XLON:CREI ESEF Annual Report
CUSTODIAN PROPERTY INCOME REIT PLC (XLON:CREI)
ESEF Annual Report
2025-08-21
For: 2025-03-31
View Original
Added on
September 22, 2026
1
Custodian Property Income REIT plc Annual Report and Accounts for the year ended 31 March 2025
(“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
[
]
Highlights
[
]
Business model and 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
[
]
Consolidated and Company statements of comprehensive income
[
]
Consolidated and Company statements of financial position
[
]
Consolidated and Company statements of cash flows
2
[
]
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
2025
£m
Comments
Portfolio value
594.4
Valuation increases
1
:
11.9
•
Investment property - £11.2m, representing
a 2.2% like-for-like increase, explained
further in the Investment Manager’s report
•
Property, plant and equipment - £0.7m,
relating to solar panels
Occupancy
91.1%
Occupancy rates have decreased from 91.7% to
91.1% due to lease expiries in Q4 but partially
mitigated by new lettings since the year end
Capital investment
8.2
Primarily comprising:
•
£2.6m
extending
and
refurbishing
an
industrial unit in Livingston
•
£1.8m completing refurbishment works at
three
office
buildings
in
Leeds
and
Manchester
•
£1.1m
refurbishing
industrial
assets
in
Plymouth and Aberdeen
•
£1.3m invested in solar panels across nine
assets
Disposal proceeds
15.1
At an aggregate 38% premium to pre-offer
valuation
2
comprising:
•
£9.0m vacant industrial unit in Warrington
•
£2.3m vacant former car showroom in Redhill
•
£1.8m vacant offices in Castle Donington
•
£0.6m industrial unit in Sheffield
•
£1.4m vacant offices in Solihull
Disposal proceeds since the
year end
6.9
At an aggregate 12% premium to pre-offer
valuation comprising:
•
£4.0m part-let offices in Cheadle
•
£2.9m fully-let offices in Cheadle
Acquisitions since the year
end
22.1
A portfolio of 28 smaller lot-sized investment
properties through the corporate acquisition of
Merlin Properties Limited (“Merlin”)
1 Comprising unrealised gains on investment property and solar panels (included within property, plant and equipment).
2
Latest external valuation prior to the disposal offer being reflected in subsequent valuations.
4
Financial highlights and performance summary
2025
2024
Comments
Returns
*EPRA
3
earnings per share
4
6.1p
5.8p
Increased by 4.9% due to rental growth
and financing costs decreasing due to
base rate reductions and property
disposals
Basic and diluted earnings per share
5
8.7p
(0.3p)
Profit
resulting
from
a
£11.2m
investment property valuation increase
(2024: £27.0m valuation loss)
Profit/(loss) before tax (£m)
38.2
(1.5)
Dividends per share
6
6.0p
5.8p
Target dividend per share for the year
ended 31 March 2026 of 6.0p
*Dividend cover
7
101.3%
100.7%
In line with the Company’s policy of
paying fully covered dividends
*NAV total return per share
8
9.5%
(0.4%)
6.6% dividends paid (2024: 5.5%) and a
2.9% capital increase (2024: 5.9%
capital decrease)
*Share price total return
9
1.2%
(2.6%)
Share price decreased from 81.4p to
76.2p during the year.
Since the year-
end share price has increased to 82p
Capital values
NAV and *EPRA NTA
10
(£m)
423.5
411.8
Increased due to £11.9m of valuation
gains
NAV per share and *NTA per share
96.1
93.4
*Net gearing
11
27.9%
29.2%
Reduced to 25.8% on a pro-forma
basis following acquisitions and
disposals since the year-end, broadly
in line with the Company’s 25% target
*Weighted average cost of drawn debt
facilities
3.9%
4.1%
Base rate (SONIA) decreased from
5.2% to 4.5% during the year.
Costs
*Ongoing charges ratio
12
(“OCR”)
2.48%
2.20%
3
The European Public Real Estate Association (“EPRA”).
4 Profit after tax, excluding depreciation and net revaluation gains on investment property, divided by weighted average number of shares in issue.
5
Profit after tax divided by weighted average number of shares in issue.
6 Dividends paid and approved for the year.
7 Profit after tax, excluding depreciation and net gains on investment property, divided by dividends paid and approved for the year.
8
Net Asset Value (“NAV”) movement including dividends paid
during the year on shares in issue at 31 March 2024.
9 Share price movement including dividends paid during the year.
10
EPRA net tangible assets (“NTA”
) does not differ from
the Company’s IFRS NAV
or EPRA NAV.
11 Gross borrowings less cash (excluding restricted cash) divided by investment
property portfolio and solar panel value.
12 Expenses (excluding depreciation and operating expenses of rental property recharged to tenants) divided by average quarterly NAV.
5
*OCR excluding direct property
expenses
13
1.30%
1.24%
Average quarterly NAV has decreased
from £423.6m in FY24 to £414.8m in
FY25
Environmental
*Weighted
average
energy
performance
certificate
(“EPC”)
rating
14
C (51)
C (53)
EPCs updated at certain units across 24
properties
demonstrating
continuing
improvements in the environmental
performance of the portfolio
*Alternative performance measures
(“APMs”)
-
the Company reports APMs to assist stakeholders in assessing
performance
alongside the Company’s results on a statutory basis, set out above.
APMs
are among the key
performance indicators used by the Board
to assess the Company’s performance
and are used by research
analysts covering the Company.
The Company uses APMs based upon the EPRA Best Practice
Recommendations Reporting Framework which is widely recognised and used by public real estate companies.
Certain other APMs may not be directly comparable with other companies’ adjusted
measures and APMs are not
intended to be a substitute for, or superior to, any IFRS measures of performance.
Supporting calculations for
APMs and reconciliations between APMs and their IFRS equivalents are set out in Note 22.
13 Expenses (excluding depreciation and operating expenses of rental property) divided by average quarterly NAV.
14
Weighted by floor area.
For properties in Scotland, English equivalent EPC ratings have been obtained.
6
Business model and strategy
Purpose
Custodian Property Income REIT offers investors access to a diversified portfolio of UK commercial real estate
through a closed-ended fund.
The Company seeks to provide investors with an attractive level of income and the
potential for capital growth from a portfolio with strong environmental credentials, becoming the REIT of choice for
private and institutional investors seeking high and stable dividends from well-diversified UK real estate.
Stakeholder interests
The Board recognises the importance of all stakeholder interests, not just those of investors, and keeps these at
the forefront of business and strategic decisions, ensuring the Company:
•
Understands and meets the needs of its occupiers, owning fit for purpose properties with strong environmental
credentials in the right locations which comply with regulations;
•
Protects and improves its stable cash flows with long-term planning and decision making, implementing its
policy of paying dividends fully covered by recurring earnings and securing the Company’s future
; and
•
Adopts a responsible approach to communities and the environment, actively seeking ways to minimise the
Company’s impact on climate change and
providing the real estate fabric of the economy, giving employers a
place of business.
Investment Policy summary
The Company’s investment policy
15
is summarised below:
•
To invest in a diverse portfolio of UK commercial real estate, principally characterised by smaller, regional,
core/core-plus
16
properties that provide enhanced income;
•
The property portfolio should be diversified by sector, location, tenant and lease term, with a maximum
weighting by income to any one property sector or geographic region of 50%;
•
To acquire modern buildings or those considered fit for purpose by occupiers, focusing on areas with:
-
High residual values;
-
Strong local economies; and
15
A full version of the Company’s Investment Policy is shown in the Investment Policy section of this Annual Report
.
16
‘
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.
7
-
An imbalance between supply and demand.
•
No one tenant or property should account for more than 10% of the rent roll at the time of purchase, except
for:
-
Governmental bodies or departments; or
-
Single tenants rated by Dun & Bradstreet as having a credit risk score worse than two
17
, where exposure
may not exceed 5% of the rent roll.
•
Not to undertake speculative development, except for the refurbishment or redevelopment of existing holdings;
•
To seek further growth, which may involve strategic property portfolio acquisitions and corporate consolidation;
and
•
The Company may use gearing provided that the maximum loan-to-
value (“
LTV
”)
shall not exceed 35%, with
a medium-term net gearing target of 25% LTV.
The Board reviews the Company’s investment objectives at least annually to ensure they remain appropriate to
the market in which the Company operates and in the best interests of shareholders.
Differentiated property strategy
The Company
’s portfolio is focused on smaller, regional
assets which helps achieve our target of high and stable
dividends from well-diversified real estate by offering:
•
An enhanced yield on acquisition
–
with no need to sacrifice quality of property, location, tenant or
environmental performance
for income and with a greater share of value in ‘bricks and mortar’
rather than the
lease;
•
Greater diversification
–
spreading risk across more assets, locations and tenants and offering more stable
cash flows; and
•
A higher income component of total return
–
driving out-performance with forecastable and predictable returns.
Success in achieving the Company’s performance and sustainability objectives is
primarily measured by
performance against key performance indicators set out in detail in the Financial review and ESG Committee
reports respectively.
The Principal risks and uncertainties section of the Strategic Report sets out potential risks
in achieving the Company’s objectives.
17
A risk score of two represents “lower than average risk”.
8
Source: Knight Frank LLP
Richard Shepherd-Cross, Investment Manager, commented: "Our smaller-lot specialism has consistently
delivered significantly higher yields with lower volatility without exposing shareholders to
additional risk”.
Growth strategy
The Board is committed to seeking further growth in the Company to increase the liquidity of its shares and reduce
ongoing charges.
Our growth strategy involves:
•
Strategic property portfolio acquisitions and corporate consolidation, in particular identifying portfolios held by
family offices seeking a solution to succession and latent tax issues;
•
Organic growth through share issuance at a premium to NAV;
•
Broadening the Company’s shareholder base,
particularly through further penetration into online platforms;
•
Becoming the natural choice for private clients and wealth managers seeking to invest in UK real estate; and
•
Taking investor market share from open-ended funds and peer group companies being wound down.
The Board ensures that property fundamentals are central to all decisions.
9
Diverse portfolio with institutional grade tenants
Sector
Weighting by
income
31 March
2025
Industrial
42%
Retail warehouse
22%
Office
16%
Other
13%
High street retail
7%
Location
Weighting
by income
31 March 2025
West Midlands
20%
North-West
19%
East Midlands
13%
Scotland
13%
South-East
11%
South-West
10%
North-East
9%
Eastern
4%
Wales
1%
Top 10 tenants
Asset locations
Annual
passing rent
(£m)
% portfolio
income
Menzies Distribution
Aberdeen, Edinburgh, Glasgow,
Ipswich, Norwich, Dundee,
Swansea, York
1.7
3.9%
Wickes Building Supplies
Winnersh, Burton upon Trent,
Southport, Nottingham, Leighton
Buzzard
1.5
3.5%
B&M Retail
Swindon, Ashton-under-Lyne,
Plymouth, Carlisle
1.4
3.1%
B&Q
Banbury, Weymouth
1.0
2.3%
Matalan
Leicester, Nottingham
1.0
2.2%
First Title (t/a Enact Conveyancing)
Leeds
0.9
2.1%
DFS
Droitwich, Measham
0.9
2.0%
Zavvi
Winsford
0.7
1.7%
Next
Evesham, Motherwell
0.7
1.6%
Nicwood Logistics
Burton upon Trent
0.6
1.5%
10
Experian tenant risk rating
Sector
31 March
2025
31 March
2024
Government
1%
2%
Very low risk
62%
57%
Low risk
11%
8%
Below average risk
11%
13%
Above average risk
5%
8%
High risk
1%
2%
Other
9%
10%
Our environmental, social and governance (“ESG”) objectives
•
Improving the energy performance of our buildings
- investing in carbon-reducing technology,
infrastructure and onsite renewables and ensuring redevelopments are completed to high environmental
standards which are essential to the future leasing prospects and valuation of each property
•
Reducing energy usage and emissions
- liaising closely with our tenants to gather and analyse data on
the environmental performance of our properties to identify areas for improvement
•
Achieving positive social outcomes and supporting local communities
- engaging constructively with
tenants and local government to ensure we support the wider community through local economic and
environmental plans and strategies and playing our part in providing the real estate fabric of the economy,
giving employers safe places of business that promote tenant well-being
•
Understanding environmental risks and opportunities
- allowing the Board to maintain appropriate
governance structures to ensure the Investment Manager is appropriately mitigating risks and maximising
opportunities
•
Complying with all requirements and reporting in line with best practice where appropriate
- exposing
the Company to public scrutiny and communicating our targets, activities and initiatives to stakeholders
•
Governance
-
maintaining high standards of corporate governance and disclosure to ensure the effective
operation of the Company and instil confidence amongst our stakeholders.
We aim to continually improve
our levels of governance and disclosure to achieve industry best practice
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
30 years’ experience in
commercial property, qualifying as a Chartered Surveyor in 1996
and until 2008 worked for JLL, latterly running its national portfolio
investment team.
Richard established Custodian Capital Limited as the Property
Fund Management subsidiary of Mattioli Woods Limited
(“Mattioli
Woods”)
and in 2014 was instrumental in the launch of
Custodian Property Income REIT from Mattioli Woods
’
syndicated
property portfolio and its 1,200 investors. Following the successful
IPO of the Company, Richard has overseen the growth of the
Company to its current property portfolio of c. £600m.
Richard is supported by the Investment Manager’s other key personnel: Ed Moore
- Finance Director and Alex Nix
- Assistant Investment Manager, along with a team of five other surveyors and five accountants.
12
Chairman
’s statement
A changing and more challenging global political landscape during the year has resulted in tensions and
uncertainty running high in parts of the world. In the UK, it is still early days for the new Labour government but
uncertainty is never good for any economy, including the real estate sector.
While commercial property in the UK is showing signs of recovering value on the back of increased occupier
activity and growing rents, the share prices of listed real estate companies do not yet reflect this recovery with
many shares in these companies continuing to trade at discounts to net asset values. As a result of these, in
some cases, quite wide discounts there has been increased corporate activity in the listed real estate sector with
mergers, take-privates and managed wind downs a feature of the last twelve months following the arrival of more
activist shareholders.
In my C
hairman’s statement last year, I reflected that
the Company could soon be one of only a few active and
genuinely diversified property investment companies available to investors in the listed sector. It would appear
that this reflection has proved prescient, however, as I note in the following paragraphs, the Company is well
positioned with a diversified portfolio of performing real estate assets which are providing a strong yield from a
fully covered dividend.
Performance
Custodian Property Income REIT’s strategy is to invest in a diversified portfolio which, at
31 March 2025,
comprised 151 properties geographically spread throughout the UK and across a diverse range of sectors. The
year-end portfolio valuation reflected a net yield
(“NIY”)
of 6.6%
18
(31 March 2024: 6.6%). With an average
property value of c.£4m and no one tenant or property accounting for more than 3.9% or 1.75%
of the Company’s
rent roll respectively, property specific risk and tenant default risk are significantly mitigated.
The Company’s NAV increased by 2.9% during the year, contributing to a 9.5% NAV total return, and at an
accelerating rate, quarter-on-quarter, as the impact of decreasing interest rates and real estate market sentiment
started to be reflected in valuations.
However, this positive underlying property portfolio performance does not yet
appear to be reflected in the share price performance and it is disappointing that the share price total return for
the year is only 1.2% which lags the NAV total return of 9.5% (2.9% capital growth and 6.6% income).
One of the challenges of the performance for listed real estate over the last 12 months has been the rise in the
10-year gilt yield, which has always been correlated to listed real estate ratings.
The 10-year gilt yield rose from
4.0% in March 2024, to 4.9% in January 2025, and was 4.6% at the year end.
This historically high and volatile
18
EPRA topped-up net initial yield.
13
rate
has had a direct impact on ratings, but set against Custodian Property Income REIT’s dividend yield as at 31
March 2025 of 7.9%, fully covered by earnings and supported by rental growth and a falling cost of variable rate
debt, this appears to be a generous margin.
Custodian Property Income REIT employs sector expertise, with high quality asset management, covenant
management and portfolio construction, to provide an institutional offering to shareholders in a diversified regional
portfolio, that generates a superior income return.
Notwithstanding recent volatility in pricing and acknowledging
that 2024 witnessed the bottom of a property valuation cycle, the Company can still look back over an average
annual NAV total return of 5.6% in the 11 years since IPO, driven by strong recurring earnings with fully covered
dividends.
0
1
2
3
4
5
6
7
8
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
EPS
EPS
Dividend pps
0
10
20
30
40
50
60
70
80
90
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Mar-25
Pence
Cumulative NAV Total Return
14
The NAV of the Company at 31 March 2025 was £423.5m, approximately 96.1p per share:
Pence per
share
£m
NAV at 31 March 2024
93.4
411.8
Valuation increases and depreciation
2.7
11.7
Profit on disposal of investment property
0.1
0.4
Net gain on property portfolio
2.8
12.1
EPRA earnings
6.1
26.8
Quarterly dividends paid during the year
19
(5.9)
(25.9)
0.2
0.9
Special dividend paid
during the year relating to FY24
(0.3)
(1.3)
NAV at 31 March 2025
96.1
423.5
Investment property and PPE valuations increased by £11.9m during the year, of which £10.4m was delivered in
the second half, demonstrating the current upward trajectory and returning the Company a positive NAV total
return per share of 9.5%.
A detailed property valuation commentary is given
in the Investment Manager’s report.
The movement in NAV also reflects the payment of interim dividends during the year, but does not include any
provision for the approved dividend of 1.5p per share relating to Q4 which was paid on Friday 30 May 2025.
Dividends
The Company’s commitment to a property strategy that supports a relatively high dividend, fully covered by EPRA
earnings, remains a defining characteristic and in May 2024 the Board announced a 9% increase in the annual target
dividend per share from 5.5p to 6.0p.
This dividend increase reflected the improving earnings characteristics of the
Company’s portfolio through asset management initiatives crystallising rental growth and the profitable disposal of
vacant properties increasing occupancy.
Our Investment Manager continues to keep a tight control on
costs, while the Company’s substantially fixed
-rate debt
profile is keeping borrowing costs below the current market rate. Based on the current forward interest rate curve the
Board expects that the ongoing cost of the Company’s revolving credit facility will fall
during the next 12 months,
tempering the impact of expiry of a £20m fixed-rate loan in August 2025.
19 Quarterly interim dividends totalling 5.875p per share (1.375p relating to the prior year and 4.5p relating to the year) were paid on shares in issue throughout the year.
15
The Board’s objective
remains to continue to grow the dividend at a rate which is fully covered by net rental income
and does not inhibit the flexibility of the Company’s investment strategy.
Borrowings
The Company’s net
gearing decreased from 29.2% LTV at 31 March 2024 to 27.9% during the year.
Property
disposals and the acquisition of Merlin since the year end have reduced pro-forma net gearing to 25.8%, drawing
the LTV closer to the Company’s 25% medium
-term target.
The proportion of the
Company’s
drawn debt facilities with a fixed rate of interest was 80% at 31 March 2025
(2024: 78%), significantly mitigating interest rate risk for the Company and maintaining the accretive margin
between the
Company’s
3.9% (2024: 4.1%) weighted average cost of debt and property portfolio EPRA topped-
up NIY
20
of 6.6% (2024: 6.6%).
The Company’s debt is summarised in Note 1
6.
Acquisitions
On 30 May 2025 the Company acquired 100% of the ordinary share capital of Merlin Properties Limited for an
initial consideration of 22.9m new ordinary shares in the Company
(“the Transaction”)
. A second tranche of
consideration, expected to comprise c. 1.7m shares, will be payable within the next six months following approval
of completion accounts drawn up to the acquisition date.
Aggregate consideration will be calculated on an
‘adjusted NAV
-for-NAV basis
’
, with
each company’s NAV
being adjusted for respective acquisition costs and
Merlin’s investment
property portfolio valuation adjusted to the agreed purchase price of £19.4m.
20
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.
16
Merlin’s
property portfolio is summarised below:
•
Investment property portfolio value of £19.4m comprising 28 regional commercial properties, primarily located
in the East Midlands, with sector splits by passing rent set out below:
Merlin portfolio sector splits
Industrial
47%
Retail warehouse
19%
Office
17%
High street retail
13%
Other
4%
100%
•
10 newly built residential properties largely under offer to sell valued at c. £2.7m
•
74% of passing rent is generated from the 10 largest assets, with Halfords representing the largest tenant (5%
of the £1.7m rent roll)
The Transaction provides us with a portfolio that is both a strong fit with our income-focused strategy and highly
complementary to our existing property portfolio, augmenting our regional, industrial bias and adding further
diversification by tenant.
The Merlin portfolio has a topped-up NIY of 8.1%, ahead of
the Company’s
equivalent
of 6.6%, making it immediately earnings-accretive, and is ungeared so reduces
the Company’s pro
-forma net
gearing by c. 1%.
