FULL YEAR RESULTS AND NOTICE OF AGM

RNS Number : 6047J

Ediston Property Inv Comp PLC

14 December 2022

 

Ediston Property Investment Company plc

(the 'Company')

(LEI: 213800JRL87EGX9TUI28)

FULL YEAR RESULTS AND NOTICE OF AGM

Ediston Property Investment Company plc (LSE: EPIC), a UK-listed Real Estate Investment Trust (REIT) investing in commercial property throughout the UK, announces its full year results for the year ended 30 September 2022.

The Company also announces that its 2022 Annual General Meeting will be held on Friday, 24 February 2023 at 2.00 p.m. at the offices of Ediston Investment Services Limited at 1 St Andrew Square, Edinburgh, EH2 2BD.

The Company's Annual Report and Financial Statements for the year ended 30 September 2022 and the formal Notice of the Annual General Meeting will be posted to shareholders and in accordance with Listing Rule 9.6.1 copies of the documents have been submitted to the UK Listing Authority and will shortly be available to view on the Company's corporate website at  https://www.epic-reit.com/literature/ and have also been submitted to the UK Listing Authority and will be shortly available for inspection from the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Year to 30 September 2022:

Operational

-     Sold four office assets and two leisure assets for £69.5m.

-     15 lease transactions completed with a contracted rent of £2.5m per annum.

-     98.2% of rent due was collected.

-     Portfolio is now 100% in retail warehousing, in line with the new investment strategy, with cash available for further investment at the appropriate time.

Key Performance Indicators and Financial

	2022	2021
NAV total return	11.5%	9.6%
Annualised dividend per shares	5.00p	4.42p
Average premium/discount of share price to NAV	-17.9%	-22.1%
Share price total return	-2.3%	54.6%
EPRA vacancy rate	6.5%	8.6%
Ongoing charges	1.4%	1.4%
Total assets	£313.7m	£303.0m
Weighted average unexpired lease term	4.5 years	5.0 years
EPRA NAV per share	94.9p	89.6p
Rent collected in the year	98.2%	95.7%
Dividend Cover	81.2%	119.0%

Anticipated Financial Calendar 2023

January 2023	Announcement of Net Asset Value as at 31 December 2022
24 February 2023	Annual General Meeting
April 2023	Announcement of Net Asset Value as at 31 March 2023
May 2023	Publication of Half Yearly Report for the six months to 31 March 2023
July 2023	Announcement of Net Asset Value as at 30 June 2023
October 2023	Announcement of Net Asset Value as at 30 September 2023
December 2023	Publication of Annual Report for the year to 30 September 2023

It is the intention of the Board that dividends will continue to be announced and paid monthly.

Enquiries
Will Barnett	Investec Bank plc	0207 597 5873
Calum Bruce	Ediston Properties Limited	0131 225 5599
Ruth Wright	JTC	0203 893 1011
Ben Robinson	Kaso Legg Communications	0203 995 6672
Stephanie Ross	Kaso Legg Communications	0203 995 6676

Chairman's Statement

OVERVIEW

The sale of the office and leisure properties has increased the retail warehouse exposure in the property portfolio from 74.1% to 100% of our invested assets. At the year end, the Company held £31.0m in the debt disposal account earmarked specifically for reinvestment, as well as £50.2m in its operational account.

In my interim statement in May, I commented that, whilst the retail warehouse market had flourished in the first part of the year, the macro-economic position was becoming more challenging due to world events and rising inflation. Behind this caution was the expectation of higher interest rates and a squeeze on business investment and consumer spending to bring inflation under control. This has happened against a background of political chaos in the UK.

The consequent spike in gilt rates has created a wave of fear in real estate markets as investors grapple with the pricing implications of needing higher returns on equity to compensate, and much higher borrowing costs than anticipated. This is reflected in the widened discounts across the closed-ended sector.

For the Company, the most obvious and immediate impact has been the deterioration in the share price, which has moved down from 78.8 pence per share at the half year to 67.6 pence at the year end. Due to a reduction in property values, the Company has seen a fall in Net Asset Value at 30 September, following five quarters of increases.

There are no doubt more real estate bumps in the road to navigate over coming months, with a slowing economy and rising interest rates. A sizeable one in the short term will be the impact of the expected mark down in market valuations at the end of December, based on transactional evidence over the quarter. External geopolitical factors will also remain a significant factor in determining the direction of the economy. The Board will continue to manage risk proactively and where possible ensure the Company is as resilient as it can be to whatever lies ahead. Despite the economic and political difficulties that emerged in 2022, the Company, with its new investment focus and cash to invest, should emerge from this period of disruption in a strong position.

INVESTMENT AND SHARE PRICE PERFORMANCE

The Company's Net Asset Value (NAV) per share increased by 5.9% with an annualised NAV total return as at 30 September 2022 of 11.5%. Like-for-like property values increased by 10.3% over the period.

Despite the increase in NAV, the share price has declined 8.4% over the year from 73.8 pence to 67.6 pence. Allowing for the payment of the dividend, the share price total return was -2.3%.

The increase in NAV for the year was driven by the improvement in valuations in the retail warehouse portfolio due to a combination of yield shift and the gains from asset management initiatives. Some of this value was lost in the last quarter due to markets falling back on economic concerns, the general rise in borrowing costs and the political turmoil. The sale of the office portfolio was completed below the September 2021 valuation, and was a drag on performance for the year. However, the sale was prescient as it is highly likely that, if these assets had not been sold, the current valuation of the offices would be below the sale value, creating a larger offset to the retail warehouse gains.

INVESTMENT STRATEGY

Asset Allocation

The completion of the office sales and the disposal of the two leisure assets during the year has shifted the asset mix from 74.1% to 100% invested in the retail warehouse sector. Uninvested cash resources will be invested into the sector, maintaining a 100% exposure for the foreseeable future and in line with the revised strategy. The Investment Manager had intended for the Company to be fully invested by the half year. However, due to the uncertainty and re-pricing of the market, it was decided that it was prudent to hold cash until the right opportunities were available, and the extent of the correction was more visible.

In considering retail warehouse investments, it is important to note that the sector is not one homogenous group of assets. Investment performance can be influenced by many factors, including planning restrictions on users, tenant focus, tenant mix, size and layout of units, the size of the overall scheme, availability of car parking, accessibility, the nature of the catchment, supply of competing space, property management, sustainability factors, the affordability of the prevailing rent, opportunities to add space and alternative use values. The dispersion of returns can be significant across the sector, accentuating the importance of stock selection and an experienced Investment Manager.

Given the focus on the sector, the Investment Manager has provided more information in its review later on in this report. What does come through from the analysis is the strength of the Company's income stream. The credit rating of 85.0% of the tenant line-up is rated by Dun & Bradstreet as having a lower than average risk of business failure. The average rent passing (including the smaller coffee and kiosk units, which command higher rents but ignoring vacant units) is £14.72 per sq. ft. The Company is aware that many of its retailers are making money from this rental base and, with void levels low, it augurs well for rental growth.

What makes the sector especially interesting is that the investment story is much more than the attractive levels of rent and capital value as:

1)  click-and-collect continues to grow, with out-of-town parks well placed to provide this function;

2)  retailers remain attracted to the better configured space on retail parks;

3)  new revenue opportunities exist from creating new spaces such as drive-thru units and electrical vehicle (EV) charging points; and

4)  densities can be increased with the potential for introducing other uses.

Sustainability

I am delighted that the Company is embracing its sustainability responsibilities and has made further progress during the year in charting its way to net zero. The Sustainability Working Group, comprising the team from the Investment Manager, Savills, Imogen Moss and myself, is proving effective in maintaining the required momentum. It is satisfying that the Investment Manager has secured another green star to last year's rating following the Company's participation in the 2022 GRESB survey.

The ESG activities are more fully described within the report. This is more detailed disclosure than the previous year and hopefully informative for shareholders.

PORTFOLIO ACTIVITY

It has been an exceptionally busy year, with the Investment Manager's report providing full information. The key highlights are:

1)  Sales

     The four office assets in Bath, Birmingham, Newcastle and Edinburgh, and the leisure assets at Hartlepool and Telford, were sold. The total capital raised from the six transactions was £69.5m. The sales achieved one of the key strategic objectives set last year.

2)  Asset Management

     The strategic priorities of protecting rent and enhancing NAV were achieved. Fifteen lease transactions involving £2.5m of rent were completed during the year, with one further deal concluding post the year end. The void management target was also achieved with the reduction in the EPRA Vacancy Rate from 8.6% to 6.5%. This all contributed to the value of the retail warehouse assets improving during the year.

RENT COLLECTION

In total, 98.2% of rent due was collected at the year end. Contracted rent had fallen at the year end from 12 months ago due to the loss of income from the office and leisure property sales and the deferral of the reinvestment of the sale proceeds. The objective is to replace as much of this income as possible through reinvestment in suitable retail warehouse assets.

GEARING AND CASH RESOURCES

The Company's total debt is unchanged at £111.1m, at a blended 'all-in' fixed rate of 2.9%. The loans do not mature until 2025 and 2027. Gearing on 30 September 2022 was 35.41% of total assets, a slight decrease from last year end. Gearing is within investment policy limits and covenants.

As at 30 September 2022, the Company held £81.2m of cash. Of this sum, £31.0m is contained within the security pool and consent from the lender is required where Loan-to-Value (LTV) levels at the time the funds are utilised is above 35%.

DIVIDENDS

In my report last year, I stated the Board's commitment to a covered dividend and the prospect of further dividend progress as contracted rental income continued to improve. I also highlighted that the likely mismatch between sales and reinvestment could lead to a period of uncovered dividends and that,if prudent to do so, the shortfall would be made up from reserves.

Delaying the reinvestment of capital from the sales has meant the period of uncovered dividend has become longer than was anticipated. The Board believes the way the Company has responded to the changed market conditions is both responsible and appropriate. The Company is well funded to continue to pay the current monthly dividend. It is the intention of the Board to maintain the dividend at 5.0 pence per share. The expectation remains that when the available capital is invested the dividend will be covered.

LONG-TERM GROWTH STRATEGY

The Board's immediate focus is on NAV per share with the active management of the current assets and ensuring that capital is invested on an accretive basis for the medium term. Longer term, the Board would like to grow the equity base of the Company to improve liquidity, lower the cost base per share and enlarge the investment opportunity set, but this will depend in no small part on the recovery of the Company's share price rating.

Although the issue of new equity is unlikely in the short term, due to the share price being at a discount to NAV, the Board is asking shareholders to renew our non-pre-emptive authority of 10%, so that we are in a better position to use 'tap issuance' if we were able to do so. We will consider other means of raising capital if there are substantial acquisitions to be financed. In any fund raising, the interests of existing shareholders will be of paramount importance in how we price and structure any new issuance or take on any new gearing.

BOARD MATTERS

I would like to thank the Board, Investment Manager and all the agents that provide services to the Company for their hard work.

We have made some Board changes during the year as part of our succession plan. I would like to welcome Karyn Lamont, who joined the Board on 1 September, as our new Audit and Risk Committee Chair. She will stand for election at the AGM in February 2023. Karyn is a chartered accountant, a former audit partner at PwC and an experienced non-executive director on other collective funds, including as audit chair. Imogen Moss became the Senior Independent Director on 1 June this year. These changes result from Robin Archibald stepping down from both these positions to enable a well-managed handover and transition to take place before he retires from the Board at the AGM in 2023.

Robin has been on the Board since the Company floated in October 2014. During his time of service he has made an immense contribution to the management oversight of the Company, and I would like to thank him not only for that but also for all the wise counsel and support he has given me personally. I know Robin will remain active in the Investment Trust sector with his other board appointments and we wish him well with these roles.

The end of my tenure is also in sight, having joined the Board at the same time as Robin. The Board has asked me to continue as Chairman in the coming year and I will, therefore, stand for election at the forthcoming AGM. It is my intention to stand down no later than the AGM in 2024 and between now and then will work with my fellow directors on identifying a new Chair.

The Board has not revised its base remuneration levels in five years. The only modifications to Board remuneration in that period related to changes in roles and the introduction of the arrangements relating to Robin Archibald's remuneration. The Remuneration Committee has concluded that a modest increase is now justified based on its assessment of market rates following the recruitment process undertaken this year. The proposed increases are significantly below the rate of inflation over the last five years. Shareholders are being asked to approve an increase in the remuneration cap to £275,000, giving the Board the flexibility it might need over its composition in future years and to manage succession.

ANNUAL GENERAL MEETING (AGM)

Shareholders are invited to attend the Company's AGM to be held at 1 St Andrew Square, Edinburgh EH2 2BD on 24 February 2023.

Those shareholders who are unable to attend the AGM in person are encouraged to raise any questions in advance with the Administrator at [e-mail] (please include 'EPIC AGM' in the subject heading). Questions must be received by 5.00 p.m. on 10 February 2023. Any questions received will be replied to by either the Investment Manager or Board, via the Administrator, before the AGM. A shareholder presentation will be made available on the Company website following the AGM, updating shareholders on the activities of the Company.

OUTLOOK

The decision to delay the reinvestment of the sales proceeds from the office and leisure disposals has undoubtedly put the Company in a better position to take advantage of the current market uncertainty and setback in asset valuations. We can expect some interesting and attractive opportunities to arise over the coming months, given the expected further falls in market valuations. Real estate markets are now much quicker to adjust than in the past so these opportunities could come quickly. However, the Investment Manager has no specific timetable in mind for the reinvestment and will be led by opportunity and to the extent that the market has re-priced. The timing will also be driven by the need to ensure the Company remains financially resilient to the effects of any sustained market downturn.

However, it will mean the payment of an uncovered dividend in the meantime.

The immediate focus is on managing the existing assets to protect the NAV per share and ensure the income is maximised to reduce the extent of the uncovered dividend. The Investment Manager did an excellent job in this regard during the COVID-19 Crisis and is well-positioned to do so during a period of economic difficulty.

