjusted NAV which exceeded the prevailing share price on issue.
29
Since the year end the Company has sold an industrial unit in Scunthorpe, acquired as part of the Scorpion
Portfolio, for £0.1m in line with valuation.
Asset management
During the year we have remained focused on active asset management, completing nine rent reviews at an
aggregate 6% increase in annual rent from £2.2m to £2.3m and 7% ahead of ERV.
We also completed 53 new
lettings, lease renewals and lease re-gears, with rental levels remaining affordable to our occupiers.
EPRA occupancy has improved to 92.4% (31 Mar 2025: 91.1%) due to the new lettings above and the sale of
vacant, or part vacant, units in Cheadle and Guildford.
During the year we invested £9.5m in capital expenditure, primarily on property refurbishments.
£2.1m of this
capital expenditure related to the
refurbishment of an industrial unit in Plymouth which moved the property’s EPC
from ‘E’ to ‘A’ and facilit
ated a new letting at a new headline rent for the area.
The new tenant, Altilium Metals,
will use the site for
‘Accelerating Carbon Capture and Storage Technologies’
which will support the UK’s first
commercial refinery for the recovery of critical battery materials from end-of-life EV batteries.
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 reached an average B rating during the year (equivalent to a score
of between 25 and 50).
With energy efficiency a core tenet of the Company’s asset management strategy and
0
10
20
30
40
50
60
70
Mar-22
Mar-23
Mar-24
Mar-25
Mar-26
Weighted Average EPC
30
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 44 units across 24 properties where existing EPCs had expired
or where works had been completed, improving the weighted average EPC rating from C (51) at 31 March 2025
to B (48).
Richard Shepherd-Cross
Managing Director
for and on behalf of Custodian Capital Limited
Investment Manager
10 June 2026
31
Financial review
A summary of the Company’s financial performance for the year is shown below:
Financial summary
Year ended
31 March 2026
£000
Year ended
31 March 2025
£000
Rental revenue excluding surrender premiums
44,312
42,828
Surrender premiums
1,134
-
Rental revenue
45,446
42,828
Other income
605
476
Expenses, dilapidations and net tenant recharges
(9,889)
(9,159)
Net finance costs
(7,205)
(7,359)
EPRA earnings
28,957
26,786
Net gain on investment property and depreciation
19,341
11,369
Profit before tax
48,298
38,155
EPRA EPS (p)
6.3
6.1
Dividend cover
104.8%
101.3%
OCR excluding direct property costs
1.28%
1.30%
Borrowings
Net gearing
25.9%
27.9%
Weighted average debt maturity
5.0 years
4.5 years
Weighted average cost of drawn debt
4.1%
3.9%
Revenue
Rental revenue excluding surrender premiums increased by 3.5% compared to the year ended 31 March 2025,
with like-for-like passing rent increasing by 3.4% as rental growth was captured throughout most sectors of the
portfolio.
Acquiring £63.8m of properties via corporate acquisitions added c. £5.5m to the annual rent roll during the year
and, net of disposals, year end annual contractual passing rent increased by 12.1% to £49.2m (2025: £43.9m).
32
During the year the Company received a £0.95m surrender
premium, reflecting c. three years’ rent, following the
early exit of a tenant of an industrial unit in Hamilton.
Total surrender premiums of £1.1m increased FY26 EPRA
earnings per share by c. 0.2p.
During the year we saw a further five PV installations complete a full operational year, which increased other
income by 27%.
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
Net finance costs decreased by £0.2m during the year, primarily due to base rate (SONIA) decreasing from 4.5%
to 3.75% and disposal proceeds of £19.9m exceeding £9.5m of capital expenditure on the existing portfolio.
These
factors more than offset the impact of refinancing a £20m loan with a fixed rate of 3.9% on expiry in August 2025
usi
ng the Company’s variable rate revolving credit facility (“RCF”)
with a prevailing 5.5% rate.
During the final quarter of the year the Company funded the £12.7m cash element of consideration for corporate
acquisitions.
Together with £2.9m of associated acquisition costs for the year, these factors resulted in a net £10m
increase in drawn debt during the year and increased the year-end weighted average cost of debt from 3.9% to
4.1%.
Earnings
The positive movements in revenue and finance costs increased EPRA earnings per share to 6.3p (2025: 6.1p).
During the year sentiment towards real estate improved despite concerns over high long-term gilt rates and the
impact of the Iran conflict.
Investment property portfolio valuation increases were £20.0m (2.7% like-for-like
increase)
, with the Company’s portfolio of solar panels also seeing a £1.5m uplift
.
During the year the Company
sold 17 properties generating a profit on disposal of £2.6m, which contributed to a profit before tax of £48.3m
(2025: £38.2m).
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 EPRA earnings.
The Company paid dividends totalling 6.0p per share during the year (£27.4m) comprising a fourth interim dividend
relating to the year ended 31 March 2025 of 1.5p, and three quarterly interim dividends of 1.5p per share relating
to the year ended 31 March 2026.
33
On Friday 29
May 2026 the Company paid a fourth quarterly interim dividend per share of 1.5p for the quarter
ended 31 March 2026 of £7.3m.
Dividends relating to the year ended 31 March 2026 of 6.0p (2025: 6.0p) were
104.8% (2025: 101.3%) covered by EPRA earnings of £29.0m (2025: £26.8m), as calculated in Note 22.
Debt financing
The
Company’s debt profile at 31 March 2026 is summarised below:
31 March
2026
31 March
2025
Gross debt
£185.0m
£175.0m
Net gearing
25.9%
27.9%
Weighted average cost
4.1%
3.9%
Weighted average maturity
5.0 years
4.5 years
Percentage of drawn debt at a fixed rate of interest
65%
80%
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 27.9% LTV last year to 25.9% at the year-end primarily due to £21.5m of valuation increases.
On 10 February 2026 the Company and
Lloyds Bank plc (“Lloyds”)
agreed to extend the term of the RCF by one
year to expire on 10 November 2028 and increased the RCF facility limit from £60m to its maximum £75m.
At the year end the Company had the following facilities available:
•
A £75m 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 2028;
•
A £45m term loan facility with
Scottish Widows (“
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:
34
•
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 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 £227.4m (34% of the property portfolio) of unencumbered assets which could
be charged to the security pools to enhance the LTV on the individual loans.
On 25 March 2026 the Company
secured an asset in Dundee valued at £1.9m to its Aviva loan pool. An £11.5m unencumbered industrial asset in
Winsford is in the process of being charged to the RCF loan pool.
The weighted average cost of the Company’s drawn debt facilities at 31
March 2026 was 4.1% (2025: 3.9%), with
a weighted average maturity of 5.0 years (2025: 4.5 years).
At 31 March 2026 the Company had £65.0m (2025:
£35.0m) drawn under its Lloyds RCF, meaning 65% (2025: 80
%) 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.
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;
35
•
Share price total return
–
reflects the movement in share price and dividends payable to shareholders, giving
returns that were available to shareholders over 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
less restricted cash 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
Comp
any’s peers through consistent reporting of key
real estate specific performance measures.
2026
2025
EPRA EPS (p)
6.3
6.1
EPRA Net Tangible Assets (“NTA”) and Net
Reinstatement Value (“NRV”) per share (p)
99.7
96.1
EPRA Net Disposal Value
(“NDV”) per share (p)
101.1
99.9
EPRA NIY
5.8%
6.2%
EPRA ‘topped
-
up’ NIY
6.4%
6.6%
EPRA vacancy rate
7.6%
8.9%
EPRA cost ratio (including direct vacancy costs)
26.2%
24.0%
EPRA cost ratio (excluding direct vacancy costs)
21.8%
19.7%
EPRA LTV
26.6%
28.7%
EPRA capital expenditure (£m)
9.5
6.8
EPRA like-for-like annual rent (£m)
43.0
42.3
•
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
36
•
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
–
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 extending
the Company’s RCF.
We
have a scalable cost structure and flexible capital structure
to continue to raise new equity through corporate acquisition opportunities.
Ed Moore
Finance Director
for and on behalf of Custodian Capital Limited
Investment Manager
10 June 2026
37
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 we
aknesses
were identified in respect of risk management, internal control and related financial and business reporting.
The
Investment Manager is undertaking a review of the risk register to ensure that material controls are identified and
their operation documented to support the Board
’s assessment of
their effectiveness during the year ending 31
March 2027, as required by the revised Provision 29 of the UK Corporate Governance Code.
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.
38
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
Restructure Plans or 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, uncertainty due
to
global
socio-political
issues
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 400 individual tenancies with the
largest tenant accounting for 3.5% of the rent roll
•
Investment policy limits the Company’s re
nt 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
property
acquisitions
and
new lettings. A
degree of tenant
covenant risk and
short WAULTs are
accepted due to
the nature of the
business
39
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
Decreases in property
portfolio valuation
•
Reduced
property market
sentiment
and
investor
demand
affecting
market
pricing
•
Upward pressure or high
longer-term
interest
rate
expectations
•
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: Moderate
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
Increased
–
although
valuations have
increased
during the year,
recent global
socio-economic
instability is
negatively
impacting
interest rate
expectations
and overall
economic
confidence
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 Compa
ny’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,
diversification
and active asset
management
initiatives.
40
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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: Moderate
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.
Increases in longer-
term
interest
rate
expectations make longer-
term fixed rate debt more
expensive.
Lack
of
availability
of
financing
would
have
a
significant
impact
on
property
strategy
if
properties needed to be sold
to repay loans.
No change
–
valuations
stabilised
during the year
but longer-term
gilt rates have
recently
increased
due
to global socio-
economic
instability
•
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
•
65% 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 £60m to £75m during the year to
provide RCF headroom funding the cash element of
corporate acquisitions
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.
41
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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: Low
Impact: High
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
No change
–
no
changes
are
expected
to
key Investment
Manager
personnel
•
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 monitoring the
safeguarding of property assets and cash
•
The Investment Management Agreement contains key
personnel provisions designed to mitigate the potential
impact of key individuals leaving
The Board relies
on the Investment
Manager’s
processes.
Its
appetite for such
risk is low
42
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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
32
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 C
ompany’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
32 As defined by the Corporation Tax Act 2010.
43
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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
44
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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 In
vestment 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.
45
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
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
The Board accepts
risk
with
such
transactions
with
the
mitigations
opposite used to
manage risk where
possible
46
Emerging risks
The impact of geo-political risk relating to the conflicts in Ukraine, Gaza and Iran and the associated volatile political
climate, and UK specific factors including government leadership uncertainty, the 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 risk
s because of the Company’s
diverse property portfolio covering all
sectors and geographical areas in the UK with over 400 individual tenancies.
The rapid adoption of
artificial intelligence (“
AI
”)
may alter demand and occupier space requirements over the
medium-term, and AI-related cyber and data risks within
the Investment Manager’s
existing technology risk
framework. AI is not considered a material risk in the near-term but is under active Board review given the pace
of change.
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.
The longer-term viability assessment assumes that debt facilities expiring in 2028 are refinanced.
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 capex, 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 key assumptions:
•
1% annual loss of contractual revenue through Company Voluntary Arrangements 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;
47
•
Portfolio valuation movements based on consensus forecast changes;
•
Continuing a programme of asset disposals;
•
The Company’
s capex programme to invest in its existing assets continues as expected; 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:
1. Covenant compliance
The Company operates the loan facilities summarised in Note 16.
At 31 March 2026 the Company had sufficient
headroom on lender covenants at a portfolio level with:
•
Parent company net gearing of 28.7%
33
compared to a maximum LTV covenant of 40% on its borrowing
facilities.
£227.4m (34% of the whole property portfolio) is unencumbered
by the Company’s borrowings; and
•
131% minimum headroom on interest cover covenants for the quarter ended 31 March 2026.
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
33 Calculated with reference to the property holdings of Custodian Property Income REIT plc, thus excluding properties held by its subsidiaries.
48
out
turn, 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
28% (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 2026 position by:
o
34% at a portfolio level; or
o
12% 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 2026 is increased or decreased by 0.5% (2025: 0.25%) and if the ERV is increased or decreased by 5.0%
(2025: 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
2.7% increase in rents during 2026 with capital value increases of 3.2%.
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.170 assets and over 300 typically 'institutional grade'
tenants across all commercial sectors.
2. Liquidity
At 31 March 2026 the Company had £10.0m of unrestricted cash and £10.0m undrawn RCF, with gross borrowings
of £185.0m resulting in net gearing of 25.9%.
The Company repaid its £20m SWIP loan using its RCF facility on
expiry.
The Company increased its RCF limit from £60m to £75m in February 2026.
T
he Company’s
forecast model
projects it will have at least £8.6m 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
assessment periods.
Results of the assessments
Based on the prudent a
ssumptions 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:
49
•
Has surplus cash to continue in operation and meet its liabilities as they fall due;
•
Complies with borrowing covenants; and
•
Complies with the REIT tests.
50
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,
minimising the Company’s impact on the environment
and benefitting communities,
and as such the long-term is firmly within the sights of the Board when all material
decisions are made.
51
The Board gains an understanding of the views of the C
ompany’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.
The Company’s Nominations Committee is responsible for app
lying 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.
52
The need to act
fairly as between
members
of
the
Company
The Company’s shareholders are a
n important stakeholder group. The Board
oversees the Investment Manager’s investor relations programme which involves
t
he 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.
During the year the Company has welcomed a number of new, significant
shareholders through its corporate acquisition activity.
In all negotiations the best
interests of existing shareholders was ensured.
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 engage
ments 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 lo
cal 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.
53
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 2027.
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 2027 to 2028, and increasing the facility limit
to its maximum £75m.
To mitigate refinancing risk by securing the existing
competitive margin for a further year, and mitigate
liquidity risk by maintaining a suitable level of headroom
on available, undrawn facilities.
Acquiring Merlin Properties Limited, Grove Court
Properties (Holdings) Limited and Scorpion Properties
Limited
(“the Acquisitions”)
in all or part-paper
transactions on an adjusted NAV-for-NAV basis.
The Company has undertaken property, legal, financial
and tax due diligence work on the Acquisitions and the
Investment Manager modelled the combined entity to
understand the projected short and medium-term impact
of the Acquisitions on the combined portfolio and its
earnings.
The Board constituted an Acquisition
Committee for each transaction 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
Committees 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.
54
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.
55
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
56
Stakeholder
Stakeholder interests
Stakeholder engagement
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
10 June 2026
57
Board of Directors and Investment Manager personnel
The Board comprises five non-executive directors.
A short biography of each director is set out below:
David MacLellan - Independent Chairman
Appointed: May 2023
David has over 40
years’ experience in private equity and fund management
first with Murray Johnstone, which
he joined in 1984, and then with RJD Partners which he founded in 2001.
He was a director of Aberdeen Asset
Managers plc following its acquisition in 2000 of Murray Johnstone where he was latterly Chief Executive.
David has served on the boards of a number of companies including as Chairman of both John Laing Infrastructure
Fund and Britannic UK Income Fund, and a Director of Maven Income and Growth VCT 2 plc.
He is currently a
Director and Chairman of the Audit Committees of Lindsell Train Investment Trust plc, an equity investment trust,
J&J Denholm Limited, a family owned business involved in shipping, logistics, seafoods and industrial services,
and of Aquila European Renewables plc, an investment trust which invests in the renewable energy sector.
David is a past council member of the British Venture Capital Association and is a member of the Institute of
Chartered Accountants of Scotland.
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
Appointed: March 2021
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 also Non-Executive
Director of Fresca Group Limited, a fruit and vegetable grower and importer.
Previously Elizabeth was SID and Remuneration Committee Chair at McBride plc, Dalata Hotels Group plc, The
Unite Group plc and at Flybe plc, SID at J D Wetherspoon plc and Chair of Moat Homes Limited.
58
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
Appointed: December 2019
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.
Hazel
’s other roles are not considered to impact her ability to allocate sufficient time to the Company to discharge
her responsibilities effectively.
Chris Ireland FRICS - Independent Director
Appointed: March 2021
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 Chairman from 2021
until retiring in March 2023.
Chris is a former Chairman 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
59
Appointed: May 2022
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 Chairman 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.
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.
60
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 £375m of new equity, arranging or refinancing nine
loan facilities and leading on seven
corporate acquisitions.
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
was
responsible for the vision and operational management of Mattioli Woods
as Chief Executive Officer (“CEO”).
He
instigated the development of Mattiol
i Woods’
investment proposition, including the syndicated property initiative
that developed the seed portfolio for the launch of Custodian Property Income REIT plc in 2014.
Ian moved to the
position of Founding President after stepping down as CEO of Mattioli Woods in November 2025.
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, was appointed High Sheriff of Leicestershire for 2021/22 and became one of four Deputy Lieutenants
commissioned in Leicestershire in 2024.
Ian and his close family own 8.9m 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.
61
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 Chartered Surveyor.
As Portfolio Manager, Eoin manages Custodian’s properties predominan
tly in the South-West and South-East of
England.
Javed Sattar MRICS
–
Portfolio Manager
Javed has
15 years’ experience in commercial real estate and asset management
.
He joined Custodian Capital
in 2011 after graduating from Birmingham City University with a degree in Estate Management Practice
and
subsequently completed a Postgraduate Diploma in Surveying at the University College of Estate Management.
Javed qualified as a chartered surveyor in 2017.
Javed operates as Portfolio Manager managing properties predominantly located in the North-West of England.
Paula Craven
–
Portfolio Manager
Paula joined Custodian Property REIT as Portfolio Manager in 2026 as part of the Grove Court acquisition. After
graduating university, Paula began her career in property management in Chicago, USA. Having relocated to
62
England, she has gained 19 years of experience managing mixed-use commercial and residential properties
developing strong tenant and client relationships.
Paula manages the Grove Court portfolio in South-East England.
Shaheen Patel MRICS
–
Portfolio Manager
Shaheen joined Custodian Capital as a Graduate Surveyor in 2023 after graduating from The University of
Cambridge with a degree in Land Economy. She qualified as a chartered surveyor in 2026 and helps manage
assets across the East Midlands and the North of England.
63
Governance report
The Board has considered the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles
and Provisions set out in the 2024 UK Corporate Governance Code (the
“
UK Code
”
), as well as setting out
additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been
endorsed by the Financial Reporting Council, provides more relevant information to shareholders. By reporting
against the AIC Code, the Company also meets its obligations under the UK Code and associate disclosure
requirements under paragraph 9.8.6 of the Listing Rules.
The Company has complied with the Principles and Provisions of the AIC Code since IPO.
The AIC Code is available on the AIC website (theaic.co.uk). It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.
Further explanation of how the main principles of the AIC Code have been applied, to enable shareholders to
evaluate how the principles have been applied, is set out below:
AIC Code principle
How applied to Custodian Property Income REIT
5
–
Board leadership and purpose
•
Role of the Board - Governance Report
6
–
Division of responsibilities
•
Division of responsibilities
- Governance Report
•
Board Committees - Governance Report
7 - Composition, succession and evaluation
•
Board
performance
and
evaluation
-
Governance Report
8 - Audit, risk and internal control
•
Internal
control
and
risk
management
-
Governance Report
•
Audit and Risk Committee report
9 - Remuneration
•
Remuneration report
Provision 29 of the UK Code, which requires boards of premium-listed companies to make an annual, public
declaration regarding the effectiveness of their material internal controls, including those over financial and non-
financial reporting, operational activities and compliance, is applicable to the Company for the financial year ending
31 March 2027.
The Investment Manager has
migrated the Company’s risk register on to newly
implemented new
risk management software during the year, specifically tailored for the updated Provision 29 compliance and
64
reporting, and has discussed material controls with the Audit and Risk Committee.
This process is expected to be
concluded ahead of the 31 March 2027 year end.
Role of the Board
The Board is responsible to shareholders, tenants and other stakeholders for promoting the long-term success of
the Company and generating shareholder value.
Good governance is fundamental to the long-term success of
the Company and the Board, Company Secretary and Investment Manager work together to ensure the highest
standards of governance are maintained by the Company and are central to every Board decision.