Hubert Lynch, Founder Director of Merlin Properties Limited, said
: “
Operating the Merlin portfolio, which our
family has compiled and managed over the last 40 years, had
become increasingly demanding in today’s complex
environment. We have undertaken the Transaction in a tax efficient manner to ensure our family’s continued
exposure to property investment both currently and for future generations through a professionally managed fund
with a strong track record. As already significant, supportive shareholders of Custodian Property Income REIT we
have a strong relationship with the Investment Management team which we look forward to continuing for many
years.”
Custodian Property Income REIT remains committed to growth and over the first 11 years of trading the Company
has grown, largely organically, but also via corporate acquisitions, with an over six-fold increase in the size of the
portfolio from £90m of property assets at IPO to a pro-forma c. £610m following the Merlin acquisition and
disposals since the year end.
This growth has improved shareholder liquidity and increased diversification,
mitigating property specific and tenant risk while stabilising earnings.
Following the Merlin acquisition, the Board of Custodian Property Income REIT and the Investment Manager are
actively exploring further opportunities to purchase complementary portfolios via mergers or corporate acquisitions.
17
Sustainability
The Company has made further progress in implementing its environmental policy during the year, improving its
weighted average EPC score from C (53) to C (51) following further refurbishments within the portfolio.
The
Company’s
Asset Management and Sustainability report is available at:
custodianreit.com/environmental-social-and-governance-esg/
This report contains details of the Company’s asset management initiatives with a clear focus on their impact on
ESG, including case studies of recent positive steps taken to improve the environmental performance of the
portfolio.
Cost disclosure exemption
We welcome the Financial Conduct Authority
’s exemption of investment companies (including REITs) from the
Packaged Retail and Insurance-based Investment Products
(“
PRIIP
s”)
and Markets in Financial Instruments
Directive II
(“
MiFID II
”)
regulation.
Since 2018 this regulation has obliged wealth managers and platforms to make
cost disclosures to clients that were ‘fundamentally misleading’
21
by being presented as being borne by investors
despite actually being incurred by the Company and included within reported investment performance
22
.
Exacerbated by more recent Consumer Duty regulations these cost disclosures, which also result in investment
companies’ management costs appearing spuriously more expensive than alternative structures, are likely to have
curtailed investment demand for the
Company’s shares over the last six years.
As the investment industry gradually adjusts to this change, we expect the Company’s competitive cost structure
and high returns to be very attractive to new investors seeking strong returns from UK real estate.
21 Source: Association of Investment Companies.
22
Since this exemption, the Company’s Key Information Document has disclosed ‘the costs that the Investment Manager takes for managing your investment’ as 0%, as annual
management charges are already deducted as an expense from reported
earnings, with its European MiFID Template disclosing the Company’s ‘ongoing costs’ as its
OCR
(excluding direct property costs).
18
Investment Manager
The performance of the Investment Manager is reviewed each year by the Management Engagement Committee.
During the year the fees charged by the Investment Manager were £3.9m (2024: £4.0m) in respect of annual
management and administrative transaction fees, resulting in an ongoing charges ratio excluding direct property
expenses of 1.30% (2024: 1.24%), which compares favourably to the peer group.
Further details of fees payable
to the Investment Manager are set out in Note 19.
The Board continues to be pleased with the performance of the Investment Manager, noting particularly the
successful acquisition of Merlin, continued positive asset management initiatives and capital improvements to the
Company’s portfolio
, with resulting valuation increases, enhanced environmental performance and maintained
occupancy and income.
As a result the Board supports the continued appointment of the Investment Manager.
On 3 September 2024, 100% of the ordinary share capital of Mattioli Woods
, the Investment Manager’s parent
company, was acquired by Tiger Bidco Limited, a wholly-owned subsidiary of investment vehicles advised and
managed by Pollen Street Capital Limited.
The Board is not expecting any operational changes to result from this
transaction.
Board
On 6 November 2024 Ian Mattioli MBE DL stepped down from the Board to focus on capitalising on the market
opportunity in UK wealth management in his role as Chief Executive Officer of Mattioli Woods, following its
transition to private ownership.
On behalf of the Board and our shareholders I thank Ian for his invaluable support
and contribution as Founder Director of the Company since IPO in 2014.
Ian and his family are expected to remain
major, long-term shareholders in the Company and he will continue to serve a valuable role for the Company in
his capacity as chair of the Investment Manager and as a member of its Investment Committee.
Also on 6 November 2024 Nathan Imlach, who is currently Chief Strategic Adviser to Mattioli Woods focusing on
acquisitions and contributing to its future direction, was appointed to the Board for a transition period up until no
later than the end of 2025.
Following that transition period the Company’s Board will become fully independent
from the Company’s Investment Manager.
The Board is conscious of the importance stakeholders place on diversity and understands a diverse Board brings
constructive challenge and fresh perspectives to discussions. The Company follows the AIC Corporate
Governance Code and our policy on board diversity is summarised in the Nominations Committee report.
From
the start of 2026, the Board
expects to meet the FCA’s target for 40% female Board representation.
Custodian
Property Income REIT is an investment company with no Executive Directors and a small Board compared to
19
equivalent size listed trading companies. The Board welcomes the gender and ethnic diversity offered by the
Investment Management team working with the Company.
At the Company’s AGM on 8 August 2024 the resolution to re
-elect Elizabeth McMeikan as a Director of the
Company (“the Resolution”) received votes against of 24.7% (2023: 23.7%), which comprised 6.8% (2023: 5.8%)
of total shareholders.
Feedback from shareholders indicates that votes against the Resolution were primarily a
result of perceived ‘over
-
boarding’, due to Elizabeth’s roles as Chair of Nichols plc and Non
-Executive Director of
Dalata Hotel Group plc and McBride plc.
These Directorships are within
the number of ‘mandates’ permitted by
Institutional Shareholder Services
(“ISS”),
a leading provider of corporate governance and responsible investment
solutions to leading institutional investors, which supported the Resolution.
Votes against the Resolution were
primarily from institutional shareholders applying stricter internal voting policies than ISS by allowing fewer
‘mandates’
, and their voting policies do not acknowledge the generally lower time commitments as Directors of
investment companies or companies of a relatively small size.
I believe additional roles offer Directors helpful insight and experience which benefits the Boards on which they sit
and I do not intend to ask any fellow Directors to reduce their additional roles.
Along with all of the Directors,
Elizabeth is a diligent and important member of the Board and I am grateful to all of them for their contributions
and support.
Outlook
The Board appreciates the support of its wide range of shareholders with the majority classified as private client
or discretionary wealth management investors.
Custodian Property Income REIT’s investment and dividend
strategy, and diversified portfolio are well suited to investors looking for a close proxy to direct real estate
investment but in a managed and liquid structure.
The Board believes strongly in the benefits of diversification in mitigating property and sector specific risk, while
delivering dividends that are fully covered by recurring earnings and generally higher than sector specialists.
The
Board also remains firm in its belief that this strategy is well suited to long-term investors in real estate, allowing
for the timely execution of acquisitions and disposals without the constraints of sector specificity, while setting the
Company apart from the single sector, often higher risk funds.
The Company’s Investment Manager
has curated a portfolio that focuses on long-term income and income growth,
through careful stock selection and a balance between the main commercial property sectors, weighted to those
that should offer the greatest rental growth potential.
This portfolio has supported growing earnings, fully covered
by growing dividends, with 101.3% dividend cover for the year (2024: 100.7%).
Income and income growth are
likely to form the greater component of total return over the next phase of the property cycle if long-term interest
rates continue to stay high with persistent inflation.
20
However, as short-term interest rates fall and investors re-connect with real estate investment for its attractive
income credentials, Custodian Property Income REIT’s share price is well
-placed to re-rate and trend back towards
NAV, enhancing the total return for all of our shareholders.
In addition, with asset prices showing signs of recovery
and the recent announcement of the Merlin portfolio acquisition, the Board looks to the future with cautious
confidence.
David MacLellan
Chairman
11 June 2025
21
Investment Manager’s report
The UK property market
At a property market level, it is encouraging that the evidence is once again supportive of a recovery in the fortunes
of UK commercial real estate.
Transaction volumes have been increasing, albeit there has been a slight hiatus
as the world reacts to US trade policy.
Of note is the increased investment in the office sector, with a focus on
grade A city centre buildings.
The industrial and logistics sector continues to be popular and there is renewed
focus on out-of-town retail/retail warehousing.
Since the middle of last year, we have seen a further stabilisation
of valuations as well as some increases during recent quarters, driven mainly by rental growth but also through
emerging yield compression.
The consistent thread in the story of UK commercial real estate is positive occupier activity, with declining vacancy
rates in prime locations and increased leasing activity, particularly in the office sector, as companies finalise their
return-to-office strategies.
While there is evidence of developments restarting and new planning applications
increasing, the lack of development over the last two/three years is maintaining pressure on supply and supporting
rental growth.
Post year-
end, Custodian Property Income REIT’s share price experienced volatility in line with the wider stock
market, but perhaps this reaction will settle into a more considered position for real estate.
It would not be
unreasonable to expect that during periods of trade uncertainty, UK real estate can be seen as a safe haven, as
investors seek stable income, with asset backing in established and secure jurisdictions.
This should be
particularly true for the Company’s investment strategy that generally
targets sub £10m, regional, UK assets, that
principally serve a local and/or domestic market.
The fully covered dividend per share for the year of 6.0p offered a dividend yield of 7.9% at the year end (2024:
5.8p dividend, 7.2% yield), as weak economic confidence pushed the share price to a discount to NAV of c.19%.
While we believe this fundamentally undervalues the security and quality of income offered through our fully
covered dividend, and despite the fact that we continually demonstrate our ability to realise sales at premiums to
book value, the discount remains less than the UK listed real estate market average discount of c. 28%.
This
suggests that while investors value the income, they also still overplay the risk in UK real estate which should be
set against a backdrop of falling interest rates, rising property prices, growing rents and falling vacancy rates which
are normally associated with a reduction in risk.
No commentary on UK listed real estate would be complete without considering the corporate activity that has
swept through the sector.
Comprising mergers, acquisitions, wind downs, strategic reviews and take-privates, the
common theme is that private equity is seeing value in the sector.
Against the average market discount to NAV
22
of c.28%, most corporate activity is pricing transactions at between a 0% and 12% discount to NAV, which
highlights the disparity in perceptions of value.
As these perceptions of value merge, we should expect to see a recovery in ratings across the sector, which adds
further support to our view that the sector is currently under-valued.
On a sectoral basis there has been positive news for all the main commercial property sectors.
Industrial and
logistics continue to lead the way on rental growth, but we have also recorded rental growth in retail warehousing,
offices and high street retail.
The table below shows the reversionary potential of the portfolio by sector, by comparing EPRA topped-up NIY to
the equivalent yield, which factors in expected rental growth and the letting of vacant units.
Across the whole
portfolio, valuers’ estimated r
ental values
(“ERV”)
are 14% (2024: 15%) ahead of passing rent and while part of
the reversionary potential is due to vacancy, the balance is this latent rental growth which will be unlocked at rent
review and lease renewal.
Sector
EPRA topped-
up NIY
31 March 2025
Equivalent
yield
23
31 March 2025
EPRA topped-up
NIY
31 March 2024
Equivalent yield
31 March 2024
Industrial
5.5%
6.9%
5.4%
6.7%
Retail warehouse
7.5%
7.6%
8.0%
7.4%
Other
7.7%
8.4%
7.1%
8.0%
Office
8.1%
11.1%
7.1%
9.8%
High street retail
9.4%
8.4%
9.9%
8.1%
6.6%
7.8%
6.6%
7.5%
Prevailing property investment approach
Based on our assessment of the current market, our strategy to maintain a regionally focused diversified portfolio,
as set out below, has proven resilient.
We expect to reinvest the proceeds from selective disposals in funding
capital expenditure to improve the environmental credentials of the portfolio and to pay down variable rate debt.
Over the long-term we intend to focus on:
•
Maintaining weighting to industrial and logistics
–
assets in this sector still have latent rental growth and strong
occupier demand for small/’mid
-
box’ units;
23
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.
23
•
Retail warehousing let off low rents which are starting to show rental growth and supply side restrictions;
•
Selective regional offices with a focus on strong city centre locations instead of out-of-town business parks;
•
Drive-through expansion involving acquisition and development where rental growth is anticipated;
•
Selective high street retail assets in the country’s strongest locations where rents have stabilised and there is
potential for growth; and
•
Refurbishment of existing property, maximising all opportunities to invest in the quality of our assets and
support our ESG goals.
Sectoral view
Industrial and logistics
Rental growth remains strongest in the industrial and logistics sector which accounts for the largest share of the
Company’s rent roll.
Lack of supply, and in some urban areas reducing supply, limited development of smaller
and ‘mid
-
box’ industrial units
and construction cost inflation have all combined to focus occupational demand and
create low vacancy rates, driving rental growth for new-build regional industrial units and well specified, refurbished
space.
The industrial sector is also providing the greatest opportunity for solar panels, generally referred to as
photovoltaic (“PV”) installations, which is not only delivering on our environmental commitments but also growing
revenue through the sale of the electricity generated to tenants via a power purchase agreement.
In the three
months to 31 March 2025 the Company recorded income of £0.1m from 10 PV installations currently operational
at industrial sites.
12 new installations are currently under consideration.
In summary:
•
Occupational demand is robust
•
Limited supply of modern,
‘
low carbon
’
, buildings
•
Latent rental growth potential
•
Target sector for well-priced opportunities
Retail warehouse
Retail warehousing is the sector which the Investment Property Forum Consensus Forecast expects to record the
highest total return, showing some rental growth but with strong capital performance.
Our preferred sub-sectors
are food, homewares, DIY and the discounters.
Vacancy rates are very low and future rental growth appears
affordable for occupiers.
24
The combination of convenience, lower costs per square foot and the complementary offer to online retail has kept
these assets trading strongly.
As the second largest sector in the Custodian Property Income REIT portfolio, the
recovery in market sentiment towards out-of-town retail is positive and vacancy rates remain low.
In summary:
•
Units let off low rents
•
Lower costs of occupation
•
Complementary to online
Offices
In the office sector, we have pursued a strategy of reducing exposure to business park assets, where we believe
tenant demand is weaker and rental growth prospects are much more limited.
While only a small percentage of
the portfolio, where we have retained offices, they have been city centre buildings that can be or have been brought
up to modern occupier requirements and have low environmental impact standards.
In summary:
•
Occupier demand is stronger in city centre locations
•
Strong rental growth in select locations
•
Valuations have stabilised
High street retail
We continue to see low vacancy rates in prime locations and occupier demand, from both retail and leisure
operators, should be supportive of future rental growth.
In summary:
•
Low vacancy rates in prime locations
•
Rents are starting to show growth
•
Rental yields support dividends
25
Other
Sub-
sector of ‘Other’ sector assets
Weighting
by income
31 March 2025
Weighting
by income
31 March 2024
Gym
20%
18%
Drive-through
17%
17%
Motor trade
16%
17%
Pub and restaurant
15%
15%
Other, including day nursery and hotel
13%
13%
Leisure
12%
13%
Trade counter
7%
7%
100%
100%
Property portfolio balance
Property portfolio summary
2025
2024
Property portfolio value
24
£594.4m
£589.1m
Separate tenancies
349
335
EPRA vacancy rate
8.9%
8.3%
Assets
151
155
Weighted average unexpired lease term to first break of expiry
(“
WAULT
”)
5.0 years
4.9 years
EPRA topped-up NIY
6.6%
6.6%
Weighted average EPC rating
C (51)
C (53)
The property portfolio is split between the main commercial property sectors in line
with the Company’s objective
to maintain a suitably balanced investment portfolio
.
The Company’s strategy since IPO has been
a relatively low
exposure to office and high street retail combined with a relatively high weighting to the industrial and alternative
sectors,
often referred to as ‘other’ in property market analysis.
24
2024 includes £11.0m of assets sold since the year end classified as ‘held
-for-
sale’.
26
The current sector weightings are:
Sector
Valuation
31 March
2025
£m
Weighting by
income
25
31 March
2025
Valuation
31 March
2024
£m
Weighting by
income
31 March
2024
Valuation
movement
£m
Weighting by
value 31
March 2025
Weighting by
value 31
March 2024
Industrial
298.3
42%
291.4
40%
11.6
50%
49%
Retail
warehouse
127.3
22%
122.7
23%
4.4
21%
21%
Other
78.2
13%
78.8
13%
0.5
13%
13%
Office
57.7
16%
63.9
16%
(5.7)
10%
11%
High street retail
32.9
7%
32.3
8%
0.4
6%
6%
Total
594.4
100%
589.1
100%
11.2
100%
100%
For details of all properties in the portfolio please see
custodianreit.com/property/portfolio
.
Disposals
Owning the right properties at the right time is a key element of effective property portfolio management, which
necessarily involves periodically selling properties to balance the property portfolio.
Custodian Property Income
REIT is not a trading company but identifying opportunities to dispose of assets significantly ahead of valuation or
that no longer fit within the Company’s investment strategy is important.
The Company sold the following properties during the year for an aggregate £15.1m, 5% ahead of the most recent
valuation and 38% ahead of their pre-offer valuation:
•
A vacant industrial unit in Warrington for £9.0m to a developer;
•
A vacant former car showroom in Redhill for £2.35m to a developer;
•
Vacant offices in Castle Donington for £1.75m to a flexible office provider;
•
Vacant offices in Solihull for £1.4m to an owner-occupier; and
•
One unit of a two-unit industrial asset in Sheffield to an owner-occupier for £0.55m.
Since the year end the Company has sold:
•
Part-let offices in Cheadle for £4.0m; and
•
Fully-let offices in Cheadle for £2.9m.
25 Current passing rent plus ERV of vacant properties.
27
Asset management
During the year we have remained focused on active asset management, completing 15 rent reviews at an
aggregate 29% increase in annual rent from £2.5m to £3.2m, along with 64 new lettings, lease renewals and lease
regears, with rental levels remaining affordable to our occupiers.
During the year we deployed £8.2m on property refurbishments including £1.3m installing solar panels.
£2.6m of
this capital expenditure related to the pre-let extension of an industrial building in Livingston, allowing the occupier
to expand and achieve its plans for growth.
The extension achieved practical completion in May 2025, increasing
annual rent by c.£0.2m.
ESG
The sustainability credentials of both the building and the location have become ever more important for occupiers
and investors.
As Investment Manager we are absolutely committed to achieving the Company’s challenging
goals in relation to ESG and believe the real estate sector should be a leader in this field.
The weighted average EPC across the portfolio is following a positive trajectory towards an average B rating
(equivalent to a score of between 25 and 50).
With energy efficiency a core tenet of the Company’s asset
management strategy and with tenant requirements aligning with our energy efficiency goals we see this as an
opportunity to secure greater tenant engagement and higher rents.
During the year the Company has updated EPCs at 35 units across 24 properties where existing EPCs had expired
or where works had been completed, improving the weighted average EPC rating from C (53) at 31 March 2024
to C (51).
0
10
20
30
40
50
60
70
Mar-21
Mar-22
Mar-23
Mar-24
Mar-25
Weighted Average EPC
28
Richard Shepherd-Cross
Managing Director
for and on behalf of Custodian Capital Limited
Investment Manager
11 June 2025
29
Financial review
A summary of the Company’s financial performance for the year is shown below:
Financial summary
Year ended
31 March 2025
£000
Year ended
31 March 2024
£000
Rental revenue
42,828
42,194
Other income
476
195
Expenses and net tenant recharges
(9,159)
(8,599)
Net finance costs
(7,359)
(8,048)
EPRA profits
26,786
25,742
Abortive acquisition costs
-
(1,557)
Net gain/(loss) on investment property and depreciation
11,369
(25,687)
Profit/(loss) before tax
38,155
(1,502)
EPRA EPS (p)
6.1
5.8
Dividend cover
101.3%
100.7%
OCR excluding direct property costs
1.30%
1.24%
Borrowings
Net gearing
27.9%
29.2%
Weighted average debt maturity
4.5 years
5.3 years
Weighted average cost of drawn debt
3.9%
4.1%
Revenue
Rental revenue increased by 1.5% compared to the year ended 31 March 2024 with year-end contractual passing
rent increasing by 1.9% from £43.1m to £43.9m during the year (a 2.3% like-for-like increase).
As illustrated
below, the £0.4m impact on year-end passing rent from an overall 0.6% decrease in occupancy was more than
offset by annual rental growth of £1.2m, of which £1.1m was from the industrial sector.
30
During the year we deployed £1.3m on PV installations at nine assets
(2024: £2.1m) and associated ‘other’
revenues have increased by 144% as a result.
We expect PV revenues to continue to grow as recent installations
go live and we continue to roll-out PV via our pipeline of anticipated refurbishments.