The attractiveness of large parts of the retail warehouse sector was recognised by investors in the early part of the year and the consequent increase in buying activity started to drive yields down and prices up. The general correction in the last quarter has brought this to an end for the moment. However, the fundamentals remain attractive with many of the tenants in the sector making money from the rebased rents, void levels are low and the click-and-collect model continues to grow in popularity.

There is good prospect that investor interest will return when confidence improves and pressure on asset sales is reduced as open-ended property fund redemptions normalise. This will not only benefit the Company's NAV but should also flow through to an improved share price and a reduction in the discount. Whether this will be evident in the second half of the new financial year will remain to be seen. Nevertheless, the Board is confident that the Company will be able to emerge from the current turbulence in a strong position to reap the benefits of better times ahead.

William Hill

Chairman

Investment Manager's Review

It has been a busy year for the Company, which has seen improvement across several areas. The NAV has increased, the EPRA Vacancy Rate has fallen, rent collection has improved further and 15 asset management transactions have been completed.

The revised strategy to sell office and leisure assets to focus investment on the retail warehouse sector has been successfully completed. During the period, all six of the office and leisure assets were sold, meaning the Company now only holds retail warehouse assets and has cash available for reinvestment.

The first half of the financial year saw positive momentum build across the portfolio, driven by the continued recovery of the retail warehouse market. Yields hardened as investors recognised the attributes of the retail warehouse sector and tenants continued to lease space.

The Interim Report cautioned that headwinds were building, which they did, and they are now affecting the Company. Rising inflation, interest rates and energy costs, coupled with political instability, have reduced consumer confidence and put a squeeze on household incomes. Reductions in disposable income could affect the retail market, including retail warehousing. Discretionary spending and the purchasing of 'big-ticket' items will be particularly affected. The fact that the Company's portfolio is underpinned by convenience-led tenants, has low average rents and a reduced vacancy rate is important and should help make the portfolio more defensive to these reductions in consumer spending.

If retailers are impacted, there is an increased likelihood of them using Company Voluntary Arrangements (CVAs) and other insolvency processes to reduce costs. The Company is in a better position to deal with these challenges than it was during the COVID-19 Crisis, which it weathered well in terms of sustaining income.

However, the increase in gilt yields has put all property valuations under downward pressure. The Company's property portfolio reduced in value by 2.5%, on a like-for-like basis, at 30 September 2022. Further, larger declines are likely as the property market reprices due to the rise in gilt yields. The expectation is that the property portfolio will fall in value as at 31 December 2022, with the potential for further volatility thereafter.

Despite the more measured short-term outlook, the fundamentals of the retail warehouse sector remain robust. Supply of available space is low, tenant demand is holding up, occupiers are still doing deals and we continue to identify and complete asset management transactions that secure income.

We expect the retail warehouse sector to be the most resilient and flexible part of the retail market, which can adapt to the changing needs of tenants and the integration of their omnichannel strategies. Having sold assets and with cash in the bank, the Company is well placed to capitalise on any investment opportunities that are identified in a re-priced market, but only at the right time and price for the Company.

Property Valuation

The Company's property portfolio is valued by Knight Frank on a quarterly basis throughout the year. As at 30 September 2022 it was valued at £231.4m, a like-for-like increase of 10.3% over the reporting period. The increase was driven by falling yields in the retail warehouse portfolio, albeit there was a decrease in the property valuation in the final quarter as some of the yield improvement was reversed.

EPRA Vacancy Rate

During the period the EPRA Vacancy Rate decreased from 8.6% to 6.5%. This was due to the sale of the office at St. Philips Point in Birmingham, which had vacant floors, and the letting of vacant units in the retail warehouse portfolio. Letting the remaining vacant units remains a key focus.

Rent

Over the year, the Company's contracted rent has reduced from £20.8m to £16.2m. This is principally because of the sale of the office and leisure properties, and the fact that the sales proceeds have not been reinvested. It is anticipated that the income will be replaced when suitable assets are acquired.

Rent collection for the year, as at 30 September 2022, was 98.2%, an improvement from 95.7% in the prior year.

Implementing the revised strategy

Last year the Company announced its strategy to sell its office and leisure assets to focus on the retail warehouse sector. During the period, the Company sold its four office assets in Bath, Birmingham, Edinburgh and Newcastle for a headline price of £61.9m. This was 3.3% below the property valuations at the time of the sales. Once deductions for topped up rents and rent-free periods were factored in, the net receipt to the Company was £60.0m.

The Company also disposed of its two leisure units, both of which were let to Mecca Bingo. The Lanyard, Hartlepool, was sold for £2.6m. This was 16.4% above the valuation. The second leisure property, Southwater Square, Telford, was sold to an owner occupier for £5.0m, which was 67% above the property valuation.

The next phase of investment activity will be focused on the retail warehouse sector. Whilst the Company recognises the benefits of being fully invested, the deterioration in the market, coupled with the economic and political challenges, means that it is carefully reviewing opportunities to ensure that the cash is deployed in appropriate assets, at the correct price, at the right time. Despite the recent challenges, we still believe the prospects are attractive for retail warehousing, both in absolute terms and relative to other sectors of the real estate market.

Portfolio activity

The Company has continued to deliver asset management transactions across the portfolio, which have helped reduce the EPRA Vacancy Rate and secure the Company's income stream.

During the period the Company completed 15 transactions across the office, leisure and retail warehouse assets.

Thirteen of the 15 deals were completed in the retail warehouse assets, securing £1.8m of rent per annum, of which £0.6m was additional rent. These are summarised as follows:

−   at Kingston Retail Park in Hull, The Range signed a 15-year lease on a 14,500 sq. ft. unit;

−   also at Hull, Greggs signed a 10-year lease with a five-year tenant break option on a 2,000 sq. ft. unit;

−   at Prestatyn Shopping Park, The Tech Edge leased a vacant unit of 1,300 sq. ft. on a five-year lease;

−   at Clwyd Retail Park, Rhyl, Now to Bed leased 8,017 sq. ft. on a three-year lease;

−   at Barnsley, Bensons downsized from a unit of 10,000 sq. ft. into one of 5,036 sq. ft. and signed a five-year lease;

−   Jysk then signed a 10-year lease with a five-year break option on the unit vacated by Bensons;

−   in one other deal at Barnsley, One Below, occupying a 4,996 sq. ft. unit on a short-term lease, committed to the park for five years;

−   at Widnes Shopping Park, Card Factory signed a five-year lease, without break, on a 1,590 sq. ft. unit;

−   at Stirling, Harry Corry signed a five-year lease extension on its 9,968 sq. ft. unit, meaning its lease will now expire in February 2027;

−   also at Stirling, Pets at Home agreed to remove its break option, due in 2024, meaning the lease now expires in June 2029; and

−   in a third deal at Stirling, existing tenant Bensons signed an agreement for lease on a 9,977 sq. ft. unit. On completion of landlord works it will sign a 10-year lease.

At Prestatyn Shopping Park, JD Sports signed a 10-year lease with breaks at years four and seven on a 7,623 sq. ft. unit, which was previously occupied by New Look. New Look was occupying the unit on a turnover rent basis following the approval of its CVA. Under the terms of the CVA landlords were entitled to break the leases.

We considered that the terms of the CVA were below market, so we took the opportunity to exercise the break clause and identified JD Sports as a more suitable tenant for the space. The rent received from JD Sports is 44.0% higher than the rent being paid by New Look.

At Coatbridge, Glasgow, we completed an AFL with existing tenant B&Q, to secure them on the park for a further 10 years. B&Q had a lease expiry in December 2022. As part of the transaction, B&Q will downsize from 102,000 sq. ft. to 79,960 sq. ft. Aldi has signed an AFL for a 20,000 sq. ft. unit which will be created in the space vacated by B&Q. Planning permission has been obtained for the change to food use. On completion of the landlord works, Aldi will enter into a 20-year lease without break, subject to five-yearly rent reviews linked to RPI.

One asset management transaction completed in each of the office and leisure portfolio. Both properties were then sold during the period.

At the office in Newcastle, Citygate II, UNW LLP signed an extension to its leases, to expire in March 2032, with a tenant break option in March 2027.

At Hartlepool, Mecca Bingo signed a 10-year reversionary lease with a seven-year tenant break option on its 31,284 sq. ft unit. The lease expiry date was extended to September 2032, with a break option in September 2029.

Post period end activity

Post period end, at Wombwell Lane Retail Park, Barnsley, B&M agreed to extend its occupation at the park by 10 years.

The lease now expires in September 2037 and the passing rent increased by 6.0%. To facilitate the deal, B&M was granted a 15-month rent-free period. This underscores B&M's commitment to the location.

Outlook

Despite the growing economic and property market headwinds, there is still occupational demand for the Company's properties. There is interest in not only the Company's vacant units, but also in let units where we are trying to accommodate the demand by right sizing tenants to secure their ongoing occupation. The fact that we can modify units to match tenant requirements demonstrates the flexibility offered by retail warehouse parks.

Protecting income and growing it where possible remains a key focus. There will be challenges to contend with, but with a reshaped portfolio (with no office or leisure exposure), a good tenant line up, a low vacancy rate (6.5%) an attractive WAULT (4.5 years) and ongoing asset management opportunities, the Company has a robust platform on which to build. Further, the Company has cash available for investment into a re-priced market, at the appropriate time.

Calum Bruce

Investment Manager

Property Portfolio as at 30 September 2022

Location	Name	Sub-sector	Market value range (£m)	Tenure
Widnes	Widnes Shopping Park	Retail Warehouse	35-40	Leasehold
Prestatyn	Prestatyn Shopping Park	Retail Warehouse	25-30	Freehold
Stirling	Springkerse Retail Park	Retail Warehouse	25-30	Heritable
Hull	Kingston Retail Park	Retail Warehouse	20-25	Freehold
Rhyl	Clwyd Retail Park	Retail Warehouse	15-20	Freehold
Sunderland	Pallion Retail Park	Retail Warehouse	15-20	Freehold
Wrexham	Plas Coch Retail Park	Retail Warehouse	15-20	Freehold
Coatbridge	B&Q	Retail Warehouse	15-20	Heritable
Haddington	Haddington Retail Park	Retail Warehouse	15-20	Heritable
Daventry	Abbey Retail Park	Retail Warehouse	10-15	Leasehold
Barnsley	Wombwell Lane Retail Park	Retail Warehouse	10-15	Freehold

Finance Report

The positive net asset value performance this year has been driven by general yield improvement in the retail warehouse portfolio, combined with the effect of the 15 asset management transactions completed. The strategic decision to sell the remaining office and leisure properties has provided significant cash reserves. This gives the Company funds to deploy at the right time and at the right level, as well as retaining sufficient cash to manage operationally through current economic uncertainty.

Rental Income

During the year, 98.2% of contracted income was collected (2021: 95.7%), of which 86.9% was collected within seven days. The remaining 1.8% is expected to be collected. This is an improvement on prior years and is also better than the collection rates pre-pandemic. The focus on rent collection continues to contribute to the improvement in payment rates.

The Company's contracted rent at the year end was £16.2m (2021: £20.8m).

The decrease in the year can be largely explained by the sale of the office and leisure properties which contributed £5.1m to the contracted rent, offset by the asset management initiatives completed in the year.

Rent free periods as a percentage of contracted rent at the year end was 3.1% (2021: 9.3%) which equates to £0.5m (2021: £1.9m). This has fallen due to tenants coming out of their rent-free periods and the effect of the office disposals where there were a number of rent-free periods in place.

The portfolio continues to provide long-term stability to the Company's income. This is demonstrated by 85.0% of our tenants having a lower than average risk of business failure, according to Dun & Bradstreet. The EPRA Vacancy Rate has fallen from 8.6% to 6.5% due to the letting of vacant units in the period and the sale of the office in Birmingham which had some vacant space. The WAULT at year end was 4.5 years (2021: 5.0 years). The decrease was due to the passing of another year offset by the 15 asset management transactions completed in the year. The disposals also impacted on the ability to show a like-for-like comparison.

Income Statement

Rental income for the year was £16.4m (2021: £17.4m). This decrease of £1.0m was due to the disposal of several assets in the year, which have yet to be replaced, offset partially by asset management transactions.

Revenue expenditure in the year was £4.8m (2021: £3.0m), including £2.1m property specific expenditure and £1.7m relating to the Investment Manager's fee. Net financing costs were £3.0m (2021: £3.1m), a decrease on the prior year due to the sale proceeds earning some interest in the year. Revenue profit decreased to £8.6m (2021: £11.3m). This decrease of 23.9% is largely due to the fall in rental income following the sale of all the office and leisure assets, plus the increase in property expenditure which relates to £1.1m of voids paid in the year and for costs relating to transactions which have not concluded. Administration expenses are £0.6m higher due to the increases in investment manager fees and other operational costs in the year, such as auditors' fees.

The positive movement in the value of our investment properties of £15.9m, combined with a loss of £3.0m on the properties sold, has enabled the Company to report a total profit of £21.5m. The sale proceeds received for the office and leisure assets sold during the year was £3.1m higher than their acquisition costs.

	2022 (£m)	2021 (£m)
Rental and other income	16.4	17.4
Property expenditure	(2.1)	(1.0)
Net rental income	14.3	16.4
Administration expenses	(2.7)	(2.0)
Net financing costs	(3.0)	(3.1)
Revenue profit	8.6	11.3
Gain on revaluation of investment properties	15.9	4.6
Loss on sale of investment properties	(3.0)	1.2
Accounting profit after tax	21.5	17.1
EPRA and diluted EPRA earnings per share	4.06p	5.34p
Dividend per share	5.00p	4.42p
Basic and diluted earnings per share	10.17p	8.10p

EPRA performance measures

As a member of EPRA, we support EPRA's drive to bring consistency to the comparability and quality of information provided to investors and other key stakeholders of property company reports. We therefore continue to include performance measures, which are based on EPRA methodology.