The Board comprises five directors, all of whom have wide experience, are non-executive and are independent of
the Investment Manager.
Biographical information on each Director is set out earlier in the Governance Report.
The Directors are responsible for managing the Company’s business in accordance with its Articles of Association
(“the Articles”) an
d the Investment Policy (as set out in the Strategic report), and have overall responsibility for the
Company’s activities.
The Directors may delegate certain functions to other parties and in particular the Directors
have delegated responsibility for man
agement of the Company’s property portfolio to the Investment Manager.
The Board retains responsibility for reviewing the engagement of the Investment Manager, based on
recommendations from the Management Engagement Committee, and exercising overall control of the Company,
reserving the following key matters:
•
Setting the Company's purpose, values, standards, culture, investment strategy, strategic aims, risk appetite
and objectives;
•
Setting the overall tone of
the Company’s ESG strategy
and health & safety approach;
•
Approving the annual operating and capital expenditure budgets and external financial reporting;
•
Approving valuations of the Company’s property portfolio;
•
Approving the Company’s dividend policy and the interim dividends;
•
Ensuring a satisfactory dialogue with shareholders and approving General Meeting resolutions and
shareholder circulars;
•
Reviewing and approving changes to the structure, size and composition of the Board, including succession
planning, following recommendations from the Nominations Committee;
•
Determining the remuneration policy for the Directors;
•
Undertaking a formal and rigorous annual review of its own performance, that of its committees and individual
directors, and the division of responsibilities and independence;
•
Considering the balance of interests between shareholders, employees, customers and the community; and
•
Approving the appointment of the Company’s principal professional advisers.
65
Meetings
The Board meets
at least four times a year to consider the Company’s qu
arterly trading performance and approve
the Annual and Interim reports.
The Board also meets on an ad hoc basis to discuss specific issues.
Meetings
are attended by the Directors, the Investment Manager, the Company Secretary and other attendees by invitation.
Culture
The culture of the Company is integral to its success. The Board promotes open dialogue and frequent, honest
and open communication between the Investment Manager and other key advisors to the Company. Whilst the
Company has no employees, the Board pays close attention to the culture of the Investment Manager and its
employees and believes that its open, proactive and pragmatic approach is the right fit for delivering the
Company’s
purpose, values and strategy.
The Board believes that its positive engagement and working
relationship with the Investment Manager helps the business achieve its objectives by creating an open and
collaborative culture, whilst allowing for constructive challenge. The Non-Executive Directors speak regularly with
key members of the Investment
Manager’s team
outside of Board meetings to discuss various key issues relating
to the Company.
Division of responsibilities
Chairman
David MacLellan is the Chairman and is responsible for the leadership of the Board and ensuring its overall
effectiveness on directing the Company.
The Chairman
is responsible for setting the Board’s agenda and ensuring
that adequate time is available for discussion of all agenda items, in particular strategic issues.
The Chairman
promotes a culture of openness and debate by facilitating the effective contribution of other non-executive
directors.
The Chairman is also responsible for ensuring that the directors receive accurate, timely and clear information and
ensuring effective communication with shareholders.
In addition to formal general meetings, the Chairman makes himself available for meetings with major shareholders
in order to understand their views on governance and performance against the Company's investment objective
and investment policy.
66
Senior Independent Director
Elizabeth McMeikan is the SID and has a responsibility to be available as an alternative point of contact (other
than the Chairman) for shareholders and other stakeholders and to act as a sounding board for the Chairman.
The SID is also expected to take an active part in the assessment of Board effectiveness and when required to
lead the recruitment process for a new Chair and recommend the Chairman’s remuneration.
Non-Executive Directors
The Company has five non-executive directors and no employees.
The Board has delegated operational functions
to the Investment Manager and other key service providers.
The independent Non-Executive Directors provide
constructive challenge, strategic guidance and offer specialist advice to the Investment Manager and hold it to
account.
Company Secretary
The Company Secretary, supported by the Company Secretarial adviser, is available to support all Directors and
is responsible for the efficient administration of the Company, particularly with regard to ensuring compliance with
statutory and regulatory requirements and for ensuring that decisions of the Board are implemented.
The
Company Secretary
’s other roles include d
eveloping Board and Committee agendas, advising on regulatory
compliance and corporate governance, facilitating Director induction programmes and organising General
Meetings.
Board performance and evaluation
The Directors have annual appraisals as part of a Board Effectiveness Review (
“
BER
”
). The Chairman reviews
the performance of the other Independent Non-Executive Directors, and the SID reviews the Chairman in
conjunction with other Directors.
Board Committees review their own performance annually.
During the year the Board undertook an internally facilitated BER overseen by David MacLellan and Elizabeth
McMeikan, covering:
•
Leadership and purpose - how effectively the Chairman, SID and Committee Chairs fulfil their roles and how
far the Board inputs into helping develop and challenge the
Company’s long
-term strategic planning;
•
Relationships and communication
–
how effectively the Board communicates with, and understands the views
of, its stakeholders in particular shareholders and key service providers;
67
•
Governance - has the Board suitably addressed best practice and its obligations around diversity,
independence and the regulatory environment;
•
Performance - how well the Board oversees and holds management to account for delivery of the strategy;
and
•
Composition - skills, knowledge and experience of the Board and its Committees.
Overall, the results of the evaluation were positive and there were no significant concerns amongst the Directors
relating to the effectiveness of the Board.
The Board considers that all the current Independent Directors remain independent, contribute effectively and
have the skills and experience relevant to foster the effective leadership and direction of the Company. It was
found that the Directors can commit sufficient time to the Company’s activ
ities.
The Chairman
’s review was
positive, and the other Directors considered that the Chairman remained independent and that he continued to
lead the Board strongly and effectively.
Board training
We require Directors to keep their knowledge and skills up to date and include training discussions with the
Chairman in their annual appraisals.
As required, we invite professional advisers to provide updates on a range
of issues including, but not limited to, market trends, legislative developments, environmental, technological and
social considerations.
Our Investment Manager and brokers provide regular updates to the Board and its
committees on regulatory and corporate governance matters.
In addition, Directors are encouraged to attend
courses hosted by the Deloitte Academy and the AIC.
Our Directors receive training on their duties under section
172(1) of the Act as part of their induction process.
The Company’s
advisers include technical and regulatory updates in reports to the Audit and Risk Committee.
Board Committees
Audit and Risk Committee
The Audit and Risk Committee comprises the independent directors, excluding the Board Chairman, and is chaired
by Malcolm Cooper.
Its responsibilities are set out in the Audit and Risk Committee report.
68
Management Engagement Committee
The Management Engagement Committee comprises the independent directors and is chaired by Chris Ireland.
Its responsibilities are set out in the Management Engagement Committee report.
Nominations Committee
The Board as a whole is responsible for ensuring adequate succession planning to maintain an appropriate
balance of skills on the Board to ensure it functions effectively and promotes the long-term success of the
Company, whilst generating shareholder value.
Changes to the structure, size and composition of the Board may
be made following recommendations from the Nominations Committee, which operates under written terms of
reference which
are available on the Company’s website.
This includes the selection of the Chair of the Board,
the SID and the Company Secretary.
The letter of appointment of new Directors sets out the expected time
commitment and the Directors must undertake that they will have sufficient time to meet what is expected of them.
Their other significant commitments are disclosed to the Board before appointment, with a broad indication of the
time involved, and they are required to inform the Board of subsequent changes.
The Nominations Committee comprises all independent Directors and is chaired by David MacLellan.
Its
responsibilities are set out in the Nominations Committee report.
ESG Committee
The ESG Committee comprises Hazel Adam as Chair, Elizabeth McMeikan and Malcolm Cooper, all of whom are
independent non-executive directors.
The ESG Committee’s key responsibilities are set out in the ESG Committee
report.
69
Meeting attendance
The attendance of the Directors at scheduled Board and Board committee meetings held during the year, reflecting
appointment or retirement dates, were as follows:
Board
Audit and Risk
Committee
Nominations
Committee
Management
Engagement
Committee
ESG
Committee
David MacLellan
4/4
n/a
1/1
2/2
n/a
Hazel Adam
4/4
3/3
1/1
2/2
2/2
Nathan Imlach*
3/3
n/a
n/a
n/a
n/a
Elizabeth McMeikan
4/4
3/3
1/1
2/2
2/2
Chris Ireland
4/4
3/3
1/1
2/2
n/a
Malcolm Cooper
4/4
3/3
1/1
2/2
2/2
* On 31 December 2025 Nathan Imlach retired from the Board.
Directors’ interests are set
out in the Remuneration report.
The Investment Manager
The Company has appointed Custodian Capital Limited as Investment Manager and Alternative Investment Fund
Manager (“AIFM”) under an IMA.
Under the IMA, t
he Investment Manager is due an annual investment
management and asset management fee, and an annual administration fee.
The Investment Manager is a subsidiary of Mattioli Woods, a related party and a provider of specialist pension
consultancy and administration, employee benefits and wealth management services.
The Investment Manager
is authorised and regulated by the Financial Conduct Authority (“FCA”) and has an established market presence
in the smaller lot-size property sector, with a proven track record of property syndication (external to the Company),
investment and asset management.
For its financial year ended 31 May 2025 remuneration paid by the Investment Manager to its 30 staff (2024: 33
staff) was £1.5m (2024: £1.7m), which included £0.4m (2024: £0.5m) payable to senior management and
members of staff whose actions could have a material impact on the risk profile of the Company.
More detail is
contained within the Investment Manager’s statutory accounts available from Companies House.
70
Key personnel
The I
nvestment Manager’s key personnel, as set out in the IMA, are Richard Shepherd
-Cross, Ed Moore and Alex
Nix.
AIFM Directive
The Company’s activities fall within the scope of the
AIFM Directive and the Board has determined that the
Investment Manager will act as AIFM for these purposes.
The Board has put in place a system of regular reporting
from the AIFM and the Company’s depositary to ensure both are meeting their regulatory responsibilities in respect
of the Company.
Non-mainstream pooled investments
The Company conducts its affairs so that its shares can be recommended by financial advisers to retail investors
in accordance with the rules of the FCA in relation to non-mainstream pooled investments, and intends to continue
to do so for the foreseeable future.
Directors’ share dealings
The Directors have adopted a code for directors’ share dealings, which is compliant with the UK’s
Market Abuse
Regulation (“MAR”).
The Board is responsible for taking all proper and
reasonable steps to ensure compliance
with the MAR.
Shareholders
The Board is responsible for ensuring a satisfactory dialogue with shareholders based on the mutual
understanding of objectives.
It approves the resolutions and corresponding documentation to be put forward to
shareholders at the AGM, together with any circulars, prospectuses, listing particulars and press releases
concerning matters decided by the Board.
The Company reports to shareholders at least twice each year in its interim and annual reports, and makes
announcements, where any price sensitive or other information requires disclosure, to the London Stock Exchange
and on the Company
’
s website.
Any material presentations to investors are made available on the Company
’
s
website.
Where there has been contact with shareholders, feedback is presented to the Board by the Investment
Manager and the Company’s broker,
Deutsche Numis, to ensure it is aware of any issues raised by investors.
The
71
Company
’
s shareholder profile and any material changes in shareholdings are reviewed by the Board at least
quarterly and more often as appropriate.
All members of the Board are available to meet with investors as and when required.
The Board considers that
the provision of independent feedback to the Board through the Company
’
s brokers and, where appropriate,
directly from investors ensures that the whole Board remains well informed of investors
’
views.
Board members, including the Chairs of Board Sub-Committees, and representatives of the Investment Manager
are available to meet with investors and to answer any questions at the Company
’
s AGM.
All shareholders have
at least 20 clear working days’ notice of the AGM, where all directors and committee members are available to
answer questions. At the AGM all votes are dealt with on a poll and the number of proxy votes cast is indicated.
Votes on separate issues are proposed as separate resolutions.
Significant holdings of ordinary shares in the Company are set out in the Directors’ report.
Conflicts of interest
The Articles allow the Board to authorise potential conflicts of interest that may arise, subject to imposing limits or
conditions when giving authorisation if this is appropriate.
Only directors, who have no interest in the matter being
considered, are able to take the relevant decision and, in taking the decision, the Directors must act in a way they
consider will be most likely to promote the Company's success.
Procedures have been established to monitor
actual and potential conflicts of interest on a regular basis, and the Board is satisfied that these procedures are
working effectively.
Internal control and risk management
We recognise the importance of identifying and managing both the financial and non-financial risks faced by the
business, including climate related risks, and the Board has agreed a robust risk management framework to
facilitate this. The framework ensures that risk management responsibilities are allocated and those, along with
the Board
’
s appetite for risk, are clearly communicated and understood.
These responsibilities are summarised
below:
72
Responsibilities
Board
Audit and Risk Committee
Investment Manager
•
Overall responsibility for the
Company’s approach to
risk
management
and
internal
controls
•
Establish strategic objectives
while considering associated
risks
•
Determine risk appetite
•
Identify, assess and quantify risk
•
Monitor risk management, internal
controls and the financial reporting
process
•
Evaluate
key
processes
and
controls over principal risks
•
Report
to
the
Board
on
the
effectiveness of risk management
and control processes
•
Appoint,
and
monitor
the
independence
of,
the
external
auditor and communicate results to
the Board
•
Implement risk mitigation
processes
and
monitor
their
operational
effectiveness
•
Ensure risk awareness is
integrated throughout the
organisation
The Board has an ongoing process
to monitor the effectiveness of the
Company’s risk management and
internal control systems, including
financial,
operational
and
compliance controls operated by
the Investment Manager, and to
identify, evaluate and manage the
significant
risks
faced
by
the
Company.
The process is regularly
reviewed by the Board, based on
reports
from
the
Investment
Manager, and accords with the
Guidance on Risk Management,
Internal
Control
and
Related
Financial and Business Reporting.
Key features of the Company’s
system of internal control include:
•
A
detailed
authorisation
process and formal delegation
of authority;
•
A
comprehensive
financial
reporting
and
forecasting
system;
•
Understanding the nature and
extent of the principal risks
faced, and those risks which
the Company is willing to take;
•
A defined schedule of matters
reserved for the Board; and
•
A report from the Audit and Risk
Committee on an annual review
of the effectiveness of internal
controls
and
formal
consideration of business risks.
Issues
are
also
raised
at
quarterly board meetings as
appropriate.
The Audit and Risk Committee provides
oversight of the framework, monitors
and
evaluates
principal risks and
undertakes the annual review of the
Company
’
s
approach
to
risk
management and compliance with the
framework, including a review of the risk
register.
This oversight involves:
•
Ensuring
the
design
and
implementation of the Investment
Manager’s
risk management and
internal control systems identify the
risks facing the business and
enable the Board to make its
assessment of principal risks;
•
Agreeing how principal risks should
be managed or mitigated to reduce
the likelihood of their incidence or
impact;
•
Ensuring that there is sufficient
relevant,
reliable
and
valid
assurance about the mitigation of
risk; and
•
Reviewing the disclosures to be
included in the Annual Report and
Accounts,
to
ensure
that
the
statements made are supported by
valid,
relevant
and
reliable
assurances
received
from
the
Investment Manager.
The external Auditor will also provide
information to the Audit and Risk
Committee concerning the system of
internal control and any material control
weaknesses, with any significant issues
referred to the Board for consideration.
The
Audit
and
Risk
Committee
’s
responsibilities are set out in further
The Investment Manager is
responsible for operating the
Company’s system of internal
control
and
reviewing
its
effectiveness.
Such a system
is designed to manage, rather
than eliminate, the risk of fraud
or the risks of not achieving
some or all of the Company’s
business objectives and can
provide only reasonable but not
absolute
assurance
against
material misstatement or loss.
Investment
Manager
employees are covered by the
whistleblowing policy of Maven
Capital
Partners
LLP
(“Maven”),
a
subsidiary
of
Mattioli Woods.
73
detail in the Audit and Risk Committee
report.
74
Audit and Risk Committee review of the effectiveness of risk management and internal controls
During the year the Audit and Risk Committee review
ed the controls and processes over the Investment Manager’s
change of accounting and property management system.
The Audit and Risk Committee has also remained close
to the Transactions and their subsequent, ongoing, integration, in addition to the ongoing challenging economic,
market and geopolitical conditions.
Outcome
Based on its review and assessment, the Audit and Risk Committee identified no significant weaknesses in the
Company
’s risk and internal control framework or
its operation. Based on the Audit and Risk
Committee’s review
and assessment of the effectiveness of the systems established for risk identification, analysis and mitigation, the
Board considers that a robust appraisal of the principal and emerging risks facing the Company, including those
that would jeopardise its strategic priorities, was carried out during the year.
Risk appetite
Risk management is embedded in our decision-making processes, supported by robust systems, policies,
leadership and governance. The level of risk considered appropriate to accept in achieving business objectives
is determined by the Board. The Board has no appetite for risk in areas relating to regulatory compliance, and the
health, safety and welfare of our occupiers and the wider communities in which we work. We have a moderate
appetite for risk in relation to activities which are directed towards driving revenues and increased financial returns
for investors.
Risk register
The Company
’
s risk register is the core of the risk management framework containing an overall assessment of
the risks faced by the Company together with the:
•
Quantified consequences;
•
Controls established, following the three lines of defence model to reduce those risks to an acceptable level;
and
•
Board appetite for each category of risk.
The Investment Manager undertakes a documented annual review of the risk register, which is also is reviewed
periodically by the Audit and Risk Committee.
75
Continuance
The Company’s Articles require that a
Continuation Resolution be proposed at every seventh AGM. The next
Continuation Resolution will be proposed at the fourteenth AGM of the Company expected to be held in 2027.
Bribery, money laundering, slavery and human trafficking
The Board has considered the requirements of the Bribery Act 2010, the Criminal Finances Act 2017 and the
Modern Slavery Act 2015 and has taken steps to ensure that it has adequate procedures in place to comply with
their requirements.
The Board has a zero tolerance policy towards unethical behaviour and is committed to carrying out business
fairly, honestly and openly and it expects the same of its business partners.
The Investment Manager actively
reviews and is responsible for monitoring perceived risks and responsibility for anti-bribery and corruption.
The
Investment Manager maintains a risk register where perceived risks and associated actions are recorded and this
is shared annually with the Board for approval.
We believe that all efforts should be made to eliminate unethical behaviour from our supply chains.
We seek to
mitigate our exposure to any unethical activity by engaging with reputable third-party professional service firms
based in the United Kingdom.
We request formal governance information from our current or potential suppliers
if there is a perceived risk of unethical behaviour to assess overall supply chain risk and conduct due diligence
and risk assessment on potential new suppliers where considered necessary.
We will continue to monitor and
collaborate with our suppliers and tenants to ensure that they continue to adopt systems and controls that reduce
the risk of facilitating bribery, money laundering, modern slavery, child labour and human trafficking.
Approval
This Governance report was approved by the Board of Directors and signed on its behalf by:
David MacLellan
Chairman
10 June 2026
76
ESG Committee report
Composition and designation
The ESG
Committee (“the Committee”) comprises
Hazel Adam as Chair, Malcolm Cooper and Elizabeth
McMeikan, all of whom are independent non-executive directors.
Reporting
The Committee published its 2026 Asset Management and Sustainability report recently which 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.
Responsibilities
The Committee’s
key responsibilities are:
•
To develop
the Company’s
forward-looking environmental KPIs, monitor expected future performance against
those KPIs and evolve them to reflect prevailing best practice;
•
To assess, at least annually, the fees and scope of engagement of the Company
’s environmental consultants;
and
•
To ensure the Company is obtaining a suitable level of social outcomes for its tenants, other stakeholders
and the communities in which it operates.
The Company is committed to delivering its strategic objectives in an ethical and responsible manner and meeting
its corporate responsibilities towards society, human rights and the environment.
The Board acknowledges its
responsibility to society is broader than simply generating financial returns for shareholders.