Finance costs
During the year we deployed £8.2m (2024: £19.0m) of variable rate debt on property refurbishments and installing
solar panels.
This capital expenditure was funded by £15.1m of disposal proceeds with the balance used to pay
down the Company’s variable rate revolving credit facility (“RCF”) facility.
With a net decrease in
the drawn RCF
balance and base rate (SONIA) decreasing from c.5.2% to c.4.5% during the year, net finance costs decreased
by £0.7m.
43.1
0.2
-0.2
-0.4
1.2
NAV per share (p)
42.0
42.5
43.0
43.5
44.0
44.5
43.9
31
Earnings
These positive movements in rent and finance costs increased EPRA earnings per share to 6.1p (2024: 5.8p).
This increase in recurring earnings demonstrates the robust
nature of the Company’s diverse property portfolio.
During the year sentiment towards real estate improved despite concerns over high long-term gilt rates and the
outlook for medium-term earnings.
Like-for-like valuation increases were 2.2% following two years of previous
decreases and over the year these outlook improvements resulted in an £11.2m valuation increase (2024: £27.0m
decrease) and an associated profit before tax of £38.2m (2024: £1.5m loss).
Dividends
The Board acknowledges the importance of income for shareholders and during the year its policy was to pay
dividends at a rate fully covered by net rental income which
does not inhibit the flexibility of the Company’s
investment strategy.
The Company paid dividends totalling 6.175p per share during the year (£27.2m) comprising a fourth interim
dividend relating to the year ended 31 March 2024 of 1.375p, a special dividend relating to FY24 of 0.3p, and three
quarterly interim dividends of 1.5p per share relating to the year ended 31 March 2025.
On Friday 30
May 2025 the Company paid a fourth quarterly interim dividend per share of 1.5p for the quarter
ended 31 March 2025 of £6.6m.
Dividends relating to the year ended 31 March 2025 of 6.0p (2024: 5.8p) were
101.3% (2024: 100.7%) covered by EPRA earnings of £26.8m (2024: £25.7m), as calculated in Note 22.
Debt financing
The Company operates with a conservative level of net gearing, with target borrowings over the medium-term of
25% of the aggregate market value of all properties at the time of drawdown.
The Company’s net gearing
decreased from 29.2% LTV last year to 27.9% at the year-end primarily due to £11.9m of valuation increases and
a net £6.9m receipt from disposals and capital deployment.
On 23 January 2025 the Company and
Lloyds Bank plc (“Lloyds”)
agreed to extend the term of the RCF by one
year to expire on 10 November 2027.
An option remains in place to extend the term by a further year to 2028,
subject
to Lloyds’ consent.
The RCF includes an ‘accordion’ option
, with the facility limit increased from £50m to
£60m since the year end
, which can be increased up to £75m subject to Lloyds’ agreement.
32
At the year end the Company had the following facilities available:
•
A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA, determined by reference
to the prevailing LTV ratio of a discrete security pool of assets, and expiring on 10 November 2027 (with an
extension option to 2028)
.
The facility limit can be increased to £75m with Lloyds’ approval;
•
A £20m term loan facility with Scottish Widows Limited (“SWIP”) repayable in August 2025, with fixed annual
interest of 3.935%;
•
A £45m term loan facility with SWIP repayable in June 2028, with fixed annual interest of 2.987%; and
•
A £75m term loan facility with
Aviva Real Estate Investors (“Aviva”)
comprising:
-
A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
-
A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
-
A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.
Each facility has a discrete
security pool, comprising a number of
the Company’s individual properties
, over which
the relevant lender has security and the following covenants:
•
The maximum LTV of each discrete security pool is either 45% or 50%, with an overarching covenant on the
Company’s property portfolio of a maximum
of either 35% or 40% LTV; and
•
Historical interest cover, requiring net rental income from each discrete security pool, over the preceding three
months, to exceed either 200% or 250% of the
facility’s quarterly interest liability
.
SWIP
3.9% fixed
Lloyds RCF - 1.62%
- 1.92% + SONIA
SWIP
3.0% fixed
Aviva
3.4% fixed
0
10
20
30
40
50
60
70
80
2024
2025
2026
2027
2028
2029
2030
2031
2032
£m
Debt profile
33
At the year end the Company had £103.5m (17% of the property portfolio) of unencumbered assets which could
be charged to the security pools to enhance the LTV on the individual loans.
A £1.9m unencumbered industrial
asset in Dundee is in the process of being charged to the Aviva loan pool.
The weighted average cost of the Company’s drawn debt facilities at 31
March 2025 was 3.9% (2024: 4.1%), with
a weighted average maturity of 4.5 years (2024: 5.3 years).
At 31 March 2025 the Company had £35.0m (2024:
£39.0m) drawn under its Lloyds RCF, meaning 80% (2024: 78
%) of the Company’s drawn debt
facilities were at
fixed rates of interest.
This high proportion of fixed rate debt significantly mitigates long-term interest rate risk for the Company and
provides shareholders with a beneficial margin between the fixed cost of debt and income returns from the property
portfolio.
The Board intends to utilise the Company’s
variable rate RCF to repay the £20m fixed rate loan with SWIP due to
expire in August 2025 and since the year end has increased the RCF facility limit from £50m to £60m to provide
headroom.
The Board intends to consider longer-term options once financial markets are more stable.
Key performance indicators
The Board reviews
the Company’s quarterly
performance against a number of key financial and non-financial
measures:
•
EPS and EPRA EPS
–
reflect the Company’s ability to generate recurring earnings from the property portfolio
which underpin dividends;
•
Dividends per share and dividend cover - to provide an attractive level of income to shareholders, fully covered
from net rental income.
The Board reviews target dividends in conjunction with detailed financial forecasts to
ensure that target dividends are being met and are maintainable;
•
Target dividend per share
–
an expectation of the Company’s ability to deliver an income stream to
shareholders for the forthcoming year;
•
NAV per share total return
–
reflects both the NAV growth of the Company and dividends payable to
shareholders.
The Board assesses NAV per share total return over various time periods and compares the
Company's returns to those of its peer group of listed, closed-ended property investment funds;
•
Share price total return
–
reflects the movement in share price and dividends payable to shareholders, giving
returns that were available to shareholders during the year;
•
NAV/NTA per share, share price and market capitalisation
–
reflect various measures of shareholder value at
a point in time;
34
•
Net gearing
–
measures the Company’s borrowings as a proportion of its investment property, balancing the
additional returns available from utilising debt with the need to effectively manage risk;
•
Weighted average cost of debt
–
measures the cost of the Company’s borrowings based on amounts drawn
and base rate at the year end;
•
OCR
–
measures the annual running costs of the Company and indicates the Board’s ability to operate the
Company efficiently, keeping costs low to maximise earnings from which to pay fully covered dividends; and
•
Weighted average EPC rating
–
measures the overall environmental performance of the Company’s property
portfolio.
The Board considers the key performance measures over various time periods and against similar funds.
A record
of these measures is disclosed in the Financial highlights and performance summary, the Chairman's statement
and the Investment Manager's report.
EPRA performance measures
EPRA Best Practice Recommendations, which are APMs, have been disclosed to facilitate comparison with the
Company’s peers through consistent reporting of key
real estate specific performance measures.
2025
2024
EPRA EPS (p)
6.1
5.8
EPRA Net Tangible Assets (“NTA”) and Net
Reinstatement Value (“NRV”) per share (p)
96.1
93.4
EPRA Net Disposal Value (“NDV”) per share (p)
99.9
97.3
EPRA NIY
6.2%
6.3%
EPRA ‘topped
-
up’ NIY
6.6%
6.6%
EPRA vacancy rate
8.9%
8.3%
EPRA cost ratio (including direct vacancy costs)
24.0%
22.0%
EPRA cost ratio (excluding direct vacancy costs)
19.7%
17.7%
EPRA LTV
28.7%
29.6%
EPRA capital expenditure (£m)
6.8
17.0
EPRA like-for-like annual rent (£m)
42.3
41.0
•
EPRA EPS
–
a key measure of the Company’s underlying operating results and an indication of the extent to
which current dividend payments are supported by earnings
•
EPRA NAV per share metrics
–
make adjustments to the NAV per the IFRS financial statements to provide
stakeholders with information on the fair value of the assets and liabilities of a real estate investment company,
under different scenarios.
EPRA NTA - assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax. EPRA NDV
–
includes an adjustment for the fair value of fixed rate debt.
35
•
EPRA NIY and ‘topped
-
up’ NIY –
alternative measures of property portfolio valuation based on cash passing
rents at the reporting date and once lease incentive periods have expired, net of vacant property operating
costs
•
EPRA vacancy rate
–
expected rental value (“
ERV
”)
of vacant space as a percentage of the ERV of the whole
property portfolio and offers insight into the additional rent generating capacity of the portfolio.
•
EPRA cost ratios
–
alternative measures of ongoing charges based on expenses, excluding operating
expenses of rental property recharged to tenants, but including increases in the doubtful debt provision,
compared to gross rental income
•
EPRA LTV
–
a measure of gearing including all payables and receivables
•
EPRA capital expenditure -
capital expenditure incurred on the Company’s property portfolio during the year
•
EPRA like-for-like rental growth - a measure of passing rent of the property portfolio, excluding acquisitions
and disposals
•
EPRA Sustainability Best Practice Recommendations
–
environmental performance measures focusing on
emissions and resource consumption which create transparency to potential investors by enabling a
comparison against peers and set a direction towards improving the integration of ESG into the management
of the Company’s property portfolio.
Outlook
The Company’s business model has remained resilient during the year and we have further mitigated against
refinancing
risk by renewing the Company’s RCF.
We
have a scalable cost structure and flexible capital structure
to be on the front foot when opportunities present themselves to raise new equity and exploit acquisition
opportunities.
Ed Moore
Finance Director
for and on behalf of Custodian Capital Limited
Investment Manager
11 June 2025
36
Principal risks and uncertainties
The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal
control which is operated by the Investment Manager.
During the year the Board has performed a robust
assessment of the principal and emerging risks facing the Company through a periodic review of, and updates to,
its risk register.
The Company’s risk management process is designed to identify, evaluate and mitigate the
significant risks the Company faces in line with its risk appetite.
At least annually, the Board undertakes a risk
review, with the assistance of the Audit and Risk Committee, to assess the effectiveness of the Investment
Manager’s risk management and internal control systems.
During this review, no significant failings or weaknesses
were identified in respect of risk management, internal control and related financial and business reporting.
Further
information on the risk governance and risk management processes are included in the Internal control and risk
management section of the Governance report.
The Company holds a portfolio of high quality property let predominantly to institutional grade tenants and is
primarily financed by fixed rate debt.
It does not undertake speculative development.
There are a number of potential risks and uncertainties which could have a material impact on the Company's
performance over the forthcoming financial year and could cause actual results to differ materially from expected
and historical results.
The Directors have assessed the risks facing the Company, including risks that would
threaten the business model, future performance, solvency or liquidity.
The table below outlines the principal risks
identified, but does not purport to be exhaustive as there may be additional risks that materialise over time that
the Company has not yet identified or has deemed not likely to have a potentially material adverse effect on the
business.
37
Risk on business and causes
Likelihood and impact
Overall
change in risk
from last year
Mitigating factors
Appetite
Loss of revenue
•
An increasing number of
tenants
exercising
contractual breaks or not
renewing at lease expiry
•
Unable to re-let void units
promptly
•
Tenant default due to a
cessation or curtailment of
trade
•
Enforced
reduction
in
contractual
rents
through
CVAs
•
Property
environmental
performance insufficient to
attract tenants or maintain
rents
•
More frequent and longer
periods
of
property
refurbishment delaying re-
letting
•
Decreases in rental rates
due to general economic
conditions or sector/property
specific factors
•
Expiries
or
breaks
concentrated in a specific
year
•
Low UK economic growth
impacting the occupational
property market
Likelihood: Moderate
Impact: High
Loss of revenue has an
immediate
impact
on
earnings
and
dividend
capacity.
There is also an
increased risk of breaching
interest cover covenants on
borrowings, detailed in Note
16, which could ultimately
lead to default.
No change
Discussed
further in
the
Investment
Manager’s
report
•
Diverse property portfolio covering all key sectors and
geographical areas
•
The Company has over 300 individual tenancies with the
largest tenant accounting for 3.9% of the rent roll
•
Investment policy limits the
Company’s rent roll to no more
than 10% from a single tenant and 50% from a single
sector
•
Primarily institutional grade tenants
•
Focused on established business locations for investment
•
Active management of lease expiry profile considered in
forming acquisition and disposal decisions
•
Building specifications typically not tailored to one user
•
Strong tenant relationships
•
Significant focus and proactive investment in asset-by-
asset environmental performance to maintain or improve
rental levels
The Board relies
on the Investment
Manager’s
processes
regarding
due
diligence
on
lettings. A degree
of tenant covenant
risk
and
short
WAULTs
are
accepted due to
the nature of the
business
38
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
•
Decreases in sector-specific
ERVs
•
Change in demand for space
•
Property
environmental
performance insufficient to
attract tenants
•
Property
obsolescence
requiring increasing levels of
capital
expenditure
to
maintain rental tone
•
Refurbishment or repair work
cost over-runs not reflected
in valuations
•
Properties concentrated in a
specific
geographical
location or sector
•
Lack
of
transactional
evidence
•
Decreases in occupancy
Likelihood: Low
Impact: Moderate
Valuation
decreases
increase the risks of:
•
Non-compliance
with
LTV
covenants
on
borrowings, detailed in
Note 16, which could
ultimately
lead
to
default; and
•
The Company realising
its investments at lower
values.
The Company’s sensitivity
to valuation decreases is
considered further in Going
concern
and
longer-term
viability below
Decreased
–
valuations have
stabilised
during the year
due to
decreasing
interest rates
and continued
robust
occupational
demand
Discussed
further in the
Chairman’s
statement and
Investment
Manager’s
report
•
Occupational demand has been resilient during the year
despite economic headwinds
•
Active property portfolio diversification between office,
industrial (distribution, manufacturing and warehousing),
retail warehousing, high street retail and other
•
Investment policy limits the Company’s
property portfolio
to no more than 50% in any specific sector or geographical
region
•
Smaller lot-size business model limits exposure to
individual asset values
•
High quality assets in good locations should remain
popular with investors
•
Significant focus on asset-by-asset ESG performance and
proactively investing in environmental performance to
maintain or improve demand
There
is
no
certainty that
property values will
be realised.
This is an inherent
risk
of
property
investment.
The
Investment
Manager aims to
minimise this risk
through its asset
selection
and active asset
management
initiatives.
39
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: Low
Impact: High
Increases in interest rates in
the
short-term
reduce
earnings
and
dividend
capacity to the extent the
Company
has
drawn
balances on its variable rate
RCF.
Lack of availability of
financing
would
have
a
significant
impact
on
property
strategy
if
properties needed to be sold
to repay loans.
Decreased
–
valuations have
stabilised
during the year
and are starting
to
increase,
with
variable
interest
rates
decreasing
•
The Company has three lenders
•
The Company’s weighted average maturity on its debt is c.
five years
•
Target net gearing of 25% LTV on property portfolio
•
80% of drawn debt facilities at the year end at a fixed rate
of interest
•
Significant unencumbered properties available to cure any
potential breaches of LTV covenants
•
Ongoing monitoring and management of the forecast
liquidity and covenant position
•
RCF limit increased from £50m to £60m since the year end
to provide RCF headroom ahead of repaying the £20m
SWIP loan expiring in August 2025
The
Board
and
Investment
Manager focus
on having funding
in place to take
advantage
of
opportunities
as
they arise.
The Board’s aim is
to
minimise
this
risk to the extent
possible
through
arranging
longer-
term facilities.
Inadequate operational
performance
•
Inadequate
performance,
controls or systems operated
by the Investment Manager
•
Over-reliance
on
key
investment
manager
personnel or other third party
service providers
Likelihood: Moderate
Impact: High
Increased
risk
of
sub-
optimal returns impacting
earnings
and
dividend
capacity, ineffective risk or
threat
management
or
decisions
made
on
inaccurate information.
Inability to retain or recruit
staff
of
an
appropriate
calibre
Increased
–
a
member of key
Investment
Manager
personnel
left
during the year
•
Ongoing review of key service provider performance by the
Management Engagement Committee
•
Outsourced internal audit function reporting directly to the
Audit and Risk Committee
•
External depositary with responsibility for safeguarding
assets and performing cash monitoring
•
The Investment Management Agreement contains key
personnel provisions designed to mitigate the potential
impact of key individuals leaving
•
A satisfactory appointment has been made by the
Investment Manager to replace its key member of
personnel who left during the year
The Board relies
on the Investment
Manager’s
processes.
Its
appetite for such
risk is low
40
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
26
or changes to
the Company’s tax status
•
Properties aren’t compliant
with prevailing fire safety
legislation
•
Conflicts of interest with the
Investment Manager
•
Non-compliance
with
the
Company’s
Articles
of
Association
Likelihood: Low
Impact: High
•
Reputational damage
could impact demand
for shares.
•
Earnings and dividend
capacity would
decrease with
penalties/fines for non-
compliance or through
an increased tax charge
•
Remedial costs or
claims for non-
compliance could be
substantial
•
Conflicts
of
interest
could lead to operational
issues or reputational
damage
No change
•
Strong
compliance
culture,
with
an
independent
Management Engagement Committee overseeing the
Investment Manager relationship
•
External professional advisers are engaged to review and
advise upon control environment, ensure regulatory
compliance and advise on the impact of changes
•
Business model and culture embraces FCA principles
•
REIT regime compliance is considered by the Board in
assessing the Company’s financial position
and setting
dividends and by the Investment Manager in making
operational decisions
•
Fire safety policy goes over and above minimum
requirements
The Board has no
appetite for non-
compliance
26 As defined by the Corporation Tax Act 2010.
41
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
42
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 Investment Committee.
Investment Committee
reports include a dedicated ESG rationale. Carbon
reducing technology is a key part of the carbon-reduction
strategy but is not invested in speculatively and only
established products are considered.
The
Board
is
averse
to
non-
compliance risk, in
particular when it
may
adversely
impact reputation,
stakeholder
sentiment or asset
liquidity.
43
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
•
Acquired companies’ trade and assets are hived
-up into
Custodian Property Income REIT plc and the acquired
entities are subsequently liquidated
The Board accepts
risk
with
such
transactions
with
the
mitigations
opposite used to
manage risk where
possible
44
Emerging risks
The following risks have been added to the
Company’s
risk register during the year:
•
Increases in yields of long-term fixed-
rate government bonds impacting demand for the Company’s shares
;
and
•
Shareholder activists in the Investment Company sector not acting in the best interests of all shareholders.
The Company’s share
price has been materially impacted by increases in gilt yields during the year, and since the
year end by the escalating global impact of US trade policy.
The Board accepts inherent risk associated with
operating a closed-ended investment structure. The I
nvestment Manager and the Company’s broker and
Distribution Agent maintain strong lines of communication with shareholders
The impact of geo-political risk relating to the ongoing conflicts in Ukraine and Gaza, tensions between the USA
and its trading partners and its volatile political climate, and UK specific factors including apparent declining health
of public markets and a ‘cost of living crisis’
also add to uncertainty over the prevailing macroeconomic outlook.
However, these factors are not considered direct emerging risk
s because of the Company’s
diverse property
portfolio covering all sectors and geographical areas in the UK with over 300 individual tenancies.
Going concern and longer-term viability
The Board assesses the Company
’s
prospects over the long-term, taking into account rental growth expectations,
climate related risks, longer-term debt strategy, expectations around capital investment in the portfolio and the
UK’s long
-term economic outlook.
At quarterly Board meetings, the Board reviews summaries of the Company
’
s
liquidity position and compliance with loan covenants, as well as forecast financial performance and cash flows.
Forecast
The Investment Manager maintains a detailed forecast model projecting the financial performance of the Company
over a period of three years, which provides a reasonable level of accuracy regarding projected lease renewals,
asset-by-asset capital expenditure, property acquisitions and disposals, rental growth, interest rate changes, cost
inflation and refinancing of the Company’s debt facilities ahead of expiry.
The detailed forecast model
allows
robust sensitivity analysis to be conducted and over the three year forecast period included the following
assumptions:
45
•
1% annual loss of contractual revenue through CVA or tenant default;
•
70% tenant retention rate at lease break or expiry with vacated assets followed by an appropriate period of
void;
•
Rental growth, captured at the earlier of rent review or lease expiry, based on current ERVs adjusted for
consensus forecast changes;
•
Portfolio valuation movements based on consensus forecast changes;
•
Completing a programme of asset disposals;
•
The Company’s capital expenditure programme to invest in its existing assets continues as expected;
•
The £20m SWIP loan is repaid using the RCF on its expiry in August 2025; and
•
Interest rates follow the prevailing forward curve.