It should be noted that there is no difference between the Company's IFRS and EPRA NAV in this year's accounts, or in any of our accounts to date.

	2022	2021
EPRA earnings	£8.6m	£11.3m
EPRA earnings per share	4.06p	5.34p
Diluted EPRA earnings per share	4.06p	5.34p
EPRA NAV per share	94.86p	89.69p
EPRA cost ratio (including direct vacancy costs)	29.6%	18.4%
EPRA cost ratio (excluding direct vacancy costs)	23.6%	18.0%
EPRA net initial yield	5.9%	6.2%
EPRA topped up net initial yield	6.1%	6.9%
EPRA Vacancy Rate	6.5%	8.6%

Net Asset Value (NAV)

At 30 September 2022 our net assets were £200.5m, equating to net assets per share of 94.86 pence (2021: 89.69 pence). This is summarised in the table below:

	£ million	Pence per share
NAV at 30 September 2021	189.6	89.69
Increase in value of investment properties (net of capital expenditure plus gain on sale and transaction costs)	12.9	6.11
Net earnings in the year	8.6	4.06
Less: dividends paid in the year	(10.6)	(5.00)
NAV at 30 September 2022	200.5	94.86

The NAV is predominantly represented by our investment properties, which have a fair value of £231.4m at the year end. This is included in the financial statements as Investment Properties at £227.5m with the difference relating to lease incentives. The remaining £27.0m of net liabilities is made up of: i) (£110.4m) of debt; ii) £50.2m of cash and cash equivalents; and iii) £33.2m of net current assets.

Debt

The Company has two debt facilities with Aviva Commercial Finance Limited, totalling £111.1m, less amortised costs of £0.7m. One facility, of £56.9m, will mature in 2025 and the other, of £54.2m, will mature in 2027. The facilities have an all-in blended, fixed interest rate of 2.86%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset cover breach covenants. Property values covering the two facilities would need to drop by more than 23% and 35% respectively, from the 30 September 2022 valuations, for the LTV covenant to be breached.

Gearing (debt to total assets) was 35.4% at the year end (2021: 36.7%). Whilst this is higher than the Board's target range of 30-35%, it is in conformity with the Company's Investment Policy as it lay within these boundaries when drawn down.

Further details are included in Note 13 of the financial statements.

Cash

As at 30 September 2022, the Company had cash and cash equivalents of £50.2m with a further £31.0m drawn and held in a disposals account under the debt facility. Cash held is significantly higher than usual due to the sales proceeds collected in the year, from the sale of the office and leisure assets, which will be used to assist with future asset management and investment opportunities.

Dividends

The Company has paid monthly dividends at an annual rate of 5.00p per share. Historically, the Company has had covered dividends but at year ended 30 September 2022, dividend cover was 81.2% (2021: 119.0%). Using the annual dividend of 5.00p per share and the share price of 67.15p as at 30 September 2022, the Company's dividend yield is 7.4%.

The Board declared a dividend of 0.4167 pence per share for the month of September which was paid in October 2022 and expects to continue with this consistent monthly rate in the near term.

The Company continues to monitor the aggregate distributions made to ensure compliance with REIT regulations, which, with some flexibility on timing, require a REIT to distribute 90% of tax-exempt rental income as Property Income Distributions (PIDs): a condition that the Company has met since inception.

Tax

As a REIT, income and capital gains from the property rental business are exempt from corporation tax and the tax charge for the year is, therefore, nil. The Company recovers all of its VAT cost.

The Company continues to meet all the REIT requirements, ensuring that REIT status is maintained.

Neelum Yousaf

Director of Finance, Ediston Investment Services Limited

Principal and Emerging Risks

The principal risks and emerging risks have all been reviewed in detail, including the significant economic risks that might impact the Company and the attainment of its investment objectives. The Board recognises that there are risks and uncertainties that could have a material effect on the Company's financial results. Under the 2019 AIC Code of Corporate Governance (the 'AIC Code'), directors of listed companies are required to confirm in the annual report that they have performed a robust assessment of the Company's emerging and principal risks, including those that would threaten its business model, future income and asset value performance, solvency or liquidity and pricing of the Company's shares.

The Group's risk register is the core element of the risk management process. The register is prepared, in conjunction with the Board, by the Investment Manager and Administrator, is updated regularly and is the assessment of all the detailed operational, performance and other risks that might impact on the Company, and how these risks are potentially mitigated by Board or third-party service provider controls.

The Directors review and challenge the risk register on a regular basis, assessing the likelihood of each risk, including identifying emerging risks and significant changes to recognised risks, the potential impact on the Group and the strength of controls operating over each risk.

The Board tries to identify emerging risks, defined as potential trends, sudden events or changing risks, which are characterised by a high degree of uncertainty in terms of probability of occurrence and possible effects on the Company - the COVID-19 pandemic, ESG and events in Ukraine, with their economic impact being examples. Once emerging risks become sufficiently clear, they may be treated as specific risks and added to the Company's matrix of significant risks.

The Board works closely with the Investment Manager and advisers to the Company to try and manage the risks, including emerging risks, as best as it can. The central aims remain to preserve net income for the Company, maintain resilience in the Company's day-to-day operations (including the Company meeting its regulatory obligations and obligations to its stakeholders), preservation of capital values and the price at which shares are traded where it can, whilst looking to the longer term to try and find strategic direction for positive rather than simply protective returns.

The impact of exposure to a particular sector, for example retail, the impact of share price volatility on shareholder returns, the effects of gearing (when returns are negative) and the continuing risks of an uncertain economic and political environment in the UK have all resulted in challenges, and emerging opportunities, during the financial year. In particular, the change in strategic direction has resulted in the disposal of the office and leisure parts of the portfolio, meaning that the Company is now focused on retail warehousing which proved more resilient during the COVID-19 Crisis than other UK commercial property categories.

Recent events in Ukraine and their impact on European economies, coinciding with inflation and cost of living issues in most developed economies, are presenting new challenges post the pandemic lock downs, as is the prospect of increasing interest rates to how returns might be earned.

For the purposes of reporting, the concentration is on the medium to longer term for the significant changes that are impacting on the UK commercial property sector. The eventual outcomes are difficult to assess or predict with any accuracy but are as challenging as most commercial property companies in UK will have faced in recent decades and are likely to transform the way in which office, retail and industrial property is used.

The Board, identifies risk under the following categories:

−   investment strategy (including sustainability considerations) and performance;

−   premium/discount level and share price volatility;

−   financial, which includes the impact of gearing;

−   regulatory;

−   operational; and

−   economic, governmental and exogenous risks outside the Company's control.

These categories of risk are broken into individual key risks with an assessment of potential impact, controls and mitigation in place and changes in that environment since the previous year end and any other comments on the risk. The risks include those that may be more remote but, should they arise, would have an impact, given the nature of a property investment company with tangible assets compared to a widely diversified listed equity portfolio, health and safety being an example.

Details of the principal and emerging risks facing the Company are set out in the following table .

Investment strategy and performance
Risk Strategic direction of the Company and how and where it invests.
Impact	Controls and mitigation in place	Change in the year
Deployment of the Company's capital in areas of the market that are poorer in their return prospects or more affected by structural changes and exogenous risks than other investment areas, with an adverse impact on income and capital values, as well as opportunity cost. Sustainability is a key part of the investment review process in making and retaining investments and how they are developed.	The Board formally reviews the Company's investment objectives, policy and strategies for achieving them on an annual basis, or more regularly, if appropriate. This includes an examination of the Company's current situation, strengths and weaknesses, and how this compares with a wider UK commercial property peer group. During its strategy sessions the Board considers how the assets are positioned and might be better positioned for the longer term. There has been increased focus on sustainability as evidenced by the reports on this subject and the establishment of a specific working group as part of the investment committee. Each quarterly Board meeting includes a detailed discussion on asset and income performance and changes in the portfolio as well as an assessment of property market trends, which is reported on by the Investment Manager, the Company's broker and with input from the valuer.	Increased Following a strategic review, the Company has changed the focus of its investment to retail warehouse assets, which included the disposal of office and other assets and re-deployment of resultant cash. Exogenous risk has increased with inflation at highest level for decades, rising interest rates and the geopolitical events in Eastern Europe impacting on supply, including energy and political security.
Risk Significant exposure to a specific property sector, tenant, and geographic location or to lease expiries. Poor asset allocation.
Impact	Controls and mitigation in place	Change in the year
Downturn in an area to which the Company has significant exposure resulting in a reduction inthe capital value of investment properties and a reduction in NAV. Significant tenant failure causing a material reduction in revenue profits, impacting on cash flow and dividends.	The investment policy and its restrictions/limits are set by the Board and are reviewed quarterly. The limits are monitored by the Investment Manager. The Board and Investment Manager also review, at least quarterly, other key metrics, such as principal property sector weightings, to ensure these remain appropriate even where there may be no formal limits on exposure. Board approval memorandums state whether there are any concentration issues, which links in with overall strategic imperatives. The AIFM and Depositary monitor compliance with the investment policy and will highlight any breaches of concentration limits. The Investment Manager is proactive in monitoring developments in the retail industry, anticipating issues, and where appropriate replacing struggling tenants with those with stronger covenants. Retail warehousing proved to be the most resilient of the retail sub-sectors, and has seen increased investment demand, which has led to an increase in property valuations during the year.	Increased (by focusing on particular property sub-sector) Heightened by recent exogenous events that have accelerated the impact on certain property sectors - some more than others - but with an impact on all UK commercial property. The Company's portfolio has moved to a position where it is now 100% invested in retail warehouse assets. The retail warehouse assets are in good locations, with strong covenants, at affordable rent levels and have low voids. The portfolio WAULT (30 September 2022) is 4.5 years. In adopting changes in strategic direction, there is exposure to more retail tenants than was previously the case, as the office and leisure assets have been sold. The Company is now focused, for the foreseeable future, in a specific property sector, whilst retaining some capacity to apply more generalist exposure at a future date.
Risk Lack of investment opportunities reducing the ability to acquire properties at the required return. Poor investment decisions, incomplete due diligence and mistimed investment of capital.
Impact	Controls and mitigation in place	Change in the year
Inappropriate use of capital that hinders investors' long-term returns. Reduction in revenue profits, impacting on cash flow and dividends. Cash drag from uninvested cash and interest cost on drawn down debt.	Regular review of property performance against acquisition and disposal plans. Experienced Investment Manager who sources assets that meet agreed investment criteria. Linkage with overall strategic objectives for the Company. The Investment Committee scrutinises and approves all proposed acquisitions. The Board reviews the portfolio performance at each quarterly meeting and, through the Management Engagement Committee, conducts a formal annual review of the performance of the Investment Manager. Comprehensive profit and cash flow forecasting is undertaken, which models the impact of property transactions at Group level and over the medium to longer term. The Investment Manager has recognised expertise in the retail warehouse sector and good connections to assist investment in that sub-sector. There is a reduced fee paid to the Investment Manager for cash held available for investment.	Increased (by focusing on single sector) Following changes in strategic direction, the Investment Manager is tasked with investing the available cash from asset sales to achieve the Company's investment objective. Re-deployment of capital is made more difficult by the significant economic risks affecting property and markets generally.
Risk Sustainability of dividend payments.
Impact	Controls and mitigation in place	Change in the year
The Company should, as far as practical, maintain dividend payments at a sustainable level, with adjustments upwards when it is financially appropriate to do so. Dividend cuts have a dramatic impact on the Company where sustainable dividend is a substantial proportion of the total return package to shareholders.	Dividend level (and any prospective adjustments) is reviewed regularly by the Board. The Board aims to have a sustainable dividend and tries to only make changes if they can be sustained for the long term. In times of market volatility, dividend level is reviewed at least monthly, as was the case during the COVID-19 Crisis when income receipts appeared under pressure for the commercial property sector as a whole.	Increased The holding of cash post asset sales has created an uncovered dividend. There are sufficient reserves and cash to maintain the dividend until the cash is reinvested. There is a risk that this position could change if there was a long delay or replacement assets provided insufficient income. Consistent monthly dividend at 5.00p annualised (increased in the previous year from 4.00p annualised but still down from a peak of 5.75p annualised in 2019).
Premium/Discount level and share price volatility
Risk Secondary market share price volatility and insufficient secondary market liquidity to cope with secondary market selling.
Impact	Controls and mitigation in place	Change in the year
The Company's share price could be impacted by a range of factors, causing it to be higher than (at a premium) or lower than (at a discount) the underlying net asset value per share. Fluctuations in the share price may not be reflective of the underlying investment portfolio and depend on supply and demand for the shares, market conditions, general investor sentiment and other factors, including political and economic uncertainties. The Company does not have a significant free float of shares and as has been apparent in the past, relatively small sales or purchases of shares can produce volatile pricing. In common with many generalist UK property vehicles, the rating of the Company's shares has been dramatically impacted since the advent of the COVID-19 Crisis in the second quarter of 2020 and more recently by the geopolitical and economic crisis.	The Board monitors closely the market in the Company's shares, including significant purchases and sales. Through the Investment Manager and the Company's broker, institutional investors are kept in regular touch directly with developments in the Company, positive and negative. The broker and Investment Manager are in regular contact with existing shareholders and prospective shareholders to try and maintain an active market in the Company's shares. The Company announces portfolio and any other significant activity between its quarterly net asset value announcements and publication of its interim and final accounts. The Company can allot shares, and has done so, where there has been demand in the secondary market and issuance has not been dilutive to existing shareholders' interests. The Company also takes the annual authority to buy back shares. However, the Company's intention is to be fully invested and geared, so the use of share buybacks would require a change in the strategic direction of the Company, not least in having liquidity in the portfolio that could only be found through realising longer-term assets. The Board reviews the strategic direction of the Company regularly to ensure that application of the investment policy, the returns generated from it and the objectives of the shareholders are being met. The Company has a Marketing Committee that focuses on trade in the Company's shares and how the corporate message is being communicated to existing and prospective new investors. The Marketing Committee, in consultation with the PR consultant, undertakes advertising (if appropriate) and engages media (print and online) where it can, to try and raise awareness of the Company to retail investors who could buy the Company's shares via the platforms.	Increased The Board and Investment Manager continue to communicate with shareholders to reinforce the value approach taken to investing in UK commercial properties and not least the resilience of the income from the portfolio. Having recovered following the COVID-19 pandemic, recent market uncertainty has caused the discount to widen materially, in common with many other closed-ended property investment funds.
Financial
Risk Gearing and non-compliance with debt facility terms.
Impact	Controls and mitigation in place	Change in the year
Gearing will accentuate returns if the cost of debt is less than the equity returns or have the reverse effect if equity returns are less than the cost of debt. A substantial fall in the property asset values or rental income levels could lead to a breach of financial covenants within the Group's debt funding arrangements. This could lead to a modification in the costs of funding or in extremis cancellation of debt funding, if the Company is unable to service the debt.	The Board reviews the level of gearing on a regular basis. The borrowing facilities have prescribed covenants and the Board signs off quarterly returns to the debt provider on asset and income cover. The Investment Manager presents for Board review quarterly cash flow forecasts prepared from the level of detail of individual properties, tenants and future rental projections. The Company has its portfolio reviewed and reported on by an external valuer each quarter. The Board intends to maintain gearing at 30% of Company gross assets at drawdown but will not exceed 35%, at the time of drawdown. In the current circumstances, the level of gearing has exceeded 35% but the covenants, which are based on Loan-to-Value and income cover, remain well covered. Covenants are reviewed on a regular basis. Compliance certificates and reports for the lender are prepared on a quarterly basis by the Investment Manager then reviewed and signed by a Director.	Increased Higher levels of cash reduce the impact of falling values. However, it weakens the income cover until investment is made in income returning assets. The Board will continue to monitor the level of gearing closely. The Board is closely appraised of the level of cover over debt covenants on net income and asset levels. There is no immediate need to re-finance debt, with the first tranche not repayable until 2025. However, the Board is monitoring the debt market closely as it will need to plan appropriately if re-financing terms are likely to be materially adverse to those in place.
Regulatory
Risk Non-compliance with laws, regulations and governance codes.
Impact	Controls and mitigation in place	Change in the year
The Company is required to comply with REIT rules, the Listing Rules, Disclosure Guidance and Transparency Rules, the UK and AIC Corporate Governance Code, IFRS accounting standards and UK legislation (including the UK Bribery Act, Modern Slavery Act, The Criminal Finances Act 2017, Market Abuse Regulations, GDPR and Health & Safety regulations).	The Company uses an experienced tax adviser, auditor, investment manager, broker, property managing agent, property valuation agent, depositary, administrator and firm of solicitors to provide advice and support throughout the year. The Company and its agents have a strong compliance culture, with regular risk reviews undertaken by the Audit and Risk Committee. The resilience of the key Company agents was reviewed during the year. No failings have arisen, despite the more difficult operating conditions for many businesses.	No change Changes in the regulatory environment over the year have not had a significant impact on the risk profile of the Company.
Risk REIT status and structure of the Company.
Impact	Controls and mitigation in place	Change in the year
The Company and its two operating subsidiaries must be managed in the context of both REIT regulations in relation to the property assets held and income distributed and the structure of the Group, with income and costs allocated between the subsidiaries and the Company.	A REIT compliance schedule is produced quarterly by the Administrator to ensure compliance. REIT compliance is covered by external tax advisers, including when major acquisitions are being considered.	No change
Operational
Risk The Company is reliant on third-party service providers, including Ediston as Investment Manager and AIFM and JTC (UK) Ltd as Administrator, and key teams and individuals at these service providers. Failure of the operational activities or internal controls at these service providers, or exposure to cyber risk through them, could result in adverse consequences for the Company.
Impact	Controls and mitigation in place	Change in the year
Risk of failure in third-party providers of services resulting in a material adverse effect to the Company's financial position, through operational inefficiency, compliance breach or reporting inadequacies, with reputational or governance impacts as potential consequences to the Company as well.	The Board is ultimately responsible for any actions taken by the Company but relies on external agents to perform their duties competently. The Audit and Risk Committee reviews the services provided for purposes of accurate and timely financial and risk reporting; the Board for any compliance or operational breaches; and there is an annual review by the Management Engagement Committee of all service providers. Any significant failings or breaches are brought to the attention of the Board when they occur and are followed up for rectification accordingly, rather than having to wait for the periodic Board meeting cycle.	No change
Economic, governmental & exogenous
Risk Weak economic and/or political environment, including the impacts of geo-political events, rising inflation and interest rates.
Impact	Controls and mitigation in place	Change in the year
Lower occupational demand impacting on income, cash flow, rental growth, property valuations and capital performance. Reduced consumer spending, particularly on discretionary items and/ or 'big-ticket' items, could impact tenants and their ability to pay rent. Rising inflation is causing the price of goods and materials used in construction to increase. Costs to refurbish or develop are increasing and many contractors will only hold tender prices for two weeks, as opposed to the usual four. The economic landscape in most developed markets is looking increasingly challenged despite relaxation of many of the COVID-19 restrictions, causing heightened uncertainty in listed and unlisted markets and for UK commercial property.	Out of the Company's control to a large extent. Executing asset management initiatives remains a high priority, and cash control continues to be a strong focus. This ensures that the income is maximised, and voids are minimised across the property portfolio. Sensitivity analysis of the portfolio is undertaken regularly via a comprehensive cash flow model, which includes stress testing of cash flows and capital values against loan covenants and the operational requirements of the business, including the payment of monthly dividends. The Company carefully considers the budgets and timing of developments/ refurbishment projects to ensure that there is enough contingency to allow for unexpected cost increases and/or delays. The Board and Investment Manager regularly review the economic backdrop and strategic implications on the portfolio as regards investment and disinvestment, holding of cash, gearing levels and operational costs to try and protect the Company, its net income and its asset value against external challenges.	Increased Whilst the impacts of the COVID-19 Crisis and economic consequences of it are better understood, there are new headwinds that means the economic and political environment in the UK and beyond remains uncertain. War in Ukraine, rising inflation, increasing interest rates, and the cost of living crisis are all risks that have emerged during the period, and which could have a negative effect on the property portfolio. This may result in lower occupational demand and lower rent collection levels. It could also affect the terms on which debt is obtained. Although partially mitigated by the Company's good-quality assets, low vacancy rate, long WAULT and strong covenants, the continuing uncertainty increases the risk to returns from the UK commercial property market as a whole.