The Company’s
approach to ESG matters addresses the importance of these issues in the day-to-day running of the business, as
summarised below.
77
ESG approach
Environmental
- we want our properties to minimise their impact on the local and wider environment.
The
Investment Manager carefully considers the environmental performance of our properties before we acquire them
as well as during our period of ownership. Sites are visited on a regular basis by the Investment Manager and
any obvious environmental issues are reported.
Social
- Custodian Property Income REIT strives to manage and develop buildings which are safe, comfortable
and high-quality spaces with modern social amenities.
As such, the safety and well-being of occupants of our
buildings is paramount.
Governance
- high standards of corporate governance and disclosure are essential to ensuring the effective
operation of the Company and instilling confidence amongst our stakeholders.
We aim to continually improve our
levels of governance and disclosure to achieve industry best practice.
The Committee encourages the Investment Manager to act responsibly in the areas it can influence as a landlord,
for example by working with tenants to improve the
environmental performance of the Company’s
properties and
minimise their impact on climate change.
The Committee believes that following this strategy will ultimately be to
the benefit of shareholders through enhanced rent and asset values.
T
he Company’s environmental
policy commits the Company to:
•
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.
•
Reporting in line with best practice and complying with all requirements
- exposing the Company to
public scrutiny and communicating our targets, activities and initiatives to stakeholders.
78
Environmental key performance indicators
The Company’s
environmental targets are measured by key performance indicators (
“
KPIs
”
), which provide a
strategic way to assess whether it expects to achieve its forward-looking environmental objectives and ensure the
Investment Manager is applying key ESG principles.
To help the assessment of progress against KPIs a data management system, operated
by the Company’s
environment consultants, has been established to provide a robust data collation and validation process. This
data management system allows us to identify data inefficiencies and improve data collection.
The table below shows progress
towards the Company’s forward
-looking KPIs.
KPI
Progress during the year
Cumulative annual 2.0 kgCO2e/m
2
reduction of
operational carbon intensity (3.0% pa of 2021
baseline)
8kgCO2e/m
2
reduction since 2021, currently 33kgCO2e/m
2
.
During the year operational carbon intensity has increased
due to improvements in data collection reducing the reliance
on estimated data, rather than a worsening in tenant
performance.
PV to be installed on five warehouses per annum
cumulatively from 2023
21 PV installations out of 91 potential assets since 2023
Cumulative annual reduction of two EPC rating
points across the portfolio, weighted by floor area.
EPCs updated across 24 properties during the year,
achieving the targeted two-point annual decrease from C
(51) to B (48)
Install smart meters or appoint data aggregators
across 60% of the portfolio by floor area
40% coverage achieved during the year (2025: 34%)
Achieve an annual improvement in GRESB
score
During the year the Company has ceased making GRESB
submissions as the Committee did not feel its current
framework and scoring priorities were sufficiently aligned
with the Company’s Investment Objectives to offer investors
meaningful insight
Utilise 25% of vacant high street retail space by
floor area for not-for-profit lettings
There are currently no vacant high street retail units in the
Company’s portfolio
ESG policy
The Company’s ESG policy is set out at:
custodianreit.com/wp-content/uploads/2023/04/20.-CREIT-ESG-policy.pdf
79
EPC ratings
During the year the Company has updated EPCs at 44 units (2025: 35) across 24 properties (2025: 24).
For
updated EPCs, there was a weighted average improvement in rating of 3
‘energy performance asset rating points
34
and the portfolio weighted average EPC score has improved from C (51) to B (48) during the year.
Particular
improvements in rating occurred during the year at the following assets:
•
50k sq ft industrial refurbishment at a vacant unit in Biggleswade including installation of a PV array, improving
the rating from D (82) to A+ (-9); and
•
23k sq ft multi-let industrial park in Aberdeen where all units were refurbished during the year, improving each
of the six units’ scores from C
-F to all Bs.
The Investment Manager is currently reviewing and undertaking new assessments of any EPCs that are older
than five
years and below a ‘C’ rating.
A ‘
B
’ rating is
due to become the minimum standard under the MEES by
2030.
The Company’s EPC profile is shown below:
Number of EPCs
Weighted average
35
EPC rating
31 March
2026
31 March
2025
31 March
2026
31 March
2025
A+
1
-
-
-
A
34
21
8%
6%
B
183
143
41%
41%
C
156
121
35%
35%
D
66
39
15%
11%
E
6
17
1%
5%
F
-
8
-
2%
G
-
-
-
-
446
349
100%
100%
The table shows that the weighted average ‘C’ or better ratings has increased from
82% to 84% during the year.
The Company has improved or sold all
‘F’ rated units during the year.
Of the six ‘E’ rated units, two are earmarked
for disposal with the remainder being properties acquired during the year which will be addressed in the
forthcoming financial year.
34 One EPC letter represents 25 energy performance asset rating points.
35
Weighted by floor area.
80
Net zero carbon
The ESG Committee announced
the Company’s operational net zero carbon (“NZC”) commitment
in June 2024.
Continuing the journey towards net zero, meaning a 90% reduction in operational carbon intensity, is a crucial part
of our ESG strategy and making this journey align with stakehol
der goals and the Company’s property strategy is
one of the key challenges facing the Company and the real estate sector.
We are working towards our long-term
KPIs in this regard and will continue our strong focus on this area.
Our initial commitment is to achieve operational NZC by 2050.
The Committee will consider bringing this date
forwards once our target for data collection is reached, to minimise reliance on estimated data.
Targets will also
be amended over time based on material acquisitions and disposals within the portfolio.
Outlook
The Company will work towards achieving its ESG targets over the course of the next financial year, improving
our understanding of the specific impacts of climate change on the Company, seeking to further influence tenant
behaviour to improve environmental outcomes and continuing to develop our carbon reduction strategy.
Approval
This report was approved by the Committee and signed on its behalf by:
Hazel Adam
Chair of the ESG Committee
10 June 2026
81
Audit and Risk Committee report
Composition and designation
The Audit and Risk Committee (“the Committee”) comprises Malcolm Cooper as Chair, Hazel Adam, Elizabeth
McMeikan and Chris Ireland, all of whom are independent non-executive directors.
Responsibilities
The Committee meets regularly to monitor the integrity of the Company’s financial statements
and to ensure they
present a fair, balanced and understandable assessment of the C
ompany’s
position and prospects.
The
Committee is also responsible for appointing and assessing the performance and independence of the external
auditor, and
liaising with the Investment Manager’s internal audit function when necessary
.
In providing support
to the Board in making this statement, the Committee has reviewed and approved a process undertaken by the
Investment Manager to provide confirmation to the Board.
The Committee
operates under written terms of reference which are available on the Company’s website.
The key responsibilities and principal activities of the Committee are as follows:
•
To monitor the integrity of the financial statements of the Company and any formal announcements relating to
the Company’s financial performance, and reviewing significant financial reporting judgements contained in
them;
•
To advise the Board on whether the Interim Report, Annual Report and financial statements are fair, balanced
and understandable and provide the information necessary for shareholders to assess the Company’s
performance, business model, strategy, risks, working capital requirements and longer-term viability;
•
To advise the Board on whether the Investment Manager’s working capital review supports assertions made
in the Annual Report regarding going concern and longer-term viability;
•
To monitor and review the effectiveness of
the Company’s internal control environment and monitoring
processes, which were in place for the year under review and up to the date of approval of these financial
statements;
•
To review the significant risks faced by the Company;
•
To review the internal audit programme and monitoring the effectiveness of the internal audit process by
reviewing reports, meeting with the internal auditor and identifying any matters it considers need action or
improvement, making recommendations as to the steps to be taken;
82
•
To make recommendations to the Board to be put to shareholders for their approval in general meetings in
relation to the appointment, reappointment and removal of the external auditor and to approve the
remuneration and terms of engagement of the external auditor;
•
To review the appointment of the external auditor, monitoring the external auditor’s independence and
objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and
regulatory requirements;
•
To develop and implement policy on the engagement of the external auditor to supply non-audit services,
taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit
firm and to report to the Board, identifying any matters in respect of which it considers that action or
improvement is needed and making recommendations as to the steps to be taken;
•
To agree the scope of statutory audit work and any additional assurance work to be undertaken;
•
To take an active part in discussions between the external auditor and the Investment Manager regarding the
resolution of issues that impact the audited financial statements;
•
To ensure the Company complies with its external reporting obligations and best practice on ESG matters
including EPRA sustainable best practice recommendations and Streamlined Energy and Carbon Report
(“
SECR
”)
; and
•
To have the opportunity to meet with the external property valuers at least once a year, to discuss the valuers
’
remit and any issues arising from the valuations.
The Committee also oversees and approves the calculation of fees payable to the Investment Manager set out in
Note 19.
Meetings
The Committee meets no less than three times a year, typically in May to consider the Annual Report and external
audit findings, in November to consider the Interim Report, interim announcement and external review findings,
and in February to plan for the financial year ahead.
Any other matters, including internal controls, are considered
as and when necessary.
Meetings are attended by the Committee members, the Investment Manager, the external auditor, the Directors
not on the Committee and, periodically, the
Investment Manager’s
internal auditor.
83
Primary areas of judgement in relation to the Annual Report and financial statements
The Committee considers the significant judgements made in the Annual Report and financial statements and
receives reports from the Investment Manager and the external auditor on those judgements.
The Committee
pays particular attention to the matters it considers to be important by virtue of size, potential impact, complexity
and level of judgement.
The principal issue considered by the Committee for the year was the valuation of the Company’s property
portfolio, which is fundamental to the Company’s statement of financial position and reported results.
The external
auditor uses real estate specialists to challenge the assumptions and approach adopted by the valuers and
reported back to the Committee on its review.
The Committee also gained comfort from the valuers
’
methodology
and other supporting market information and representatives of the Committee attended valuation meetings
involving the external auditor and the valuers, and held separate meetings with each valuer to discuss each
valuer’s remit and any issues
arising from the valuations.
Loan covenant and REIT regime compliance are matters for the whole Board.
The Committee has considered
reports to support the Company’s REIT regime compliance
, going concern status and longer-term viability
statement, along with details of available undrawn facilities and financial forecasts.
The Committee has reviewed, challenged and assessed the Company's use of APMs in previous years, in
particular in the context of ESMA Guidelines on APMs, and believes that there is an appropriate balance between
APMs and IFRS reported measures.
The Committee considers that the use of APMs, some of which are based
upon EPRA Best Practice Recommendations, is reflective of best practice in the sector and in line with other
similar companies.
The Committee was satisfied that these issues had been fully and adequately considered and addressed and that
the judgements made were appropriate.
The Committee discussed the issues with the external auditor, who had
concurred with the judgement of the Investment Manager.
84
Audit
Internal audit
The Company’s day
-to-day operations are contracted to the Investment Manager.
The Company’s internal audit
function, which assesses the systems and control framework of the Investment Manager and its parent company,
Mattioli Woods, is carried out by RSM.
The Committee agrees ad hoc internal audit work with the Investment
Manager when considered necessary, taking into consideration the current size of the Company and its relative
lack of business complexity.
The Committee receives and reviews reports of the internal audit function, which during the year covered the
forecast model.
The Committee allows time to speak with the internal auditor without the Investment Manager
present for at least one meeting each year.
The external audit, review of audit effectiveness, auditor reappointment and audit tendering
The Committee reviews ann
ually the external auditor’s:
•
Relationship with the Company;
•
Level of effectiveness;
•
Audit and non-audit fees; and
•
Independence.
The Committee uses a framework to assess the effectiveness of the audit approach and considered the views of
the Investment Manager.
This framework includes:
•
The auditor confirming its independence and compliance the FRC’s Ethical Standard and the Company’s
policy for the supply of non-audit services;
•
The Investment Manager confirming its view on external auditor independence;
•
How the auditor demonstrated professional scepticism and challenged assumptions where necessary; and
•
Assessment of the audit quality of Deloitte LLP
(“Deloitte”).
In assessing how the Auditor demonstrated professional scepticism and challenged assumptions, the Committee
considered
the depth of discussions held with the auditor, particularly in respect to challenging the Company’s
approach to its significant judgements and estimates (set out in the Strategic report) and risk assessment.
During
the year the Committee also reviewed co
rrespondence from the FRC’s Audit Quality Review (AQR) team, which
85
reviewed Deloitte’s audit of the Company’s 2025 Financial Statements as part of its annual inspection of audit
firms.
The Committee received and reviewed the final report from the AQR team which identified no key findings
or other findings, and noted several areas of good practice.
After taking these matters into account, the Committee concluded that Deloitte had performed the audit effectively,
efficiently and to a high quality.
The Committee allows time to speak with the external auditor without the Investment Manager present for at least
one meeting each year.
Fees incurred by the Company from Deloitte during the year were as follows:
Year ended
31 March
2026
Year ended
31 March
2025
£000
£000
Audit of the Company’s Annual Report
227
171
Total audit related fees
227
171
Review of the Company’s Interim Report
42
39
Total non-audit fees
42
39
Total fees
269
210
Non-audit fees
An external auditor independence policy has been adopted by the Committee, which considers the appointment
of the external auditor for non-audit work, after taking into account their suitability to perform the services, the
potential impact on their independence and objectivity and the relationship of non-audit to audit fees.
Fees for
permissible non-audit fees payable to the external auditor are capped at 70% of the average audit fee over the
three preceding financial years (or from appointment, if later) in line with
the FRC’s Revised
Ethical Standard 2019.
Where there are any doubts as to whether the external auditor has a conflict of interest, Committee approval is
required in advance of the engagement.
Given the external auditor’s detailed knowledge of the structure of the organisa
tion, certain recurring services
provided by them, subject to the amount of fee involved, are not considered to impair the external auditor’s
independence or objectivity.
Services included in this category are: accounting advice forming part of extended
86
audit procedures; compliance and regulatory certificates and minor projects, where the fee involved per service
will not exceed £10k without the prior consent of the Committee.
Other than the review of the Interim Report, the Committee will not normally allow the external auditor to be used
for the following: tax services, compiling accounting records; payroll services; work on internal controls; valuation
work; legal services; internal audit services; corporate finance services; share brokerage or human resources.
The Committee has reviewed the level of fees due to Deloitte for permitted non-audit services and is satisfied the
independence and objectivity of Deloitte
as the Company’s audit
or is not impaired.
As a ‘public interest entity’ the Company
will be required to rotate audit firms by 2034, meaning the final audit
Deloitte can carry out is for the year ending 31 March 2033.
Deloitte has confirmed its willingness to continue in office and ordinary resolutions reappointing Deloitte as auditor
and
authorising the Committee to set the auditor’s remuneration will be proposed at the AGM.
Approval
This report was approved by the Committee and signed on its behalf by:
Malcolm Cooper
Chairman of the Audit and Risk Committee
10 June 2026
87
Management Engagement Committee report
Composition
The Management Engagement
Committee (“the Committee”) comprises Chris Ireland as Chair
man, Hazel Adam,
Elizabeth McMeikan, Malcolm Cooper and David MacLellan, all of whom are independent non-executive directors.
Meetings
The Committee meets at least twice a year and otherwise as required.
Responsibilities
The key responsibilities of the Committee are:
•
Monitor and annually review the independence, expertise and performance of the Investment Manager and
its compliance with the terms of the IMA;
•
Ensure the terms of the IMA comply with all relevant regulatory requirements, conform with market practice
and remain in the best interests of Shareholders;
•
Oversee the relationship with the external property valuers considering changes, reappointment and
tendering, their remuneration, terms of engagement, independence and expertise; and
•
Review annually the remuneration, any points of conflict and the Investment
Manager’s views on the
effectiveness of the Company’s other key service providers
, excluding internal and external auditors and ESG
advisers.
Investment Manager
During the year, the Committee has considered:
•
The capability and resources of the Investment Manager to deliver satisfactory investment performance; and
•
The fees payable to the Investment Manager, including transaction fees in relation to corporate acquisitions.
The Committee concluded that, based on its interaction with the I
nvestment Manager’s staff during the year,
participation in meetings and quarterly reporting, that the Investment Manager had sufficient capability and
resources and had delivered satisfactory investment performance.
88
Other key service providers
The Committee has also considered its external valuer engagements of
Knight Frank LLP (“Knight Frank”) and
Savills (UK) Limited which began in 2019 and 2021 respectively.
The Company follows prevailing RICS guideline
regarding valuers’ rotation, and in li
ne with RICS Valuation Standards UK National Supplement (October 2023)
transitional arrangements, Knight Frank signatories rotated off the engagement ahead of the 30 September 2025
half-year end.
Approval
This report was approved by the Committee and signed on its behalf by:
Chris Ireland
Chairman of the Management Engagement Committee
10 June 2026
89
Nominations Committee report
Composition
The Nominations Committee (“the Committee”)
consists of David MacLellan as Chairman, Hazel Adam, Elizabeth
McMeikan, Chris Ireland and Malcolm Cooper.
Meetings
The Committee meets at least once a year and otherwise as required.
Responsibilities
The key responsibilities of the Committee are:
•
Review the structure, size and composition (including the skills, knowledge, experience and diversity) of the
Board and make recommendations to the Board with regard to any changes;
•
Consider succession planning for directors taking into account the:
o
Challenges and opportunities facing the Company;
o
Skills, expertise and diversity needed on the Board in the future; and
o
Independence of the Board regarding tenure and external appointments.
•
Keep under review the leadership needs of the organisation, with a view to ensuring the continued ability of
the Company to compete effectively in the marketplace; and
•
Identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they
arise.
Before any appointment of an independent director is made by the Board the Committee is required to evaluate
the balance of skills, knowledge, experience and diversity on the Board and, in light of this evaluation, prepare a
description of the role and capabilities required for a particular appointment.
In identifying suitable candidates the
committee shall:
•
Use open advertising or the services of external advisers to facilitate the search;
•
Consider candidates from a wide range of backgrounds; and
•
Consider candidates on merit and against objective criteria and with due regard for the benefits of diversity on
the Board, including gender, social and ethnic backgrounds and cognitive and personal strengths, taking care
that appointees have enough time available to devote to the position.
90
The Committee also makes recommendations to the Board concerning:
•
Formulating plans for succession for the Non-Executive Directors;
•
Suitable candidates for the role of SID;
•
Membership of the
Company’s Board Committees
, in consultation with the chairs of those committees; and
•
The annual re-election by s
hareholders of directors or the retirement by rotation provisions in the Company’s
Articles, having due regard to their performance and ability to continue to contribute to the Board in light of the
knowledge, skills and experience required and the need for progressive refreshing of the Board.
Policy on tenure and succession planning
In determining an appropriate period of tenure for each Director, including the Chair, the Committee considers:
•
The ongoing independence of each of the Non-Executive Directors;
•
The benefits of regular Board refreshment and diversity;
•
Their respective skills and experience;
•
Whether each Non-Executive Director is able to commit sufficient time to the Company; and
•
The nature and time commitment involved in any other appointments held.
The Board considers that each Non-Executive Director has contributed an appropriate amount of time during the
year.
Pursuant to the Articles, at every AGM of the Company, one third of the Non-Executive Directors who are subject
to the requirement to retire by rotation (not including any Non-Executive Director who was appointed by the Board
since the last AGM and is standing for election) will retire from office and may offer themselves for re-election.
However, notwithstanding the provisions of the Articles, all the Non-Executive Directors will offer themselves for
re-election at each AGM in accordance with the provisions of the AIC Code.
Succession planning
The Directors have a duty to ensure the long-term success of the Company, which includes ensuring that we have
an established succession plan for Board changes. The Committee considers succession planning on a regular
basis to ensure that changes to the Board are proactively planned and co-ordinated where possible.
91
Induction
The Company provides new Directors with a comprehensive and tailored induction process which includes
meetings with the Company
’s audit partner and
corporate lawyer, together with meetings with Investment Manager
key personnel and the Directors individually.
The induction programme is managed by the Company Secretary and approved by the Chair of the Committee.
New Directors are also provided with external training that addresses their role and duties as a Director of a public
company.