The Directors have assessed the Company
’s
prospects and longer-term viability over this three-year period in
accordance with Provision 36 of the AIC Code, and the Company
’s
prospects as a going concern over a period of
12 months from the date of approval of the Annual Report, using the same forecast model and assessing the risks
against each of these assumptions.
The Directors note that the Company has performed strongly during the year despite economic headwinds with
like-for-like rents increasing over the last 12 months.
Sensitivities
Sensitivity analysis involves flexing the assumptions listed above, taking into account the principal risks and
uncertainties and emerging risks detailed in the Strategic Report.
This analysis includes stress testing the point
at which covenants would breach through rent losses and property valuation movements, and assessing their
impact on the following areas:
Covenant compliance
The Company operates the loan facilities summarised in Note 16.
At 31 March 2025 the Company had sufficient
headroom on lender covenants at a portfolio level with:
•
Net gearing of 27.9% compared to a maximum LTV covenant of 35% on its Aviva facilities and 40% on its
Lloyds and SWIP facilities, with £103.5m (17% of the property portfolio)
unencumbered by the Company’s
borrowings; and
•
117% minimum headroom on interest cover covenants for the quarter ended 31 March 2025.
46
Over the one and three year assessment periods the
Company’s forecast model projects a small increase in net
gearing and an increase in headroom on interest cover covenants. Reverse stress testing has been undertaken
to understand what circumstances would result in potential breaches of financial covenants over these periods.
While the assumptions applied in these scenarios are possible, they do not represent the Board’s view of the
likely
outturn, but the results help inform the Directors’ assessment of
the viability of the Company.
The testing indicated
that:
•
The rate of loss of contractual rent on the borrowing facility with least headroom would need to deteriorate by
17% (for the going concern assessment period) to breach its interest cover covenant from the levels included
in the Company’s prudent base case
forecasts, assuming no unencumbered properties were charged; or
•
To risk breaching the applicable covenant for both assessment periods, property valuations would have to
decrease from the 31 March 2025 position by:
o
20% at a portfolio level; or
o
13% at an individual charge pool level, assuming no further properties were charged
Note 10 details the expected movements in the valuation of investment properties if the equivalent yield at 31
March 2025 is increased or decreased by 0.25% and if the ERV is increased or decreased by 5.0%, which
the Board believes are reasonable sensitivities to apply given historical changes.
The Board notes that the latest IPF Forecasts for UK Commercial Property Investment survey suggests an average
2.8% increase in rents during 2025 with capital value increases of 3.7%.
The Board believes that the valuation of
the Company’s property portfolio
will prove resilient due to its higher weighting to industrial assets and overall
diverse and high-quality asset and tenant base comprising c.150 assets and over 300 typically 'institutional grade'
tenants across all commercial sectors.
Liquidity
At 31 March 2025 the Company had £7.9m of unrestricted cash and £15.0m undrawn RCF, with gross borrowings
of £175.0m resulting in net gearing of 27.9%.
As detailed in Note 16, the Company’s
£20m loan with SWIP expires
in August 2025 which the Company intends to repay using its RCF facility.
The Company increased its RCF limit from £50m to £60m in June 2025 ahead of the August 2025 expiry to
maintain headroom, with t
he Company’s
forecast model projecting it will have at least £10.8m of undrawn RCF
facility over the next 12 months to continue its programme of discretionary capital investment, pay its target
dividends and its expense and interest liabilities over the one and three year assessment periods.
Results of the assessments
47
Based on the prudent assumptions within the Company’s forecasts regarding the factors set out above,
the
Directors expect that over the one-year and three-year periods of their assessment:
•
The Company has surplus cash to continue in operation and meet its liabilities as they fall due;
•
Borrowing covenants are complied with; and
•
REIT tests are complied with.
48
Section 172 statement and stakeholder relationships
The Directors consider that in conducting the business of the Company over the course of the year they have
complied with Section 172(1) of the Companies Act 2006 (“the Act”) by fulfilling their duty to promote the success
of the Company and act in the way they consider, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole.
Issues, factors and stakeholders
The Board has direct engagement with the Company’s shareholders and
seeks a rounded and balanced
understanding of the broader impact of its decisions through regular engagement with its stakeholder groups
(detailed below) to understand their views, typically through feedback from the Investment Manager, the
Company’s broker
and the distribution agent, which is regularly communicated to the Board via quarterly meetings.
Stakeholder engagement also ensures the Board is kept aware of any significant changes in the market, including
the identification of emerging trends and risks, which in turn can be factored into its strategy discussions.
Management of the Company’s day
-to-day operations has been delegated to the Investment Manager, Custodian
Capital Limited, and the Company has no employees.
This externally managed structure allows the Board and
the Investment Manager to have due regard to the impact of decisions on the following matters specified in Section
172 (1) of the Act:
Section 172(1)
factor
Approach taken
Likely
consequences
of
any decision in the
long-term
The business model and strategy of the Company is set out within the Strategic
Report.
Any deviation from or amendment to that strategy is subject to Board and,
if necessary, shareholder approval.
The Company’s Management Engagement
Committee ensures that the Investment Manager is operating within the scope of
the Company’s
investment objectives.
At least annually, the Board considers a budget for the delivery of its strategic
objectives based on a three year forecast model.
The Investment Manager reports
non-financial and financial key performance indicators to the Board, set out in detail
in the Business model and strategy section of the Strategic report, at least quarterly
which are used to assess the outcome of decisions made.
The Board’s commitment to keeping in mind the long
-term consequences of its
decisions underlies its focus on risk, including risks to the long-term success of the
business.
The investment strategy of the Company is focused on medium to long-term returns
and minimising the Company’s impact on communities and the environment
and as
such the long-term is firmly within the sights of the Board when all material decisions
are made.
49
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 to.
The Company’s Nominations Committee is responsible for applying the diversity
policy set out in the Nominations Committee report to Board recruitment.
The need to foster
the
Company’s
business
relationships
with
suppliers,
customers
and
others
Business relationships with suppliers, tenants and other counterparties are
managed by the Investment Manager.
Suppliers and other counterparties are
typically professional firms such as lenders, property agents and other property
professionals, accounting firms and legal firms and tenants with which the
Investment Manager often has a longstanding relationship.
Where material
counterparties are new to the business, checks, including anti money laundering
checks where appropriate, are conducted prior to transacting any business to
ensure that no reputational or legal issues would arise from engaging with that
counterparty.
The Company also periodically reviews the compliance of all material
counterparties with relevant laws and regulations such as the Modern Slavery Act
2015 and environmental practices.
The Company pays suppliers in accordance
with pre-agreed terms.
The Management Engagement Committee engages directly
with the Company’s key service providers
where necessary providing a direct line
of communication for receiving feedback and resolving issues.
The Investment Manager has open lines of communication with tenants and can
understand and resolve any issues promptly.
The impact of the
Company’s
operations on the
community and the
environment
The Board recognises the importance of supporting local communities where the
Company’s assets are located and seeks to invest in properties which will be fit for
future purpose and which align with ESG targets.
The Company also seeks to
benefit local communities by creating social value through employment, viewing its
properties as a key part of the fabric of the local economy.
The Board takes overall responsibility for the Company’s impact on the community
and the environment and its ESG policies are set out in the ESG Committee report.
The
Company’s approach to preventing bribery, money laundering, slavery and
human trafficking is disclosed in the Governance report.
The desirability of
the
Company
maintaining
a
reputation for high
standards
of
business conduct
The Board believes that the ability of the Company to conduct its investment
business and finance its activities depends in part on the reputation of the Board
and Investment Manager’s team.
The risk of falling short of the high standards
expected and the
reby 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 Com
pany’s requirements for a high standard of conduct and business
ethics are set out in the Governance report.
50
The need to act
fairly as between
members
of
the
Company
The Company’s shareholders are a very important stakeholder group.
The Board
oversees the Investment Manager’s investor relations programme which involves
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.
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 local communities where the Company’s assets are located
;
•
The Board’s risk management
procedures set out in the Governance report identify the potential
consequences of decisions in the short, medium and long-term so that mitigation plans can be put in place to
prevent, reduce or eliminate risks to the Company and wider stakeholders;
•
The Board sets the Company
’s purpose, values and strategy,
detailed in the Business model and strategy
section of the Strategic report, and the Investment Manager ensures they align with its culture;
•
The Board carries out direct shareholder engagement via the AGM and Directors attend shareholder meetings
on an ad hoc basis;
•
External assurance is received through internal and external audits and reports from brokers and advisers;
•
Specific training for existing Directors and induction for new Directors as set out in the Governance report; and
•
Ad hoc meetings to consider corporate acquisition opportunities.
51
Principal decisions in the year
The Board has delegated operational functions to the Investment Manager and other key service providers.
In
particular,
responsibility for management of the Company’s property portfolio has been delegated to the
Investment Manager.
The Board retains responsibility for reviewing the engagement of the Investment Manager
and exercising overall control of the Company, reserving certain key matters as set out in the Governance report.
The principal non-routine decisions taken by the Board during the year, and its rationale on how the decision was
made, were:
Decision
How decision was made
Setting target dividends at 6.0pps for the year ending 31
March 2026.
In line with the Board’s dividend policy of paying a high,
fully covered level of dividend which maximises
shareholder returns without negatively influencing
property strategy.
Extending the RCF by one year to move expiry from
November 2026 to 2027.
To mitigate refinancing risk and secure the existing
competitive margin for a further year.
Appointing a new Director as detailed in the Chairman
’s
statement.
The Board believes Nathan Imlach brings a wealth of
experience which will benefit shareholders.
Acquiring Merlin Properties Limited in an all-paper
transaction on an adjusted NAV-for-NAV basis.
The Company has undertaken property, legal, financial
and tax due diligence work on Merlin and the Investment
Manager modelled the combined entity to understand
the projected short and medium-term impact of the
Acquisition on the combined portfolio and its earnings.
The Board constituted an Acquisition Committee
comprising Malcolm Cooper and Chris Ireland which
held regular meetings to understand and oversee
progress and any issues arising to remain in position to
make decisions as they arose. The key challenges
faced by the Acquisition Committee and Board focused
on ensuring forecasts and potential risks were
accurately identified to ensure the transaction was in the
best long-term interests of all stakeholders by increasing
long-term
earnings within the Company’s stated
investment policy.
52
Due to the
nature of these decisions, a variety of stakeholders had to be factored into the Board’s discussions.
Each decision was announced at the time, so that all stakeholders were aware of the decisions.
Stakeholders
The Board recognises the importance of stakeholder engagement to deliver its strategic objectives and believes
its stakeholders are vital to the continued success of the Company.
The Board is mindful of stakeholder interests
and keeps these at the forefront of business and strategic decisions.
Regular engagement with stakeholders is
fundamental to understanding their views. The below section highlights how the Company engages with its key
stakeholders, why they are important and the impact they have on the Company and therefore its long-term
success, which the Board believes helps demonstrate the successful discharge of its duties under s172(1) of the
Act.
The Board assesses the effectiveness of stakeholder engagement through discussion with the Investment
Manager and the Company’s broker and distribution agent.
53
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
54
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
11 June 2025
55
Board of Directors and Investment Manager personnel
The Board comprises six non-executive directors.
A short biography of each director is set out below:
David MacLellan - Independent Chairman
David was appointed to the Board on 9 May 2023 and took over the Chairman role on 8 August 2023.
He has over 35 years’ experience in private equity and fund management and an established track record as
Chairman and Non-Executive director of public and private companies.
During his executive career David was an
Executive Director of Aberdeen Asset Management plc following its purchase of Murray Johnstone Limited (“MJ”)
in 2000.
At the time of the purchase he was Group Managing Director of MJ, a Glasgow based fund manager
managing inter alia closed and open ended funds, having joined MJ’s venture capi
tal team in 1984.
Prior to joining
MJ he qualified as a Chartered Accountant at Arthur Young McLelland Moores (now EY).
David is currently Chairman and Managing Partner of RJD Partners, a private equity business; Non-Executive
Director and Audit Committee Chairman of Lindsell Train Investment Trust plc, a closed-ended equity investment
fund; Non-Executive Director and Audit Committee Chair of J&J Denholm Limited, a family owned business
involved in shipping, logistics, seafoods and industrial services; and Non-Executive Director and Audit Committee
Chair of Aquila Renewables plc, an investment trust.
David is former Chairman and Senior Independent Director
(“SID”)
of John Laing Infrastructure Fund, a FTSE 250
investment company, former Chairman of Stone Technologies Limited, former Chairman of Havelock Europa plc
and former Non-Executive Director of Maven Income & Growth VCT 2 plc.
He was also Chairman of Britannic UK
Income Fund for 12 years until 2013 as well as a director of a number of private equity backed businesses.
David’s other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge
his responsibilities effectively.
Elizabeth McMeikan
–
Senior Independent Director
Elizabeth’s substantive career was with Tesco plc, where she was a Stores
Board Director before embarking on
a non-executive career in 2005.
Elizabeth is currently Chair of Nichols plc, the AIM listed diversified soft drinks group. She is SID and
Remuneration Committee Chair at both Dalata Hotel Group plc, the largest hotel group in Ireland, and at McBride
56
plc, Europe’s leading manufacturer of cleaning and hygiene products.
She is also Non-Executive Director of
Fresca Group Limited, a fruit and vegetable grower and importer.
Previously Elizabeth was SID and Remuneration Committee Chair at both The Unite Group plc and at Flybe plc,
SID at J D Wetherspoon plc and Chair of Moat Homes Limited.
Elizabeth’s other roles are not considered to impact her ability to allocate sufficient time to the Company to
discharge her responsibilities effectively.
Hazel Adam - Independent Director
Hazel was an investment analyst with Scottish Life until 1996 and then joined Standard Life Investments. As a
fund manager she specialised in UK and then Emerging Market equities. In 2005 Hazel joined Goldman Sachs
International as an executive director on the new markets equity sales desk before moving to HSBC in 2012,
holding a similar equity sales role until 2016.
Hazel was an independent non-executive director of Aberdeen Latin American Income Fund Limited until June
2023 and holds the CFA Level 4 certificate in ESG Investing and the Financial Times Non-Executive Directors
Diploma.
Chris Ireland FRICS - Independent Director
Chris joined international property consultancy King Sturge in 1979 as a graduate and has worked his whole career
across the UK investment property market. He ran the investment teams at King Sturge before becoming Joint
Managing Partner and subsequently Joint Senior Partner prior to its merger with JLL in 2011.
Chris was Chief Executive Officer of JLL UK between 2016 and 2021 and subsequently its Chair from 2021 until
retiring in March 2023.
Chris is a former Chair of the Investment Property Forum and is a Non-Executive Director of Le Masurier, a Jersey
based family trust with assets across the UK, Germany and Jersey. Chris is also a keen supporter of the UK
homelessness charity Crisis.
Chris’
other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge
his responsibilities effectively.
57
Malcolm Cooper FCCA FCT - Independent Director
Malcolm is a qualified accountant and an experienced FTSE 250 company Audit Committee Chair with an
extensive background in corporate finance and a wide experience in infrastructure and property.
Malcolm worked with Arthur Andersen and British Gas/BG Group/Lattice before spending 15 years with National
Grid with roles including Managing Director of National Grid Property and Global Tax and Treasury Director, and
culminated in the successful sale of
a majority stake in National Grid’s gas distribution business, now known as
Cadent Gas.
Malcolm is currently Chair of MORhomes plc, SID and Audit Committee Chair at Southern Water Services Limited
and Non-Executive Director and Audit and Risk Committee Chair at Local Pensions Partnership Investment.
Malcolm was previously: a Non-Executive Director of Morgan Sindall Group plc, a FTSE 250 UK construction and
regeneration business, Chairing its Audit and Responsible Business Committees; SID and Audit Committee Chair
at CLS Holdings plc; a Non-Executive Director of St William Homes LLP; President of the Association of Corporate
Treasurers
and a member of the Financial Conduct Authority’s Listing Authority Advisory Panel.
Malcolm’s other roles are not considered to impact his ability to allocate sufficient time to the Company to discharge
his responsibilities effectively.
Nathan Imlach CA FCSI CF - Director
Nathan was appointed to the Board on 6 November 2024 for a transition period up until no later than the end of
2025 following Ian Mattioli stepping down as a Company Director to focus on his role as Chief Executive Officer
of Mattioli Woods following its recent transition to private ownership.
Nathan is currently Chief Strategic Adviser
to Mattioli Woods with a focus on acquisitions and contributing to its future direction.
Nathan is also currently SID of Mortgage Advice Bureau (Holdings) plc and is a patron and former trustee of
Leicester Grammar School Trust.
He
is a chartered accountant, holds the ICAEW’s Corporate Finance
qualification and is a Chartered Fellow of the Chartered Institute for Securities and Investment.
From 2005 to
2020 Nathan was Chief Financial Officer of Mattioli Woods, Company Secretary of Custodian Property Income
REIT and a director of Custodian Capital Limited.
Before this, Nathan gained over 15 y
ears’ experience as a
corporate finance adviser to directors of leading organisations in both the private and public sectors, gaining
international experience across a wide range of transactions throughout Europe, North America and Australia.
58
Nathan is a non-independent Director of the Company due to his role with Mattioli Woods and is viewed by the
Board as representative of Mattioli Woods’ client shareholders which represent
approximately 65% of the
Company’s shareholders.
Nathan
’s other roles are not considered to impact his ability
to allocate sufficient time to the Company to discharge
his responsibilities effectively.
Investment Manager personnel
Short biographies
of the Investment Manager’s key personnel
and senior members of its property team are set
out below:
Richard Shepherd-Cross MRICS - Managing Director
Richard qualified as a Chartered Surveyor in 1996 and until 2008 worked for JLL, latterly running its national
portfolio investment team.
Since joining Mattioli Woods in 2009, Richard established Custodian Capital as the Property Fund Management
subsidiary to Mattioli Woods and in 2014 was instrumental in the establishment of Custodian Property Income
REIT from Mattioli Woods
’
syndicated property portfolio and its 1,200 investors. Following the successful IPO of
the Company, Richard has overseen the growth of the Company to its current property portfolio of over £0.6bn.
Ed Moore FCA
–
Finance Director
Ed qualified as a Chartered Accountant in 2003 with Grant Thornton, specialising in audit, financial reporting and
internal controls across its Midlands practice.
He is Finance Director of Custodian Capital with responsibility for
all day-to-day financial aspects of its operations.
Since IPO in 2014 Ed has overseen the Company raising over £300m of new equity, arranging or refinancing eight
loan facilities and completing four corporate acquisitions, including leading on the acquisition of DRUM in 2021.
Ed’s key responsibilities for
Custodian Property Income REIT are accurate external and internal financial reporting,
ongoing regulatory compliance and maintaining a robust control environment.
Ed is Company Secretary of
Custodian Property Income REIT and is a member of the Investment
Manager’s Investment Committee.
Ed is
also responsible for the Investment Manager’s environmental initiatives, attending Custodian Property Income
REIT ESG Committee meetings and co-
leading the Investment Manager’s ESG working group.
59
Ian Mattioli MBE - Founder and Chair
With nearly 40 years’ experience in financial services, wealth management and property businesses, Ian is
responsible for the vision and operational management of Mattioli Woods. With this experience he instigated the
development of
Mattioli Woods’
investment proposition, including the syndicated property initiative that developed
the seed portfolio for the launch of Custodian Property Income REIT plc in 2014.
Outside of work, Ian has many personal achievements, including winning the London Stock Exchange AIM
Entrepreneur of the Year award and CEO of the Year in the 2018 City of London Wealth Management Awards.
He was also awarded an MBE in the Queen’s 2017 New Year’s Honours lists for services to business and the
community in Leicestershire. More locally, Ian was awarded an honorary degree (Doctor of Laws) by the University
of Leicester and was appointed High Sheriff of Leicestershire for 2021/22.
Ian and his close family own 6.4m shares in the Company.
Alex Nix MRICS
–
Assistant Investment Manager
Alex graduated from Nottingham Trent University with a degree in Real Estate Management before joining Lambert
Smith Hampton, where he spent eight years and qualified as a Chartered Surveyor in 2006.
Alex is Assistant Investment Manager to Custodian Property Income REIT having joined Custodian Capital in
2012.
Alex heads the Company’s property management and asset management initiatives, assists in sourcing
and executing new investments and is a member of the Investment Manager’s Investment Committee.
James Hunt MRICS
–
Portfolio Manager
James joined Custodian as Portfolio Manager in January 2025 bringing 15 years of commercial real estate
experience from previous consultancy and client-side roles, most recently with the portfolio management team at
St Modwen Logistics. James previously studied Real Estate Management at Nottingham Trent University and
qualified as a Chartered Surveyor in 2014.
As Portfolio Manager, James manages Custodian’s properties predominantly in the Midlands and Scotland.