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report, including the Director's Remuneration 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 have to prepare the Group Financial Statements in accordance with UK-adopted international accounting standards and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 'Reduced Disclosure Framework' (UK Accounting Standards and applicable law).

Under company law the Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group and the Company for that period. In preparing these Financial Statements, the Directors are required to:

−   select suitable accounting policies and then apply them consistently;

−   make judgements and accounting estimates that are reasonable and prudent;

−   state whether applicable UK-adopted international accounting standards have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company financial statements,, subject to any material departures disclosed and explained in the Financial Statements; and

−   prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the Financial Statements and the Directors' Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and 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.

The Directors consider the Annual Report and the Financial Statements, taken as a whole, provide the information necessary to assess the Group and Company's performance, business model and strategy and are fair, balanced and understandable.

DIRECTORS' RESPONSIBILITY STATEMENT UNDER THE DISCLOSURE GUIDANCE AND TRANSPARENCY RULES

To the best of our knowledge:

−   the Group Financial Statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole;

−   the Company Financial Statements, prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities and financial position of the Company; and

−   the Annual Report, including the Strategic Report and the Directors' Report, includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

DISCLOSURE OF INFORMATION TO THE AUDITOR

The Directors confirm that:

−   so far as each Director is aware, there is no relevant audit information of which the Group and Company's auditor is unaware; and

−   the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group and Company's Auditor is aware of that information.

William Hill

Chairman

13 December 2022

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2022

		Year ended 30 September 2022			Year ended 30 September 2021
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Revenue
Rental income		16,426	-	16,426	17,371	-	17,371
Total revenue		16,426	-	16,426	17,371	-	17,371
Unrealised gain on revaluation of investment properties	9	-	15,920	15,920	-	4,655	4,655
(Loss)/gain on sale of investment properties realised during the year	9	-	(3,014)	(3,014)	-	1,179	1,179
Total income		16,426	12,906	29,332	17,371	5,834	23,205
Expenditure
Investment management fee	2	(1,703)	-	(1,703)	(1,687)	-	(1,687)
Other expenses	3	(3,212)	-	(3,212)	(1,914)	-	(1,914)
Total expenditure		(4,915)	-	(4,915)	(3,601)	-	(3,601)
Movement in expected credit losses	11	51	-	51	615	-	615
Profit before finance costs and taxation		11,562	12,906	24,468	14,385	5,834	20,219
Net finance costs
Interest receivable	4	22	-	22	-	-	-
Interest payable	5	(3,003)	-	(3,003)	(3,109)	-	(3,109)
Profit before taxation		8,581	12,906	21,487	11,276	5,834	17,110
Taxation	6	-	-	-	-	-	-
Profit and total comprehensive income for the year		8,581	12,906	21,487	11,276	5,834	17,110
Basic and diluted earnings per share	8	4.06p	6.11p	10.17p	5.34p	2.76p	8.10p

The total column of this statement represents the Group's Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS.

The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement are derived from continuing operations.

No operations were acquired or discontinued in the year.

The accompanying notes are an integral part of these Financial Statements.

Consolidated Statement of Financial Position

As at 30 September 2022

	Notes	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Non-current assets
Investment properties	9	227,465	277,984
		227,465	277,984
Current assets
Trade and other receivables	11	35,978	13,390
Cash and cash equivalents	12	50,235	11,642
		86,213	25,032
Total assets		313,678	303,016
Non-current liabilities
Loans	13	(110,443)	(110,277)
		(110,443)	(110,277)
Current liabilities
Trade and other payables	14	(2,767)	(3,190)
Total liabilities		(113,210)	(113,467)
Net assets		200,468	189,549
Equity and reserves
Called-up equity share capital	16	2,113	2,113
Share premium		125,559	125,559
Capital reserve - investments held		(32,957)	(42,710)
Capital reserve - investments sold		6,714	3,561
Special distributable reserve		82,075	82,711
Revenue reserve		16,964	18,315
Equity shareholders' funds		200,468	189,549
Net asset value per Ordinary Share	15	94.86p	89.69p

The accompanying notes are an integral part of these Financial Statements.

Company number: 09090446.

The Financial Statements were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:

William Hill

Chairman

Consolidated Statement of Changes in Equity

For the year ended 30 September 2022

	Notes	Share capital account £'000	Share premium £'000	Capital reserve - investments held £'000	Capital reserve - investments sold £'000	Special distributable reserve £'000	Revenue reserve £'000	Total equity £'000
As at 30 September 2021		2,113	125,559	(42,710)	3,561	82,711	18,315	189,549
Profit and total comprehensive income for the year		-	-	15,920	(3,014)	-	8,581	21,487
Transfer between unrealised and realised reserves		-	-	(6,167)	6,167	-	-	-
Transactions with owners recognised in equity:
Dividends paid	7	-	-	-	-	-	(10,568)	(10,568)
Transfer from special reserve		-	-	-	-	(636)	636	-
As at 30 September 2022		2,113	125,559	(32,957)	6,714	82,075	16,964	200,468

For the year ended 30 September 2021

	Notes	Share capital account £'000	Share premium £'000	Capital reserve - investments held £'000	Capital reserve - investments sold £'000	Special distributable reserve £'000	Revenue reserve £'000	Total equity £'000
As at 30 September 2020		2,113	125,559	(47,365)	2,382	83,162	15,922	181,773
Loss and total comprehensive income for the year		-	-	4,655	1,179	-	11,276	17,110
Transactions with owners recognised in equity:
Dividends paid	7	-	-	-	-	-	(9,334)	(9,334)
Transfer from special reserve		-	-	-	-	(451)	451	-
As at 30 September 2021		2,113	125,559	(42,710)	3,561	82,711	18,315	189,549

The accompanying notes are an integral part of these Financial Statements.

Consolidated Statement of Cash Flow

For the year ended 30 September 2022

	Notes	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Cash flows from operating activities
Profit before tax		21,487	17,110
Adjustments for:
Interest payable		3,003	3,109
Unrealised revaluation gain on property portfolio		(15,920)	(4,655)
Loss/(gain) on sale of investment property realised		3,014	(1,179)
Operating cash flows before working capital changes		11,584	14,385
Decrease in trade and other receivables		547	1,823
Decrease in trade and other payables		(420)	(492)
Net cash inflow from operating activities		11,711	15,716
Cash flows from investing activities
Capital expenditure		(3,207)	(10,345)
Acquisition of investment properties		-	(21,640)
Sale of investment properties		67,704	27,953
Deposits with Aviva		(24,210)	-
Net cash inflow/(outflow) from investing activities		40,287	(4,032)
Cash flows from financing activities
Dividends paid		(10,568)	(9,334)
Interest paid		(2,837)	(3,016)
Net cash outflow from financing activities		(13,405)	(12,350)
Net increase/(decrease) in cash and cash equivalents		38,593	(666)
Opening cash and cash equivalents		11,642	12,308
Closing cash and cash equivalents	12	50,235	11,642

The accompanying notes are an integral part of these Financial Statements.