Diversity policy
The Committee is conscious of stakeholder focus on diversity and understands a diverse Board brings constructive
challenge and fresh perspectives to discussions.
The Committee follows the AIC Code of Corporate Governance which recommends:
•
The Board has a combination of skills, experience and knowledge; and
•
Both appointments and succession plans should be based on merit and objective criteria and, within this
context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
The Company complied with these recommendations during the year.
The Board’s positive approach to diversity means that each time a
n independent director is recruited at least one
of the shortlist candidates is female and at least one of the shortlist candidates is from a minority ethnic
background.
The Board supports the overall recommendations of the FTSE Women Leaders Review and Parker Reviews for
appropriate gender and ethnic diversity.
The FCA has ‘comply or explain’ targets of:
•
At least 40% of the board should be women;
•
At least one of the senior board positions (Chair, Chief Executive Officer, Chief Financial Officer or SID) should
be a woman; and
•
At least one member of the board should be from a minority ethnic background.
92
At the year end, the Company met two of the three criteria above, with women comprising 40% of the Board
including Elizabeth McMeikan acting as the SID.
In line with the requirements of listing rule LR 9.8.6,
the Board’s
ethnicity and gender balance at the year-end is shown in tabular format below.
No other categories of ethnicity
are relevant for the Company and as the Company has no executive directors it has not reported the fields and
the corresponding data relating to executive management in the table below as required by listing rule 15.4.29RB.
Number of Board
members
Percentage of
the Board
Number of senior
positions on the Board
(SID and Chair)
White British or other White
(including minority-white groups)
5
100%
2
Female
2
40%
1
Male
3
60%
1
This information has been collected by self-disclosure directly from the individuals concerned who were asked to
confirm their gender and ethnicity.
Custodian Property Income REIT is an investment company with no Executive Directors and a small Board
compared to equivalent size listed trading companies.
As a result, the Company does not comply with the FCA
diversity targets relating to ethnicity.
The Committee considers diversity in a broad sense, not limited to gender or ethnicity, including socio-economic
background and education.
During the year Nathan Imlach stepped down as a non-independent Director the Company and following that
change on
31 December 2025 the Company’s board
is fully independent and 40% female.
Formulating strategies
to further promote diversity and inclusivity will be made in the forthcoming financial year.
Approval
This report was approved by the Committee and signed on its behalf by:
David MacLellan
Chairman of the Nominations Committee
10 June 2026
93
Remuneration report
Responsibilities
The Board is responsible for:
•
Setting the Remuneration Policy for all the Directors taking into account relevant legal and regulatory
requirements and the provisions and recommendations of the AIC Code;
•
Reviewing the on-going appropriateness and relevance of the Remuneration Policy; and
•
Within the terms of the agreed policy, determining the individual remuneration of each director, taking into
account information about remuneration in other companies of comparable scale and complexity.
Directors and officers
The Non-Executive Directors and Company Secretary are the only officers of the Company. The Company
Secretary is engaged under the terms of the IMA with the Investment Manager.
The Company has no employees.
The Articles require one third of Directors to retire and seek re-election each year. However, notwithstanding the
provisions of the Articles, all the Non-Executive Directors offer themselves for re-election at each AGM in
accordance with the terms of their appointment and the provisions of the AIC Code.
Remuneration Policy
The
Company’s objective is to have a simple and transparent remuneration structure, aligned with the Company’s
strategy and be comparable with similar companies.
The Company offers Directors, including any new Directors,
an annual fee with no pension contributions, allowances or variable elements.
Directors are engaged under Letters
of Appointment (rather than service contracts with the Company), which do not allow for any payments on the
termination of office.
Each Director’s appointment under their respect
ive Letter of Appointment is terminable
immediately by either party (the Company or the Director) giving written notice. Letters of Appointment are kept
available for inspection at the Company’s registered office.
The Remuneration Policy was last approved at the AGM held on 9 September 2025 with 99.34% of votes cast for
the resolution, 0.66% of votes cast against the resolution with 11,818 votes withheld.
The
Company’s remuneration
policy is designed to attract, retain and motivate non-executive directors with the
skills and experience necessary to maximise shareholder value on a long-term basis.
The Board believes that the
94
policy remains fit for purpose and operates as intended and will seek shareholder approval of the policy at the
forthcoming AGM.
There have been no major decisions, substantial changes or discretion applied relating to Directors’ remuneration
during the year, other than the fees payable to the Directors for the forthcoming financial year.
The Remuneration Policy has been prepared in accordance with Schedule 8 of The Large and Medium-sized
Companies and Groups
(Accounts and Reports) Regulations 2008 (“the Regulations”) as amended in August
2013, the Compani
es (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019,
the Companies (Miscellaneous Reporting) Regulations 2018 and with the AIC Code.
The Board takes
into account any views in respect of directors’ remuneration expressed
by shareholders in the
formulation of the Remuneration Policy.
Directors’ remuneration (audited)
2026
Fees
£
2025
Fees
£
David MacLellan
75,000
73,000
Ian Mattioli*
-
25,000
Nathan Imlach*
33,750
17,607
Hazel Adam
47,500
46,000
Elizabeth McMeikan
50,500
49,000
Chris Ireland
50,500
46,000
Malcolm Cooper
50,500
49,000
307,750
305,607
* Ian Mattioli retired as a Director, and Nathan Imlach was appointed as a Director, on 6 November 2024.
Nathan Imlach retired as
a Director on 31 December 2025.
The Company incurred Employer’s national insurance contributions of
£44,098 (2025: £40,736) during the year
relating to Directors’ fees.
95
In February 2026 the Board
reviewed Directors’ remuneration against comparable
entities, with information
supplied by the Investment Manager, taking into account the performance of the Company, the nature of each
Directors’ duties,
their responsibilities and the time spent discharging their duties during the year.
The Board has approved the following annual fees with effect from 1 April 2026: David MacLellan - £77,000;
Malcolm Cooper - £51,750; Elizabeth McMeikan - £51,750; Chris Ireland - £51,750; and Hazel Adam - £48,750.
The table below illustrates the year-on-year percentage change in remuneration for the Non-Executive Directors:
Month of
appointment
Month of
retirement
2022
2023
2024
2025
2026
David Hunter
Jan 2014
Aug 2023
12%
4%
(59%)
N/a
N/a
David MacLellan
May 2023
N/a
N/a
N/a
N/a
29%
3%
Matthew Thorne
Jan 2014
Aug 2022
4%
(56%)
N/a
N/a
N/a
Ian Mattioli*
Jan 2014
Nov 2024
9%
7%
5%
(40%)
N/a
Nathan Imlach*
Nov 2024
Dec 2025
N/a
N/a
N/a
N/a
92%
Hazel Adam
Dec 2019
N/a
11%
6%
5%
4%
2%
Elizabeth McMeikan
Apr 2021
N/a
N/a
13%
5%
4%
3%
Chris Ireland
Apr 2021
N/a
N/a
6%
5%
4%
10%
Malcolm Cooper
Jun 2022
N/a
N/a
N/a
38%
4%
3%
At the 2021 AGM shareholders approved increasing the Directors’ aggregate remuneration cap contained in the
Articles to £300,000, subsequently rising with CPI to £385,000.
The proposed FY27 fees are below this limit.
The Board is mindful of the need to attract suitably experienced members and offer candidates competitive levels
of remuneration when Board refre
shment is required in line with the Company’s succession and diversity planning.
No pension benefits accrued to any of the directors during the year (2025: £nil).
The Directors and the key Investment Manager personnel are considered to be the
Company’s key management
personnel defined by IAS 24 ‘Related Party Disclosures’.
The terms and conditions of the IMA and the amounts
due to the Investment Manager are set out in Note 19.
Directors’ interests (audited)
The Directors had the following interests in the ordinary shares of the Company at 31 March 2026:
96
2026
2025
No. shares
% holding
No. shares
% holding
Nathan Imlach
N/a
N/a
235,993
0.05%
David MacLellan
144,500
0.03%
144,500
0.03%
Chris Ireland
122,500
0.03%
122,500
0.03%
Malcolm Cooper
115,300
0.03%
115,300
0.03%
Elizabeth McMeikan
34,600
0.00%
20,400
0.00%
Hazel Adam
19,566
0.00%
19,566
0.00%
436,466
0.09%
658,259
0.14%
No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions,
or significant to the business of the Company and which were affected by the Company or remain in any respect
outstanding or unperformed.
No loan or guarantee has been granted or provided by any member of the Company
for the benefit of any director.
There are no restrictions agreed by any Director on the disposal within a certain
period of time of their holdings in the Company’s securities
during their tenure as Director or post-retirement.
Restrictions on other transfers of ordinary shares are set out in the Directors’
Report.
There have been no changes
to Directors’ interests since the year end.
There are no requirements or guidelines for the Directors to own shares in the Company.
Ian Mattioli, Richard Shepherd-Cross and Ed Moore, respectively Chairman, Managing Director and Finance
Director of the Investment Manager, and their immediate families
36
, own 8,911,842, 435,818 and 143,881 shares
in the Company respectively.
Total shareholder return
The graph below illustrates the total shareholder return over the 10 year period to 31 March 2026 in terms of the
change in value of an initial investment of £100 invested on 31 March 2016
in a holding of the Company’s
shares
against the EPRA NAREIT UK Index
37
.
36 For Ian Mattioli this comprises shares held by Ian, his wife and a charitable trust under his control of 5,561,197 (2025: 2,950,690) and 3,350,645 (2025: 3,479,117) shares held by
other persons closely associated.
37 The EPRA NAREIT UK Index incorporates weightings of UK listed REITs and real estate holding and development companies.
97
Source: Deutsche Numis, EPRA
Benchmarking performance against a UK REIT index is considered to be the most appropriate method of
measuring the Company’s relative performance,
as required by the Regulations.
The performance of the
Company relative to its peers is also
discussed in the Investment Manager’s report.
The Act requires the Auditor to report to the shareholders on certain parts of the Remuneration report and to state
whether, in their opinion, those parts of the report have been properly prepared in accordance with the Regulations.
The parts of the Remuneration report that are subject to audit are
shown in this Report as ‘audited’.
Approval
This report was approved by the Committee and signed on its behalf by:
David MacLellan
Chairman
10 June 2026
40
60
80
100
120
140
160
180
Apr 16
Aug 16
Dec 16
Apr 17
Aug 17
Dec 17
Apr 18
Aug 18
Dec 18
Apr 19
Aug 19
Dec 19
Apr 20
Aug 20
Dec 20
Apr 21
Aug 21
Dec 21
Apr 22
Aug 22
Dec 22
Apr 23
Aug 23
Dec 23
Apr 24
Aug 24
Dec 24
Apr 25
Aug 25
Dec 25
Apr 26
CREI vs FTSE EPRA Nareit UK Index
CREI
FTSE EPRA Nareit UK
98
Directors’ report
Report and financial statements
The Directors have pleasure in presenting their report together with the audited financial statements for the year
ended 31 March 2026.
The Governance report forms part of this report.
For the purposes of this report and the
Directors’ responsibilities statement, the expression ‘Company’ means
Custodian Property Income REIT plc and
the expression ‘Group’ means the Company and its subsidiaries.
The Strategic report includes further
information about the Company’s principal activity, financial performance during the
year and indications of likely
future developments.
The trading status of the
Company’s subsidiaries
is shown in Note 12.
Details of significant events since the year end are contained in Note 21 to the financial statements.
The Directors believe they have discharged their responsibilities under section 414C of the Act to provide a
balanced and comprehensive review of the development and performance of the business.
Per section 414C(11) of the Act the Directors have elected to include the following matters, which are required by
section 416(4) of the Act to be including in the Directors' Report, within the Strategic Report:
•
Financial Risk management objectives and policies; and
•
Future developments.
Results and dividends
The Group profit for the year after taxation is set out in the consolidated statement of comprehensive income.
Total dividends paid during the year of 6.0p per share (2025: 6.175p), totalled £27.4m (2025: £27.2m).
On Friday
29
May 2026 the Company paid a fourth interim dividend per share of 1.5p for the quarter ended 31 March 2026.
The Company’s dividend policy is set out in the
Financial review section of the Strategic report.
99
Going concern
At 31 March 2026 the Group
’s forecasts indicate that over the next 12 months
the Group and Company:
•
Have surplus cash to continue in operation and meet their liabilities as they fall due;
•
Comply with borrowing covenants; and
•
Comply with REIT tests.
Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements.
The forecast is subject to sensitivity analysis, which involves flexing certain key assumptions and judgements
included in the financial projections, impacting the following areas:
Covenant compliance
The Company operates loan facilities summarised in Note 16.
At 31 March 2026 the Company had significant
headroom on lender covenants at a portfolio level with:
•
Parent Company net gearing of 28.7%
38
compared to a maximum LTV covenant of 40% on its borrowing
facilities.
£227.4m (34% of the whole property portfolio) is unencumbered
by the Company’s borrowings
; and
•
131% minimum headroom on interest cover covenants for the quarter ended 31 March 2026.
Reverse stress testing has been undertaken to understand what circumstances would result in potential breaches
of financial covenants.
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
going concern status
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
28% 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 2026 position by:
o
34% at a portfolio level; or
o
12% at an individual charge pool level, assuming no further properties were charged
38 Calculated with reference to the property holdings of Custodian Property Income REIT plc, thus excluding properties help by its subsidiaries.
100
Note 10 details the expected movements in the valuation of investment properties if the equivalent yield at 31
March 2026 is increased or decreased by 0.5% (2025: 0.25%) and if the ERV is increased or decreased by 5.0%
(2025: 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
2.7% increase in rents during 2026 with capital value increases of 3.2%.
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.170 assets and over 300 typically 'institutional grade'
tenants across all commercial sectors.
Liquidity
At 31 March 2026 the Company had £10.0m of unrestricted cash and £10.0m undrawn RCF, with gross borrowings
of £185.0m resulting in net gearing of 25.9%.
The Company repaid its £20m SWIP loan using its RCF facility on
expiry.
The Company increased its RCF limit to £75m during the year to maintain headroom, with t
he Company’s
forecast
model projecting it will have sufficient cash and undrawn facilities to continue its programme of capital investment,
pay its target dividends and its expense and interest liabilities over the one and three year assessment periods.
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.
101
Directors and Officers
A list of the directors and their short biographies are shown in the Board of Directors and Investment Manager
personnel section of the Governance report.
The appointment and replacement of directors is governed by the Articles, the AIC Code, the Companies Act and
related legislation.
The Articles themselves may be amended by special resolution of the shareholders.
Directors’ fees and beneficial interests in the shares of the Company are disclosed in the Remuneration report.
During the year, no director had a material interest in a contract to which the Company or its subsidiary was a
party (other than their own letter of appointment), requiring disclosure under the Companies Act 2006 other than
in respect of Custodian Capital Limited and the IMA as disclosed in Note 19 to the financial statements.
On 31 December 2025 Nathan Imlach retired as a Director.
Directors’ indemnity
All directors and officers of the Company have the benefit of a qualifying third party indemnity provision contained
in the Articles, which was in force throughout the year and is currently still in force.
The Company also purchased
and maintained directors’ and officers’ liability insurance in respect of itself, its directors and officers
and the
directors and officers of its subsidiaries as permitted by Section 234 of the Companies Act 2006, although no cover
exists in the event directors or officers are found to have acted fraudulently or dishonestly.
Conflicts of interest
There are procedures in place to deal with any dir
ectors’ conflicts of interest arising under section 175 of the
Companies Act 2006 and such procedures have operated effectively.
Donations
No political or charitable donations were made during the current or prior year.
102
Capital structure
The Company’s authorised and issued share capital is shown in Note 1
7 to the financial statements.
The ordinary shares rank pari passu in all respects.
Save as may be agreed at each AGM, the ordinary shares
have pre-emption rights in respect of any future issues of ordinary shares to the extent conferred by section 561
of the Companies Act 2006.
There are no restrictions on the transfer of ordinary shares in the Company, other than certain restrictions that
may be imposed from time to time by laws and regulations and pursuant to the Listing Rules of the FCA and the
Company’s share dealing code, whereby
certain directors and officers require approval to deal in ordinary shares
of the Company.
The Directors are not aware of any other agreements between holders of securities that may result in restrictions
on the transfer of ordinary shares.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed
by the general provisions of the Articles and prevailing legislation.
No person has any special rights of control
over the Company’s share capital and a
ll issued shares are fully paid.
Note 17 sets out the Directors’ authority
to issue shares, pursuant to section 551 of the Companies Act 2006, to
satisfy market demand and raise further monies for investment in accordance with the Company’s investment
policy, and to make market purchases of ordinary shares under section 701 of the Companies Act 2006.
CREST
Custodian Property Income REIT plc share dealings are settled in CREST, the computerised system for the
settlement of share dealings on the London Stock Exchange.
CREST reduces the amount of documentation
required and makes the trading of shares faster and more secure.
CREST enables shares to be held in an
electronic form instead of traditional share certificates.
CREST is voluntary and shareholders can keep their share
certificates if they wish.
This may be preferable for shareholders who do not trade in shares on a frequent basis.
103
Substantial shareholdings
At 31 March 2026 the Directors were aware that the following shareholders each owned
39
3% or more of the
issued share capital:
Shareholder
Number of
ordinary shares
Percentage
holding
40
BlackRock
14,946,887
3.1%
No changes in substantial shareholding were disclosed between 31 March 2026 and 10 June 2026.
Close company provisions
The Company is not a close company within the provisions of the Income and Corporation Taxes Act 1988.
Change of control
The Company has borrowing facilities provided by its bankers which include provisions which may require any
outstanding borrowings to be repaid, altered or terminated upon the occurrence of a change of control in the
Company.
Related party transactions
Details of related party transactions are given in Note 19 to the financial statements.
Environmental performance and strategy
Custodian Property Income REIT is committed to minimising the environmental impact of its portfolio. This is
underpinned by pro-active performance monitoring as a key part of the business strategy. Our sustainability
consultants and advisors, JLL, support us through centralised environmental data management and reporting so
that we can quantify and evaluate our impact. This has continued our efforts to improve data collection, quality,
and coverage, to better understand the performance of our buildings. This is fundamental for transparency and
39 Ownership incorporates the control of voting rights through acting as discretionary investment manager on behalf of retail investors holding the beneficial interest.
40 Based on the issued share capital on 31 March 2026.
104
compliance reporting in alignment with the industry reporting framework (EPRA) we adhere to each year.
The
Company ceased reporting under the GRESB framework this year.
The following information summarises our environmental performance in 2025. Our environmental impacts
include the consumption of fuels, electricity, and water, and have been derived from both landlord and tenant
obtained consumption data.
GHG emissions
This section has been prepared in accordance with our regulatory obligation to report greenhouse gas (“GHG”)
emissions pursuant to The Companies (Directors’ repor
t) and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 which implement the Government’s policy on SECR.
Data collected relates to the calendar years 2025 and 2024 but has been disclosed as 2026 and 2025 respectively
due to the C
ompany’s March accounting reference date.
Methodology
We quantify and report our organisational energy consumption and GHG emissions according to the Greenhouse
Gas Protocol Corporate Standard (revised edition). As all our properties are located within the UK, 100% of our
energy consumption and GHG emissions are applicable to the UK. In categorising data and reporting our impact,
landlord obtained refers to instances where we are responsible for the consumption/emissions of utilities in our
buildings and maintain control, whereas tenant obtained refers to instances where tenants are responsible; either
procuring their own utilities or via submetering from landlord-obtained supplies.
To collect consumption data, our sustainability consultants have contacted the Company’s managing agents and
tenants to request the provision of data for their properties. Creating and maintaining strong relationships with
these stakeholders is key to generating good data flows, and we are continuously working on strengthening these
to enhance our data coverage. Where possible, we also automate data collection to obtain information direct from
suppliers and via smart meters or using a data aggregator. We then consolidate all data collected into a single
source to run analysis, quality checks and further calculations as required.