Eoin Greenwood MRICS
–
Portfolio Manager
60
Eoin joined Custodian in 2018 where he successfully graduated from The University College of Estate
Management with a remote learning degree in Real Estate Management. After five years Eoin joined Buccleuch
Property, managing a £130m mixed use UK commercial portfolio for the Buccleuch family office before returning
to Custodian Capital in 2024 where he recently qualified as a Charted Surveyor.
As Portfolio Manager, Eoin now manages Custodian’s properties predominantly in the South
-west and South-east
of England.
Javed Sattar MRICS
–
Portfolio Manager
Javed joined Custodian Capital in 2011 after graduating from Birmingham City University with a degree in Estate
Management Practice.
Whilst working as a trainee surveyor on Custodian Property Income REIT
’s
property
portfolio for Custodian Capital he completed a PGDip in Surveying via The College of Estate Management and
qualified as a Chartered Surveyor in 2017.
Javed operates as Portfolio Manager managing properties predominantly located in the North-West of England.
61
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 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
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.
62
The Board comprises six directors, all of whom have wide experience, are non-executive and, save for Nathan
Imlach, 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”) and the Investment Policy (as set out in the Strategic report),
and
have overall responsibility for the Company’s activities.
The Directors may delegate certain funct
ions to other
parties and in particular the Directors have delegated responsibility for management 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 values, standards, investment strategy, strategic aims, risk appetite and objectives;
•
Setting the overall tone of
the Company’s ESG strategy;
•
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.
Meetings
The Board meets
at least four times a year to consider the Company’s quarterly 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
63
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.
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 six 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.
64
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;
•
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 activities.
The Chair
man
’s review was
positive, and the other Directors considered that the Chairman remained independent and that he continued to
strongly and effectively lead the Board.
65
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 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.
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.
66
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.
67
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
4/4
Nathan Imlach
2/2
n/a
n/a
n/a
n/a
Ian Mattioli
2/2
n/a
1/1
n/a
n/a
Elizabeth McMeikan
4/4
3/3
1/1
2/2
4/4
Chris Ireland
4/4
3/3
1/1
2/2
n/a
Malcolm Cooper
4/4
3/3
1/1
2/2
4/4
* On 6 November 2024 Ian Mattioli resigned from the Board and Nathan Imlach was appointed.
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 fund 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 Fina
ncial 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.
Nathan Imlach is Chief Strategic Adviser to Mattioli Woods, the parent company of the Investment Manager, and
therefore has an indirect interest in the Investment Manager. As a result, Nathan Imlach is not independent.
For its financial year ended 31 May 2024 remuneration paid by the Investment Manager to its 33 staff (2023: 26
staff) was £1.7m (2023: £1.5m), which included £0.5m (2023: £0.4m) payable to senior management and
68
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.
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
69
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
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.
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
70
assurance against material misstatement or loss.
The Investment Manager outsources its internal audit function
to RSM which has undertaken an assessment of the design and operational effectiveness of internal controls
during the year with no significant deficiencies reported.
Investment Manager employees are covered by the
whistleblowing policy of Maven Capital Partners LLP
(“Maven”)
, a subsidiary of Mattioli Woods.
The Board has an ongoing process to monitor the Company’s risk management and internal control systems,
including financial, operational and compliance controls, 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 inc
lude:
•
A detailed authorisation process and formal delegation of authority;
•
A comprehensive financial reporting and forecasting system;
•
A defined schedule of matters reserved for the Board; and
•
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.
Responsibilities
The Board has overall responsibility for the Company
’
s approach to risk management and internal control,
including:
•
Ensuring the design and implementation of risk management and internal control systems which identify the
risks facing the business and enable the Board to make an assessment of principal risks;
•
Determining the nature and extent of the principal risks faced, and those risks which the Company is willing to
take;
•
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 Audit and Risk Committee provides oversight of the framework, monitors principal risks and undertakes the
annual review of the Group
’
s approach to risk management and compliance with the framework, including a review
of the risk register.
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 detail in the Audit
and Risk Committee report.
71
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.
Framework
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 Board.
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
72
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
11 June 2025
73
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 was delighted to publish its 2025 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 environmental KPIs
, monitor expected future performance against those KPIs and
evolve them to reflect prevailing best practice;
•
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
”)
;
•
To assess, at least annually, the fees and scope of engagement of the Company
’s environmental consultants;
and
•
To assess whether 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
74
approach to ESG matters addresses the importance of these issues in the day-to-day running of the business, as
summarised below.
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.
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.
75
•
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.
Environmental key performance indicators
The Company’s
environmental targets are measured by key performance indicators (
“
KPIs
”
), which provide a
strategic way to assess its success towards achieving its environmental objectives and ensure the Investment
Manager has embedded key ESG principles.
To help the assessment of progress against KPIs a central data management
system, hosted 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.
This data
management system is also being used to identify tenant engagement and asset optimisation opportunities and
facilitates the communication of environmental performance data to various stakeholders.
The Company has decreased the number of environmental KPIs it reports on during the year on advice from its
Environmental Consultants, JLL, in order to focus on the most important areas, with other areas now only subject
to ad hoc reporting.
The table below shows progress against revised KPIs expected to be reported against going
forwards.
2025 KPIs
KPI
Progress during the year
Cumulative annual 1.5 kgCO2e/m
2
reduction of operational
carbon intensity (3.5% pa of 2021 baseline)
13kgCO2e/m
2
reduction
since
2021,
currently 28kgCO2e/m
2
PV to be installed on five warehouses per annum cumulatively
from 2023
17 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 (53) to C (51)
76
KPI
Progress during the year
Install smart meters or appoint data aggregators
across 60% of the portfolio by floor area
56% annual increase (48 installs)
Achieve an annual improvement in GRESB
score*
•
Real estate
–
48 (2024: 45)
•
Developments
–
59 (2024: 57)
Utilise 25% of vacant high street retail space by
floor area for not-for-profit lettings
Of five vacant retail properties two are occupied by charities
representing 55% floor coverage of the vacant space
*the use of GRESB as an appropriate framework is currently under review by the Committee.
77
ESG policy
The Company’s ESG policy is set out at:
custodianreit.com/wp-content/uploads/2023/04/20.-CREIT-ESG-policy.pdf
EPC ratings
During the year the Company has updated EPCs at 35 units (2024: 112) across 24 properties (2024: 42).
For
updated EPCs, there was a simple average improvement in rating of 20
‘energy
performance asset rating points
27
(2024: 20) and the portfolio weighted average EPC score has improved from C (53) to C (51) during the year.
Particular improvements in rating occurred during the year at the following assets:
•
36k sq ft offices in Leeds which were refurbished during the year, improving the average rating from C (52) to
A (25); and
•
72k sq ft gym and leisure centre in Lincoln which had PV installed during the year, improving the rating from
D (85) to B (49).
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
28
EPC rating
31 March
2025
31 March
2024
31 March
2025
31 March
2024
A
21
19
6%
5%
B
143
127
41%
36%
C
121
130
35%
38%
D
39
49
11%
14%
E
17
18
5%
5%
F
8
8
2%
2%
G
-
-
-
-
349
351
100%
100%
27 One EPC letter represents 25 energy performance asset rating points.
28
Weighted by floor area.
78
The
table shows that the weighted average ‘C’ or better ratings has increased from 79% to 82
% during the year.
The Company has ‘F’ rated units at 31 March 2024 and 2025 in two properties
. Both properties were recently
refurbished, which is expected to improve the EPC rating once assessed in the next six months.
Net zero carbon
The ESG Committee was delighted to announce 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 stakeholder 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
11 June 2025
79
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 the programme of work and reports of the internal auditor.
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;
80
•
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; 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.
81
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 valuation
s.
During the year, the Committee recommended to the Board that the Company amend its accounting policy relating
to solar panels, moving the basis of carrying value from cost to fair value, and amending their useful economic life
from 20 years to 30 years.
The Committee believes these changes give shareholders a more accurate reflection
of the value of the Company’s property, plant and equipment.
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.
82
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 an appropriate annual internal audit programme
with the Investment Manager, 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 annually 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 a
uditor, particularly in respect to challenging the Company’s
approach to its significant judgements and estimates (set out in the Strategic report) and risk assessment.
The
Committee
was satisfied that Deloitte’s individual report on
Audit Quality Inspections carried out by the Financial
83
Reporting Council (“FRC”) Audit Quality Review team and ICAEW Quality Assurance Department showed very
positive results with no audits requiring ‘significant improvements’.
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
2025
Year ended
31 March
2024
£000
£000
Audit of the Company’s Annual Report
171
163
Total audit related fees
171
163
Review of the Company’s Interim Report
39
37
Total non-audit fees
39
37
Total fees
210
200
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 organisation, 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
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.
84
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.
Non-audit fees incurred during the year related to a review of Board effectiveness.
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
Chair of the Audit and Risk Committee
11 June 2025
85
Management Engagement Committee report
Composition
The Management Engagement
Committee (“the Committee”) comprises Chris Ireland as Chair, 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.
The Committee concluded that, based on its interaction with the Investment 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.
86
Other key service providers
During the year the Committee recommended to the Board replacing PwC with Maven as Company Secretarial
Adviser due to its investment management specialism.
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 line with
RICS Valuation Standards UK National Supplement (October 2023)
transitional arrangements, Knight Frank signatories will rotate 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
Chair of the Management Engagement Committee
11 June 2025
87
Nominations Committee report
Composition
The Nominations Committee (“the Committee”)
consists of David MacLellan as Chair, 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.
88
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 shareholders 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.
89
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.
90
At the year end, the Company only met one of the three criteria above, as Elizabeth McMeikan acts 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)
6
100%
2
Female
2
33%
1
Male
4
67%
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.
The Committee considers diversity in a broad sense, not limited to gender or ethnicity, including socio-economic
background and education. The Board also welcomes the diversity offered by the Investment Management team
working with the Company.
During the prior
year the Company engaged Human EDI Limited to assess the demographics of the Company’s
Board and key stakeholders, including factors such as gender, ethnicity, age, and other relevant diversity
indicators, evaluate the diversity of skills, experiences, and perspectives and make recommendations for
enhancing diversity and inclusivity.
The results of the review are under consideration and are expected to be
implemented during future appointments to the Board and of key service providers.
During the year Ian Mattioli stepped down as a Director the Company and was replaced by Nathan Imlach, who
as Chief Strategic Adviser to Mattioli Woods is not independent
.
Nathan’s appointment is for a transition period
to no later than 31 December 2025 and
following that transition period the Company’s board will be 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:
91
David MacLellan
Chair of the Nominations Committee
11 June 2025
92
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 respective
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 31 August 2022 with 99.98% of votes cast for
the resolution, 0.02% of votes cast against the resolution with 22,539 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
93
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 Companies (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.
94
Directors’ remuneration (audited)
2025
Fees
£
2024
Fees
£
David Hunter*
-
24,855
David MacLellan**
73,000
56,623
Ian Mattioli***
25,000
42,000
Nathan Imlach***
17,607
-
Hazel Adam
46,000
44,250
Elizabeth McMeikan
49,000
47,250
Chris Ireland
46,000
44,250
Malcolm Cooper
49,000
47,250
305,607
306,478
The Company incurred Employer’s national insurance contributions of £
40,736 (2024: £39,575) during the year
relating to Directors’ fees.
* David Hunter retired as a Director on 8 August 2023.
** David MacLellan was appointed as a Director on 9 May 2023.
*** Ian Mattioli retired as a Director, and Nathan Imlach was appointed as a Director, on 6 November 2024.
In February 2025 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 2025: David MacLellan - £75,000;
Malcolm Cooper - £50,500; Elizabeth McMeikan - £50,500; Chris Ireland - £50,500; Hazel Adam - £47,500, and
Nathan Imlach - £45,000.
At the 2021 AGM shareholders approved increasing the Directors’ aggregate remuneration cap contained in the
Articles to £300k, subsequently rising with CPI to £375,000.
The proposed FY26 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 refreshment is required in line with the Company’s
succession and diversity planning.
95
No pension benefits accrued to any of the directors during the year (2024: £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 2024:
2025
2024
No. shares
% holding
No. shares
% holding
Ian Mattioli
N/a
N/a
6,069,506
1.38%
Nathan Imlach
235,993
0.05%
N/a
N/a
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
20,400
0.00%
20,400
0.00%
Hazel Adam
19,566
0.00%
19,566
0.00%
658,259
0.14%
6,491,772
1.47%
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
29
, own 6,429,807, 371,381 and 102,596 shares
in the Company respectively.
29 For Ian Mattioli this comprises shares held by Ian, his wife and a charitable trust under his control of 2,950,690 (2024: 3,923,445) and 3,479,117 (2024: 2,146,061) shares held by
other persons closely associated.
96
Total shareholder return
The graph below illustrates the total shareholder return over the 10 year period to 31 March 2025 in terms of the
change in value of an initial investment of £100 invested on 31 March 2015
in a holding of the Company’s
shares
against the EPRA NAREIT UK Index
30
.
Source: Deutsche Numis
The Company has historically disclosed total shareholder return for a hypothetical basket of peer group
companies.
However, the majority of these peers have delisted due to mergers and take-privates or are subject
to ongoing wind-down and the Board considers the remainder too narrow a peer group to offer an appropriate
comparator.
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.
30 The EPRA NAREIT Index incorporates weightings of UK listed REITs and real estate holding and development companies.
20
40
60
80
100
120
140
160
180
Pence
CREI
NAREIT
97
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
11 June 2025
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 2025.
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 6.175p per share (2024: 5.5p), totalled £27.2m (2024: £24.2m).
On Friday
30
May 2025 the Company paid a fourth interim dividend per share of 1.5p for the quarter ended 31 March 2025.
The Company’s dividend policy is set out in the
Financial review section of the Strategic report.
99
Going concern
At 31 March 2025
the Company’s forecasts indicate that over the next 12 months:
•
The Company has surplus cash to continue in operation and meet its liabilities as they fall due;
•
Borrowing covenants are complied with; and
•
REIT tests are complied with.
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 2025 the Company had significant
headroom on lender covenants at a portfolio level with:
•
Net gearing of 27.9% compared to a maximum LTV covenant of 35% on its Aviva facilities and 40% on its
Lloyds and SWIP facilities, with £103.5m (17% of the property portfolio)
unencumbered by the Company’s
borrowings; and
•
117% minimum headroom on interest cover covenants for the quarter ended 31 March 2025.
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
17% to breach its interest cover covenant
from the levels included in the Company’s prudent base case
forecasts, assuming no unencumbered properties were charged; or
•
To risk breaching the applicable covenant for both assessment periods, property valuations would have to
decrease from the 31 March 2025 position by:
o
20% at a portfolio level; or
o
13% at an individual charge pool level, assuming no further properties were charged
100
Note 10 details the expected movements in the valuation of investment properties if the equivalent yield at 31
March 2025 is increased or decreased by 0.25% and if the ERV is increased or decreased by 5.0%, which
the Board believes are reasonable sensitivities to apply given historical changes.
The Board notes that the February 2025 IPF Forecasts for UK Commercial Property Investment survey suggests
an average 2.8% increase in rents during 2025 with capital value increases of 3.7%.
The Board believes that the
valuation of the Company’s property portfolio
will prove resilient due to its higher weighting to industrial assets and
overall diverse and high-quality asset and tenant base comprising over 150 assets and over 300 typically
'institutional grade' tenants across all commercial sectors.
Liquidity
At 31 March 2025 the Company had £7.9m of unrestricted cash and £15.0m undrawn RCF, with gross borrowings
of £175.0m resulting in net gearing of 27.9%.
As detailed in Note 16, the Company’s
£20m loan with SWIP expires
in August 2025 which resulted in the Company having £19.8m of net current assets at the year end.
The Company
intends to repay the £20m SWIP loan using its RCF facility.
The Company has increased its RCF limit from £50m to £60m since the year end to maintain headroom, with the
Company’s
forecast model projecting it will have sufficient cash and undrawn facilities to repay the £20m SWIP
loan, 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 6 November 2024 Nathan Imlach was appointed as a Director and Ian Mattioli 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 directo
rs’ 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 directors’ 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, wh
ereby 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 c
apital and all 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 2025 the Directors were aware that the following shareholders each owned
31
3% or more of the
issued share capital:
Shareholder
Number of
ordinary shares
Percentage
holding
32
BlackRock
15,441,201
3.50%
No changes in substantial shareholding were disclosed between 31 March 2025 and 11 June 2025.
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
31 Ownership incorporates the control of voting rights through acting as discretionary investment manager on behalf of retail investors holding the beneficial interest.
32 Based on the issued share capital on 31 March 2025.
104
compliance reporting in alignment with the industry reporting frameworks we adhere to each year, which are EPRA
and GRESB.
The use of GRESB as an appropriate framework is currently under review by the Committee.
The following information summarises our environmental performance in 2024. 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’ report) and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 which implem
ent the Government’s policy on SECR.
Data collected relates to the calendar years 2024 and 2023 but has been disclosed as 2025 and 2024 respectively
due to the Company’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.
Absolute energy consumption (MWh)
2025
2024
Change
Fuels
Landlord obtained
2,990
3,523
-15%
Tenant obtained
21,795
23,291
-6%
24,785
26,814
-8%
Electricity
Landlord obtained
3,337
2,103
59%
Tenant obtained
37,910
40,133
-6%
41,247
42,236
-2%
Energy
66,032
69,050
-4%
We have observed a 2% and 8% decrease in absolute electricity and fuel consumption respectively from 2024 to
2025. Our total reported absolute energy consumption has decreased by 4% from 2024 to 2025. This includes
both our landlord consumption, as well as that of our tenants from assets that are not managed by us directly.
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
2025
2024
Change
Scope 1
Landlord fuel consumption (MWh)
2,990
3,523
-15%
GHG emissions (tCO
₂
e)
548
645
-15%
Scope 2
Landlord electricity consumption (MWh)
3,337
2,103
59%
(location-
based)
GHG emissions (tCO
₂
e)
717
422
70%
Total Scope 1&2 emissions (location-based)
(tCO
₂
e)
1,264
1,067
18%
Scope 1&2 (location-based) emissions intensity
(kgCO
₂
e/m²/yr)
2.74
2.26
21%
Scope 3
Tenant fuel consumption (MWh)
21,795
23,291
-6%
Tenant electricity consumption (MWh)
37,910
40,134
-6%
Total Scope 3 emissions (tCO
₂
e)
12,135
12,313
-1%
Scope 3 emissions intensity (kgCO
₂
e/m²/yr)
26.25
26.0
-1%
Gross Scope 1,2 and 3 emissions (location-based)
(tCO
₂
e)
13,400
13,380
-%
Water consumption (dam³)
151.3
168.9
-10%
107
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.
Overall, our absolute emissions for Scope 1 and 2 (location-based) have increased by 18% from 2024 to 2025,
due to an increase in electricity consumption, despite a decrease in fuel consumption being observed. We
anticipate that the improved data coverage that has been achieved this year is a key driving factor in the Scope 3
emissions reductions observed, as less data relies on estimations which are generally more conservative. This is
particularly prominent with our tenant consumption, where coverage is generally lower.
In 2025, our environmental data covers 34% of the total floor area (combined landlord and tenant data) of our
entire property portfolio, compared to total coverage of 26% in 2024. This strong improvement reflects our focused
efforts to increase our data coverage. We understand that this enhances the accuracy and quality of our
performance reporting, whilst providing our stakeholders with greater insights of our impact, and are continuing to
target further improvements moving forwards.
The return of data by our tenants has improved compared to previous years, with information received from tenants
in 45 assets (2024: 33 assets) covering 206,537 sq m (2024: 160,017sq m) of floor area representing 37% (2024:
34%) of the total portfolio’s f
loor area. We are continuing to address the challenge of obtaining tenant data, and
working hard to further improve response rates to ensure these disclosures give the best available insight into
overall consumption. We target quarterly tenant engagement, which is essential to review and address our
collective ESG issues. We are committed to minimising our environmental impact, and aim to make data driven
decisions to strategically enhance our portfolio. By using this engagement as an opportunity to also improve data
coverage, we can increase our insights and accelerate progress, as well as working in collaboration with our
tenants to improve the assets they occupy.
Where feasible, we are also seeking opportunities to streamline data collection through automation to minimise
collection efforts and maximise data coverage. This has been a strong contributor to the improvements in
coverage that we have achieved this year. We have activated a number of sites over the past year using this
solution, and will continue to review where and how we can roll this out further.
Energy Efficiency Action
During the year, the Company has continued to take action to increase energy efficiency across the property
portfolio. A summary of actions taken are detailed below; further details can be found in our 2025 Asset
Management and Sustainability Report.
108
•
Smart meters - we have installed smart meters in 21 buildings during 2024, increasing our total to 48 buildings.