Notes to the Consolidated Financial Statements

1. ACCOUNTING POLICIES

(A) BASIS OF PREPARATION

BASIS OF ACCOUNTING

These Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with IFRS adopted pursuant to UK adopted international accounting standards. The accounts have been prepared on a historical cost basis, except for investment property valuations that have been measured at fair value.

The Notes and Financial Statements are presented in pounds sterling (being the functional currency and presentational currency for the Company) and are rounded to the nearest thousand except where otherwise indicated.

GOING CONCERN

Under the AIC Code, the Board needs to report whether the business is a going concern. In considering this requirement, the Directors have taken the following into account:

−   the Group's projections for the next three years, in particular the cash flows, borrowings and occupancy rate;

−   the ongoing ability to comply comfortably with the Group's financial covenants (details of the loan covenants are included in Note 13);

−   the risks included on the Group's risk register that could impact on the Group's liquidity and solvency over the next 12 months (details of risks are included in the Strategic Report); and

−   the risks on the Group's risk register that could be a potential threat to the Group's business model (details of risks are included in the Strategic Report).

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The Strategic Report also includes the Group's risks and risk management processes.

The Directors made an assessment of going concern, under the guidelines of the AIC. Details of this assessment is included in the Directors' Report.

Furthermore, the Company and Investment Manager have assessed that values would need to drop by 23% in EPIC No.1 and 35% in EPIC No.2 respectively, based on the 30 September 2022 valuations, for the Loan-to-Value covenant to be breached. This would be a dramatic decline and considered to be remote. Beyond these drops, cure rights are available under the facility agreement to rectify any breach.

With this information and bearing in mind the nature of the Group's business and assets, the Directors consider that the Group has adequate resources to continue in operational existence over the medium term and believe that the Company has the ability to meet its financial commitments for a period of at least twelve months from the date of approval of the accounts. For these reasons, the Directors continue to adopt the going concern basis in preparing the accounts.

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of Financial Statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the year-end date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.

KEY ESTIMATES

The only significant source of estimation uncertainty relates to the investment property valuations. The fair value of investment properties is determined by independent real estate valuation experts using recognised valuation techniques. The properties have been valued on the basis of 'Fair Value' in accordance with the current editions of Royal Institution of Chartered Surveyors (RICS) Valuation - Global Standards, which incorporate the International Valuation Standards, and the RICS UK National Supplement. Investment property under construction is subject to a higher estimation uncertainty than that of investment property due to the estimation required for future expenditure, which is factored into the valuation models for any such properties. In line with the recommendation of the European Public Real Estate Association, all properties have been deemed to be Level 3 under the fair value hierarchy classification set out below. This is described in more detail in Note 9. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

The fair value measurement for the assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or a similar instrument. As explained in more detail in Note 9, all investment properties are included in Level 3.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred.

KEY JUDGEMENTS

Key judgements relate to property acquisitions where different accounting policies could be applied and operating lease contracts. These are described in more detail below, or in the relevant notes to the Financial Statements.

PROPERTY ACQUISITIONS AND BUSINESS COMBINATIONS

The Group acquires real estate either as individual properties or as the acquisition of a portfolio of properties either directly or through the acquisition of a corporate entity.

OPERATING LEASE CONTRACTS - THE GROUP AS LESSOR

The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases. Management has applied judgement by considering key new leases this year and have assessed that no lease exceeds a term of 40 years and as such determined that the terms and conditions of the arrangements do not result in a transfer of significant risks and rewards of ownership of these properties and that these should therefore be accounted for as operating leases.

The leases, when signed, are for between 5 and 35 years. At the inception of the lease, management do not consider any extension of the leases to be reasonably certain and, as such do not factor any lease extensions into their considerations of lease incentives and the treatment of rental income.

BASIS OF CONSOLIDATION

The Consolidated Financial Statements comprise the Financial Statements of the Company and its two subsidiaries drawn up to 30 September 2022. Subsidiaries are those entities, including special purpose entities, controlled by the Company and are detailed in Note 10. Control exists when the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases.

In preparing the Consolidated Financial Statements, intra-Group balances, transactions and unrealised gains or losses have been eliminated in full. Uniform accounting policies are adopted for all companies within the Group.

(B) REVENUE RECOGNITION

RENTAL INCOME

Rental income, excluding VAT, arising on investment properties is accounted for in the Statement of Comprehensive Income on a straight-line basis over the terms of the individual leases.

Lease incentives, including rent-free periods and payments to tenants, are allocated to the Statement of Comprehensive Income on a straight-line basis over the lease term or on another systematic basis, if applicable. Where income is recognised in advance of the related cash flows, an adjustment is made to ensure that the carrying value of the relevant property, including accrued rent disclosed separately within 'trade and other receivables', does not exceed the external valuation.

The Group may from time to time receive surrender premiums from tenants who break their leases early. To the extent they are deemed capital receipts to compensate the Group for loss in value of property to which they relate, they are credited through the capital column of the Statement of Comprehensive Income to capital reserves. All other surrender premiums are recognised within rental income in the Statement of Comprehensive Income.

INTEREST INCOME

Interest income is accounted for on an accruals basis.

SERVICE CHARGES AND EXPENSES RECOVERABLE FROM TENANTS

Where service charges and other expenses are recharged to tenants, the expense and the income received in reimbursement are offset within the Statement of Comprehensive Income and are not separately disclosed, as the Directors consider that the Group acts as agent in this respect. Service charges and other property-related expenses that are not recoverable from tenants are recognised in expenses on an accruals' basis.

(C) OTHER EXPENSES

Expenses are accounted for on an accruals' basis. The Group's investment management and administration fees, finance costs and all other expenses are charged to revenue through the Statement of Comprehensive Income.

(D) DIVIDENDS PAYABLE

Dividends are accounted for in the period in which they are paid. All the dividends are paid as interim dividends and the dividend policy is put to shareholders for approval.

(E) TAXATION

The Group is a UK REIT and is thereby exempt from corporation tax on both net rental profits and chargeable gains arising on properties using within its exempt property business. In order to retain UK REIT status, certain ongoing criteria must be maintained. The main criteria are as follows:

−   at the start of each accounting period, the assets of the Tax-exempt Business must be at least 75% of the total value of the Group's assets;

−   at least 75% of the Group's total profits must arise from the Tax-exempt Business;

−   at least 90% of the tax-exempt rental business profits must be distributed in the form of a Property Income Distribution within 12 months of the end of the period; and

−   the Group must hold a minimum of three properties with no single property exceeding 40% of the total values of the properties used within the Tax-exempt Business.

The Directors intend that the Group should continue as a UK REIT for the foreseeable future, with the result that deferred tax is not recognised on temporary differences relating to the property rental business which is within the UK REIT structure.

Taxation on any profit or loss for the period not exempt under UK-REIT regulations comprises current and deferred tax. Taxation is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movements in equity, in which case it is also recognised as a direct movement in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates and laws enacted or substantively enacted at the year-end date.

Deferred tax is provided using the liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes calculated using rates and laws enacted or substantively enacted by the end of the period expected to apply. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward tax credits or tax losses can be utilised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. In determining the expected manner of realisation of an asset, the Directors consider that the Group will recover the value of investment property through sale. Deferred tax relating to items recognised directly in equity is recognised in equity and not in profit or loss.

(F) INVESTMENT PROPERTIES

Investment properties are properties held to earn rentals or for capital appreciation, or both, and are accounted for using the fair value model.

Investment properties are revalued quarterly with resulting gains and losses recognised in profit or loss. These are included in the Consolidated Statement of Financial Position at their fair values.

Investment properties consist of land and buildings that are not occupied for use by or in the operations of the Group or for sale in the ordinary course of business but are held to earn rental income together with the potential for capital and income growth.

Investment properties are initially recognised at the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property.

After initial recognition, investment properties are measured at fair value, with gains and losses recognised in the Statement of Comprehensive Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date using recognised valuation techniques appropriately adjusted for unamortised lease incentives, lease surrender premiums and rental adjustments.

The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (including lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.

In terms of IAS 40, investment property under construction is measured at fair value, with gains and losses recognised in the Statement of Comprehensive Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date. The determination of the fair value of investment property under construction requires the use of estimates such as future cash flows from assets (including lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. On derecognition, gains and losses on disposals of investment properties are recognised in the Statement of Comprehensive Income and transferred to the capital reserve - investments sold. Recognition and derecognition occurs on the completion of a sale.

(G) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash in hand and short-term deposits in banks with an original maturity of three months or less.

(H) TRADE AND OTHER RECEIVABLES

Rents receivable, which are generally due for settlement at the relevant quarter end, are recognised and carried at the original invoice amount less an allowance for any uncollectable amounts. An expected credit loss methodology is applied to applicable trade and other receivables. Expected credit losses are recognised in the Statement of Comprehensive Income as part of the ongoing assessment. Any incurred losses are written off when identified.

The Group applies the IFRS 9 simplified approach to measuring the expected credit losses (ECLs) for trade receivables whereby the allowance or provision for all trade receivables are based on the lifetime ECLs. The Group considers historical defaults over the expected life of the trade receivables and any information related to the debtors available at year end to determine forward-looking estimates of possible defaulting. This is consistent with the approach followed in prior periods.

(I) INTEREST-BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognised at the fair value of the consideration received net of arrangement costs associated with the borrowing. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost; any difference is recognised in the Statement of Comprehensive Income over the period of the borrowing using the effective interest method. Amortised cost is calculated by taking into account any loan arrangement costs and any discount or premium on settlement.

The Company discloses the bases and impact of early repayment of debt and also the fair value of the loans but includes the creditor amounts on the accounting policy above.

(J) PROPERTY ACQUISITIONS

Where property is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business or the acquisition of an asset.

Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, 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. Otherwise, acquisitions are accounted for as business combinations.

(K) RESERVES

SHARE PREMIUM

The surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. The reserve is non-distributable. The initial share premium account, on the launch of the Company in 2014, was transferred to the special distributable reserve, following shareholder approval and successful application to court.

CAPITAL RESERVES

The following are accounted for in the capital reserve - investments sold:

−   realised gains and losses arising on the disposal of investment properties.

The following are accounted for in the capital reserve - investments held:

−   increases and decreases in the fair value of investment properties held at the period end.

REVENUE RESERVE

The net profit arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve which is available for paying dividends. Where the Company's revenue reserve is insufficient to fund the dividends paid, a transfer can be made to this reserve from the special distributable reserve.

SPECIAL DISTRIBUTABLE RESERVE

Shortly after the launch of the Company, an application to Court was successfully made for the cancellation of the initial share premium account, which allowed the balance of the share premium account at that date to be transferred to the special distributable reserve. This reserve is available for paying dividends and buying back the Company's shares.

CAPITAL MANAGEMENT

The Group's capital is represented by the Ordinary Shares, share premium, capital reserves, revenue reserve and special distributable reserve. The Group is not subject to any externally imposed capital requirements.

The capital of the Group is managed in accordance with its investment policy, in pursuit of its investment objective. Capital management activities may include the allotment of new shares, the buy back or re-issuance of shares from treasury, the management of the Group's discount to net asset value and consideration of the Group's net gearing level.

There have been no changes in the capital management objectives and policies or the nature of the capital managed during the year.

(L) CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the previous financial year.

STANDARDS ISSUED BUT NOT YET EFFECTIVE

The following standards have been issued but is not effective for this accounting period and has not been adopted early:

−   IAS 1 (amended) - Amendments regarding classifications of liabilities, and disclosure of accounting policies - effective from 1 January 2023

−   IAS 8 (amended) - Amendments regarding the definition of accounting estimates - effective from 1 January 2023.

−   IAS 12 (amended) - Amendments regarding deferred tax on leases and decommissioning obligations - effective from 1 January 2023.

−   IFRS 17 - Amendments to IFRS 17 'Insurance Contracts' (Amendments to IFRS 17 and IFRS 4) - effective from 1 January 2023.

Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the financial statements of the Group.

The Group does not consider the adoption of any new standards or amendments, other than those noted above, to be applicable to the Group.

2. INVESTMENT MANAGEMENT FEE

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Investment management fee	1,703	1,687
Total	1,703	1,687

Ediston Investment Services Limited has been appointed as the Company's Alternative Investment Fund Manager (AIFM) and Investment Manager, with the property management services of the Group being delegated to Ediston Properties Limited. Ediston Investment Services Limited is entitled to a fee calculated as 0.95% per annum of the net assets of the Group up to £250m, 0.75% per annum of the net assets of the Group over £250m and up to £500m and 0.65% per annum of the net assets of the Group over £500m. The management fee on any cash available for investment (being all cash held by the Group except cash required for working capital and capital expenditure) is reduced to 0.475% per annum while such cash remains uninvested. The Management fee is reduced by £40,000 per annum pursuant to the side letter agreement entered into in December 2020.

Ediston Investment Services Limited has committed to investing 20.0% of the quarterly management fee in the Company's shares each quarter commencing from 1 October 2020 to 21 December 2023. Refer to Note 17 for further information.

3. OTHER EXPENSES

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Direct operating expenses for investment properties:
- from which income is received	2,077*	1,016
- from which income is not received	-	-
Administration fee	190	179
Valuation and other professional fees	174	157
Directors' fees	216	212
Public relations and marketing	83	73
Auditor's remuneration for:
Audit services:
- fees payable for the audit of the consolidation and the parent company accounts	80	42
- fees payable for the audit of subsidiaries, pursuant to legislation	45	36
Listing and registrar fees	73	46
Other	274	153
Total	3,212	1,914

*    Direct property expenses includes transaction costs for potential acquisitions not concluded.

The movement in expected credited losses, which was previously grouped with other expenses, has been reconsidered and whilst this is immaterial, it has been presented separately on the face of the Consolidated Statement of Comprehensive Income, in line with the requirements of IAS 1.