Consumption data has been collated and converted into carbon dioxide equivalent (“CO2e”) using the International
Energy Agency Conversion Factors for Company Reporting for electricity, and Carbon Risk Real Estate Monitor
(
“
CRREM
”
) for fuels, to calculate emissions from corresponding activity data. Due to the delay in the publication
of annual emissions factors, a three-year lag is used in the application of emissions factors to ensure that GHG
emissions data is continuously available for reporting.
105
Reporting boundaries and limitations
The GHG sources that constitute our operational boundary for the year in this disclosure are:
•
Scope 1: Natural gas combustion within boilers, gas oil combustion within generators, road fuel combustion
within owned and leased vehicles, and fugitive emissions from refrigerants in air-conditioning equipment;
•
Scope 2: Purchased electricity consumption for our own use; and
•
Scope 3: Natural gas and electricity consumption from tenants.
Assumptions and estimations
In instances where data is missing or unavailable, estimations have been applied to ensure a complete view of
our impact is presented. We utilise different estimation methodologies depending on whether the data is missing
(eg one month of the year) or unavailable (eg data we were not able to obtain). For missing data, we estimate
based on historical data and figures from other months throughout the year. For data that was unavailable, we
use benchmarking factors recommended by the CRREM tool and floor area. We have maintained detailed records
of all instances of estimation.
Performance
The Company monitors and reports on environmental targets quarterly (internally) and annually within its Asset
Management and Sustainability Report. Monitoring performance quarterly allows the business to assess and
improve performance across ESG issues and implement a range of initiatives, including energy efficiency, green
energy procurement, tenant engagement and ESG due diligence. The ESG Committee continues to oversee the
Company’s robust environmental governance structure
, monitoring overall progress towards these targets and
ensuring the Investment Manager seeks to identify new opportunities to further embed sustainability across the
portfolio.
106
The table below shows absolute energy consumption for the past two years, as well as year-on-year change.
*For the following tables, the 2025 figures have been restated to reflect enhanced data coverage and accuracy
obtained through the onboarding of new sites to the Arbnco platform, which provide more precise measurements
of actual data and reduce reliance on estimations.
Absolute energy consumption (MWh)
2026
2025
(restated*)
Change
Fuels
Landlord obtained
2,803
3,293
(15%)
Tenant obtained
28,272
27,105
4%
31,075
30,398
2%
Electricity
Landlord obtained
2,776
2,784
0%
Tenant obtained
48,243
41,657
16%
51,019
44,441
15%
Energy
82,094
74,839
10%
We have observed a 15% and 2% increase in absolute electricity and fuel consumption respectively from 2025 to
2026. Our total reported absolute energy consumption has increased by 10% from 2025 to 2026. This includes
both our landlord consumption, as well as that of our tenants from assets that are not managed by us directly. This
increase is partially due to the onboarding of 30 assets, where data is estimated. We have also seen large
increases for some sites where we have started to replace estimations with actual data obtained through Arbnco
data aggregator.
The table below presents absolute performance for both landlord and tenant obtained consumption for electricity
and subsequently carbon. We report gas and water consumption on a whole building basis:
Absolute GHG emissions
2026
2025
(restated*)
Change
Scope 1
Landlord fuel consumption (MWh)
2,803
3,293
(15%)
GHG emissions (tCO
₂
e)
513
640
(20%)
Scope 2
Landlord electricity consumption (MWh)
2,776
2,784
0%
(location-
based)
GHG emissions (tCO
₂
e)
677
1,019
(34%)
Total Scope 1&2 emissions (location-based)
(tCO
₂
e)
1,191
1,658
(28%)
Scope 1&2 (location-based) emissions intensity
(kgCO
₂
e/m²/yr)
2.42
3.39
(29%)
Scope 3
Tenant fuel consumption (MWh)
28,272
27,105
4%
Tenant electricity consumption (MWh)
48,243
41,657
16%
107
Total Scope 3 emissions (tCO
₂
e)
15,294
13,936
10%
Scope 3 emissions intensity (kgCO
₂
e/m²/yr)
31.05
28.48
9%
Gross Scope 1,2 and 3 emissions (location-based)
(tCO
₂
e)
16,485
15,594
6%
Water consumption (dam³)
151.9
167.3
(10%)
The emissions intensity calculation is based upon the floor area metrics available relative to the Scope 1, 2 and 3
emissions. As the Company is a REIT, primarily investing in real estate, floor area is an appropriate denominator
to normalise energy consumption and GHG emissions as an intensity metric, and is consistent with the SECR
guidelines' recommendations for the property sector.
Our absolute Scope 1 and 2 (location-based) emissions decreased by 28% from 2025 to 2026, primarily driven by
a 15% reduction in landlord fuel consumption and a 34% decrease in electricity-related emissions. This
improvement reflects both our decarbonisation initiatives and the enhanced data accuracy from our automated
metering systems.
We continue to streamline data collection through automation to maximise coverage while minimising collection
efforts. This approach has significantly improved our data quality this year, with multiple sites now activated using
these automated solutions.
Energy Efficiency Action
Custodian Property Income REIT continues to assess opportunities for direct savings in energy and associated
carbon emissions through operational and technological reviews. In March 2025, an Energy Savings Opportunity
Scheme (ESOS) Action Plan was developed following comprehensive energy audits of representative properties
across the UK portfolio. This plan identified a series of recommended measures including LED lighting upgrades,
HVAC optimisation aligned with occupancy patterns, and installation of timer-based controls for ventilation and
water heating systems. The ESOS Action Plan comprises seven energy-saving measures identified across
representative properties, estimated to deliver 20,305 kWh annually. These measures provide a framework for
potential implementation across the broader portfolio.
During the year, the Company actively implemented renewable energy and infrastructure improvements to reduce
energy consumption:
•
Increased PV capacity by 67% to 4,162 kWp across 21 properties;
•
Enhanced energy monitoring through smart meter installations, achieving 40% data coverage across the
portfolio; and
•
Expanded EV charging infrastructure to support low-carbon transportation.
108
These initiatives, combined with the ESOS Action Plan recommendations, support the Company's commitment to
improving energy efficiency and reducing carbon emissions across its property portfolio.
Financial risk management
The Company
’s fi
nancial risk management is based upon sound economic objectives and good corporate practice.
The Board has overall responsibility for risk management and internal control, with the assistance of the Audit and
Risk Committee
.
The Board’s process for ident
ifying and managing risks is set out in more detail in the
Governance report.
Since Admission, the Company has sought to manage financial risk to ensure sufficient liquidity is available to
meet its identifiable needs and to invest cash assets safely and profitably.
Short-term flexibility is achieved through
the use of bank facilities.
The Company does not undertake any trading activity in financial instruments.
All
activities are transacted in pounds sterling.
The Company has not engaged in any hedging activities during the
year.
The Company reviews the credit quality of potential tenants and limits credit exposures accordingly.
All trade
receivables are subject to credit risk exposure.
However, there is no specific concentration of credit risk as the
amounts recognised represent income from a wide range of the Company’s tenants.
The Company’s financial risk management policy is further detailed in Note
20 to the financial statements.
Auditor
Deloitte LLP
, which has been the Company’s
auditor since 20 May 2014, has confirmed its willingness to continue
in office as auditor in accordance with Section 489 of the Companies Act 2006.
The Group is satisfied that Deloitte
LLP is independent and there are adequate safeguards in place to safeguard its objectivity.
A resolution to
reappoint Deloitte LLP
as the Group’s auditor will be proposed at the forthcoming
AGM.
Directors’ statement as to disclosure of information to the auditor
The Directors who were members of the Board at the time of approving the Directors’ report are listed in the
Governance report
.
Having made enquiries of fellow directors and of the Company’s auditor, each of these
directors confirms that:
109
•
To the best of
each Director’s knowledge and belief, there is no relevant audit information of which the
Company’s auditor is unaware; and
•
Each Director has taken all steps they might reasonably be expected to have taken as a director to make
themselves aware of any rele
vant audit information and to establish that the Company’s auditor is aware of
that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
Annual General Meeting
The AGM of the Company will be held on 17 September 2026 at 9:30am.
The results of the meeting will be
published on
the Company’s
website following the meeting.
At the AGM the votes will be dealt with on a poll, using the proxy votes submitted prior to the meeting. Every
member entitled to vote shall have one vote for every ordinary share held.
None of the ordinary shares carry any
special voting rights with regard to control of the Company.
The Notice of AGM specifies deadlines for exercising
voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the AGM.
The
relevant proxy votes are counted and the number for, against or withheld in relation to each resolution will be
published on our website following the AGM.
Engagement with suppliers, customers and others
The Company’s approach to engagement with suppliers, customers and other stakeholders is set out in the s172
statement and stakeholder relationships section of the Strategic report.
Events since 31 March 2026
Details of significant events occurring after the end of the reporting year are given in Note 21 to the financial
statements.
110
Approval
This Directors’ report was approved by the Board of
Directors and signed on its behalf by:
David MacLellan
Chairman
10 June 2026
111
Directors’ responsibilities statement
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors are required to prepare the group financial statements in accordance with United Kingdom adopted
international accounting standards. The financial statements also comply with IFRS Accounting Standards as
issued by the International Accounting Standards Board (IASB). The directors have also chosen to prepare the
parent company financial statements under United Kingdom adopted international accounting standards.
Under
company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing
these financial statements, International Accounting Standard 1 requires that directors:
•
Properly select and apply accounting policies;
•
Present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information;
•
Provide additional disclosures when compliance with the specific requirements of the financial reporting
framework are insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity's financial position and financial performance; and
•
Make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
112
•
The financial statements, prepared in accordance with the relevant financial reporting framework, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
•
The Strategic report includes a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
•
The annual report and financial statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company’s position and performance,
business model and strategy.
Approval
This responsibility statement was approved by the board of directors and is signed on its behalf by:
David MacLellan
Chairman
10 June 2026
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CUSTODIAN PROPERTY
INCOME REIT PLC
Report on the audit of the financial statements
1.
Opinion
In our opinion:
•
the financial statements of Custodian Property Income REIT PLC
(the ‘
parent
company’
or the
‘company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and
of the parent company’s
affairs as at 31 March 2026
and of the group’s
profit for the year then
ended;
•
the group financial statements have been properly prepared in accordance with United Kingdom
adopted international accounting standards and IFRS Accounting Standards as issued by the
International Accounting Standards Board (IASB);
•
the parent company financial statements have been properly prepared in accordance with United
Kingdom adopted international accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements which comprise:
•
the consolidated statement of comprehensive income;
•
the consolidated and company statements of financial position;
•
the consolidated and company statements of cash flows;
•
the consolidated statement of changes in equity;
•
the company statement of changes in equity; and
•
the related notes 1 to 22.
The financial reporting framework that has been applied in the preparation of the group financial statements
is applicable law, United Kingdom adopted international accounting standards and IFRS Accounting
Standards as issued by the IASB. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom adopted
international accounting standards and as applied in accordance with the provisions of the Companies Act
2006.
2.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (
‘
ISAs (UK)
’
) and
applicable law. Our responsibilities under those standards are further described in the auditor
’
s
responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s
(the ‘FRC’s’) Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. The non-audit services provided to the group
and parent company for the year are disclosed in note 5 to the financial statements.
We confirm that we have not provided any non-audi
t services prohibited by the FRC’s Ethical Standard to
the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
3.
Summary of our audit approach
Key audit matter
The key audit matter that we identified in the current year was
•
Valuation of investment property.
Materiality
The materiality that we used for the group financial statements was £8.6m
which was determined on the basis of 1.25% of total assets. We have also
used a lower materiality for items impacting EPRA earnings of £2.1m
which was determined on the basis of 8% of EPRA earnings. We have
reduced the percentage applied to the total assets benchmark to bring it
more closely in line with the listed peer group.
Scoping
Following the acquisitions of Merlin Properties Limited, Grove Court
Properties (Holdings) Limited and Scorpion Properties Limited, we have
identified four components in the current year, in addition to the parent
company component audited in the prior year. The parent company
continued as the sole component subject to an audit of the entire financial
information and, in addition, we performed specific audit procedures on
selected balances for the three newly acquired components. Our audit
procedures covered 98 of group revenue and 96% of group profit before
tax and 100% of group investment property.
Work on all four components
has been completed by the group engagement team.
Significant changes in
our approach
There have been no significant changes in our approach, aside from
the change in scoping and percentage applied to the materiality
benchmark, as explained above.
4.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’
use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the
directors’
assessment of the
group’s and the parent company’s
ability to continue to
adopt the going concern basis of accounting included:
•
testing the clerical accuracy of the model used to prepare the going concern forecasts;
•
assessing the historical accuracy of forecasts prepared by Custodian Capital Limited (the
“Investment Manager”);
•
agreeing the available financing facilities to underlying agreements and assessing the accuracy of
covenant calculation forecasts performed by the Investment Manager;
•
assessing the accuracy of the REIT regime calculation forecasts performed by the Investment
Manager;
•
assessing the
reasonableness of the Investment Manager’s reverse
-stress testing; and
•
assessing the appropriateness of disclosures made in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the
group’s and the parent
company’s
ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
directors’
statement in the financial statements
about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
5.
Key audit matter
The key audit matter communicated below is a matter that, in our professional judgement, was of most
significance in our audit of the financial statements of the current year and included the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. This matter had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team.
This matter was addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on this matter.
5.1. Valuation of investment property
Key audit matter
description
The group’s principal activity is to invest in commercial properties and
secure income from the tenants of those properties. As disclosed in note 10
the group’s investment property portfolio is valued at £669.3m as at 31
March 2026 (2025: £594.4m).
The group’s accounting policy in
note 2 states that investment property is
held at fair value and note 2.6 describes the key estimates made in the
valuation of investment properties.
Valuation of investment property is an area of judgement which could
materially affect the financial statements.
The valuations were carried out
by third party valuers. The valuers were engaged by those charged with
governance and performed their work in accordance with the Royal Institute
of Chartered Surveyors (RICS) Valuation
–
Professional Standards.
In determining the fair value, the external valuers make a number of key
estimates and significant assumptions, in particular assumptions in relation
to market comparable yields and estimates in relation to future rental
income increases or decreases.
Certain of these estimates and
assumptions require input from the Investment Manager. Estimates and
assumptions are subject to market forces and will change over time.
The estimation of yields and estimated rental values (ERVs) in the property
valuation is a significant judgement area, focused on a number of
assumptions relating to the size and location of the property as well as
certain attributes of the lease. Given the high level of judgement involved,
we determined that there was a potential for fraud through the possible
manipulation of these key inputs to the valuation. The inherent subjectivity
in relation to estimation of yields and ERVs, coupled with the fact that only a
small percentage difference in individual property valuations, when
aggregated, could result in a material misstatement on the financial
statements, warrants specific audit focus in this area and we have
considered it as a key audit matter.
The Audit and Risk Committee report on pages XX to XX discloses this as a
primary area of judgement.
How the scope of
our audit responded
to the key audit
matter
We obtained an understanding of the relevant controls over the valuation
process, including assessing the Investment Manager’s process and control
for reviewing and challenging the work of the external valuers. Our work
included consideration of the Investment Manager’s experience and
knowledge to undertake these activities.
With the involvement of our real estate specialists, we identified items
subject to further testing by performing an analytical procedure over the
whole population and identifying properties with unexpected movements;
we also met with the third-party valuers appointed by those charged with
governance with the aim of assessing the valuation methodology adopted.
We assessed the competence, capability and objectivity of the external
valuers, and read their terms of engagement with the group to determine
whether there were any matters that might have affected their objectivity or
may have imposed scope limitations on their work.
We assessed the reasonableness of the significant judgments and
assumptions applied in the valuation model for each property in our sample,
focusing in particular on the yields and ERVs assumed and assessing the
sensitivity of the valuation to changes in assumptions. We assessed the
completeness and accuracy of the data provided by the group to the valuers
for the purposes of their valuation exercise.
With the involvement of our real estate specialists, we assessed the
significant assumptions in the valuation process, tested a sample of
properties by benchmarking against external appropriate property indices,
and understood the valuation methodology and the wider market analysis.
We checked the information provided by the external valuers, both in the
meetings and contained in the detailed valuation report and undertook our
own research into the relevant markets to evaluate the reasonableness of
the valuation inputs and the resulting fair values.
We tested the integrity of the model which is used by the external valuers.
We also considered the appropriateness of the group’s disclosures
detailing
the degree of the estimation and sensitivity to key assumptions made when
valuing these properties.
Key observations
The results of our procedures were satisfactory, and we concluded that the
key assumptions applied in determining the investment property valuations
were appropriate. Based on the work performed we concluded that the
valuation of investment property is appropriate.
6.
Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We
use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Group financial statements
Parent company financial statements
Materiality
£8.6m (2025: £9.2m)
£8.2m (2025: £9.2m)
Basis for
determining
materiality
1.25% of total assets (2025: 1.5% of total
assets). This percentage takes into account our
knowledge of the group and parent company,
our assessment of audit risks and the reporting
requirements for the financial statements.
We
have reduced the percentage applied to the
total assets benchmark to bring it more closely
in line with the listed peer group.
Parent company materiality represents 95% of
group materiality in the current year.
This has
reduced from the prior year, where the group
was a single component represented by the
parent company.
Rationale for
the benchmark
applied
We have used the total assets value as the benchmark for determining materiality, as this
benchmark is one of the key drivers of business value, and is a focus for users of those financial
statements for property companies. In addition to total assets, we consider EPRA earnings as a
critical performance measure for the group that is applied to underlying earnings. We have also
benchmarked these percentages and our approach to materiality to other listed REITs based on
information publicly disclosed in the audit reports and found them to be consistent.
A lower materiality of £2.1m (2025: £2.1m) which was determined on the basis of 8% (2025: 8%) EPRA
earnings was used for the account balances and class of transactions impacting EPRA earnings. We
consider EPRA earnings to be the most appropriate benchmark due to it being one of the key focus areas
for both investors and the Investment Manager. Refer to note 22 for a reconciliation to the IFRS equivalent
earnings measure.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance
materiality
70% (2025: 70%) of group materiality
70% (2025: 70%) of parent company
materiality
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
1. our cumulative knowledge of the group and its environment, including industry wide
pressure on valuation of property portfolio; and
2. our past experience of the audit, which has indicated a low number of corrected and
uncorrected misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to them all audit differences in excess
of £430k (2025: £415k), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
7.
An overview of the scope of our audit
7.1. Identification and scoping of components
In the year, the parent company made three acquisitions, being Merlin Properties Limited, Grove Court
Properties (Holdings) Limited and Scorpion Properties Limited. The three new acquisitions have a separate
control environment to the original group and therefore we have identified these as three additional
components to the one component, being the parent company, recognised in the prior year. Work on all
four components has been completed by the group engagement team.
We determined the performance materiality for the four components in the group to be based on 50-95% of
group performance materiality, ranging between £3m and £5.7m.
The parent company was subject to audit procedures over 100% of its financial information.
Within Merlin Properties Limited, we have performed specified procedures over investment property,
revenue and tax balances, based on the timing of acquisition resulting in ten months of trading being
included in the consolidated EPRA earnings for the year. For Grove Court Properties (Holdings) Limited
and Scorpion Properties Limited, we have performed specified procedures over investment property, tax
balances (where appropriate) and the repayment of debt facilities.
As a result of the above, we have scoped in components for procedures on one or more classes of
transactions, account balances or disclosures that together represent 100% of group investment property,
98% of group revenue and 96% of group profit before tax.
7.2. Our consideration of the control environment
As part of our risk assessment procedures, we obtained an understanding of the control environment which
encompassed the processes and relevant controls established within the group, as well as the IT systems
that were relevant to the audit.
We tested and relied on controls in performing our audit of rental income for the parent company only
component and obtained an understanding of the relevant controls relating to investment property, the
financial reporting cycle and going concern.
The group outsources its investment management and administration functions to Custodian Capital
Limited for all four components, and where relevant to our audit process, we have obtained an
understanding of the control environment, including the relevant controls over key business cycles such as
property valuation.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the group’s business
and its financial statements.