We are also continuing to explore further implementation of smart metering, as well as expanding out data
aggregation via an external third-party to improve coverage further. These measures led to 34% data
coverage across the portfolio, which in turn improves insights of how and where we can target energy efficiency
actions most effectively
•
EV charging - capacity increased to a total of 3,746 kWh (110 chargers) against previous year of 2,862 kWh
(96 chargers).
•
Onsite renewables
–
at 31 March 2025 we had a total of 15 PV arrays across the portfolio equating to circa
18% of assets which are deemed suitable for PV and representing a capacity of 4,161 kWp. We have also
established a strong pipeline of opportunities for continued rollout, with a further 12 projects targeted for the
next 12 months.
•
Lighting upgrades - installed energy efficient LEDs at industrial properties in Livingston, Aberdeen and
Atherstone, which will help to reduce our operational energy consumption
109
Financial risk management
The Company
’s financial 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 identifying 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 fro
m 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:
•
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 relevant audit information and to establish that the Company’s auditor is aware of
that information.
110
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 9 September 2025 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 2025
Details of significant events occurring after the end of the reporting year are given in Note 21 to the financial
statements.
Approval
This
Directors’ report was approved by the Board of Directors and signed on its behalf by:
David MacLellan
Chairman
11 June 2025
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 directors have also chosen to prepare the parent company financial
statements under United Kingdom adopted international accounting standards.
The financial statements also
comply with International Financial Reporting Standards (IFRSs). 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
11 June 2025
113
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CUSTODIAN PROPERTY
INCOME REIT PLC
Andy Siddorns (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
11 June 2025
114
Consolidated statement of comprehensive income
For the year ended 31 March 2025
Year ended
31 March
2025
Year ended
31 March
2024
Note
£000
£000
Revenue
4
Investment management fees
(3,417 )
(3,451 )
Operating expenses of rental property
-
rechargeable to tenants
(3,562 )
(3,280 )
-
directly incurred
(4,891 )
(3,899 )
Professional fees
(823 )
(791 )
Directors’ fees
(345 )
(349 )
Other expenses
(814 )
(683 )
Depreciation
(285 )
(133 )
Expenses
(14,137 )
(12,586 )
Abortive acquisition costs
(1,557 )
Operating profit before gains/(losses) on investment
property and financing
Unrealised profit/(loss) on revaluation of investment
property:
•
relating to property revaluations
10
(26,972 )
•
relating to costs of acquisition
10
(1 )
Valuation increase/(decrease)
(26,972 )
Profit on disposal of investment property
Net gain/(loss) on investment property
(25,554 )
Operating profit
115
Finance income
6
Finance costs
7
(7,486 )
(8,126 )
Net finance costs
(7,359 )
(8,048 )
Profit/(loss) before tax
(1,502 )
Income tax expense
8
Profit/(loss) for the year, net of tax
(1,502 )
Other comprehensive income
11
Total comprehensive income/(loss) for the year, net
of tax
(1,502 )
Earnings per ordinary share:
Basic and diluted (p)
3
(0.3
Basic and diluted EPRA (p)
3
The profit/(loss) for the year and total comprehensive income/(loss) for the year arise from continuing operations
and is all attributable to owners of the Company.
Other comprehensive income represents items that will not be
subsequently reclassified to profit or loss.
116
Consolidated and Company statement of financial position
As at 31 March 2025
Registered number: 08863271
Group and Company
Note
31 March
2025
£000
31 March
2024
£000
Non
–
current assets
Investment property
10
Property, plant and equipment
11
Investments
12
Total non-current assets
Current assets
Assets held for sale
10
Trade and other receivables
13
Cash and cash equivalents
15
Total current assets
Total assets
Equity
Issued capital
17
Share premium
17
Merger reserve
17
Retained earnings
17
Revaluation reserve
17
Total equity attributable to equity holders of the Company
Non-current liabilities
Borrowings
16
Other payables
14
Total non-current liabilities
Current liabilities
Borrowings
16
117
Trade and other payables
14
Deferred income
Total current liabilities
Total liabilities
Total equity and liabilities
The parent Company’s
profit for the year was £38,155,000 (2024: loss of £1,502,000).
These consolidated and Company financial statements of Custodian Property Income REIT plc, company number
08863271, were approved and authorised for issue by the Board of Directors on 11 June 2025 and are signed on
its behalf by:
David MacLellan
Chairman
118
Consolidated and Company statements of cash flows
For the year ended 31 March 2025
Group and Company
Year ended
31 March
2025
Year
ended
31 March
2024
Note
£000
£000
Operating activities
Profit/(loss) for the year
(1,502 )
Net finance costs
Valuation (increase)/decrease of investment property
10
(11,211 )
Impact of lease incentives
10
(1,470 )
(2,105 )
Amortisation of right-of-use asset
Profit on disposal of investment property
(444 )
(1,418 )
Depreciation
Cash flows from operating activities before changes in
working capital and provisions
(Increase)/decrease in trade and other receivables
(1,871 )
Increase in trade and other payables and deferred income
Cash generated from operations
Interest and other finance charges
7
(7,068 )
(7,694 )
Net cash inflows from operating activities
Investing activities
Capital expenditure on investment property
10
(6,843 )
(17,034 )
Purchase of property, plant and equipment
11
(1,326 )
(1,977 )
Disposal of investment property and assets held-for-sale
Costs of disposal of investment property
(331 )
(134 )
Interest and finance income received
6
Net cash inflows/(outflows) from investing activities
(891 )
Financing activities
New borrowings
16
Repayment of borrowings and origination costs
16
(4,078 )
(744 )
Dividends paid
9
(27,223 )
(24,247 )
119
Net cash outflow from financing activities
(31,301 )
(19,491 )
Net increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Cash and cash equivalents at end of the year
120
Consolidated and Company statement of changes in equity
For the year ended 31 March 2025
Note
Issued
capital
£000
Merger
reserve
£000
Share
premium
£000
Revaluation
reserve
£000
Retained
earnings
£000
Total
equity
£000
Group and Company
As at 31 March 2023
Loss for the year
(1,502 )
(1,502 )
Total comprehensive loss for
year
(1,502 )
(1,502 )
Transactions with owners
of the Company,
recognised directly in
equity
Dividends
9
(24,247 )
(24,247 )
As at 31 March 2024
Profit for the year
Revaluation of property,
plant and equipment
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
121
Notes to the financial statements for the year ended 31 March 2025
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 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 International
Financial Reporting Standards (IFRSs).
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its
own statement of comprehensive income.
Certain statements in this report are forward looking statements.
By their nature, forward looking statements
involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially
from those expressed or implied by those statements.
Forward looking statements regarding past trends or
activities should not be taken as representation that such trends or activities will continue in the future.
Accordingly,
undue reliance should not be placed on forward looking statements.
Basis of consolidation
The consolidated financial statements consolidate those of the parent company and its subsidiaries.
The parent
controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and
has the ability to affect those returns through its power over the subsidiary.
Custodian Real Estate Limited has a
reporting date in line with the Company.
All transactions and balances between group companies are eliminated
on consolidation, including unrealised gains and losses on transactions between group companies.
Where
unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for
impairment from a group perspective.
Amounts reported in the financial statements of the subsidiary are adjusted
33
Electricity is being both imported by the tenant and exported to the grid.
122
where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and
other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date the Company gains control up to the effective date when the Company ceases to control the
Change in accounting policy
The Company has changed its accounting policy for PV from cost less accumulated depreciation to fair value, as
determined by the Company’s independent valuers,
with effect from 31 March 2025.
This change in policy has
been made because at 31 March 2025 certain
of the Company’s
PV arrays have been fully operational
33
for at
least 12 months, providing accurate annual revenue and cost data which incorporates:
•
Energy production per panel;
•
The import/export ratio (based on tenant usage and all metering being operational); and
•
Seasonal/local changes in both of the above (hours of daylight, tenant seasonality, panel maintenance).
The fair value of PV arrays with less than 12 months of operational data is considered to be cost less accumulated
depreciation. The Board believes that fair valuing PV, using reliable data that has become available this year,
better reflects the
Company’s
investment in PV assets within its net asset value. The impact of this change in
accounting policy on the current financial year is:
31 March 2025 |
|
£000 |
|
Consolidated statement of comprehensive income |
|
Increase in profit for the financial year |
- |
Consolidated and Company statements of financial position |
|
Increase in net assets |
714 |
In subsequent years, this revaluation surplus will be depreciated thus ultimately recognised within profit or loss.
Independent valuations of the Company’s PV portfolio
were not available at 31 March 2024 so this change in
accounting policy has been applied with effect from 31 March 2025, with no changes made to comparative
numbers as allowed by IAS 16
–
‘
Property, plant and equipment
’
.
123
Business combinations
Where property is acquired, via corporate acquisitions or otherwise, the substance of the assets and activities of
the acquired entity are considered in determining whether the acquisition represents a business combination or
an asset purchase under IFRS 3 - Business Combinations.
A business combination is a transaction or event in which an acquirer obtains control of one or more businesses.
A business is defined in IFRS 3 as an integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing goods or services to customers, generating investment income (such
as dividends or interest) or generating other income from ordinary activities.
To assist in determining whether a
purchase of investment property via corporate acquisition or otherwise meets the definition of a business or is the
purchase of a group of assets, the group will apply the optional concentration test in IFRS 3 to determine whether
substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group
of similar identifiable assets.
If the concentration test is not met the group applies judgement to assess whether
acquired set of activities and assets includes, at a minimum, an input and a substantive process by applying IFRS
3:B8 to B12D.
Where such acquisitions are not judged to be a business combination, due to the asset or group
of assets not meeting the definition of a business, they are accounted for as asset acquisitions and the cost to
acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their
relative fair values at the acquisition date.
Accordingly no goodwill or additional deferred taxation arises.
Under the acquisition accounting method, the identifiable assets, liabilities and contingent liabilities acquired are
measured at fair value at the acquisition date. The consideration transferred is measured at fair value which is
calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by
the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control
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.
124
The following new and revised accounting standards not yet effective:
•
IFRS 18 -
‘Presentation and Disclosures in Financial Statements’.
This standard on presentation and
disclosure replaces IAS 1, with a focus on updates to the statement of profit or loss.
•
IFRS 19
–
‘Subsidiaries without Public Accountability: Disclosures’.
This reduces disclosure requirements that
an eligible subsidiary entity is permitted to apply instead of the disclosure requirements in other IFRS
Accounting Standards.
•
Amendments to IFRS 9
–
‘
Financial Instruments
’
and IFRS 7
–
‘
Financial Instruments: Disclosures
’
. The
amendments provide clarity on the date of recognition and derecognition of certain financial instruments and
amends/updates the disclosure required for some financial instruments.
The Directors have yet to assess the full outcome of these new standards, amendments and interpretations;
however, with the exception of IFRS 18, these other new standards, amendments and interpretations are not
expected to have a significant impact on the
Group’s financial statements.
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
Contractual revenues are allocated to each performance obligation of a contract and revenue is recognised on a
basis consistent with the transfer of control of goods or services.
Revenue is measured at the fair value of the
consideration received, excluding discounts, rebates, VAT and other sales taxes or duties.
125
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 with
in ‘income from recharges
to tenants’.
Amounts received from occupiers to terminate leases or to compensate for dilapidation work not carried out by the
occupier is recognised in the statement of comprehensive income when the right to receive them arises, typically
at the cessation of the lease.
Lease incentives are recognised on a straight-line basis over the lease term. The initial direct costs incurred in
negotiating and arranging an operating lease are recognised as an expense over the lease term on the same
basis.
Revenue and profits on the sale of properties are recognised on the completion of contracts.
The amount of profit
recognised is the difference between the sale proceeds and the carrying amount and costs of disposal.
Finance income relates to bank interest receivable and amounts receivable on ongoing development funding
The Group operates as a REIT and hence profits and gains from the property rental business are normally
expected to be exempt from corporation tax.
The tax expense represents the sum of the tax currently payable
and deferred tax relating to the residual (non-property rental) business.
The tax currently payable is based on
taxable profit for the year.
Taxable profit differs from net profit as reported in the statement of comprehensive
income because it excludes items of income and expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible.
The Company’s liability for current tax is calculated
Investment property is held to earn rentals and/or for capital appreciation and is initially recognised at cost including
direct transaction costs.
Investment property is subsequently valued externally on a market basis at the reporting
date and recorded at valuation.
Any surplus or deficit arising on revaluing investment property is recognised in
profit or loss in the year in which it arises.
Any ultimate gains or shortfalls are measured by reference to previously
published valuations and recognised in profit or loss, offset against any directly corresponding movement in fair
126
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.
N
on-current assets classified as held for sale are
valued externally on
a market basis at the reporting date and recorded at valuation.
Group undertakings
Investments are included in the Company only statement of financial position at cost less any provision for
impairment.
Electric vehicle chargers are stated at cost less accumulated depreciation and accumulated impairment loss.
PV is valued under the revaluation model of IAS 16
–
‘
Property, plant and equipment
. After initial recognition PV
arrays whose fair value can be reliably established, assumed to be once an array has been operational for at least
12 months, are held at the fair value at the time of the revaluation less any subsequent accumulated depreciation
and impairment losses. Fair value is determined by independent valuers and based on assumptions including
future net income, capital expenditure and appropriate discount rates (yield). The fair value of assets which have
not yet been operational for 12 months is considered equivalent to historical cost less accumulated depreciation
(“
Net Book Value
”
or
“
NBV
”)
.
Valuation movements:
•
Above NBV will be recognised directly within equity (revaluation reserve); and
•
Below NBV will be recognised in profit or loss.
useful lives, using the straight-line method, on the following bases:
EV chargers | 10 years |
PV | 30 years |
The depreciation charge for PV is:
127
•
Included within profit or loss (classified as property operating expenditure) where depreciating historical cost;
or
•
Offset against the revaluation reserve where depreciating the revalued amount.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
The useful lives of PV
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 l
osses, which reflect the Company’s historical 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
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
128
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
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 Com
pany’s investment properties as a portfolio,
129
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.
Judgements
No significant judgements have been made in the process of applying the Group’s and parent company's
accounting policies, other than those involving estimations, that have had a significant effect on the amounts
recognised within the financial statements.
Estimates
The accounting estimate with a significant risk of a material change to the carrying values of assets and liabilities
within the next year relates to the valuation of investment property. Investment property is valued at the reporting
date at fair value.
Where an investment property is being redeveloped the property continues to be treated as an
investment property.
Surpluses and deficits attributable to the Company arising from revaluation are recognised
in profit or loss.
Valuation surpluses reflected in retained earnings are not distributable until realised on sale.
In
making its judgement over the valuation of properties, the Company considers valuations performed by the
independent valuers in determining the fair value of its investment properties.
The valuers make reference to
market evidence of transaction prices for similar properties.
The valuations are based upon assumptions including
future rental income, anticipated capital expenditure and maintenance costs (particularly in the context of mitigating
the impact of climate change) and appropriate discount rates (ie property yields).
The key sources of estimation
uncertainty within these inputs above are future rental income and property yields.
Reasonably possible changes
to these inputs across the portfolio would have a material impact on its valuation.
The valuers have considered
the impact of climate change which has not had a material impact on the valuation.
Further detail on the
Company’s climate related risks are set out in the Asset Management and Sustainability report.
The sensitivity analysis in Note 10 details the expected movements in the valuation of investment properties and
PV if the equivalent yield at 31 March 2024 is increased or decreased by 0.25% and if the ERV is increased or
130
Earnings per ordinary share
Basic EPS amounts are calculated by dividing net profit for the year by the weighted average number of ordinary
shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary
shares.
There are no dilutive instruments in issue.
Any shares issued after the year end are disclosed in Note
21.
The Company is a FTSE EPRA/NAREIT index series constituent and EPRA performance measures have been
disclosed to facilitate comparability with the Company’s peers through consistent reporting of key performance
measures.
EPRA has issued recommended bases for the calculation of EPS as alternative indicators of
performance.
Year | Year | |
ended | ended | |
31 March | 31 March | |
Group | 2025 | 2024 |
Net profit/(loss) for the year (£000) | 38,155 | (1,502) |
Net (gains)/losses on investment property and depreciation (£000) | (11,369) | 25,687 |
Abortive acquisition costs | - | 1,557 |
EPRA net profit attributable to equity holders of the Company (£000) | 26,786 | 25,742 |
Weighted average number of ordinary shares: | ||
Issued ordinary shares at start of the year (thousands) | 440,850 | 440,850 |
Effect of shares issued during the year (thousands) | - | - |
Basic and diluted weighted average number of shares (thousands) | 440,850 | 440,850 |
Basic and diluted EPS (p) | 8.7 | (0.3) |
Basic and diluted EPRA EPS (p) | 6.1 | 5.8 |
131
Revenue
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Gross rental income from investment property | 42,828 | 42,194 |
Income from recharges to tenants | 3,562 | 3,280 |
Income from dilapidations | 1,131 | 574 |
Other income | 476 | 195 |
47,997 | 46,243 |
Operating profit
Operating profit is stated after (crediting)/charging:
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Profit on disposal of investment property | (444) | (1,418) |
Investment property valuation (increase)/decrease | (11,211) | 26,972 |
Fees payable to the Company’s auditor and its associates for the audit of the | ||
Company’s annual financial statements | 171 | 163 |
Fees payable to the Company’s auditor and its associates for the interim | ||
review | 39 | 37 |
Administrative fee payable to the Investment Manager | 494 | 511 |
Directly incurred operating expenses of vacant rental property | 1,886 | 1,968 |
Directly incurred operating expenses of let rental property | 2,081 | 1,124 |
Amortisation of right-of-use asset | 7 | 7 |
132
Finance income
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Bank interest | 127 | 78 |
127 | 78 |
7.
Finance costs
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Amortisation of arrangement fees on debt facilities | 418 | 432 |
Other finance costs | 443 | 113 |
Bank interest | 6,625 | 7,581 |
7,486 | 8,126 |
133
Income tax
The tax charge assessed for the year is lower than the standard rate of corporation tax in the UK during the year
of 25.0% (2024: 25.0%).
The differences are explained below:
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Profit/(loss) before income tax | 38,155 | (1,502) |
Tax charge on profit at a standard rate of 25.0% | 9,539 | (376) |
Effects of: | ||
REIT tax exempt rental profits and gains | (9,539) | 376 |
Income tax expense | - | - |
Effective income tax rate | 0.0% | 0.0% |
The Company operates as a REIT and hence profits and gains from the property rental business are normally
134
9.
Dividends
Year |
Year |
|
ended |
ended |
|
31 March |
31 March |
|
2025 |
2024 |
|
Group and Company |
£000 |
£000 |
Interim dividends paid on ordinary shares relating to the quarter ended: |
||
Prior year |
||
- 31 March 2024: 1.375p |
6,062 |
6,062 |
Special equity dividends paid on ordinary shares relating to the year ended: |
||
- 31 March 2024: 0.3p |
1,322 |
- |
Current year |
||
- 30 June 2024: 1.5p (2023: 1.375p) |
6,613 |
6,061 |
- 30 September 2024: 1.5p (2023: 1.375p) |
6,613 |
6,062 |
- 31 December 2024: 1.5p (2023: 1.375p) |
6,613 |
6,062 |
27,223 |
24,247 |
The Company paid a fourth interim dividend relating to the quarter ended 31 March 2025 of 1.5p per ordinary
135
Investment property and assets held for sale
Assets held-for-sale
At 31 March |
At 31 March |
|
Group and Company |
2025 |
2024 |
£000 |
£000 |
|
Balance at the start of the year |
11,000 |
- |
Disposals |
(11,000) |
- |
Reclassification from investment property |
- |
11,000 |
Balance at the end of the year |
- |
11,000 |
Investment property
Company |
|
£000 |
|
Group and Company |
|
At 31 March 2023 |
613,587 |
Impact of lease incentives and lease costs |
2,105 |
Amortisation of right-of-use asset |
(7) |
Capital expenditure |
17,034 |
Disposals |
(16,625) |
Valuation decrease |
(26,972) |
Reclassification as held-for-sale |
(11,000) |
At 31 March 2024 |
578,122 |
Impact of lease incentives and lease costs |
1,470 |
Amortisation of right-of-use asset |
(7) |
Capital expenditure |
6,843 |
Disposals |
(3,275) |
Valuation increase |
11,211 |
At 31 March 2025 |
594,364 |
£490.9m (2024: £486.8m) of investm
ent property was charged as security against the Company’s borrowings at
the year end. £0.6m (2024: £0.6m) of investment property comprises right-of-use assets.
136
The carrying value of investment property at 31 March 2025 comprises £506.5m freehold (2024: £493.0m) and
£87.9m leasehold property (2024: £85.1m).
The aggregate historical cost of investment property and assets held-
for-sale was £629.8m (2024: £637.6m).