4. INTEREST RECEIVABLE

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Deposit interest	22	-
Total	22	-

5. INTEREST PAYABLE

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Loan interest	2,837	2,938
Amortisation of loan set-up costs	166	165
Bank interest	-	6
Total	3,003	3,109

 6. TAXATION

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Total tax charge	-	-

A reconciliation of the corporation tax charge applicable to the results at the statutory corporation tax rate to the charge for the year is as follows:

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Profit/(loss) before taxation	21,487	17,110
UK tax at a rate of 19.0% (2021: 19.0%)	4,082	3,251
Effects of:
REIT exempt profits	(1,751)	(2,228)
REIT exempt gains/losses	(2,452)	(1,109)
Excess management expenses of residual business	121	86
Total tax charge	-	-

The Company served notice to HM Revenue & Customs that the Company, and its subsidiaries, qualified as a REIT with effect from 31 October 2014. Subject to continuing relevant UK-REIT criteria being met, the profits from the Group's property rental business, arising from both income and capital gains, are exempt from corporation tax.

The Group has unutilised tax losses carried forward in its residual business of £3,202,000 at 30 September 2022 (2021: £2,566,000). No deferred tax asset has been recognised on this amount as the Group cannot be certain that there will be taxable revenue profits arising within its residual business from which the future reversal of the deferred tax asset could be deducted. Although the Group anticipates sufficient capital profits, these cannot be offset against losses which are revenue in nature.

7. DIVIDENDS

Twelve monthly dividends of 0.4167 pence per share, at a total cost of £10,568,000 (2021: Seven monthly dividends of 0.3333 pence per share and five monthly dividends of 0.4167 pence per share, at a total cost of £9,334,000) were paid during the year. This equates to an annualised dividend of 5.00 pence (2021: 4.42 pence) per share.

Since the year end, interim dividends, each of 0.4167 pence per share, have been paid on 31 October 2022 and 30 November 2022. A further

interim dividend, of 0.4167 pence per share, will be paid on 30 December 2022. This monthly dividend of 0.4167 pence per share equates to an annualised dividend level of 5.00 pence per share. All of the distributions made by the Company have been Property Income Distributions (PIDs).

8. EARNINGS PER SHARE

Basic and diluted earnings per share.*

	Year ended 30 September 2022		Year ended 30 September 2021
	£'000	Pence per share	£'000	Pence per share
Revenue earnings	8,581	4.06	11,276	5.34
Capital earnings	12,906	6.11	5,834	2.76
Total earnings	21,487	10.17	17,110	8.10
Average number of shares in issue		211,333,737		211,333,737

* There is no difference between basic and diluted earnings per share (2021: no difference).

9. INVESTMENT PROPERTIES

Freehold and leasehold properties	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Opening book cost	320,694	315,611
Opening unrealised depreciation	(42,710)	(47,365)
Opening fair value	277,984	268,246
Movements for the period
Acquisitions	-	21,850
Sales - proceeds	(67,704)	(27,953)
- (Loss)/gain on sales	(3,014)	1,179
Transfer to unrealised reserves on properties sold	6,167	-
Capital expenditure	4,279	10,007
Movement in book cost	(60,272)	5,083
Unrealised gains on investment properties	29,772	10,798
Unrealised losses on investment properties	(13,852)	(6,143)
Unrealised movement during the year	15,920	4,655
Transfer between unrealised and realised reserves for properties sold	(6,167)	-
Movement in fair value	9,753	4,655
Closing book cost	260,422	320,694
Closing unrealised depreciation	(32,957)	(42,710)
Closing fair value	227,465	277,984

During the year ended 30 September 2022, the Group sold the properties at Bath, Newcastle, Edinburgh, Birmingham, Hartlepool and Telford. The Group received a net amount of £67,704,000 (2021: £27,953,000) from investments sold during the year. The total book cost of the investments when it was purchased was £64,551,000 (2021: £26,774,000). These investments have been revalued over time and, until it was sold, any unrealised gains/losses were included in the fair value of the investments.

During the year, expenditure totalling £4,279,000 (2021: £10,007,000), including capitalised lease incentives, incurred in improving investment properties, has been capitalised to the book cost of the property.

The fair value of the investment properties reconciled to the appraised value as follows:

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Closing fair value	227,465	277,984
Lease incentives held as debtors (Note 11)	3,970	5,361
Appraised market value per Knight Frank	231,435	283,345
Changes in the valuation of investment properties:
	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
(Loss)/gain on sale of investment properties	(3,014)	1,179
Unrealised profit realised during the year	6,167	-
Gain on sale of investment properties realised*	3,153	1,179
Unrealised gains on investment properties	9,753	4,655
Total gain on revaluation of investment properties	12,906	5,834

* Represents the difference between the sales proceeds, net of costs, and the property valuation at the time of sale.

The gain/loss on revaluation of investment properties reconciles to the movement in appraised market value as follows:

	Year ended 30 September 2022 £'000	Year ended 30 September 2021 £'000
Total gain on revaluation of investment properties held at year end	9,753	4,655
Purchases	-	21,850
Capital expenditure	4,279	10,007
Sales - net proceeds	(64,551)	(26,774)
Movement in fair value	(50,519)	9,738
Movement in lease incentives held as debtors	(1,391)	632
Movement in appraised market value	(51,910)	10,370

At 30 September 2022, the investment properties were valued at £231,435,000 (2021: £283,345,000) by Knight Frank LLP (Knight Frank), in their capacity as external valuers. This includes no investment property under construction (2021: £Nil). The valuation was undertaken in accordance with the current editions of RICS Valuation - Global Standards, which incorporate the International Valuation Standards, and the RICS UK National Supplement. Fair value is based on an open market valuation (the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date), provided by Knight Frank on a quarterly basis, using recognised valuation techniques as set out in the Group's accounting policies.

The Group is required to classify fair value measurements of its investment properties using a fair value hierarchy, in accordance with IFRS 13 'Fair Value Measurement'. In determining what level of the fair value hierarchy to classify the Group's investments within, the Directors have considered the content and conclusion of the position paper on IFRS 13 prepared by the European Public Real Estate Association (EPRA), the representative body of the publicly listed real estate industry in Europe. This paper concludes that, even in the most transparent and liquid markets, it is likely that valuers of investment property will use one or more significant unobservable inputs or make at least one significant adjustment to an observable input, resulting in the vast majority of investment properties being classified as Level 3.

Observable market data is considered to be that which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market. In arriving at the valuation Knight Frank will have to make adjustments to observable data of similar properties and transactions to determine the fair value of a property and this will involve the use of considerable judgement.

Considering the Group's specific valuation process, industry guidance, and the level of judgement required in the valuation process, the Directors believe it appropriate to classify the Group's assets within Level 3 of the fair value hierarchy.

All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are applied to leasehold and freehold properties. All leasehold properties have more than 100 years remaining on the lease term.

The Group's investment properties, which are all commercial properties, are considered to be a single class of assets. There have been no changes to the valuation technique used through the period, nor have there been any transfers between levels.

The key unobservable inputs made in determining the fair values are:

−   estimated rental value (ERV): the rent at which space could be let in the market conditions prevailing at the date of valuation; and

−   net equivalent yield: the equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review, but with no further rental growth.

Information on these inputs is disclosed below:

	30 September 2022		30 September 2021
	Range	Weighted average	Range	Weighted average
Estimated rental value per sq. ft. per annum	£5 - £42.82	£12.90	£5 - £43	£13.80
Net equivalent yield	5.5% - 8.0%	6.96%	6.0% - 9.8%	7.0%

The ERV for the total portfolio is not materially different from the contracted rent.

A decrease in the net equivalent yield applied to the portfolio by 0.25% will increase the fair value of the portfolio by £11,087,000 (2021: £10,500,000), and consequently increase the Group's reported income from unrealised gains on investments. An increase in yield by 0.25% will decrease the fair value of the portfolio by £9,243,699 (2021: £9,800,000) and reduce the Group's income.

The management of market price risk is part of the investment management process and is typical of a property investment company. The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is minimised through the appointment of external property valuers. The basis of valuation of the property portfolio is set out in detail in the accounting policies.

Any changes in market conditions will directly affect the profit and loss reported through the Statement of Comprehensive Income. Details of the Group's investment property portfolio held at the balance sheet date are disclosed in Note 9. A 10% increase in the value of the investment properties held as at 30 September 2022 would have increased net assets available to shareholders and increased the net income for the year by £23,000,000 (2021: £28,000,000); an equal and opposite movement would have decreased net assets and decreased the net income by an equivalent amount.

The calculations are based on the investment property valuations at the respective balance sheet date and are not representative of the year as a whole, nor reflective of future market conditions.

10. INVESTMENT IN SUBSIDIARIES

EPIC (No.1) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company number: 09106328) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.1) Limited was incorporated on 27 June 2014 and began trading on 5 May 2015. On 5 May 2015, the ownership of the property portfolio held by the Company at that date was transferred to EPIC (No.1) Limited. The net asset value of EPIC (No.1) Limited as at 30 September 2022 was £96,727,000 (2021: £102,605,000). The loss of EPIC (No.1) Limited for the year to 30 September 2022 was £1,026,000 (2021: £4,716,000 profit).

EPIC (No.2) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company number: 10978359) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.2) Limited was incorporated on 23 September 2017, having been established to hold the five properties acquired by the Group and to enter into the Group's additional loan facility. The net asset value of EPIC (No.2) Limited as at 30 September 2022 was £99,011,000 (2021: £81,412,000). The profit of EPIC (No.2) Limited for the period to 30 September 2022 was £23,149,000 (2021: £12,680,000).

11. TRADE AND OTHER RECEIVABLES

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Secured balance held with loan provider	31,047	6,837
Capital and rental lease incentives	3,970	5,361
Rent receivable (net of allowance for expected credit losses)	865	1,175
Other debtors and prepayments	96	17
Total	35,978	13,390

The secured balance held with the loan provider represents monies that have been drawn under the Group's loan facilities, which are not currently invested in properties and which have been placed in a secured account with Aviva until required. The balance includes interest receivable of £90,000 (2021: £186,000). These monies are available for reinvestment in the Group's investment property portfolio or, if necessary, could be used to partially repay the Group's borrowings. During the year ended 30 September 2022, the Company deposited an additional sum of £24,209,000 to the secured account (2021: utilised £1,646,000 from the secured amount).

Capital and rental lease incentives consist of £3,435,000 (2021: £3,717,000) being the prepayments for rent-free periods recognised over the life of the lease, £570,000 (2021: £1,644,000) relating to capital incentives paid to tenants, and £33,000 (2021: £Nil) of lease premium being the premium paid by the tenant. As set out in the accounting policy for rental income, an adjustment is made for these amounts to the fair value of the investment properties (see Note 9) to prevent double counting.

Rent receivable is shown net of an allowance for expected credit losses balance of £34,000 (2021: £85,000). The movement in the allowance is shown below and reflected in the Statement of Comprehensive Income.

Allowance for expected credit losses	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Opening balance as at 30 September	85	700
Reversal of allowance for expected credit losses	(51)	(615)
Closing balance as at 30 September	34	85

12. CASH AND CASH EQUIVALENTS

All cash balances at the year end were held in cash, current accounts or deposit accounts.

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Cash and cash equivalents	50,235	11,642
Total	50,235	11,642

13. LOANS

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Principal amount outstanding	111,076	111,076
Set-up costs	(1,612)	(1,612)
Amortisation of loan set-up costs	979	813
Total	110,443	110,277

The Group's loan arrangements are with Aviva Commercial Finance Limited.

The Group has loans totalling £56,920,000, which carry a blended fixed interest rate of 2.99% and mature in May 2025. This rate is fixed for the period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the Loan-to-Value is 40% or higher. These loans are secured over EPIC (No.1) Limited's property portfolio.

The Group also has a loan totalling £54,156,000, which carries a fixed interest rate of 2.73% and matures in December 2027. This rate is fixed for the period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the LTV is 40% or higher. This loan is secured over EPIC (No.2) Limited's property portfolio. At year end, the covenants were both below 40 per cent LTV.

The Group's weighted average cost of borrowings remained 2.86% at 30 September 2022.

Under the financial covenants relating to the loans, the Group has to ensure that for each of EPIC (No.1) Limited and EPIC (No.2) Limited:

−   the Historic Interest Cover and Projected Interest Cover, each being the passing rental income as a percentage of finance costs and generally calculated over a period of 12 months to/from the calculation date, is at least 300%; and

−   the LTV ratio, being the adjusted value of the loan as a percentage of the aggregate market value of the relevant properties, must not exceed 50%.

Breach of the financial covenants, subject to various cure rights, may lead to the loans falling due for repayment earlier than the final maturity dates stated above. The Group has complied with all the loan covenants during the year. Under the terms of early repayment relating to the loans, the cost of repaying the loans on 30 September 2022, based on the yield on the treasury 5% 2025 and treasury 4.25% 2027 plus a margin of 0.5%, would have been approximately £111,520,000 (2021: £120,268,000), including repayment of the principal of £111,076,000 (2021: £111,076,000).

The fair value of the loans based on a marked-to-market basis, being the yield on the relevant treasury plus the appropriate margin, was £98,682,000 as at 30 September 2022 (2021: £114,918,000). This includes the principal amount borrowed. Analysis of net debt:

	Cash and cash equivalents 2022 £'000	Borrowing 2022 £'000	Net Debt 2022 £'000	Cash and cash equivalents 2021 £'000	Borrowing 2021 £'000	Net debt 2021 £'000
Opening balance	11,642	(110,277)	(98,635)	12,308	(110,112)	(97,804)
Cash flows	38,593	2,837	41,430	(666)	-	(666)
Non-cash flows	-	(3,003)	(3,003)	-	(165)	(165)
Closing balance	50,235	(110,443)	(60,208)	11,642	(110,277)	(98,635)

14. TRADE AND OTHER PAYABLES

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Rental income received in advance	406	1,320
VAT payable to HMRC	471	549
Investment management fee payable	438	437
Loan interest payable	444	444
Capital expenditure payable	-	2
Other payables	1,008	438
Total	2,767	3,190

The Group's payment policy is to ensure settlement of supplier invoices in accordance with stated terms.