The group continues to develop its assessment of the potential impacts of climate change, as explained in
the ESG Committee Report on pages 48 to 50. As a part of our audit, we have obtained the Investment
Manager’s climate
-related risk assessment within the risk register and held discussions with the Investment
Manager to understand the process of identifying climate-related risks, the determination of mitigating
actions and the impact on the group’s financial statements.
The Investment Manager has assessed that sustainability and, in particular, the management of climate
risk represents a factor within the principal risks for the business.
In mitigation, management aim to comply
with sustainability targets and future Minimum Energy Efficiency Standards (‘MEES’). as detailed within
Principal Risks and Uncertainties on pages [xx] to [xx].
We performed our own assessment of the potential
impact of climate change on the group’s account balances and classes of transactions and did not identify
any additional risks of material misstatement. Our procedures also included reading disclosures included in
the strategic report to consider whether they are materially consistent with the financial statements and our
knowledge obtained in the audit.
8.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and
our auditor’s report thereon. The
directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9.
Responsibilities of directors
As explained more fully in the
directors’
responsibilities statement, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the
group’s and the parent
company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
10.
Auditor’s re
sponsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor
’
s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the aud
it of the financial statements is located on the FRC’s
website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditor’s report.
11.
Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and
non-compliance with laws and regulations, we considered the following:
•
the nature of the industry and sector, control environment and business performance including the
design of the
group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels
and performance targets;
•
the
group’s
own assessment of the risks that irregularities may occur either as a result of fraud or
error that was approved by the board
•
results of our enquiries of the Investment Manager and the Audit and Risk Committee about their
own identification and assessment of the risks of irregularities, including those that are specific to
the
group’s
sector;
•
any matters we identified having obtained and reviewed the
group’s
documentation of their policies
and procedures relating to:
•
identifying, evaluating and complying with laws and regulations and whether they were aware of
any instances of non-compliance;
•
detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
•
the internal controls established to mitigate risks of fraud or non-compliance with laws and
regulations;
•
the matters discussed among the audit engagement team and relevant internal specialists, including
real estate specialists, regarding how and where fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential for fraud in the following areas: valuation of
investment property.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond
to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the group operates in,
focusing on provisions of those laws and regulations that had a direct effect on the determination of
material amounts and disclosures in the financial statements. The key laws and regulations we considered
in this context included the UK Companies Act, Listing Rules and REIT legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the
financial statements but compliance with which may be fundamental to the
group’s
ability to operate or to
avoid a material penalty.
11.2.
Audit response to risks identified
As a result of performing the above, we identified the valuation of investment property as a key audit matter
related to the potential risk of fraud. The key audit matters section of our report explains the matter in more
detail and also describes the specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
•
reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on
the financial statements;
•
enquiring of the Investment Manager, the Audit and Risk Committee and external legal counsel
concerning actual and potential litigation and claims;
•
performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
•
reading minutes of meetings of those charged with governance;
•
in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the judgements made
in making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement
team members, including internal specialists
,
and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the
directors’
remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the
directors’
report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
•
the strategic report and the
directors’
report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the group and of the parent company and their
environment obtained in the course of the audit, we have not identified any material misstatements in the
strategic report or the
directors’
report.
13.
Corporate Governance Statement
The Listing Rules require us to review the
directors’
statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the
group’s
compliance with the
provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements and our
knowledge obtained during the audit:
•
the director
s’
statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on pages XX and XX;
•
the
directors’
explanation as to its assessment of the
group’s
prospects, the period this assessment
covers and why the period is appropriate set out on page XX;
•
the
directors’
statement on fair, balanced and understandable set out on page XX;
•
the board’s confirmation that it has carried out a robust assessment of the emerging and pr
incipal risks
set out on page xx;
•
the section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on page xx; and
•
the section describing the work of the Audit and Risk Committee set out on pages xx to xx.
14.
Matters on which we are required to report by exception
14.1.
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not received all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and
returns.
We have nothing to report in respect of these matters.
14.2.
Directors’
remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’
remuneration have not been made or the part of the
directors’
remuneration report to be audited
is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15.
Other matters which we are required to address
15.1.
Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the shareholders in
2014 to audit the financial statements for the year ending 24 March 2014 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is
13 years, covering the years ending 24 March 2014 to 31 March 2026.
15.2.
Consistency of the audit report with the additional report to the Audit and Risk
Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to
provide in accordance with ISAs (UK).
16.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the
company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule
(DTR) 4.1.15R
–
DTR 4.1.18R, these financial statements will form part of the Electronic Format Annual
Financial Report filed on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R
–
DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format Annua
l
Financial Report has been prepared in compliance with DTR 4.1.15R
–
DTR 4.1.18R.
Andy Siddorns (Senior statutory audit)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
10 June 2026
114
Consolidated statement of comprehensive income
For the year ended 31 March 2026
Year ended
31 March
2026
Year ended
31 March
2025
Note
£000
£000
Revenue
4
Investment management fees
(3,769 )
(3,417 )
Operating expenses of rental property
-
rechargeable to tenants
(3,776 )
(3,562 )
-
directly incurred
(6,106 )
(4,891 )
Professional fees
(806 )
(823 )
Directors’ fees
(351 )
(345 )
Cost of sold housing stock
(485 )
Other expenses
(1,244 )
(1,099 )
Expenses
(16,537 )
(14,137 )
Operating profit before gains on investment property
and financing
Unrealised profit on revaluation of investment property:
•
relating to property revaluations
10
•
relating to costs of acquisition
10
(2,931 )
(1 )
Valuation increase
Profit on disposal of investment property
Net gains on investment property
Operating profit
115
Finance income
6
Finance costs
7
(7,320 )
(7,486 )
Net finance costs
(7,205 )
(7,359 )
Profit before tax
Income tax expense
8
Profit for the year, net of tax
Other comprehensive income
11
Total comprehensive income for the year, net of tax
Earnings per ordinary share:
Basic and diluted (p)
3
EPRA (p)
3
The profit for the year and total comprehensive income 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.
116
Consolidated and Company statements of financial position
As at 31 March 2026
Registered number: 08863271
Group
Company
Note
31 March
2026
£000
31 March
2025
£000
31 March
2026
£000
31 March
2025
£000
Non
–
current assets
Investment property
10
609,718
594,364
Property, plant and equipment
11
6,009
4,711
Investments
12
56,463
-
Total non-current assets
672,190
599,075
Current assets
Housing inventory
-
-
Trade and other receivables
13
13,360
5,201
Cash and cash equivalents
15
11,067
10,118
Total current assets
24,427
15,319
Total assets
696,617
614,394
Equity
Issued capital
17
4,941
4,409
Share premium
17
250,970
250,970
Merger reserve
17
64,039
18,931
Treasury shares
17
(4,791 )
(4,791)
-
Retained earnings
17
166,088
148,442
Revaluation reserve
17
2,209
714
Total equity attributable to equity holders
of the Company
483,456
423,466
Non-current liabilities
Borrowings
16
183,777
153,641
Other payables
14
1,711
2,087
117
Total non-current liabilities
185,488
155,728
Current liabilities
Borrowings
16
-
19,989
Trade and other payables
14
19,757
7,029
Deferred income
7,916
8,182
Total current liabilities
27,673
35,200
Total liabilities
213,161
190,928
Total equity and liabilities
696,617
614,394
The parent c
ompany’s profit for the year
was £45,021,000 (2025: £38,155,000).
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 10 June 2026 and are signed on
its behalf by:
David MacLellan
Chairman
118
Consolidated and Company statements of cash flows
For the year ended 31 March 2026
Group
Company
Group and Company
Year
ended
31 March
2026
Year
ended
31 March
2025
Year
ended
31 March
2026
Year
ended
31 March
2025
Note
£000
£000
£000
£000
Operating activities
Profit for the year
45,021
38,155
Net finance costs
7,209
7,359
Valuation increase of investment property
10
(20,022 )
(11,211 )
(15,937)
(11,211)
Acquisition costs relating to the purchase of
subsidiaries
-
-
Impact of lease incentives
10
(2,977 )
(1,470 )
(2,977)
(1,470)
Amortisation of right-of-use asset
7
7
Profit on disposal of investment property
(2,599 )
(444 )
(1,897)
(444)
Depreciation
328
285
Cash flows from operating activities
before changes in working capital and
provisions
31,754
32,681
Increase in trade and other receivables
(1,082 )
(1,871 )
(8,159)
(1,871)
Increase in trade and other payables and
deferred income
16,730
1,286
Sale of housing stock
-
-
Cash generated from operations
40,325
32,096
Interest and other finance charges
7
(6,878 )
(7,068 )
(6,878)
(7,068)
Net cash inflows from operating activities
33,447
25,028
Investing activities
Purchase of subsidiaries/investments
12
(15,275 )
(15,275)
-
Capital expenditure on investment property
10
(9,523 )
(6,843 )
(9,523)
(6,843)
Purchase of property, plant and equipment
11
(131 )
(1,326 )
(131)
(1,326)
Disposal of investment property and assets
held-for-sale
15,060
15,050
Costs of disposal of investment property
(200 )
(331 )
(143)
(331)
Interest and finance income received
6
113
127
119
Net cash inflows from investing activities
(5,071 )
(9,899)
6,677
Financing activities
41
Net increase in RCF
16
10,000
-
Repayment of borrowings and origination
costs
16
(295 )
(4,078 )
(295)
(4,078)
Dividends paid
9
(27,375 )
(27,223 )
(27,375)
(27,223)
Share buybacks
(4,791 )
(4,791)
-
Equity issuance costs
(138 )
(138)
-
Net cash outflow from financing activities
(22,599 )
(31,301 )
(22,599)
(31,301)
Net (decrease)/increase in cash and cash
equivalents
949
404
Cash and cash equivalents at start of the
year
10,118
9,714
Cash and cash equivalents acquired
-
-
Cash and cash equivalents at end of the
year
11,067
10,118
41
The net increase in RCF and repayment of borrowings exclude the settlement of a £20m loan at expiry, which was processed by the common lender without impacting the
Company’s cash
position.
120
Consolidated statement of changes in equity
For the year ended 31 March 2026
Note
Issued
capital
£000
Merger
reserve
£000
Treasury
shares
£000
Share
premium
£000
Revaluation
reserve
£000
Retained
earnings
£000
Total
equity
£000
As at 31 March 2024
Profit for the year
Revaluation of PPE
11
Total comprehensive profit for year
Transactions with owners of the
Company, recognised directly in equity
Dividends
9
(27,223 )
(27,223 )
As at 31 March 2025
Profit for the year
Revaluation of PPE
11
Depreciation of PPE revaluation surplus
(26 )
(26 )
Total comprehensive profit for year
Transactions with owners of the
Company, recognised directly in
equity
121
Dividends
9
(27,375 )
(27,375 )
Purchase of own shares into treasury
(4,791 )
(4,791 )
Share issuance
As at 31 March 2026
(4,791 )
122
Company statement of changes in equity
For the year ended 31 March 2026
Note
Issued
capital
£000
Merger
reserve
£000
Treasury
shares
£000
Share
premium
£000
Revaluation
reserve
£000
Retained
earnings
£000
Total
equity
£000
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 PPE
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
Profit for the year
-
-
-
-
-
45,021
45,021
Revaluation of PPE
11
-
-
-
-
1,521
-
1,521
Depreciation of PPE revaluation surplus
11
-
-
-
-
(26)
-
(26)
Total comprehensive profit for year
-
-
-
-
1,495
45,021
46,516
Transactions with owners of the
Company, recognised directly in
equity
123
Dividends
9
-
-
-
-
-
(27,375)
(27,375)
Purchase of own shares into treasury
-
-
(4,791)
-
-
-
(4,791)
Share issuance
532
45,108
-
-
-
-
45,640
As at 31 March 2026
4,941
64,039
(4,791)
250,970
2,209
166,088
483,456
124
Notes to the financial statements for the year ended 31 March 2026
The Company is a public limited company incorporated and domiciled in England and Wales
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.
Basis of preparation and material accounting policies
2.1.
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 IFRS Accounting
Standards as issued by the International Accounting Standards Board (IASB).
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.
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 and
Merlin Properties Limited have accounting reference dates in line with the Company.
The accounting reference
dates of Grove Court Properties (Holdings) Limited and its subsidiaries and Scorpion Properties Limited are 1
March and 12 February respectively which were amended to fall one day before acquisition for the purpose of
125
preparing completion accounts.
These subsidiaries will have their accounting reference dates aligned with the
Company for the 2027 financial year. 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 Company.
Profit or loss and other
comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective
New accounting policies
During the year the Company acquired housing stock as part of the Merlin acquisition, to which the following policy
has been applied:
Housing inventory
Housing inventory comprises residential properties acquired for sale measured at the lower of cost and net
realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and costs necessary to make the sale.
Housing stock is assessed for impairment
at each reporting date, and any write-downs to net realisable value are recognised in cost of sales.
During the year the Company commenced a share buyback programme, to which the following policy has been
applied:
Treasury shares
Consideration for the purchase of the Company’s own equity instruments (treasury shares), including any directly
attributable incremental costs, is recognised as a deduction from equity within a treasury shares reserve.
Treasury
shares are not recognised as a financial asset.
When treasury shares are sold or reissued, any difference between the carrying amount and the consideration
received is recognised within share premium.
The number of treasury shares held is excluded from the calculation of basic and diluted earnings per share.
126
127
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 Company, liabilities incurred
by the Company to the former owners of the acquiree and the equity interest issued by the Company in exchange
2.4.
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.
128
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 discl
osure 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 financial statements.
The impact of IFRS 18 is expected to be
presentational only involving the structure of the income statement and the disclosure of alternative performance
measures and associated reconciliations.
2.5.
Material accounting policies
The material accounting policies adopted by the Group and Company and applied to these financial statements
are set out below.
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
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other
sales taxes or duties.
129
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 (surrender premiums) 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.
The sale of housing stock is recognised as revenue on the completion of the sale contract, with the carrying amount
of associated housing stock recognised through expenses.
Profits on the sale of investment properties and assets held for sale are recognised on the completion of contracts.
Finance income relates to bank interest receivable and amounts receivable on ongoing development funding
The Company operates as a REIT and hence profits and gains from its property rental business of it and its
subsidiaries 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
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
130
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
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.
Subsidiary undertakings
Investments are included in the Company only statement of financial position at cost less any provision for
impairment.
Electric vehicle chargers and motor vehicles are stated at cost less accumulated depreciation and accumulated
impairment loss.
PV is valued at the year-end 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.
useful lives, using the straight-line method, on the following bases:
131
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
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
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 histo
rical credit loss experience and an assessment
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
132
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 premium represents the excess over
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
Revaluation reserve represents the unrealised fair value of PV assets in excess of their historical cost less
accumulated depreciation.
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
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the
Deferred consideration
–
cash settled
Cash-settled deferred consideration is recognised as a financial liability at the transaction date. Initial
measurement is at fair value, based on the net present value of the future cash flows.
Subsequent measurement
is at amortised cost using the effective interest method. Where cash consideration is contingent upon future
events cash flows are estimated by reference to the probability-weighted average of the possible outcomes, the
range of plausible outcomes and their likelihood and any contractual clawback provisions.
133
Where cash-settled deferred consideration is settled in full or in part, any difference between the carrying amount
of the liability and the consideration paid is recognised in profit or loss.
Deferred consideration
–
equity settled
Equity-settled deferred consideration is classified as a financial liability which is initially recognised at fair value at
the transaction date and subsequently measured at fair value through profit or loss at each reporting date, with
changes in fair value recognised in profit or loss.
The fair value of such obligations reflects the current market value of the shares that would be required to settle
the obligation, adjusted for any contractual features affecting the settlement amount.
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
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 i
nvestment properties as a portfolio,
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 j
udgement 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.
134
Judgements
No critical 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 an
d Sustainability report.
Valuation reports at 31 March 2026 include ‘market conditions commentary’ which notes that the
valuation has
been prepared during a period of geopolitical tension arising from the Middle East conflict which commenced on
28 February 2026. The valuers draw attention to the resulting increase in global risk premiums, disrupted supply
chain conditions and heightened volatility in energy markets as such instability can affect financing conditions,
inflation and investor sentiment, with behaviour capable of changing rapidly during periods of heightened volatility.
The valuers also note that their opinions used in the valuations are only valid as at the valuation date,
recommending, where appropriate, valuations are closely monitored for evolving market conditions.
The Board
does not believe market conditions have changed materially since 31 March 2026.
Note 10 details the expected movements in the valuation of investment properties if the equivalent yield at 31
March 2026 is increased or decreased by 0.5% (2025: 0.25%) and if the ERV is increased or decreased by 5.0%
135
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.
Deferred equity consideration relating to corporate
acquisitions is considered dilutive. There are other no dilutive instruments in issue.
Any shares issued after the
year end are disclosed in Note 21.
The Company is a FTSE EPRA UK NAREIT index constituent and EPRA performance measures have been
disclosed to facilitate comparability with the Company’s peers through consistent reporting of key performance
measures.
EPRA issues recommended bases for the calculation of EPS as alternative indicators of performance.
Year | Year | |
ended | ended | |
31 March | 31 March | |
Group | 2026 | 2025 |
Net profit for the year attributable to equity holders of the Company (£000) | 48,298 | 38,155 |
Net gains on investment property (£000) | (19,690) | (11,654) |
Depreciation (£000) | 349 | 285 |
Net gains on investment property and depreciation (£000) | (19,341) | (11,369) |
EPRA net profit attributable to equity holders of the Company (£000) | 28,957 | 26,786 |
Weighted average number of ordinary shares (excluding treasury shares) | ||
Issued ordinary shares at start of the year (thousands) | 440,850 | 440,850 |
Effect of shares issued during the year (thousands) | 19,678 | - |
Basic weighted average number of shares (excluding treasury shares) (thousands) | 460,528 | 440,850 |
Dilutive effect of deferred equity consideration | 574 | - |
Diluted weighted average number of shares (excluding treasury shares) (thousands) | 461,102 | 440,850 |
Basic EPS (p) | 10.4 | 8.7 |
Diluted EPS (p) | 10.4 | 8.7 |
EPRA EPS (p) | 6.3 | 6.1 |
136
Revenue
Year |
Year |
|
ended |
ended |
|
31 March |
31 March |
|
2026 |
2025 |
|
Group |
£000 |
£000 |
Rental income from investment property |
45,446 |
42,828 |
Sale of housing stock |
472 |
- |
Income from recharges to tenants |
3,623 |
3,562 |
Income from dilapidations |
2,204 |
1,131 |
Other income |
605 |
476 |
52,350 |
47,997 |
Operating profit
Operating profit is stated after (crediting)/charging:
Year |
Year |
|
ended |
ended |
|
31 March |
31 March |
|
2026 |
2025 |
|
Group |
£000 |
£000 |
Profit on disposal of investment property |
(2,599) |
(444) |
Investment property valuation increase |
(20,022) |
(11,211) |
Fees payable to the Company’s auditor and its associates for the audit of the |
||
Company’s annual financial statements |
227 |
171 |
Fees payable to the Company’s auditor and its associates for the interim |
||
review |
42 |
39 |
Administrative fee payable to the Investment Manager |
534 |
494 |
Directly incurred operating expenses of vacant rental property |
2,132 |
1,886 |
Directly incurred operating expenses of let rental property |
3,363 |
2,081 |
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.
No
137
Finance income
Year | Year | |
ended | ended | |
31 March | 31 March | |
2026 | 2025 | |
Group | £000 | £000 |
Bank interest | 115 | 127 |
115 | 127 |
7.
Finance costs
Year | Year | |
ended | ended | |
31 March | 31 March | |
2026 | 2025 | |
Group | £000 | £000 |
Amortisation of arrangement fees on debt facilities | 442 | 418 |
Other finance costs | 105 | 443 |
Bank interest | 6,773 | 6,625 |
7,320 | 7,486 |
138
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% (2025: 25.0%).