Investment property is stated at the Directors
’ estimate of its
31 March 2025 fair value.
Savills (UK) Limited
(“Savills”) and Knight Frank LLP (“KF”), professionally qualified independent valuers, each valued approximately
half of the property portfolio as at 31 March 2025 in accordance with the Appraisal and Valuation Standards
published by the
Royal Institution of Chartered Surveyors (“RICS”).
Savills and KF have recent experience in the
relevant locations and categories of the property being valued.
Investment property has been valued using the investment method which involves applying a yield to rental income
streams.
Inputs include yield, current rent and ERV.
For the year end valuation, the following inputs were used:
Valuation | Weighted | Weighted | |||
31 March | average | average ERV | |||
2025 | passing rent | range | |||
Sector | £000 | (£ per sq ft) | (£ per sq ft) | Equivalent yield | Topped-up NIY |
Industrial | 298.3 | 6.1 | 4 .75 – 14.9 | 6.9% | 5.5% |
Retail warehouse | 127.3 | 11.6 | 6.1 – 22.4 | 7.6% | 7.5% |
Other | 78.2 | 11.3 | 2.7 – 80.0* | 8.4% | 7.7% |
Office | 57.7 | 16.8 | 8.5 – 38.0 | 11.1% | 8.1% |
High street retail | 32.9 | 19.3 | 3.7 – 67.0 | 8.4% | 9.4% |
*Drive-
through restaurants’ ERV per sq ft are based on building floor area rather than area inclusive of drive
-
through lanes.
Valuation reports are based on both information provided by the Company eg current rents and lease terms, which
are derived from the Company’s financial and property management systems and are subject to the Company’s
overall control environment, and assumptions applied by the valuers eg ERVs, expected capital expenditure and
yields.
These assumptions are based on market observation and the valuers’ professional judgement.
In
estimating the fair value of each property, the highest and best use of the properties is their current use.
All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of investment
property, and an increase in the current or estimated future rental stream would have the effect of increasing
capital value, and vice versa.
There are interrelationships between unobservable inputs which are partially
determined by market conditions, which could impact on these changes, but the table below presents the
sensitivity of the investment property valuations to changes in the most significant assumptions underlying their
137
valuation, being equivalent yield and ERV. The Board believes these are reasonable sensitivities given historical
changes.
Group and Company | ||
Year | Year | |
ended | ended | |
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Increase in equivalent yield of 0.25% | 34,941 | 21,627 |
Decrease in equivalent yield of 0.25% | (30,975) | (20,134) |
Increase of 5% in ERV | 1,864 | 1,807 |
Decrease of 5% in ERV | (1,834) | (1,754) |
Property, plant and equipment
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 |
138
PV cells | EV chargers | Total | |
Group and Company | £000 | £000 | £000 |
Cost | |||
At 31 March 2023 | - | - | - |
Additions | 2,076 | 1,126 | 3,202 |
At 31 March 2024 | 2,076 | 1,126 | 3,202 |
Depreciation | |||
At 31 March 2023 | - | - | - |
Depreciation | (123) | (122) | (245) |
Accumulated at 31 March 2024 | (123) | (122) | (245) |
Net book value at 31 March 2024 | 1,953 | 1,004 | 2,957 |
Investments
The Company’s
non-trading UK subsidiary has claimed the audit exemption available under Section 480 of the
Companies Act 2006.
Company | ||||||
Country of | 31 | 31 | ||||
registration | Ordinary | March | March | |||
Company | and | Principal | shares | 2025 | 2024 | |
Name | number | incorporation | activity | held | £000 | £000 |
Custodian REIT Limited | 08882372 | England and Wales | Non-trading | 100% | - | - |
- | - |
139
Trade and other receivables
31 | 31 | |
Group and Company | March | March |
2025 | 2024 | |
£000 | £000 | |
Falling due in less than one year: | ||
Trade receivables before expected credit loss provision | 4,387 | 1,911 |
Expected credit loss provision | (627) | (855) |
3,760 | 1,056 | |
Other receivables | 1,146 | 2,081 |
Prepayments and accrued income | 295 | 193 |
5,201 | 3,330 |
The Company regularly monitors the effectiveness of the criteria used to identify whether there has been a
significant increase in credit risk, for example a deterioration in a tenant’s or sector’s outlook or rent payment
performance, and revises them as appropriate to ensure that the criteria are capable of identifying significant
increases in credit risk before amounts become past due.
Tenant rent deposits of £1.6m (2024: £1.7m) are held as collateral against certain trade receivable balances.
The Company considers the following as constituting an event of default for internal credit risk management
purposes as historical experience indicates that financial assets that meet either of the following criteria are
generally not recoverable:
•
When there is a breach of financial covenants by the debtor; or
•
Available information indicates the debtor is unlikely to pay its creditors.
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.
140
Group and Company | 31 March | 31 March |
2025 | 2024 | |
Expected credit loss provision | £000 | £000 |
Opening balance | 855 | 1,143 |
Increase/(decrease) in provision relating to trade | 196 | (241) |
receivables that are credit-impaired | ||
Utilisation of provisions | (424) | (47) |
Closing balance | 627 | 855 |
The ageing of receivables considered credit impaired is as follows:
Group and Company | 31 March | 31 March |
2025 | 2024 | |
£000 | £000 | |
0 to 3 months | 106 | 288 |
3 – 6 months | 40 | - |
Over 6 months | 551 | 567 |
Closing balance | 697 | 855 |
141
Trade and other payables
Group and Company | 31 March | 31 March |
2025 | 2024 | |
£000 | £000 | |
Falling due in less than one year: | ||
Trade and other payables | 2,603 | 1,442 |
Social security and other taxes | 760 | 830 |
Accruals | 3,601 | 4,079 |
Rental deposits | 65 | 1,732 |
7,029 | 8,083 | |
Falling due in more than one year: | ||
Rental deposits | 1,521 | - |
Other creditors | 566 | 569 |
2,151 | 569 |
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Trade
payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
For most
suppliers interest is charged if payment is not made within the required terms.
Thereafter, interest is chargeable
on the outstanding balances at various rates.
The Company has financial risk management policies in place to
ensure that all payables are paid within the credit timescale.
The ageing of rental deposits has been reassessed
Cash and cash equivalents
Group and Company | ||
31 March | 31 March | |
2025 | 2024 | |
£000 | £000 | |
Cash and cash equivalents | 10,118 | 9,714 |
(2024: £1.7m) rental deposits held on behalf of tenants, £0.6m (2024: £0.6m) retentions held in respect of
142
Borrowings
The table below sets out changes in liabilities arising from financing activities during the year.
Costs |
|||
Group and Company |
incurred in the |
||
arrangement |
|||
Borrowings |
of borrowings |
Total |
|
Falling due within one year: |
£000 |
£000 |
£000 |
At 31 March 2023 |
- |
- |
- |
Repayment of |
|||
borrowings |
- |
- |
- |
Amortisation of |
|||
arrangement fees |
- |
- |
- |
At 31 March 2024 |
- |
- |
- |
Reclassification |
20,000 |
(11) |
19,989 |
Repayment of |
|||
borrowings |
- |
- |
- |
Amortisation of |
- |
- |
- |
arrangement fees |
|||
At 31 March 2025 |
20,000 |
(11) |
19,989 |
Falling due in more than one |
|||
year: |
|||
At 31 March 2023 |
173,500 |
(1,398) |
172,102 |
Additional |
5,500 |
- |
5,500 |
borrowings |
|||
Arrangement fees |
- |
(744) |
(744) |
incurred |
|||
Amortisation of |
- |
432 |
432 |
arrangement fees |
|||
At 31 March 2024 |
179,000 |
(1,710) |
177,290 |
Reclassification |
(20,000) |
11 |
(19,989) |
Repayment of |
(4,000) |
- |
(4,000) |
borrowings |
|||
Arrangement fees |
- |
(78) |
(78) |
incurred |
|||
Amortisation of |
- |
418 |
418 |
arrangement fees |
|||
At 31 March 2025 |
155,000 |
(1,359) |
153,641 |
143
On 23 January 2025, the Company and Lloyds agreed to extend the term of the RCF by one year to expire on 10
November 2027.
An option remains in place to extend the term by a further year to 202
8, subject to Lloyds’
consent.
At the year end the Company had the following facilities available:
•
A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA and is repayable on 10
November 2027.
The RCF limit can be increased to £75
m with Lloyds’ consent, with £
39m drawn at the year
end.
Since the year end, the RCF limit has been increased to £60m;
•
A £20m term loan with Scottish Widows plc with interest fixed at 3.935% and is repayable on 13 August 2025;
•
A £45m term loan with Scottish Widows plc with interest fixed at 2.987% and is repayable on 5 June 2028;
and
•
A £75m term loan facility with Aviva comprising:
-
A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
-
A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
-
A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.
Each facility has a discrete
security pool, comprising a number of the Company’s individual properties, over which
the relevant lender has security and covenants:
•
The maximum LTV of each discrete security pool is either 45% and 50%, with an overarching covenant on the
Company’s property portfolio of a maximum
of either 35% or 40% LTV; and
•
Historical interest cover, requiring net rental income from each discrete security pool, over the preceding three
months, to exceed either 200% or 250% of the facility’s quarterly interest liability.
The Company’s debt facilities contain market
-standard cross-guarantees such that a default on an individual
144
Share capital
Group and Company | Ordinary | |
shares | ||
Issued and fully paid share capital | of 1p | £000 |
At 1 April 2023, 31 March 2024 and 31 March 2025 | 440,850,398 | 4,409 |
Rights, preferences and restrictions on shares
All ordinary shares carry equal rights and no privileges are attached to any shares in the Company.
All the shares
are freely transferable, except as otherwise provided by law.
The holders of ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
All
shares rank equally with regard to the Company’s residual assets.
At the AGM of the Company held on 8 August 2024, the Board was given authority to issue up to 146,950,133
shares, pursuant to section 551 of the Companies Act 2006 (“the Authority”).
The Authority is intended to satisfy
market demand for the ordinary shares and raise further monies for investment in a
ccordance with the Company’s
investment policy.
The Authority expires on the earlier of 15 months from 8 August 2024 and the subsequent
AGM, due to take place on 9 September 2025. Since 8 August 2024, 22.9m ordinary shares have been issued in
connection with the acquisition of Merlin.
In addition, the Company was granted authority to make market purchases of up to 44,085,039 ordinary shares
under section 701 of the Companies Act 2006.
No market purchases of ordinary shares have been made.
145
| Group and Company | ||||
Share | ||||
Retained | Revaluation | premium | Merger | |
earnings | reserve | account | reserve | |
Other reserves | £000 | £000 | £000 | £000 |
At 1 April 2023 | 163,259 | - | 250,970 | 18,931 |
Loss for the year | (1,502) | - | - | - |
Dividends paid | (24,247) | - | - | - |
At 31 March 2024 | 137,510 | - | 250,970 | 18,931 |
Revaluation of PPE | - | 714 | - | - |
Profit for the year | 38,155 | - | - | |
Dividends paid | (27,223) | - | - | |
At 31 March 2025 | 148,442 | 714 | 250,970 | 18,931 |
The nature and purpose of each reserve within equity are:
•
Share premium - amounts subscribed for share capital in excess of nominal value less any associated issue
costs that have been capitalised.
•
Revaluation reserve - the unrealised fair value of PV assets in excess of their historical cost less accumulated
depreciation.
•
Retained earnings - all other net gains and losses and transactions with owners (eg dividends) not recognised
elsewhere.
•
Merger reserve - a non-statutory reserve that is credited instead of a company's share premium account in
146
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:
31 March | 31 March | |
2025 | 2024 | |
Group and Company | £000 | £000 |
Not later than one year | 38,406 | 39,751 |
Year 2 | 35,206 | 34,984 |
Year 3 | 29,810 | 31,620 |
Year 4 | 24,353 | 26,113 |
Year 5 | 19,380 | 19,946 |
Later than five years | 77,434 | 74,059 |
224,589 | 226,473 |
The following table presents rent amounts reported in revenue:
31 March | 31 March | |
Group and Company | 2025 | 2024 |
£000 | £000 | |
Lease income on operating leases | 42,587 | 41,926 |
Therein lease income relating to variable lease | 241 | 268 |
payments that do not depend on an index or rate | ||
42,828 | 42,194 |
147
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.
During the year, the terms of the
Directors’
appointments were amended such that
each director is required to retire by rotation and seek re-election annually (2024: at least every three years).
Each
director’s appointment under their respective letter of appointment is terminable immediately by either party (the
Company or the director) giving written notice and no compensation or benefits are payable upon termination of
office as a director of the Company becoming effective.
Nathan Imlach is Chief Strategic Adviser of Mattioli Woods, the parent company of the Investment Manager.
As
a result, Nathan Imlach is not independent.
The Company Secretary, Ed Moore, is also a director of the Investment
Manager.
Compensation paid to the directors, who are also considered
‘
key management personnel
’
in addition to the key
Investment Manager personnel, is disclosed in the Remuneration report.
The directors' remuneration report also
Project Merlin
Since the year end the Company has acquired Merlin and as part of this transaction the Company is due to pay
Mattioli Woods an introducer’s fee of £
0.2m and Custodian Capital a transaction fee of £0.06m.
The vendors of
Merlin are advised clients of Mattioli Woods.
Investment Management Agreement
The Investment Manager is engaged as AIFM under an IMA with responsibility for the management of the
Company’s assets, subject to the overall supervision of the Directors.
The Investment Manager manages the
Company’s investments in accordance with the policies laid down by the Board and the investment restrictions
referred to in the IMA.
The Investment Manager also provides day-to-day administration of the Company and acts
as secretary to the Company, including maintenance of accounting records and preparing the annual and interim
financial statements of the Company.
148
Annual management fees payable to the Investment Manager under the IMA are:
•
0.9% of the NAV of the Company as at the relevant quarter day which is less than or equal to £200m divided
by 4;
•
0.75% of the NAV of the Company as at the relevant quarter day which is in excess of £200m but below £500m
divided by 4;
•
0.65% of the NAV of the Company as at the relevant quarter day which is in excess of £500m but below £750m
divided by 4; plus
•
0.55% of the NAV of the Company as at the relevant quarter day which is in excess of £750m divided by 4.
Administrative fees payable to the Investment Manager under the IMA are:
•
0.125% of the NAV of the Company as at the relevant quarter day which is less than or equal to £200m divided
by 4;
•
0.115% of the NAV of the Company as at the relevant quarter day which is in excess of £200m but below
£500m divided by 4;
•
0.02% of the NAV of the Company as at the relevant quarter day which is in excess of £500m but below £750m
divided by 4; plus
•
0.015% of the NAV of the Company as at the relevant quarter day which is in excess of £750m divided by 4.
The IMA is terminable by either party by giving not less than 12 months’ prior written notice to the other.
The IMA
may also be terminated on the occurrence of an insolvency event in relation to either party, if the Investment
Manager is fraudulent, grossly negligent or commits a material breach which, if capable of remedy, is not remedied
within three months, or on a force majeure event continuing for more than 90 days.
The Investment Manager receives a marketing fee of 0.25% (2024: 0.25%) of the aggregate gross proceeds from
any issue of new shares in consideration of the marketing services it provides to the Company.
During the year the Investment Manager charged the Company £3.9m (2024: £4.0m) comprising £3.4m (2024:
£3.5m) in respect of annual management fees and £0.5m (2024: £0.5m) in respect of administrative fees.
During the year the Company appointed Maven, a subsidiary of Mattioli Woods, as Company Secretarial Adviser,
which charges the Company an annual fee of £0.02m for Company Secretarial Services.
149
Mattioli Woods arranges insurance on behalf of the Company’s tenants through an insurance broker and the
Investment Manager is paid a commission by the Company’s tenants for administering the policy.
On 4 September 2024 100% of the share capital of Mattioli Woods was acquired Tiger Bidco Limited, a wholly-
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 unrestricted cash) to its property.
The net gearing ratio
at the year-end was 27.9% (2024: 29.2%).
Externally imposed capital requirements
The Company is not subject to externally imposed capital requirements, although there are restrictions on the level
of interest that can be paid due to conditions imposed on REITs.
Financial risk management
The Company seeks to minimise the effects of interest rate risk, credit risk, liquidity risk and cash flow risk by using
fixed and floating rate debt instruments with varying maturity profiles, at low levels of net gearing.
Interest rate risk management
150
The Company’s activities expose it primarily to the financial risks of increases in interest rates, as it borrows funds
at floating interest rates.
The risk is managed by maintaining:
•
An appropriate balance between fixed and floating rate borrowings;
•
A low level of net gearing; and
•
An RCF whose flexibility allows the Company to manage the risk of changes in interest rates by paying down
variable borrowings using the proceeds of equity issuance, property sales or arranging fixed-rate debt.
The Board periodically considers the availability and cost of hedging instruments to assess whether their use is
appropriate and also considers the maturity profile of the Company’s borrowings.
Interest rate sensitivity analysis
Interest rate risk arises on interest payable on the RCF only, as interest on all other debt facilities is payable on a
fixed rate basis.
At 31 March 2025, the RCF was drawn at £35m (2024: £39m).
Assuming this amount was
outstanding for the whole year and based on the exposure to interest rates at the reporting date, if SONIA had
been 1.0% higher/lower and all other variables were constant, the Company’s profit for the year ended 31 March
2025 would decrease/increase by £0.4m (2024: £0.4m).
The Company manages its exposure to market risk by holding a portfolio of investment property diversified by
sector, location and tenant.
Market risk sensitivity
Market risk arises on the valuation of the Company’s property portfolio in complying with its bank loan covenants
(Note 16). The valuation of
the Company’s
property portfolio would have to fall by 20% (2024: 17%) for the
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
34
Source: Moody’s
.
151
allowance for impairment is made where a debtor is in breach of its financial covenants, available information
indicates a debtor can’t pay or where balances are significantly past due.
The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the
risk of financial loss from defaults.
The maximum credit risk on financial assets at 31 March 2025, which comprise
trade receivables plus unrestricted cash, was £11.7m (2024: £8.3m).
The Company has no significant concentration of credit risk, with exposure spread over a large number of tenants
covering a wide variety of business types.
Further detail on the Company’s credit risk management process is
included within the Strategic report.
Cash of £10.1m (2024: £9.7m) is held with Lloyds Bank plc which has a credit rating of A1
34
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.
152
The table includes both interest and principal cash flows.
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 |
31 March | |||||
31 March | 2024 | 31 March | 31 March | ||
2024 | 3 months – | 2024 | 2024 | ||
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 | 5,922 | - | 151 | 420 |
Borrowings: | |||||
Variable rate | 6.9 | 673 | 2,018 | 46,041 | - |
Fixed rate | 3.935 | 197 | 590 | 20,295 | - |
Fixed rate | 2.987 | 336 | 1,008 | 49,283 | - |
Fixed rate | 3.020 | 264 | 793 | 4,228 | 38,191 |
Fixed rate | 3.260 | 122 | 367 | 1,956 | 16,760 |
Fixed rate | 4.100 | 154 | 461 | 2,460 | 27,214 |
7,668 | 5,237 | 124,414 | 82,585 |
153
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 of PV is based on valuations provided by independent firms of valuers, which use the inputs set out in
Note 10.
These values were determined after having taken into consideration recent market transactions for
similar properties in similar locations to the investment properties held by the Company.
The fair value hierarchy
of investment property is level 3.
At 31 March 2024
, the fair value of the Company’s investment
properties and
assets held-for-sale was £594.4m (2024: £589.1m).
PV
–
level 3
Fair value is based on valuations provided by independent firms of chartered surveyors and registered appraisers,
which use the inputs set out in Note 11.
These values were determined after having taken into consideration an
appropriate yield and the net income from each array.
The fair value hierarchy of PV is level 3.
At 31 March 2025,
the fair value of the Company’s
PV was £3.8m (2024: £2.0m).
Interest bearing loans and borrowings
–
level 3
At 31 March 2025
the gross value of the Company’s loans with Lloyds, SWIP and Aviva all held at amortised cost
was £175.0m (2024: £179.0m).
The
difference between the carrying value of Company’s loans and their fair value
is detailed in Note 22.
154
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 30 May 2025 the Company paid a fourth quarterly interim dividend per share of 1.5p.
Property disposals
Since the year end the Company has sold:
•
Part-let offices in Cheadle for £4.0m; and
•
Fully-let offices in Cheadle for £2.9m.
Acquisitions
On 30 May 2025 the Company completed the corporate acquisition of Merlin Properties Limited for initial
consideration of 22.9m new ordinary shares in the Company. Based on the nature of the acquisition it does not
fall within the scope of IFRS 3 Business Combinations and the assets acquired were purchased at fair value. The
155
22.
Alternative performance measures
NAV per share total return
An alternative measure of performance taking into account both capital returns and dividends by assuming
dividends
declared are reinvested at NAV at the time the shares are quoted ex-dividend, shown as a percentage
change from the start of the year.