15. NET ASSET VALUE

The Group's net asset value per Ordinary Share of 94.86 pence (2021: 89.69 pence) is based on equity shareholders' funds of £200,468,000 (2021: £189,549,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.

The net asset value calculated under IFRS above is the same as the EPRA net asset value at 30 September 2022 and 30 September 2021.

16. CALLED-UP EQUITY SHARE CAPITAL

Allotted, called-up and fully paid Ordinary Shares of 1 pence par value	Number of shares	£'000
Opening balance as at 30 September 2021	211,333,737	2,113
Issue of Ordinary Shares	-	-
Closing balance as at 30 September 2022	211,333,737	2,113

The Company did not issue any Ordinary Shares in the last two financial years. The Company did not hold any shares in treasury during the previous two years. Under the Company's Articles of Association, the Company may issue an unlimited number of Ordinary Shares but issuance is subject to shareholder approval.

Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.

17. RELATED PARTIES

There have been no material transactions between the Company and its Directors during the year other than amounts paid to them in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end.

Ediston Investment Services Limited has received investment management fees of £1,703,000 in relation to the year ended 30 September 2022 (2021: £1,687,000), of which £438,000 (2021: £437,000) remained payable at the year end. Ediston Investment Services Limited received no development management fees in relation to the year ended 30 September 2022 (2021: £257,000).

Ediston Investment Services Limited acquired 541,000 shares in the Company during the year ended 30 September 2022 (2021: 374,215) as part of its commitment to reinvest 20% of its quarterly management fee.

The aggregate shareholding of the Manager and its senior personnel as at 30 September 2022 is 2,618,148 (2021: 1,984,667) shares, 1.2% (2021:

0.9%) of the issued share capital as at that date.

18. OPERATING SEGMENTS

The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Group is engaged in a single unified business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has no segments. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Group. The key measure of performance used by the Board to assess the Group's performance is the total return on the Group's net asset value. As the total return on the Group's net asset value is calculated based on the net asset value per share calculated under IFRSs as shown at the foot of the Consolidated Statement of Financial Position, the key performance measure is that prepared under IFRSs. Therefore, no reconciliation is required between the measure of profit or loss used by the Board and that contained in the Financial Statements.

The view that the Group is engaged in a single unified business is based on the following considerations:

−   one of the key financial indicators received and reviewed by the Board is the total return from the property portfolio taken as a whole;

−   there is no active allocation of resources to particular types or groups of properties in order to try to match the asset allocation of an index or benchmark; and

−   the management of the portfolio is ultimately delegated to a single property manager, Ediston Properties Limited.

19. FINANCIAL INSTRUMENTS

Consistent with its objective, the Group holds UK commercial property investments. In addition, the Group's financial instruments comprise cash and receivables and payables that arise directly from its operations. The Group does not have exposure to any derivative instruments.

The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk and interest rate risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling. The Group has insignificant exposure to market price risk related to financial instruments.

The Board reviews and agrees policies for managing the Group's risk exposure. These policies are summarised below and have remained unchanged for the period under review. These disclosures include, where appropriate, consideration of the Group's investment properties which, whilst not constituting financial instruments as defined by IFRSs, are considered by the Board to be integral to the Group's overall risk exposure.

SECURITIES FINANCING TRANSACTIONS (SFT)

The Company has not, during the year to 30 September 2022 (2021: same), participated in any: repurchase transactions; securities lending or borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no disclosure to make in satisfaction of the EU regulations on transparency of SFT.

The following table summarises the Group's financial assets and liabilities into the categories required by IFRS 7 'Financial Instruments: Disclosures':

	As at 30 September 2022		As at 30 September 2021
	Held at fair value through profit or loss £'000	Financial assets and liabilities at amortised cost £'000	Held at fair value through profit or loss £'000	Financialassets and liabilities at amortised cost £'000
Financial assets
Trade and other receivables	-	31,912	-	8,012
Cash and cash equivalents	-	50,235	-	11,642
	-	82,147	-	19,654
Financial liabilities
Loan	-	(110,443)	-	(110,277)
Trade and other payables	-	(1,890)	-	(1,321)
	-	(112,333)	-	(111,598)

Apart from the Aviva loans, as disclosed in Note 13, the fair value of financial assets and liabilities is not materially different from their carrying value in the financial statements.

CREDIT RISK

Credit risk is the risk that a counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group. At the reporting date, the Group's financial assets exposed to credit risk amounted to £82,147,000 (2021: £19,654,000), consisting of cash of £50,235,000 (2021: £11,642,000), the secured balance held with the loan provider of £31,047,000 (2021: £6,837,000) and rent receivable of £865,000 (2021: £1,175,000).

In the event of default by a tenant, if it is in financial difficulty or otherwise unable to meet its obligations under the lease, the Group will suffer a rental shortfall and incur additional expenses until the property is re-let. These expenses could include legal and surveyor's costs in re-letting, maintenance costs, insurances, rates and marketing costs, and may have an adverse impact on the financial condition and performance of the Group. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Investment Manager monitors such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants. In assessing the probability of default of the individual debtor. The Directors have considered a number of factors including history of default, past experience, future expectations as well as the support the debtor receives from its parent company and the ability to settle the amount receivable when due.

Where there are concerns over the recoverability of rental income, the Group monitors creditworthiness of the tenants and makes provision for potential bad debts based on the ECL model. The Group considers historical defaults over the expected life of the trade receivables and any information related to the debtors available at year end to determine forward-looking estimates of possible defaulting. This is consistent with the approach followed in prior periods. Given an improved rent profile of tenants and having considered their ability to pay, the wider expected credit losses considered by the Group has reduced to £34,000 at 30 September 2022 from £85,000 at 30 September 2021. Having given consideration to these criteria, the Group has determined that there are no additional expected credit losses other than those already recognised. As at 30 September 2022, collection plans are in place to recover any outstanding amounts. There were no other financial assets that were either past due or considered impaired at 30 September 2022 or at 30 September 2021.

At 30 September 2022, the Group held £47,382,000 (2021: £8,789,000) with RBS and £2,853,000 (2021: £2,853,000) with Bank of Scotland plc. Bankruptcy or insolvency of the bank holding cash balances may cause the Group's ability to access cash placed with them to be delayed, limited or lost. Both RBS and Bank of Scotland plc are rated by all the main rating agencies. Should the credit quality or the financial position of the banks currently employed significantly deteriorate, cash holdings would be moved to another bank. As at 30 September 2022, 'S&P Global Ratings' credit rating for RBS was A-1 and Moody's was P-1. The equivalent credit ratings for Bank of Scotland plc were A-1 and P-1, respectively. There has been no change in the fair values of cash or receivables as a result of changes in credit risk in the current or prior periods.

LIQUIDITY RISK

Liquidity risk is the risk that the Group will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments. The Group's investments comprise commercial properties.

Property and property-related assets in which the Group invests are not traded in an organised public market and are relatively illiquid assets, requiring individual attention to sell in an orderly way. As a result, the Group may not be able to liquidate quickly its investments in these properties at an amount close to their fair value in order to meet its liquidity requirements.

The Group's liquidity risk is managed on an ongoing basis by the Investment Manager and monitored on a quarterly basis by the Board. In order to mitigate liquidity risk the Group has a comprehensive nine-year cash flow forecast that aims to have sufficient cash balances, taking into account projected receipts for rental income and property sales, to meet its obligations for a period of at least 12 months. At the reporting date, the maturity of the financial assets was:

FINANCIAL ASSETS AS AT 30 SEPTEMBER 2022

	Three months or less £'000	More than three months but less than one year £'000	More than one year but less than three years £'000	More than three years £'000	Total £'000
Cash and cash equivalents	50,235	-	-	-	50,235
Secured balance held with loan provider	31,047	-	-	-	31,047
Rent receivable	865	-	-	-	865
Total	82,147	-	-	-	82,147

FINANCIAL ASSETS AS AT 30 SEPTEMBER 2021

	Three months or less £'000	More than three months but less than one year £'000	More than one year but less than three years £'000	More than three years £'000	Total £'000
Cash and cash equivalents	11,642	-	-	-	11,642
Secured balance held with loan provider	6,837	-	-	-	6,837
Rent receivable	1,175	-	-	-	1,175
Total	19,654	-	-	-	19,654

At the reporting date, the financial liabilities on a contractual maturity basis were:

FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2022

	Three months or less £'000	More than three months but less than one year £'000	More than one year but less than three years £'000	More than three years £'000	Total £'000
Loan	-	-	56,920	54,156	111,076
Interest payable on loan	802	2,378	5,927	3,439	12,546
Other payables	1,446	-	-	-	1,446
Total	2,248	2,378	62,847	57,595	125,068

FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2021

	Three months or less £'000	More than three months but less than one year £'000	More than one year but less than three years £'000	More than three years £'000	Total £'000
Loan	-	-	-	111,076	111,076
Interest payable on loan	802	2,378	6,389	6,162	15,731
Other payables	877	-	-	-	877
Total	1,679	2,378	6,389	117,238	127,684

Included in the tables above are payments due to Aviva, including interest payable, in connection with the loans as detailed in Note 13.

As at 30 September 2022, the Group remain in compliance with the loan covenants.

As at 30 September 2022, EPIC 1 reported a LTV of 38.10% (LTV of less than 50% required), the historical interest cover was reported at 349.74% (historical interest cover of at least 300% required) and the projected interest cover was reported at 493.81% (projected interest cover of at least 300% required).

As at 30 September 2022, EPIC 2 reported a LTV of 32.78% (LTV of less than 50% required), the historical interest cover was reported at 627.54% (historical interest cover of at least 300% required) and the projected interest cover was reported at 557.03% (projected interest cover of at least 300% required).

INTEREST RATE RISK

Some of the Group's financial instruments will be interest-bearing. They are a mix of both fixed and variable rate instruments with differing maturities. As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate. The Group's exposure to floating interest rates gives cash flow interest rate risk and its exposure to fixed interest rates gives fair value interest rate risk.

The following table sets out the carrying amount of the Group's financial instruments that are exposed to interest rate risk:

	As at 30 September 2022		As at 30 September 2021
	Fixed rate £'000	Variable rate £'000	Fixed rate £'000	Variable rate £'000
Cash and cash equivalents	-	50,235	-	11,642
Secured balance held with loan provider	-	31,047	-	6,837
Loan	(110,443)	-	(110,277)	-

VARIABLE RATE

An increase of 1% in interest rates would have increased the reported profit for the year and increased the net assets at 30 September 2022 by £813,000 (2021: 0.5% £92,000), a decrease of 1% in interest rates would have had an equal and opposite effect. These calculations are based on the variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual future conditions.

FIXED RATE

Considering the effect on the loan balance, it is estimated that an increase of 1% in interest rates as at the balance sheet date would have decreased its fair value by approximately £3,373,000 (2021: 0.50% £2,500,000) and a decrease of 1% would have increased its fair value by approximately £3,390,000 (2021: 0.50% £2,600,000). As the loan balance is recognised in the Consolidated Financial Statements at amortised cost, this change in fair value would not have resulted in a change in the reported loss for the year, nor the net assets of the Group at the year end.

20. CAPITAL COMMITMENTS

The Group had contractual commitments totalling £62,100 in relation to new frontages and roofs overclad of units 1A-1C, Stirling, as at 30 September 2022 (30 September 2021: £4,666,000).

21. OPERATING LEASES

The Group leases out its investment properties under operating leases. These properties are measured under the fair value model as the properties are held to earn rentals. All leases are non-cancellable with a weighted average unexpired lease term of 4.5 years (2021: 5.0 years).

The Group's investment properties are leased to tenants under the terms of property leases that include rent reviews as determined at the inception of the lease. These reviews can be linked to RPI, fixed rate or stepped rent increases.

The following table sets out the maturity analysis of leases receivables, showing the undiscounted lease payments under non-cancellable operating leases receivable by the Group:

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Year 1	12,795	19,448
Year 2	11,510	16,136
Year 3	10,182	14,267
Year 4	7,857	12,887
Year 5	6,680	10,643
Year 6 and onwards	16,026	27,507
Total	65,050	100,888

The largest single tenant at the year end accounted for 9% (2021: 6.4%) of the contracted rent.

22. ALTERNATIVE INVESTMENT FUND MANAGERS (AIFM) DIRECTIVE

Ediston Investment Services Limited has been authorised as an AIFM by the Financial Conduct Authority under the AIFMD regulations and

became the Group's AIFM with effect from 24 February 2016. In accordance with the AIFMD, information in relation to the Group's leverage and the

remuneration of the Company's AIFM is required to be made available to investors. Ediston Investment Services Limited has provided disclosures

on its website, https://www.ediston.com/about-us-ediston-investment-services-limited/, incorporating the requirements of the AIFMD regulations

regarding remuneration.

The Group's maximum and actual leverage levels at 30 September 2022 are shown below:

	Leverage ratio
Leverage exposure	Gross method	Commitment method
Maximum limit	3.00	3.00
Actual	1.3	1.3

For the purposes of the AIFMD, leverage is any method which increases the Group's exposure, including the borrowing of cash and the use of

derivatives. It is expressed as a percentage of the Group's exposure to its net asset value and is calculated on both a gross and commitment method.

Under the gross method, exposure represents the sum of the Group's positions after deduction of cash balances, without taking account of any

hedging or netting arrangements. Under the commitment method, exposure is calculated in a similar manner as the Company doesn't have any hedging or netting arrangements.

The leverage limits are set by the AIFM and approved by the Board, and are in line with the maximum leverage levels permitted in the Company's

Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.

Detailed regulatory disclosures to investors in accordance with the AIFMD are contained on the Company's website.