The differences are explained below:
Year | Year | |
ended | ended | |
31 March | 31 March | |
2026 | 2025 | |
Group | £000 | £000 |
Profit before income tax | 48,298 | 38,155 |
Tax charge on profit at a standard rate of 25.0% | 12,075 | 9,539 |
Effects of: | ||
REIT tax exempt rental profits and gains | (12,075) | (9,539) |
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.
The Company’s residual business produced an annual loss so no corporation tax
139
9.
Dividends
Year |
Year |
|
ended |
ended |
|
31 March |
31 March |
|
2026 |
2025 |
|
Group and Company |
£000 |
£000 |
Interim dividends paid on ordinary shares relating to the quarter ended: |
||
Prior year |
||
- 31 March 2025: 1.5p (2024: 1.375p) |
6,613 |
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 2025: 1.5p (2024: 1.5p) |
6,952 |
6,613 |
- 30 September 2025: 1.5p (2024: 1.5p) |
6,921 |
6,613 |
- 31 December 2025: 1.5p (2024: 1.5p) |
6,889 |
6,613 |
27,375 |
27,223 |
The Company paid a fourth interim dividend relating to the quarter ended 31 March 2026 of 1.5p per ordinary
140
Investment property
Group |
Company |
|
£000 |
£000 |
|
At 31 March 2024 |
578,122 |
578,122 |
Impact of lease incentives and lease costs |
1,470 |
1,470 |
Amortisation of right-of-use asset |
(7) |
(7) |
Capital expenditure |
6,843 |
6,843 |
Disposals |
(3,275) |
(3,275) |
Valuation increase |
11,211 |
11,211 |
At 31 March 2025 |
594,364 |
594,364 |
Impact of lease incentives and lease costs |
2,977 |
2,977 |
Amortisation of right-of-use asset |
(7) |
(7) |
Acquisitions, including acquisition costs |
62,484 |
- |
Capital expenditure |
9,523 |
9,523 |
Disposals |
(17,145) |
(13,020) |
Valuation increase |
20,022 |
15,937 |
Acquisition costs |
(2,931) |
(56) |
At 31 March 2026 |
669,287 |
609,718 |
£441.9m (2025: £490.9m) of investm
ent property was charged as security against the Company’s borrowings at
the year end. £0.6m (2025: £0.6m) of investment property comprises right-of-use assets.
The carrying value of investment property at 31 March 2026 comprises:
•
Group - £583.7m freehold (2025: £506.5m) and £85.6m leasehold property (2025: £87.9m); and
•
Parent company - £524.5m freehold (2025: £506.5m) and £85.2m leasehold property (2025: £87.9m).
The aggregate historical cost of investment property and assets held-for-sale at 31 March 2026 was:
•
Group - £674.7m (2025: £629.8m); and
•
Parent company - £614.2m (2025: £629.8m).
141
Investment property is stated at the Directors
’ estimate of its
31 March 2026 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 2026 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:
Group | Valuation | Weighted | Weighted | ||
31 March | average | average ERV | |||
| 2026 | passing rent | range | Equivalent | ||
Sector | £000 | (£ per sq ft) | (£ per sq ft) | yield | Topped-up NIY |
Industrial | 332.2 | 7.59 | £2.27 - £15.39 | 7.1% | 5.6% |
Retail warehouse | 138.8 | 12.79 | £3.46 - £28.35 | 7.6% | 7.3% |
Other | 100.7 | 22.92 | £1.46 - £80.00* | 7.9% | 7.6% |
Office | 59.5 | 19.76 | £8.49 - £50.00 | 11.4% | 7.8% |
High street retail | 38.1 | 26.32 | £3.16 - £67.02 | 8.1% | 9.2% |
Company | Valuation | Weighted | Weighted | ||
31 March | average | average ERV | |||
| 2026 | passing rent | range | Equivalent | ||
Sector | £000 | (£ per sq ft) | (£ per sq ft) | yield | Topped-up NIY |
Industrial | 315.3 | 7.82 | £4.33 - £15.39 | 6.8% | 5.6% |
Retail warehouse | 134.4 | 12.83 | £3.46 - £22.37 | 7.2% | 7.3% |
Other | 83.1 | 23.65 | £1.46 - £80.00* | 7.6% | 7.6% |
Office | 46.8 | 20.46 | £8.49 - £39.08 | 10.8% | 7.5% |
High street retail | 30.1 | 24.17 | £3.16 - £67.02 | 7.8% | 9.7% |
*Drive-
through restaurants’ ERV per sq ft are based on building floor area rather than area inclusive of drive
-
through lanes.
142
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 mark
et 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.
143
Group | Company | |||
Year | Year | Year | Year | |
ended | ended | ended | ended | |
31 March | 31 March | 31 March | 31 March | |
2026 | 2025* | 2026 | 2025 | |
£000 | £000 | £000 | £000 | |
Increase in equivalent yield of 0.5% (2025: 0.25%) | (41,503) | (34,941) | (40,970) | (34,941) |
Decrease in equivalent yield of 0.5% (2025: 0.25%) | 50,877 | 30,975 | 47,330 | 30,975 |
Increase of 5% in ERV | 25,355 | 22,120 | 23,331 | 22,120 |
Decrease of 5% in ERV | (25,010) | (21,768) | (22,984) | (21,768) |
*
The impact of the ERV sensitivities on the Group investment property balance in the comparative period has
Property, plant and equipment
Motor | EV | |||
Group | vehicles | PV cells | chargers | Total |
£000 | £000 | £000 | £000 | |
Cost/valuation | ||||
At 31 March 2025 | - | 3,808 | 1,126 | 4,934 |
Acquisitions | 21 | - | - | 21 |
Additions | - | 131 | - | 131 |
Valuation increase, net of depreciation eliminated on | - | 1,417 | - | 1,417 |
revaluation | ||||
At 31 March 2026 | 21 | 5,356 | 1,126 | 6,503 |
Depreciation | ||||
At 31 March 2025 | - | - | (223) | (223) |
Depreciation | (21) | (125) | (229) | (375) |
Eliminated on revaluation | - | 104 | - | 104 |
Accumulated at 31 March 2026 | (21) | (21) | (452) | (494) |
Net book value at 31 March 2026 | - | 5,335 | 674 | 6,009 |
144
EV |
|||
Company |
PV cells |
chargers |
Total |
£000 |
£000 |
£000 |
|
Cost/valuation |
|||
At 31 March 2025 |
3,808 |
1,126 |
4,934 |
Additions |
131 |
- |
131 |
Valuation increase, net of depreciation eliminated on |
1,417 |
- |
1,417 |
revaluation |
|||
At 31 March 2026 |
5,356 |
1,126 |
6,482 |
Depreciation |
|||
At 31 March 2025 |
- |
(223) |
(223) |
Depreciation |
(125) |
(229) |
(354) |
Eliminated on revaluation |
104 |
- |
104 |
Accumulated at 31 March 2026 |
(21) |
(452) |
(473) |
Net book value at 31 March 2026 |
5,335 |
674 |
6,009 |
PV cells |
EV chargers |
Total |
|
Group and Company |
£000 |
£000 |
£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 |
145
Investments
Company | ||||||
Country of | 31 | 31 | ||||
registration | Ordinary | March | March | |||
Company | and | Principal | shares | 2026 | 2025 | |
Name | number | incorporation | activity | held | £000 | £000 |
Grove Court Properties (Holdings) Limited | 00549088 | England and Wales | Intermediate company holding | 100% | 30,458 | - |
Grove Court Properties (Beaconsfield) Limited | 00679817 | England and Wales | investment company Property | 100%* | - | - |
Gerrards House Limited | 10478903 | England and Wales | investment company Property | 100%* | - | - |
Merlin Properties Limited | 09339026 | England and Wales | investment company Property | 100% | 20,963 | - |
Scorpion Properties Limited | 08628299 | England and Wales | investment company Property | 100% | 5,042 | - |
Custodian REIT Limited | 08882372 | England and Wales | Non-trading | 100% | - | - |
56,463 | - |
*held indirectly
The Company’s
non-trading UK subsidiary has claimed the audit exemption available under Section 480 of the
Companies Act 2006.
In accordance with Section 479C of the Companies Act 2006, the Company will guarantee
the debts and liabilities of Merlin Properties Limited to facilitate it claiming the audit exemption available under
Section 479A of the Companies Act 2006 for its period ended 31 March 2026.
The Company’s registered office
is also the registered office of each UK subsidiary, except for Grove Court Properties (Holdings) Limited, Grove
Court Properties (Beaconsfield) Limited and Gerrards House Limited whose registered office is 58 Oak End Way,
Acquisitions
The acquisitions of Grove Court Properties (Holdings) Limited, Merlin Properties Limited and Scorpion Properties
Limited during the year have been accounted for as asset acquisitions.
Consideration and its allocation to the fair
value of the acquired assets and liabilities is set out below:
146
Grove Court |
Merlin |
Scorpion |
||
Properties (Holdings) |
Properties |
Properties |
Total |
|
Limited |
Limited |
Limited |
||
£000 |
£000 |
£000 |
£000 |
|
Total consideration |
||||
Initial consideration |
||||
- New ordinary shares |
24.1m |
22.9m |
4.9m |
|
- Market value per share on issue |
£0.89 |
£0.83 |
£0.88 |
|
21,464 |
19,010 |
4,325 |
44,799 |
|
- Cash consideration paid to shareholders |
6,044 |
- |
- |
6,044 |
- Acquisition costs |
1,493 |
953 |
450 |
2,896 |
Deferred consideration |
||||
- New ordinary shares |
0.7m |
1.2m |
0.3m |
|
- Market value per share |
£0.87 |
£0.80 |
£0.88 |
|
622 |
1,000 |
267 |
1,889 |
|
- Overage |
835 |
- |
- |
835 |
Total investments |
30,458 |
20,963 |
5,042 |
56,463 |
Financial statement allocation of total consideration
Grove Court |
Merlin |
Scorpion |
||
Properties |
Properties |
Properties |
||
(Holdings) Limited |
Limited |
Limited |
Total |
|
£000 |
£000 |
£000 |
£000 |
|
Investment property |
34,363 |
17,212 |
8,012 |
59,587 |
Working capital, provisions and housing stock |
(2,435) |
2,798 |
(48) |
315 |
Settlement of debt on acquisition |
(2,963) |
- |
(3,372) |
(6,335) |
Acquisition costs |
1,493 |
953 |
450 |
2,896 |
Total investments |
30,458 |
20,963 |
5,042 |
56,463 |
Cash allocation of total consideration |
||||
Cash consideration paid to shareholders |
6,044 |
- |
- |
6,044 |
Cash settlement of debt on acquisition |
2,963 |
- |
3,372 |
6,335 |
Acquisition costs |
1,493 |
953 |
450 |
2,896 |
Total cash consideration |
10,500 |
953 |
3,822 |
15,275 |
147
Trade and other receivables
Group | Company | |||
31 March | 31 March | 31 March | 31 March | |
2026 | 2025 | 2026 | 2025 | |
£000 | £000 | £000 | £000 | |
Falling due in less than one year: | ||||
Trade receivables before expected credit loss provision | 4,777 | 4,387 | 4,573 | 4,387 |
Expected credit loss provision | (710) | (627) | (670) | (627) |
4,067 | 3,760 | 3,903 | 3,760 | |
Amounts due from subsidiaries | - | - | 7,267 | - |
Other receivables | 1,508 | 1,146 | 1,099 | 1,146 |
Prepayments and accrued income | 1,204 | 295 | 1,091 | 295 |
6,779 | 5,201 | 13,360 | 5,201 | |
Amounts due from subsidiaries are unsecured, repayable on demand with no fixed repayment date with no interest
receivable.
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 rental deposits are held as collateral against certain trade receivable balances by:
•
Group - £1.8m (2025: £1.6m); and
•
Parent company - £1.7m (2025: £1.6m).
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.
148
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 | Company | |||
31 March | 31 March | 31 March | 31 March | |
Expected credit loss provision | 2026 | 2025 | 2026 | 2025 |
£000 | £000 | £000 | £000 | |
Opening balance | 627 | 855 | 627 | 855 |
Increase in provision relating to trade receivables that are credit-impaired | 85 | 196 | 45 | 196 |
Utilisation of provisions | (2) | (424) | (2) | (424) |
Closing balance | 710 | 627 | 670 | 627 |
The ageing of receivables considered credit impaired is as follows:
Group | Company | |||
Group and Company | 31 March | 31 March | 31 March | 31 March |
2026 | 2025 | 2026 | 2025 | |
£000 | £000 | £000 | £000 | |
0 - 3 months | 97 | 106 | 97 | 106 |
3 - 6 months | 119 | 40 | 100 | 40 |
Over 6 months | 457 | 551 | 436 | 551 |
Closing balance | 673 | 697 | 633 | 697 |
149
Trade and other payables
Group |
Company |
|||
31 March |
31 March |
31 March |
31 March |
|
2026 |
2025 |
2026 |
2025 |
|
£000 |
£000 |
£000 |
£000 |
|
Falling due in less than one year: |
||||
Trade and other payables |
5,158 |
2,603 |
4,700 |
2,603 |
Amount due to subsidiaries |
- |
- |
7,762 |
- |
Deferred consideration |
1,743 |
- |
1,743 |
- |
Social security and other taxes |
2,233 |
760 |
831 |
760 |
Accruals |
4,366 |
3,601 |
4,172 |
3,601 |
Rental deposits and retentions |
586 |
65 |
549 |
65 |
14,086 |
7,029 |
19,757 |
7,029 |
|
Falling due in more than one year: |
||||
Rental deposits |
1,254 |
1,521 |
1,144 |
1,521 |
Other creditors |
778 |
566 |
567 |
566 |
2,032 |
2,087 |
1,711 |
2,087 |
|
Amounts due to subsidiaries are unsecured, repayable on demand with no fixed repayment date with no interest
payable.
The Group social security and other taxes figure includes current year and historical corporation tax and VAT
liabilities acquired through the purchase of subsidiaries.
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
150
Cash and cash equivalents
Group | Company | |||
31 March | 31 March | 31 March | 31 March | |
2026 | 2025 | 2026 | 2025 | |
£000 | £000 | £000 | £000 | |
Cash and cash equivalents | 12,293 | 10,118 | 11,067 | 10,118 |
£1.8m (2025: £1.6m) rental deposits held on behalf of tenants and £0.5m (2025: £0.6m) retentions held in respect
of development funding.
Parent company cash and cash equivalents at 31 March 2026 include £2.2m (2025: £2.2m) of restricted cash
comprising: £1.7m (2025: £1.6m) rental deposits held on behalf of tenants and £0.5m (2025: £0.6m) retentions
151
Borrowings
The table below sets out changes in liabilities arising from financing activities during the year.
Costs incurred |
|||
Group and Company |
in the |
||
arrangement of |
|||
Borrowings |
borrowings |
Total |
|
Falling due within one year: |
£000 |
£000 |
£000 |
At 31 March 2024 |
- |
- |
- |
Reclassification |
20,000 |
(11) |
19,989 |
At 31 March 2025 |
20,000 |
(11) |
19,989 |
Amortisation |
- |
11 |
11 |
| Repayment of borrowings |
(20,000) |
- |
(20,000) |
At 31 March 2026 |
- |
- |
- |
Falling due in more than one year: |
|||
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 |
Net draw down of RCF |
30,000 |
- |
30,000 |
Arrangement fees incurred |
- |
(295) |
(295) |
Amortisation of arrangement fees |
- |
431 |
431 |
At 31 March 2026 |
185,000 |
(1,223) |
183,777 |
In August 2025 the Company increased the limit on the RCF from £50m to £60m and repaid a £20m loan from
SWIP on its expiry using the RCF facility.
On 10 February 2026 the Company and Lloyds Bank plc agreed to extend the term of the RCF by one year to
expire on 10 November 2028 and increased the RCF facility limit from £60m to £75m.
152
At the year end the Company had the following facilities available:
•
A £75m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA and is repayable on 10
November 2028.
The RCF was £65m drawn at the year end.
•
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% or 50%, with an overarching covenant on the
property portfolio of the parent company of a maximum of 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.
On 25 March 2026 the Company secured an asset in Dundee valued at £1.9m to its Aviva loan pool. An £11.5m
153
Share capital
Group and Company |
Ordinary |
|
shares |
||
Issued and fully paid share capital |
of 1p |
£000 |
At 1 April 2025 |
440,850,398 |
4,409 |
Issue of shares |
53,212,123 |
532 |
494,062,521 |
4,941 |
At 31 March 2026 6,045,732 ordinary shares are held in treasury (2025: nil).
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 9 September 2025, the Board was given authority to issue up to 154,592,914
shares, pursuant to section 551 of the Companies Act 2006 (“the Authority”).
The Authority is intended to satisfy
mar
ket 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 9 September 2025 and the subsequent
AGM, due to take place on 17 September 2026. Since 9 September 2025, 31.0m ordinary shares have been
issued in connection with corporate acquisitions.
In addition, the Company was granted authority to make market purchases of up to 46,377,874 ordinary shares
under section 701 of the Companies Act 2006.
Since 9 September 2025 3.8m ordinary shares have been
purchased into treasury.
154
The nature and purpose of each reserve within equity are:
•
Retained earnings - all other net gains and losses and transactions with owners (eg dividends) not recognised
elsewhere.
•
Revaluation reserve - the unrealised fair value of PV assets in excess of their historical cost less accumulated
depreciation.
•
Treasury shares -
the purchase of the Company’s own equity instruments (treasury shares), including a
ny
directly attributable incremental costs, is recognised as a deduction from equity within a treasury shares
reserve.
•
Share premium - amounts subscribed for share capital in excess of nominal value less any associated issue
costs that have been capitalised.
•
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.
During the year the Company:
•
Issued 24,152,744 new ordinary shares as consideration for the purchase of Merlin Properties Limited;
•
Issued 24,116,729 new ordinary shares as consideration for the purchase of Grove Court Properties (Holdings)
Limited;
•
Issued 4,942,650 new ordinary shares as consideration for the purchase of Scorpion Properties Limited; and
•
Commenced a share buyback programme, purchasing 6,045,732 of its own ordinary shares during the year
which are held in treasury.
Aggregate consideration for these buybacks was £4.8m at a weighted average
cost per share of 79.1p, representing an average 17.7% discount to prevailing NAV per share.
Since the year end, the Company has issued 0.7m new ordinary shares as final consideration for the purchase of
155
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 | Company | |||
31 March | 31 March | 31 March | 31 March | |
2026 | 2025 | 2026 | 2025 | |
Group | £000 | £000 | £000 | £000 |
Not later than one year | 44,252 | 38,406 | 40,236 | 38,406 |
Year 2 | 39,680 | 35,206 | 36,470 | 35,206 |
Year 3 | 32,280 | 29,810 | 30,359 | 29,810 |
Year 4 | 26,577 | 24,353 | 25,376 | 24,353 |
Year 5 | 21,767 | 19,380 | 21,110 | 19,380 |
Later than five years | 84,201 | 77,434 | 80,611 | 77,434 |
248,757 | 224,589 | 234,162 | 224,589 | |
The following table presents rent amounts reported in revenue:
31 March | 31 March | |
Group and Company | 2026 | 2025 |
£000 | £000 | |
Lease income on operating leases | 45,193 | 42,587 |
Therein lease income relating to variable lease | 253 | 241 |
payments that do not depend on an index or rate | ||
45,446 | 42,828 |
156
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.
Each of the directors is engaged under a letter of appointment with the Company and does not have a service
contract with the Company.
Directors are required to retire by rotation and seek re-election annually.
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 former Chief Strategic Advisor of Mattioli Woods, the parent company of the Investment Manager.
As a result, Nathan Imlach was 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
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;
157
•
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 i
s 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.