Group
Calculation
Year ended
31 March
2025
Year ended
31 March
2024
Net assets (£000)
423,466
411,820
Shares in issue at 31 March (thousands)
440,850
440,850
NAV per share at the start of the year (p)
A
93.4
99.3
Dividends per share paid during the year (p)
B
6.175
5.5
NAV per share at the end of the year (p)
C
96.1
93.4
NAV per share total return
(C-A+B)/A
9.5%
(0.4%)
Share price total return
An alternative measure of performance taking into account both share price returns and dividends by assuming
dividends declared are reinvested at the ex-dividend share price, shown as a percentage change from the start of
the year.
Group
Calculation
Year ended
31 March
2025
Year
ended
31 March
2024
Share price at the start of the year (p)
A
81.4
89.2
Dividends per share paid during the year (p)
B
6.175
5.5
Share price at the end of the year (p)
C
76.2
81.4
Share price total return
(C-A+B)/A
1.2%
(2.6%)
156
Dividend cover
The extent to which dividends relating to the year are supported by recurring net income.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Dividends paid relating to the year
19,838
18,185
Dividends approved relating to the year
6,613
7,384
Dividends relating to the year
26,451
25,569
Profit/(loss) after tax
38,155
(1,502)
One-off costs
-
1,557
Net (gains)/losses on investment property and depreciation
(11,369)
25,687
Recurring net income
26,786
25,742
Dividend cover
101.3%
100.7%
157
Weighted average cost of debt
The interest rate payable on bank borrowings at the year end weighted by the amount of borrowings at that rate
as a proportion of total borrowings.
31 March 2025
Amount
drawn
£m
Interest rate
Weighting
RCF
35.0
6.080%
1.22%
Total variable rate
35.0
SWIP £20m loan
20.0
3.935%
0.77%
SWIP £45m loan
45.0
2.987%
0.45%
Aviva
•
£35m tranche
35.0
3.020%
0.60%
•
£15m tranche
15.0
3.260%
0.28%
•
£25m tranche
25.0
4.100%
0.59%
Total fixed rate
140.0
Weighted average drawn facilities
175.0
3.91%
31 March 2024
Amount
drawn
£m
Interest rate
Weighting
RCF
39.0
6.900%
1.50%
Total variable rate
39.0
SWIP £20m loan
20.0
3.935%
0.44%
SWIP £45m loan
45.0
2.987%
0.75%
Aviva
£35m tranche
35.0
3.020%
0.59%
•
£15m tranche
15.0
3.260%
0.27%
•
£25m tranche
25.0
4.100%
0.57%
Total fixed rate
140.0
Weighted average rate on drawn facilities
179.0
4.13%
158
Net gearing
Gross borrowings less cash (excluding restricted cash), divided by portfolio
35
value.
This ratio indicates whether
the Company is meeting its investment objectives to target 25% loan-to-value in the medium-term with a maximum
permitted level of 35%, to balance enhancing shareholder returns without facing excessive financial risk.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Gross borrowings
175,000
179,000
Cash
(10,118)
(9,714)
Restricted cash
2,188
2,502
Net borrowings
167,070
171,788
Investment property
594,364
589,122
PV
3,808
-*
598,172
589,122
Net gearing
27.9%
29.2%
*PV was not included in the net gearing calculation in the prior year.
35
Comprising investment property, assets held-for-sale and PV.
159
Ongoing charges
A measure of the regular, recurring costs of running an investment company expressed as a percentage of
average NAV, and indicates how effectively costs are controlled in comparison to other property investment
companies.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Average quarterly NAV for the year
414,786
423,622
Expenses (excluding depreciation)
13,852
12,586*
Operating expenses of rental property rechargeable to tenants
(3,562)
(3,280)
Ongoing charges
10,290
9,306
Operating expenses of rental property directly incurred
(4,891)
(4,032)
One-off costs
-
-
Ongoing charges excluding direct property expenses
5,399
5,274
OCR
2.48%
2.20%
OCR excluding direct property expenses
1.30%
1.24%
*depreciation was not deducted from total expenses in the prior year calculation.
EPRA performance measures
The Company uses EPRA alternative performance measures based on its Best Practice Recommendations to
supplement IFRS measures, in line with best practice in the sector.
The measures defined by EPRA are designed
to enhance transparency and comparability across the European real estate sector.
The Board supports EPRA’s
drive to bring parity to the comparability and quality of information provided in this report to investors and other
key stakeholders.
EPRA alternative performance measures are adopted throughout this report and are considered
by the directors to be key business metrics.
160
EPRA earnings per share
A measure of the Company’s operating results excluding
capital gains or losses, giving an alternative indication
of performance compared to basic EPS which sets out the extent to which dividends relating to the year are
supported by recurring net income.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Profit/(loss) for the year after taxation
38,155
(1,502)
Net (gains)/losses on investment property and depreciation
(11,369)
25,687
Abortive acquisition costs
-
1,557
EPRA earnings
26,786
25,742
Weighted average number of shares in issue (thousands)
440,850
440,850
EPRA earnings per share (p)
6.1
5.8
161
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 (“NR
V
”)
NRV assumes the Company never sells its assets and aims to represent the value required to rebuild the entity.
Group
31 March
2025
£000
31 March
2024
£000
IFRS NAV
423,546
411,820
Fair value of financial instruments
-
-
Deferred tax
-
-
EPRA NRV
423,546
411,820
Number of shares in issue (thousands)
440,850
440,850
EPRA NRV per share (p)
96.1
93.4
162
EPRA Net Tangible Assets (“NTA”)
Assumes that the Company buys and sells assets for short-term capital gains, thereby crystallising certain deferred
tax balances.
Group
31 March
2025
£000
31 March
2024
£000
IFRS NAV
423,546
411,820
Fair value of financial instruments
-
-
Deferred tax
-
-
Intangibles
-
-
EPRA NTA
423,546
411,820
Number of shares in issue (thousands)
440,850
440,850
EPRA NTA per share (p)
96.1
93.4
163
EPRA Net Disposal Value (“NDV”)
R
epresents the shareholders’ value under a disposal scenario, where deferred tax, financial
instruments and
certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.
Group
31 March
2025
£000
31 March
2024
£000
IFRS NAV
423,546
411,820
Fair value of fixed rate debt below book value
16,754
16,926
Deferred tax
-
-
EPRA NDV
440,221
428,746
Number of shares in issue (thousands)
440,850
440,850
EPRA NDV per share (p)
99.9
97.3
At 31 March 2025
the Company’s gross debt
included in the balance sheet at amortised cost was £175.0m (2024:
£179.0m) and its fair value is considered to be £158.2m (2024: £160.4m). This fair value has been calculated
based on prevailing mark-to-
market valuations provided by the Company’s lenders, and excludes ‘break’ costs
chargeable should the Company settle loans ahead of their contractual expiry.
164
EPRA NIY and EPRA ‘topped
-
up’ NIY
EPRA NIY represents annualised rental income based on cash rents passing at the balance sheet date, less non-
recoverable property operating expenses, divided by the property valuation
plus estimated purchaser’s costs
.
The
EPRA
‘
topped-up
’
NIY is calculated by making an adjustment to the EPRA NIY in respect of the expiration of rent
free periods (or other unexpired lease incentives such as discounted rent periods and stepped rents).
These
measures offer comparability between the rent generating capacity of portfolios.
Group
31 March
2025
£000
31 March
2024
£000
Investment property
36
594,364
589,122
Allowance for estimated purchasers’ costs
37
38,634
38,293
Gross-up property portfolio valuation
632,998
627,415
Annualised cash passing rental income
38
41,135
41,732
Property outgoings
39
(2,122)
(1,931)
Annualised net rental income
39,013
39,801
Impact of expiry of current lease incentives
40
2,780
1,408
Annualised net rental income on expiry of lease incentives
41,793
41,209
EPRA NIY
6.2%
6.3%
EPRA ‘topped
-
up’ NIY
6.6%
6.6%
36 Including assets held-for-sale.
37 Assumed at 6.5% of investment property valuation.
38
Annualised cash rents at the year date.
39
Non-recoverable directly incurred operating expenses of vacant rental property and ground rent costs.
40
Adjustment for the expiration of lease incentives.
165
EPRA vacancy rate
EPRA vacancy rate is the ERV of vacant space as a percentage of the ERV of the whole property portfolio and
offers insight into the additional rent generating capacity of the portfolio.
Group
31 March
2025
£000
31 March
2024
£000
Annualised potential rental value of vacant premises
4,467
4,743
Annualised potential rental value for the property portfolio
50,194
48,976
EPRA vacancy rate
8.9%
9.7%
EPRA cost ratios
EPRA cost ratios reflect overheads and operating costs as a percentage of gross rental income and indicate how
effectively costs are controlled in comparison to other property investment companies.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Directly incurred operating expenses and other expenses, excluding
depreciation
10,290
9,306*
Ground rent costs
(38)
(38)
EPRA costs (including direct vacancy costs)
10,252
9,268
Property void costs
(1,806)
(1,807)
EPRA costs (excluding direct vacancy costs)
8,446
7,461
Gross rental income
42,828
42,194
Ground rent costs
(38)
(38)
Rental income net of ground rent costs
42,790
42,156
EPRA cost ratio (including direct vacancy costs)
24.0%
22.0%
EPRA cost ratio (excluding direct vacancy costs)
19.7%
17.7%
*depreciation was not deducted from total expenses in the prior year calculation.
166
EPRA LTV
An alternative measure of gearing including all payables and receivables.
This ratio indicates whether the
Company is complying with its investment objective to target 25% loan-to-value in the medium-term to balance
enhancing shareholder returns without facing excessive financial risk.
Group
Year ended
31 March
2025
£000
Year ended
31 March
2024
£000
Gross borrowings
175,000
179,000
Trade and other receivables
5,201
3,330
Trade and other payables
(8,550)
(8,083)
Deferred income
(8,181)
(7,361)
Cash
10,118
9,714
Restricted cash
(2,188)
(2,502)
Net borrowings
171,400
174,098
Investment property and PV
598,172
589,122
EPRA LTV
28.7%
29.6%
EPRA capital expenditure
Capital expenditure incurred on the
Company’s property portfolio during the year.
This ratio offers insight into the
proportion of cash deployment relating to acquisitions compared to the like-for-like portfolio.
Group
31 March
2025
£000
31 March
2024
£000
Acquisitions
-
-
Development
4,843
3,567
Like-for-like portfolio
2,000
13,467
Total capital expenditure
6,843
17,034
167
EPRA like-for-like annual rent
Like-for-like rental growth of the property portfolio by sector
which offers an alternative view on the ‘run
-
rate’ of
revenues at the year end.
31 March 2025
Group
Industrial
£000
Retail
warehouse
£000
Retail
£000
Other
£000
Office
£000
Total
£000
Like-for-like rent
17,688
9,711
3,270
6,310
5,351
42,330
Acquired properties
-
-
-
-
-
-
Sold properties
390
-
-
-
108
498
18,078
9,711
3,270
6,310
5,459
42,828
31 March 2024
Group
Industrial
£000
Retail
warehouse
£000
Retail
£000
Other
£000
Office
£000
Total
£000
Like-for-like rent
16,357
3,679
9,785
5,807
5,415
41,043
Acquired properties
-
-
-
-
-
-
Sold properties
918
14
-
28
191
1,151
17,275
3,693
9,785
5,835
5,606
42,194
168
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
2024 and we aim to retain this recognition.
In alignment with our SECR statement, EPRA sBPR data relates to the calendar years 2024 and 2023 but has
been disclosed as 2025 and 2024
respectively due to the Company’s March accounting reference 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 33 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;
169
•
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 six 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/
170
Historical performance summary (unaudited)
Income statement
2025
£000
2024
£000
2023
£000
2022
£000
2021
£000
Revenue
47,997
46,243
44,147
39,891
39,578
Expenses and finance costs
(21,211)
(20,501)
(19,359)
(14,639)
(15,904)
EPRA earnings
26,786
25,742
24,788
25,252
23,674
Property
valuation
movements
and
depreciation
10,926
(27,105)
(91,551)
93,977
(19,611)
Acquisition costs
(1)
(1,557)
(3,426)
(2,273)
(707)
Profit/(loss) on disposal
444
1,418
4,368
5,369
393
Property gains/(losses)
11,369
(27,244)
(90,609)
97,073
(19,925)
Profit/(loss) after tax
38,155
(1,502)
(65,821)
122,325
3,749
Statement of financial position
Property portfolio
594,364
589,122
613,587
665,186
551,922
PV and EV chargers
4,711
2,957
1,113
-
-
Net borrowings
(163,512)
(171,788)
(168,123)
(127,277)
(137,259)
Other assets and liabilities
(12,097)
(8,471)
(9,008)
(10,269)
(4,797)
NAV
423,466
411,820
437,569
527,640
409,866
Financial highlights
NAV per share total return
9.5%
(0.4%)
(12.5%)
28.4%
0.9%
NAV per share (p)
96.1
93.4
99.3
119.7
97.6
EPRA earnings per share (p)
6.1
5.8
5.6
5.9
5.6
Dividends per share (p)
6.0
5.8
5.5
5.25
5.0
Dividend cover
101.3%
100.7%
102.2%
110.3%
112.7%
Share price total return
1.2%
(2.6%)
(7.0%)
17.0%
(2.3%)
Net gearing
27.9%
29.2%
27.4%
19.1%
24.9%
OCR excl. direct property expenses
1.30%
1.24%
1.23%
1.20%
1.12%
171
Company information
Directors:
David MacLellan
(Independent Non-Executive Chairman)
Elizabeth McMeikan
(
Senior Independent Non-Executive Director
)
Nathan Imlach
(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:
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Banker:
Lloyds Bank plc
114-116 Colmore Row
Birmingham
B3 3BD
Solicitors (property):
Shoosmiths LLP
100 Avebury Boulevard
Milton Keynes
MK9 1FH
Solicitors (corporate):
Stephenson Harwood
1 Finsbury Circus
London
EC2M 7SH
Property valuers:
Savills
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:
Link Market Services Limited
Unit 10
Central Square
29 Wellington Street
Leeds
LS1 4DL
ESG adviser:
JLL
30 Warwick Street
London
W1B 5NH
172
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
173
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 the 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.
174
(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.
175
Glossary of terms
Term
Explanation
2019
AIC
Corporate
Governance Code for
Investment Companies
(AIC Code)
The AIC Code addresses the Principles and Provisions set out in the UK Corporate
Governance Code, as well as setting out additional provisions on issues that are of
specific relevance to the Company and provide more relevant information to
shareholders.
Alternative
Investment
Fund Manager (AIFM)
External investment manager with appropriate FCA permissions to manage an
‘alternative investment fund’
Alternative performance
measures (APMs)
Assess Company performance alongside IFRS measures
Building
Research
Establishment
Environmental
Assessment
Method
(BREEAM)
A set of assessment methods and tools designed to help understand and mitigate the
environmental impacts of developments
Carbon Risk Real Estate
Monitor (CRREM)
A project focused on carbon risk assessment for the European real estate industry’s
push to decarbonise, building a methodology to empirically quantify the different
scenarios and their impact on the investor portfolios and identify which properties will
be at risk of stranding due to the expected increase in the stringent building codes,
regulation, and carbon prices. It also enables an analysis of the effects of refurbishing
single properties on the total carbon performance of a company
Core real estate
Generally understood to offer the lowest risk and target returns, requiring little
asset management and fully let on long leases.
Core-plus real estate
Generally understood to offer low-to-moderate risk and target returns, typically
high-quality and well-occupied properties but also providing asset management
opportunities.
Dividend cover
EPRA earnings divided by dividends paid and approved for the year
Earnings
per
share
(EPS)
Net profit/(loss) divided by number of shares in issue
Energy
performance
certificate (EPC)
Required certificate whenever a property is built, sold or rented. An EPC gives a
property an energy efficiency rating from A (most efficient) to G (least efficient). An
EPC contains information about a property’s energy use and
typical energy costs,
and recommendations about how to reduce energy use and save money
EPRA
earnings
per
share
Profit after tax, excluding net loss on property portfolio, divided by weighted average
number of shares in issue
EPRA occupancy
ERV of occupied space as a percentage of the ERV of the whole property portfolio
EPRA
(Sustainability)
Best
Practice
Recommendations
(BPR), (sBPR)
EPRA BPR and sBPR facilitate comparison with the Company’s peers through
consistent reporting of key real estate specific and environmental performance
measures
176
EPRA
topped-up
net
initial yield
Annualised cash rents at the year-end date, adjusted for the expiration of lease
incentives (rent free periods or other lease incentives such as discounted rent periods
and stepped rents), less non-recoverable vacant property operating expenses and
ground rent costs,
divided by property valuation plus estimated purchaser’s costs
Estimated rental value
(ERV)
The external valuers’ opinion of the open market rent which, on
the date of valuation,
could reasonably be expected to be obtained on a new letting or rent review of a
property
Equivalent yield
Weighted average of annualised cash rents at the year-end date and ERV, less
estimated non-recoverable property operating expenses, divided by property
valuation plus estimated purchaser’s costs
Expected
credit
loss
(ECL)
Unbiased, probability-weighted amount of doubtful debt provision, using reasonable
and supportable information that is available without undue cost or effort at the
reporting date
Global
Real
Estate
Sustainability
Benchmark (GRESB)
GRESB independently benchmarks ESG data to provide financial markets with
actionable insights, ESG data and benchmarks
Greenhouse gas (GHG)
Gasses in the earth’s atmosphere which trap heat and lead directly to climate change
Institutional
grade
tenants
Tenants with strong credit ratings and financial stability, with a proven track record
which are more highly sought after by institutional investors
Investment
management
agreement (IMA)
The Investment Manager is engaged under an IMA to manage the Company’s assets,
subject to the overall supervision of the Directors
Investment policy
Published, FCA approved policy that contains information about the policies which
the Company will follow relating to asset allocation, risk diversification, and gearing,
and that includes maximum exposures.
This is a requirement of Listing Rule 15
Key
performance
indicator (KPI)
The Company’s environmental and performance targets are measured by KPIs which
provide a strategic way to assess its success towards achieving its objectives
Like-for-like
Comparisons adjusted to exclude assets bought or sold during the current or prior
year
Market
Abuse
Regulation (MAR)
Regulations to which the Company’s code for directors’ share dealings is aligned
Minimum
Energy
Efficiency
Standards
(MEES)
MEES regulations set a minimum energy efficiency level for rented properties.
Net asset value (NAV)
Equity attributable to owners of the Company
NAV per share total
return
The movement in EPRA Net Tangible Assets per share plus the dividend paid during
the period expressed as a percentage of the EPRA net tangible assets per share at
the beginning of the period
Net gearing / loan-to-
value (LTV)
Gross borrowings less cash (excluding restricted cash), divided by property portfolio
and solar panel value
Net initial yield (NIY)
Annualised cash rents at the year-end date, adjusted for the expiration of lease
incentives
,
divided by property valuation plus estimated purchaser’s costs
177
Net rental income
Annualised cash rents at the year-end date, adjusted for the expiration of lease
incentives, less estimated non-recoverable property operating expenses
including
void costs and net service charge expenses
Net
tangible
assets
(NTA)
NAV adjusted to reflect the fair value of trading properties and derivatives and to
exclude deferred taxation on revaluations
Ongoing charges ratio
(OCR)
Expenses (excluding operating expenses of rental property recharged to tenants)
divided by average quarterly NAV, representing the Annual running costs of the
Company
Passing rent
Annualised cash rents at the year-end date, adjusted for the expiration of lease
incentives
Real Estate Investment
Trust (REIT)
A property company which qualifies for and has elected into a tax regime which is
exempt from corporation tax on profits from property rental income and UK capital
gains on the sale of investment properties
Revolving credit facility
(RCF)
Variable rate loan which can be drawn down or repaid periodically during the term of
the facility
Reversionary potential
Expected future increase in rents once reset to market rate
Share price total return
Share price movement including dividends paid during the year
Sterling Overnight
Index Average (SONIA)
Base rate payable on variable rate bank borrowings before the bank’s margin
Streamlined Energy and
Carbon Report (SECR)
SECR requirements aim to put green credentials into the public domain and help
organisations achieve the benefits of environmental reporting
Weighted average cost
of drawn debt facilities
The total loan interest cost per annum, based on prevailing rates on variable rate debt,
divided by the total debt in issue
Weighted
average
unexpired lease term to
first break or
expiry
(WAULT)
Average unexpired lease term across the investment portfolio weighted by contracted
rent
178
Financial calendar
24 April 2025
Ex-dividend date for fourth interim dividend
25 April 2025
Record date for fourth interim dividend
30 May 2025
Payment of fourth interim dividend and special dividend
12 June 2025
Announcement of results for the year ended 31 March 2025
9 September 2025
AGM