23. SUBSEQUENT EVENTS

No significant events have occurred between the statement of financial position date and the date when the financial statements have been approved, which would require adjustments to, or disclosure in the financial statements.

Company Statement of Financial Position

As at 30 September 2022

	Notes	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Non-current assets
Investment in subsidiary undertakings	3	200,553	177,448
		200,553	177,448
Current assets
Trade and other receivables	4	3,077	3,521
Cash and cash equivalents	5	2,958	2,989
		6,035	6,510
Total assets		206,588	183,958
Current liabilities
Trade and other payables	6	(1,304)	(1,143)
Total liabilities		(1,304)	(1,143)
Net assets		205,284	182,815
Equity and reserves
Called-up equity share capital	7	2,113	2,113
Share premium		125,559	125,559
Capital reserve - investments sold		4,649	4,649
Capital reserve - investments held		(9,112)	(32,217)
Special distributable reserve		82,075	82,711
Revenue reserve		-	-
Equity shareholders' funds		205,284	182,815
Net asset value per Ordinary Share	10	97.15p	86.51p

The accompanying notes are an integral part of these Financial Statements.

Company number: 09090446.

The Company made a profit for the year ended 30 September 2022 of £33,037,000 (2021: loss of £8,955,000).

The Company Financial Statements were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:

William Hill

Chairman

Company Statement of Changes in Equity

For the year ended 30 September 2022

	Notes	Share capital account £'000	Share premium £'000	Capital reserve - investments held £'000	Capital reserve - investments sold £'000	Special distributable reserve £'000	Revenue reserve £'000	Total equity £'000
As at 30 September 2021		2,113	125,559	(32,217)	4,649	82,711	-	182,815
Profit and total comprehensive income for the year		-	-	23,105	-	-	9,932	33,037
Transactions with owners recognised in equity:
Issue of Ordinary Shares	7	-	-	-	-	-	-	-
Dividends paid	2	-	-	-	-	-	(10,568)	(10,568)
Transfer from special reserve		-	-	-	-	(636)	636	-
As at 30 September 2022		2,113	125,559	(9,112)	4,649	82,075	-	205,284

For the year ended 30 September 2021

	Notes	Share capital account £'000	Share premium £'000	Capital reserve - investments held £'000	Capital reserve - investments sold £'000	Special distributable reserve £'000	Revenue reserve £'000	Total equity £'000
As at 30 September 2020		2,113	125,559	(32,289)	4,649	83,162	-	183,194
Profit and total comprehensive income for the year		-	-	72	-	-	8,883	8,955
Transactions with owners recognised in equity:
Issue of Ordinary Shares	7	-	-	-	-	-	-	-
Dividends paid	2	-	-	-	-	-	(9,334)	(9,334)
Transfer from special reserve		-	-	-	-	(451)	451	-
As at 30 September 2021		2,113	125,559	(32,217)	4,649	82,711	-	182,815

The accompanying notes are an integral part of these Financial Statements.

Notes to the Company Financial Statements

1. ACCOUNTING POLICIES

BASIS OF PREPARATION

The Company Financial Statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework and applicable legal and regulatory requirements of the Companies Act 2006.

The accounts have been prepared on a historical cost basis. The notes and financial statements are presented in pounds sterling (being the functional currency and presentational currency for the Company) and are rounded to the nearest thousand except where otherwise indicated.

The major accounting policies of the Company are set out below and have been applied consistently throughout the current and prior year.

The results of the Company have been included in the Group's Consolidated Financial Statements. The accounting policies adopted are consistent with those adopted by the Group as stated in Note 1 to the Consolidated Financial Statements. The only additional policy applied is in relation to investments in subsidiary undertakings and this is set out below.

The Company has taken advantage of the following exemptions permitted under FRS 101:

−   an exemption from preparing the Company cash flow statement and related notes;

−   an exemption from listing any new or revised standards that have not been adopted or providing information about their likely impact; and

−   an exemption from disclosing transactions between the Company and its wholly-owned subsidiaries.

Shareholders were informed about the Company's intention to use the above disclosure exemptions in the Annual Report and Accounts 2017 and no objections have since been received. A shareholder holding, or shareholders holding in aggregate, 5% or more of the total allotted shares in Ediston Property Investment Company plc may serve objections to the future use of the disclosure exemptions on Ediston Property Investment Company plc, in writing, to its registered office (The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF) to be received not later than 90 days prior to the end of Company's relevant reporting period.

GOING CONCERN

The Financial Statements are prepared on the going concern basis as explained for the Consolidated Financial Statements.

INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

Investments in subsidiary undertakings are stated at cost less, where applicable, any provision for impairment under the provisions of IAS 36. A provision for impairment is recognised to reflect the recoverable amount (Note 3) of the subsidiaries. In accordance with IAS 36, provisions for impairment will be reduced or increased dependent on the assessment of the recoverable amount of the subsidiary in future. The value of investments can never exceed costs.

CAPITAL MANAGEMENT

The Company's capital is represented by the Ordinary Shares, Share Premium, Capital Reserves, Revenue Reserve and Special Distributable Reserve and is managed in line with the policies set out for the Group.

COMPANY PROFIT FOR THE FINANCIAL YEAR AFTER TAX

Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account. The profit after tax for the year was £33,037,000 (2021: £8,955,000).

The Company does not have any employees (2021: nil). Details of the Directors' fees paid during the year are disclosed in the Group's Remuneration Report and in Note 3 to the Consolidated Financial Statements. All of the Directors' fees were paid by the parent company, although £217,000 (2021: £202,000) was subsequently re-allocated to the subsidiaries to reflect the work completed by the Directors in relation to the property assets held by those companies.

Audit fees in relation to the parent company only were £70,000 (2021: £42,000), excluding VAT. There were no non-audit fees paid to Grant Thornton UK LLP by the Company during the year (2021: nil).

2. DIVIDENDS

Details of dividends paid by the Company are included in Note 7 to the Consolidated Financial Statements.

3. INVESTMENTS IN SUBSIDIARIES

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Opening balance - Investment in EPIC (No.1) Limited	99,527	104,160
Opening balance - Investment in EPIC (No.2) Limited	77,921	73,216
Opening balance - Investments in subsidiaries	177,448	177,376
Impairment loss - EPIC (No.1) Limited	(509)	(4,633)
Impairment loss reversal - EPIC (No.2) Limited	23,614	4,705
Closing balance - Investment in EPIC (No.1) Limited	99,018	99,527
Closing balance - Investment in EPIC (No.2) Limited	101,535	77,921
Closing balance - Investments in subsidiaries	200,553	177,448

At 1 October 2017, the Company had a single equity investment in a wholly owned subsidiary, EPIC (No.1) Limited. During the year ended 30 September 2018, EPIC (No.1) Limited repurchased £19,520,000 of the equity previously issued to the Company.

During the year ended 30 September 2018, the Company subscribed for shares in a newly incorporated subsidiary, EPIC (No.2) Limited.

The Company's two property-owning subsidiaries above has seen an increase in investment property values over the course of the year to 30 September 2022. Details of the movement in the fair value of the investment properties of the Group are set out in Note 9 to the Consolidated Financial Statements. At 30 September 2022, an assessment of potential impairment of the equity investment in EPIC (No.1) Limited and EPIC (No.2) Limited was conducted, pursuant to the principles of IAS 36: Impairment of Assets. The net assets of EPIC (No.1) were lower than its carrying value which resulted in an impairment, and the net assets of EPIC (No. 2) Limited were higher than its carrying value which triggered an impairment write back. Following the principles of IAS 36 an impairment of £509,000 (2021: £4,633,000 impairment) was identified for EPIC (No.1) and a write back of £23,614,000 (2021: £4,705,000) in EPIC 2 was determined.

In terms of IAS 36, an asset should be carried at no more than their recoverable amount. The recoverable amount is determined as the higher of an asset's fair value less costs of disposal (FVLCOD) and its value in use. The cost of disposal used in determining the recoverable amount was 1.5% of the fair value of the asset. The value in use of an asset is the present value of the future cash flows expected to be derived from the asset.

In the assessment of this impairment, consideration was given to the nature of the assets and liabilities of the subsidiaries and a suitable determination of the recoverable amount of the investment in the subsidiaries. In line with the requirements of IAS 36, the value in use of each subsidiary was determined using projected cash flows over a five-year period using a discount rate of 7.7% (2021: 7%) and an expected growth rate of 2% for periods beyond the projected period of five years. The valuation technique is the sum of the fair value of the different components within the subsidiaries. Properties are carried at fair value, cash and working capital are held at amortised cost, which is considered its fair value. The fair value of debt was discounted based on a blended discount rate of 7.05% for EPIC (No.1) Limited and a discount rate of 6% for EPIC (No.2) Limited. The fair value hierarchy of the assets has been assessed as part of the fair value less costs of disposal, the assessment sits as a level 3 asset (refer to the accounting policies in the group accounts for the definition of a level 3 asset). The cost of disposal used in determining the recoverable amount was 3% of the fair value of the asset. The inputs to the calculations are subject to a high degree of estimation uncertainty.

EPIC (No.1) Limited has a FVLCOD of £99,018,000, which is considered an appropriate recoverable amount. The impairment thus reflects the amount by which the carrying value of £99,527,000 exceeds the recoverable amount of the investment in EPIC (No.1). A reasonably possible increase of 10% in the fair value of EPIC 1's property values would result in a recoverable amount of £104,160,000 this is limited to the original purchase price of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result in a decrease in the recoverable amount to £88,866,000.

EPIC (No.2) Limited has a FVLCOD of £101,535,000, which is considered an appropriate recoverable amount. A write back of previous impairment of £23,614,000 has therefore been raised, as the recoverable amount of the investment in EPIC (No.2) Limited exceeds its carrying amount of £77,921,000. A reasonably possible increase of 10% in the fair value of EPIC 2's property values would result in a recoverable amount of £105,505,000 this is limited to the original purchase price of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result in a decrease in the recoverable amount to £90,937,000.

See Note 10 to the Consolidated Financial Statements for further details on the Group structure.

4. TRADE AND OTHER RECEIVABLES

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
Amount due from subsidiary undertakings	3,052	3,504
Other receivables and prepayments	25	17
Total	3,077	3,521

The amount due from subsidiary undertakings is a short-term balance, which arises from the re-allocation of the Group VAT payment and certain expenses between members of the Group on a quarterly basis and is settled in cash shortly after each quarter end.

Based on the assessment of impairment of the subsidiaries, there are no expected credit losses related to the amounts due from subsidiary undertakings.

5. CASH AND CASH EQUIVALENTS

All cash balances at the year end were held in cash, current accounts or deposit accounts.

6. TRADE AND OTHER PAYABLES

	As at 30 September 2022 £'000	As at 30 September 2021 £'000
VAT payable to HMRC	471	549
Investment management fee payable	438	437
Other payables	395	157
Total	1,304	1,143

The Company's payment policy is to ensure settlement of supplier invoices in accordance with stated terms.

7. SHARE CAPITAL

Allotted, called-up and fully paid Ordinary Shares of 1 pence par value	Number of shares	£'000
Opening balance as at 30 September 2021	211,333,737	2,113
Issue of Ordinary Shares	-	-
Closing balance as at 30 September 2022	211,333,737	2,113

During the year to 30 September 2022, the Company did not issue any Ordinary Shares (year ended 30 September 2021: did not issue any Ordinary Shares). The Company did not buyback or resell from treasury any Ordinary Shares during the year (2021: nil). The Company did not hold any shares in treasury. Under the Company's Articles of Association, the Company may issue an unlimited number of Ordinary Shares.

Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.

8. FINANCIAL INSTRUMENTS

The Company's risks associated with financial instruments and the policies for managing its risk exposure are consistent with those detailed in Note 19 to the Consolidated Financial Statements.

With regards to the categorisation required by IFRS 7 'Financial Instruments: Disclosures' all of the Company financial assets and liabilities are categorised as 'financial assets and liabilities at amortised cost'. The Company's financial assets consist of trade and other receivables and cash and cash equivalents. The Company's financial liabilities consist of trade and other payables.

At the reporting date, the Company's financial assets exposed to credit risk amounted to £6,010,000 (2021: £6,493,000), consisting of the Company's cash balance of £2,958,000 (2021: £2,989,000) and current account balances due from its wholly-owned subsidiaries of £3,052,000 (2021: £3,504,000).

The maturity of the Company's financial liabilities (on a contractual maturity basis) at 30 September 2022 was as follows:

	Three months or less £'000	More than three months but less than three years £'000	More than three years £'000	Total £'000
Other payables	833	-	-	833

The maturity of the Company's financial liabilities (on a contractual maturity basis) at 30 September 2021 was as follows:

	Three months or less £'000	More than three months but less than three years £'000	More than three years £'000	Total £'000
Other payables	594	-	-	594

The Company's only financial instrument exposed to interest rate risk at 30 September 2022 was its cash balance of £2,958,000 (2021: £2,989,000), which received a variable rate of interest. An increase of 1% in interest rates would have increased the reported profit for the year, and the net assets at year end, by £30,000 (2021: 0.50% £15,000). A decrease of 1% in interest rates would have had an equal and opposite effect. These calculations are based on the variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual future conditions.

9. RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE INVESTMENT MANAGER

Other than transactions between the Company and its wholly owned subsidiaries, in relation to which the Company has adopted the permitted exemption allowed by FRS 101, related party transactions are the same for the Company as for the Group. For details, refer to Note 17 to the Consolidated Financial Statements. The fees payable to the Directors and the Investment Manager are initially paid by the Company, but may be reallocated, in whole or in part, to the subsidiaries.

10. NET ASSET VALUE

The Company's NAV per Ordinary Share of 97.15 pence (2021: 86.51 pence) is based on equity shareholders' funds of £205,284,000 (2021: £182,815,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.

 

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