158
Transactions with the Mattioli Woods Group
Year |
Year |
|
ended |
ended |
|
31 March |
31 March |
|
2026 |
2025 |
|
£000 |
£000 |
|
Mattioli Woods |
||
Merlin introduction |
222 |
- |
Maven Capital Partners LLP |
||
Company Secretarial Consultancy |
20 |
13 |
Custodian Capital Limited |
||
Investment Management |
3,769 |
3,417 |
Administration |
534 |
494 |
Merlin transaction |
56 |
- |
Grove Court transaction |
119 |
- |
Scorpion transaction |
25 |
- |
4,745 |
3,924 |
The vendors of Merlin are advised clients of Mattioli Woods.
The Investment Manager receives a marketing fee of 0.25% (2025: 0.25%) of the aggregate gross proceeds from
any issue of new shares in consideration of the marketing services it provides to the Company.
Where new shares
are issued as consideration for an asset acquisition, the Investment Manager receives a further 0.25% fee (2025%:
nil), subject to Board approval.
Mattioli Woods arranges insurance on behalf of the Company’s tenants through an insurance broker and the
159
Financial 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,
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 tenant deposits and retentions) to its property.
The Group
net gearing ratio at the year-end was 25.9% (2025: 27.9%), with parent company net gearing of 28.7% (2025:
27.9%).
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;
160
•
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 2026, the RCF was drawn at £65m (2025: £35.0m).
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 2.0% higher/lower (2025: 1%)
and all other variables were constant, the Company’s profit for the year ended
31 March 2026 would decrease/increase by £1.4m (2025: £0.4m).
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 parent c
ompany’s property portfolio would have to fall by
28% (2025: 20%) for the
Company to breach its overall borrowing covenant.
Note 10 details the expected movements in the valuation of
investment properties if the equivalent yield at 31 March 2026 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
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
42
Source: Moody’s
.
161
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 significantl
y 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 2026, which comprise
trade receivables plus cash subject to credit risk, was £13.5m (2025: £11.7m).
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 held in bank accounts controlled by the Company and subject to credit risk of £9.4m (2025: £10.1m) is held
with the following banks:
Credit rating 42 |
£000 |
|
Lloyds Bank plc |
A1 |
8,181 |
Barclays Bank plc |
A1 |
1,025 |
Metrobank plc |
Baa2 |
201 |
9,407 |
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.
162
The table includes both interest and principal cash flows.
31 March | |||||
31 March | 2026 | 31 March | 31 March | ||
2026 | 3 months – | 2026 | 2026 | ||
Interest rate | 0-3 months | 1 year | 1-5 years | 5 years + | |
Group | % | £000 | £000 | £000 | £000 |
Trade and other payables | N/a | 11,494 | 362 | 983 | 919 |
Borrowings: | |||||
Variable rate | 5.530 | 899 | 2,696 | 81,604 | - |
Fixed rate | 2.987 | 336 | 1,008 | 46,591 | - |
Fixed rate | 3.020 | 264 | 793 | 4,228 | 36,077 |
Fixed rate | 3.260 | 122 | 367 | 1,956 | 15,782 |
Fixed rate | 4.100 | 154 | 461 | 2,460 | 25,984 |
13,269 | 5,687 | 137,822 | 78,762 |
31 March | |||||
31 March | 2026 | 31 March | 31 March | ||
2026 | 3 months – | 2026 | 2026 | ||
Interest rate | 0-3 months | 1 year | 1-5 years | 5 years + | |
Company | % | £000 | £000 | £000 | £000 |
Trade and other payables | N/a | 11,316 | 343 | 858 | 723 |
Borrowings: | |||||
Variable rate | 5.530 | 899 | 2,696 | 81,604 | - |
Fixed rate | 2.987 | 336 | 1,008 | 46,591 | - |
Fixed rate | 3.020 | 264 | 793 | 4,228 | 36,077 |
Fixed rate | 3.260 | 122 | 367 | 1,956 | 15,782 |
Fixed rate | 4.100 | 154 | 461 | 2,460 | 25,984 |
13,091 | 5,668 | 137,697 | 78,566 |
163
31 March | |||||
31 March | 2025 | 31 March | 31 March | ||
2025 | 3 months – | 2025 | 2025 | ||
Interest rate | 0-3 months | 1 year | 1-5 years | 5 years + | |
Group and Company | % | £000 | £000 | £000 | £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 |
164
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
Investment property and assets held-for-sale
–
level 3
Fair value 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 2026
, the fair value of the Company’s investment properties and
assets held-for-sale was £669.3m (2025: £594.4m).
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 2026,
the fair value of the Company’s PV
was £5.3m (2025: £3.8m).
Interest bearing loans and borrowings
–
level 3
At 31
March 2026 the gross value of the Company’s loans with Lloyds, SWIP and Aviva all held at amortised cost
was £185.0m (2025: £175.0
m).
The difference between the carrying value of Company’s loans and their fair value
is detailed in Note 22.
165
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
Events after the reporting date
Dividends
On Friday 29 May 2026 the Company paid a fourth quarterly interim dividend per share of 1.5p.
Share issuance
Since the year end, the Company has issued 0.7m new ordinary shares as final consideration for the purchase of
166
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.
Year ended
Year ended
31 March
31 March
2026
2025
Group
Calculation
Net assets (£000)
486,733
423,466
Shares in issue (excluding treasury shares) (thousands)
488,017
440,850
NAV per share at the start of the year (p)
A
96.1
93.4
Dividends per share paid during the year (p)
B
6.0
6.175
NAV per share at the end of the year (p)
C
99.7
96.1
NAV per share total return
(C-A+B)/A
10.0%
9.5%
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.
Year ended
Year ended
31 March
31 March
2026
2025
Group
Calculation
Share price at the start of the year (p)
A
76.2
81.4
Dividends per share paid during the year (p)
B
6.0
6.175
Share price at the end of the year (p)
C
79.9
76.2
Share price total return
(C-A+B)/A
12.7%
1.2%
167
EPRA earnings per share
A measure of 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.
Year
Year
ended
ended
31 March
31 March
2026
2025
Group
Calculation
£000
£000
Profit for the year after taxation
48,298
38,155
Net gains on investment property and depreciation
(19,341)
(11,369)
EPRA earnings
A
28,957
26,786
Weighted average number of shares in issue (excluding treasury
B
460,528
440,850
shares) (thousands)
EPRA earnings per share (p)
A/B
6.29
6.08
Dividend cover
The extent to which dividends relating to the year are supported by recurring net income (EPRA earnings),
indicating whether the level of dividends is maintainable.
Year ended
Year ended
31 March
31 March
2026
2025
Group
Calculation
£000
£000
EPRA earnings per share
A
6.29
6.08
Dividends per share paid relating to the year (p)
B
6.0
6.0
Dividend cover
A/B
104.8%
101.3%
168
Net gearing
Gross borrowings less cash (excluding tenant deposits and retentions), divided by portfolio
43
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.
Year
Year ended
ended
31 March
31 March
2025
Group
Calculation
2026
£000
£000
Gross borrowings
185,000
175,000
Cash
(12,293)
(10,118)
Tenant deposits and retentions
2,281
2,188
Net borrowings
A
174,988
167,070
Investment property
669,287
594,364
PV
5,334
3,808
B
674,621
598,172
Net gearing
A/B
25.9%
27.9%
43
Comprising investment property, assets held-for-sale and PV.
169
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 2026
Amount
drawn
Interest rate
£m
Weighting
RCF
65.0
5.530%
1.94%
Total variable rate
65.0
SWIP £45m loan
45.0
2.987%
0.73%
Aviva
•
£35m tranche
35.0
3.020%
0.58%
•
£15m tranche
15.0
3.260%
0.26%
•
£25m tranche
25.0
4.100%
0.55%
Total fixed rate
120.0
Weighted average drawn facilities
185.0
4.06%
31 March 2025
Amount
drawn
Interest rate
£m
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%
170
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.
Year ended
Year ended
31 March
31 March
2026
2025
Group
Calculation
£000
£000
Average quarterly NAV for the year
A
454,708
414,786
Expenses (excluding depreciation and the cost of sold
15,703
13,852
houses)
Operating expenses of rental property rechargeable to tenants
(3,776)
(3,562)
Ongoing charges
B
11,927
10,290
Operating expenses of rental property directly incurred
(6,106)
(4,891)
One-off costs
-
-
Ongoing charges excluding direct property expenses
C
5,821
5,399
OCR
B/A
2.62%
2.48%
OCR excluding direct property expenses
C/A
1.28%
1.30%
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.
171
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.
31 March
31 March
2026
2025
Group
Calculation
£000
£000
IFRS NAV
486,733
423,466
Fair value of financial instruments
-
-
Deferred tax
-
-
EPRA NRV
A
486,733
423,466
Number of shares in issue (excluding treasury shares) (thousands)
B
488,017
440,850
EPRA NRV per share (p)
A/B
99.7
96.1
172
EPRA Net Tangible Assets (“NTA”)
Assumes that the Company buys and sells assets for short-term capital gains, thereby crystallising certain deferred
tax balances.
31 March
31 March
2026
2025
Group
Calculation
£000
£000
IFRS NAV
486,733
423,466
Fair value of financial instruments
-
-
Deferred tax
-
-
Intangibles
-
-
EPRA NTA
A
486,733
423,466
Number of shares in issue (excluding treasury shares) (thousands)
B
488,017
440,850
EPRA NTA per share (p)
A/B
99.7
96.1
173
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.
31 March
31 March
2026
2025
Group
Calculation
£000
£000
IFRS NAV
486,733
423,466
Fair value of fixed rate debt below book value
6,419
16,754
Deferred tax
-
-
EPRA NDV
A
493,152
440,220
Number of shares in issue (excluding treasury shares)
B
488,017
440,850
(thousands)
EPRA NDV per share (p)
A/B
101.1
99.9
At 31 March 2026
the Company’s gross debt included in the balance sheet at amortised cost
was £185.0m (2025:
£175.0m) and its fair value is considered to be £178.6m (2025: £158.2m). 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.
174
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.
31 March
31 March
2026
2025
Group
Calculation
£000
£000
Investment property
44
669,287
594,364
Allowance for estimated purchasers’ costs
45
43,504
38,634
Gross-up property portfolio valuation
A
712,791
632,998
Annualised cash passing rental income
46
45,419
41,135
Property outgoings
47
(3,856)
(2,122)
Annualised net rental income
B
41,563
39,013
Impact of expiry of current lease incentives
48
3,786
2,780
Annualised net rental income on expiry of lease incentives
C
45,349
41,793
EPRA NIY
B/A
5.8%
6.2%
EPRA ‘topped
-
up’ NIY
C/A
6.4%
6.6%
44 Including assets held-for-sale.
45 Assumed at 6.5% of investment property valuation.
46
Annualised cash rents at the year end date.
47
Non-recoverable directly incurred operating expenses of vacant rental property and ground rent costs.
48
Adjustment for the expiration of lease incentives.
175
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.
31 March
31 March
2026
2025
Group
Calculation
£000
£000
Annualised potential rental value of vacant premises
A
4,207
4,467
Annualised potential rental value for the property portfolio
B
55,560
50,194
EPRA vacancy rate
A/B
7.6%
8.9%
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
Calculation
Year ended
31 March
2026
£000
Year ended
31 March
2025
£000
Directly incurred operating expenses and other expenses,
excluding depreciation and cost of houses sold
11,927
10,290
Ground rent costs
(38)
(38)
EPRA costs (including direct vacancy costs)
A
11,889
10,252
Property void costs
(1,996)
(1,806)
EPRA costs (excluding direct vacancy costs)
B
9,893
8,446
Rental income
45,446
42,828
Ground rent costs
(38)
(38)
Rental income net of ground rent costs
C
45,408
42,790
EPRA cost ratio (including direct vacancy costs)
A/C
26.2%
24.0%
EPRA cost ratio (excluding direct vacancy costs)
B/C
21.8%
19.7%
176
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
Calculation
Year ended
31 March
2026
£000
Year ended
31 March
2025
£000
Gross borrowings
185,000
175,000
Trade and other receivables
6,779
5,201
Trade and other payables
(14,086)
(8,550)
Deferred income
(8,531)
(8,181)
Cash
12,293
10,118
Tenant deposits and retentions
(2,281)
(2,188)
Net borrowings
A
179,174
171,400
Investment property and PV
B
674,621
598,172
EPRA LTV
A/B
26.6%
28.7%
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
2026
£000
31 March
2025
£000
Acquisitions
-
-
Development
1,671
4,843
Like-for-like portfolio
7,852
2,000
Total capital expenditure
9,523
6,843
177
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 2026
Group
Industrial
£000
Retail
warehouse
£000
Retail
£000
Other
£000
Office
£000
Total
£000
Like-for-like rent
19,160
9,646
3,037
6,586
4,506
42,935
Acquired properties
617
333
181
329
334
1,794
Sold properties
300
-
-
-
417
717
20,077
9,979
3,218
6,915
5,257
45,446
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
178
Environmental disclosures (unaudited)
EPRA Sustainability Best Practice Recommendations (“sBPR”) Guidelines
Custodian Property Income REIT recognises the significance of disclosing ESG information and aligns reporting
with the industry-leading, EPRA Sustainability Best Practices
Recommendations (“sBPR”).
This provides potential
investors with transparent insights into ESG performance and facilitates benchmarking against our peers, setting
clear objectives to achieve continued progress.
We are pleased to have received an EPRA sBPR Gold Award in
2025 and we aim to retain this recognition.
In alignment with our SECR statement, EPRA sBPR data relates to the calendar years 2025 and 2024 but has
been disclosed as 2026 and 2025
respectively due to the Company’s March accounting refer
ence date.
Materiality
The scope of our EPRA sBPR data disclosure was influenced by our application of materiality.
Custodian Property
Income REIT undertook a materiality assessment to review the applicability of the full set of EPRA indicators.
Based on professional judgement, each indicator was assessed in terms of its impact on the Company and its
importance to stakeholders.
This calculation resulted in an overall score which determined if an issue was material.
As part of the EPRA disclosures and associated materiality assessment, we have defined Custodian Property
Income REIT’s organisational boundary in line with the GHG Protocol.
We have taken the operational control
approach which has played a fundamental role in the materiality assessment.
Custodian Property Income REIT
is an externally managed REIT which has no direct employees.
The Investment Manager has 30 employees and
the Company has operational control over neither the Investment Manager nor its employees.
The Social
Performance indicators determined immaterial are in relation to employees, thus they are not relevant for reporting
at the Company level.
In addition, the Company does not have district heating and cooling which is therefore not
a material reporting metric.
Using this organisational boundary, our materiality assessment determined the following Sustainability
Performance measures immaterial for Custodian Property Income REIT:
•
Total district heating and cooling consumption;
•
Life-for-like total district heating and cooling consumption;
179
•
Employee gender and diversity;
•
Employee gender pay ratio;
•
Employee training and development;
•
Employee performance appraisals;
•
New hires and turnover; and
•
Employee health and safety.
However, as Custodian Property Income REIT does have its own board, which comprises five Non-Executive
Directors, we have chosen to report on gender, diversity and the gender pay ratio of board members, to be as
transparent as possible with our stakeholders.
The Company’s overarching recommendations and asset level sustainability performance measures are disclosed
on its website at:
custodianreit.com/epra-sbpr/
180
Historical performance summary (unaudited)
Income statement
2026
£000
2025
£000
2024
£000
2023
£000
2022
£000
Revenue
52,350
47,997
46,243
44,147
39,891
Expenses
and
finance
costs
(23,393)
(21,211)
(20,501)
(19,359)
(14,639)
EPRA earnings
28,957
26,786
25,742
24,788
25,252
Property and housing stock
valuation movements and
depreciation
19,673
10,926
(27,105)
(91,551)
93,977
Acquisition costs
(2,931)
(1)
(1,557)
(3,426)
(2,273)
Profit on disposal
2,599
444
1,418
4,368
5,369
Property gains/(losses)
including depreciation
19,341
11,369
(27,244)
(90,609)
97,073
Profit/(loss) after tax
48,298
38,155
(1,502)
(65,821)
122,325
Statement of financial position
Property portfolio
669,287
594,364
589,122
613,587
665,186
PV and EV chargers
6,009
4,711
2,957
1,113
-
Net borrowings
(171,484)
(163,512)
(171,788)
(168,123)
(127,277)
Other assets and liabilities
(17,079)
(12,097)
(8,471)
(9,008)
(10,269)
NAV
486,733
423,466
411,820
437,569
527,640
Financial highlights
NAV per share total return
10.0%
9.5%
(0.4%)
(12.5%)
28.4%
NAV per share (p)
99.7
96.1
93.4
99.3
119.7
EPRA earnings per share
(p)
6.3
6.1
5.8
5.6
5.9
Dividends per share (p)
6.0
6.0
5.8
5.5
5.25
Dividend cover
104.8%
101.3%
100.7%
102.2%
110.3%
Share price total return
12.7%
1.2%
(2.6%)
(7.0%)
17.0%
Net gearing
25.9%
27.9%
29.2%
27.4%
19.1%
OCR excl. direct property
expenses
1.28%
1.30%
1.24%
1.23%
1.20%
181
Company information
Directors:
David MacLellan
(Independent Non-Executive Chairman)
Elizabeth McMeikan
(
Senior Independent Non-Executive Director
)
Malcolm Cooper
(Independent Non-Executive Director)
Hazel Adam
(Independent Non-Executive Director)
Chris Ireland
(Independent Non-Executive Director)
Company secretary:
Ed Moore
Registered office:
Registered number:
08863271
Investment Manager:
Custodian Capital Limited
1 New Walk Place
Leicester
LE1 6RU
Depositary:
Langham Hall UK Depositary LLP
1 Fleet Place
London
EC4M 7RA
Broker:
Deutsche Numis
21 Moorfields
London
EC2Y 9DB
Banker:
Lloyds Bankl plc
25 Gresham Street
London
EC2V 7HN
Solicitors (property):
Shoosmiths LLP
100 Avebury Boulevard
Milton Keynes
MK9 1FH
Solicitors (corporate):
Stephenson Harwood
1 Finsbury Circus
London
EC2M 7SH
Property valuers:
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Tax adviser:
KPMG LLP
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
Registrar:
MUFG Corporate Markets (UK)
Limited
Central Square
29 Wellington Street
Leeds
LS1 4DL
ESG adviser:
Jones Lang LaSalle Limited
30 Warwick Street
London
W1B 5NH
182
Company secretarial
Maven Capital Partners UK LLP
adviser:
205 West George Street
Glasgow
G2 2LW
Distribution agents
Frostrow Capital
25 Southampton Buildings
London
WC2A 1AL
Property administrator
Workman LLP
80 Cheapside
London
EC2V 6EE
Auditor:
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Marketing
FTI Consulting
adviser:
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
183
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:
(a) 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.
(b) The property portfolio should not exceed a maximum weighting to any one property sector, or to any
geographic region, of greater than 50%.
(c) 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.
(d) 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:
(i)
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
(ii)
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”).
(e) 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 th
e Company to development risk would not exceed 10% of the Company’s gross assets.
(f)
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.
184
(g) 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.
(h) The Company reserves the right to use efficient portfolio management techniques, such as interest rate
hedging and credit default swaps, to mitigate market volatility.
(i)
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.
(j)
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.
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.
185
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
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
Dividend cover
EPRA earnings divided by dividends paid and approved for the year
Earnings
per
share
(EPS)
Profit before tax dividend by number of shares in issue (excluding treasury shares)
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 energ
y 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 (excluding treasury shares)
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’ opin
ion 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
186
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
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 tenant deposits and retentions), 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
187
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
Yield shift
A change in the percentage return (yield) an investor receives on a property due to
movement in its capital value due to investor market sentiment rather than movement
in rental expectations.
188
Financial calendar
30 April 2026
Ex-dividend date for fourth interim dividend
1 May 2026
Record date for fourth interim dividend
29 May 2026
Payment of fourth interim dividend
11 June 2026
Announcement of results for the year ended 31 March 2026
17 September 2026
AGM