29 November 2015
DRIP REIT - Unaudited results for the six months ended 30 September 2015
Unaudited results for the six months ended 30 September 2015
I am delighted to present the Interim report of Drum Income Plus REIT plc (the “Company”) for the six months to 30 September 2015.
The Company listed on the London Stock Exchange on 29 May 2015, and raised £31.9m gross of share capital prior to issue costs. It has, subsequent to launch, entered into the REIT regime for the purposes of UK taxation.
The Company has extended its accounting period to 30 September 2016, and therefore this first Interim report covers the period from 1 April until 30 September 2015. The Board is pleased to take this opportunity to welcome all Shareholders.
The Company's net asset value ("NAV") as at 30 September 2015 was 96.37 pence per share. This represents a decrease in NAV of 3.6% since launch, of which 2.0% is accounted for by costs incurred in respect of the launch.
As at 30 September 2015 the share price was 105 pence, an increase of 5% from the 100 pence at launch. This represents a premium of 9.0% to the NAV at 30 September 2015.
As presented in the Condensed Statement of Comprehensive Income, the Company incurred a loss of £510,000 for the 6 months ended 30 September 2015 (period from incorporation to 31 March 2015: £nil). The revenue loss of £128,000 represents the early stages of the Company’s development where the rental income generated has been outweighed by day-to-day expenses. The revaluation loss of £382,000 in the period reflects the fact that the fair value of the Company’s property portfolio at 30 September 2015 is impaired by the extent of the initial acquisition costs.
The Company has been active in the period since launch as the proceeds of the listing have been invested. As at 30 September two properties have been acquired, one an office complex in Gateshead and the other a retail park in Dunfermline. The cost of these properties was £7.3m. These investments are reflected in the balance sheet. Subsequent to the balance sheet date of 30 September 2015 the Company acquired two further properties, in Gosforth and Glasgow. The total consideration for the four properties is approximately £26m. A fifth property is under negotiation and if acquired will result in all of the proceeds of the issue being invested. Further details of the properties purchased since 30 September 2015 are included in the notes to the condensed interim financial statements.
The Board is delighted that the proceeds of the issue have been invested in properties at yields very much in line with those described in the Prospectus.
The Board said in the Prospectus that it intended to target initial gearing, calculated as borrowings as a percentage of the Company’s gross assets, of 40% and this remains the case. I am pleased to inform shareholders that negotiations are well advanced to enter into a 12 month debt facility the terms of which are attractive to the Company and give flexibility in respect of future funding strategies.
It was stated in the Prospectus that once fully invested the Company intended to pay an annualised dividend of 5 pence per Ordinary share. It is expected that the first quarterly dividend will be paid once the full net proceeds of the Offer and available borrowings have been invested in income producing investments.
On 18 November 2015 the High Court confirmed the cancellation of the Company’s share premium account. The special reserve created as a result of the cancellation can be applied in any manner in which the Company’s profits available for distribution are to be applied. Further details of this transaction are included in the notes to the condensed interim financial statements.
As at 27 November 2015 the Company has £5.2m of cash reserves. While the Company is in negotiations to purchase a fifth property, these negotiations have not concluded and as such there is currently no contractual commitment. In the event the acquisition does progress, the Company has sufficient funds available to conclude the purchase.
Based on financial projections which extend beyond twelve months from the date of this report, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors have concluded that they should prepare the condensed interim financial statements under the going concern basis.
Your Board is pleased that the proceeds of the listing have been invested and that more opportunities offering similar value characteristics are under consideration. Since listing the legal advisers have been made aware of additional interest in the Company’s equity as the validity of the investment case becomes proven. The Board and its advisers are exploring ways in which further equity may be raised by the Company and I hope to be in a position to write to you in the near future with greater detail on such proposals.
Chairman27 November 2015