Chamoss in the First Quarter: AFFO Rose While Open Cash Barely Moved
Chamoss reported first-quarter AFFO of £6.9 million and operating cash flow of £10.6 million, but after restricted-cash deposits, debt service and bond buybacks, open cash increased by only £18 thousand. The VW lease extension is still unsigned, so the quarter reinforces that the real issue is not rent collection, but how much cash flexibility remains before 2028.
Chamoss opened 2026 with a quarter that looks stronger on AFFO and operating cash flow, but it does not change the center of the story. Rent keeps rising through the RPI mechanism, debt service keeps declining as principal amortizes, and the covenants remain comfortably above their stress thresholds. A reader who stops at £6.9 million of AFFO or £10.6 million of operating cash flow gets too generous a picture: after restricted-cash deposits, interest, principal repayment and a bond buyback, open cash increased by only £18 thousand. At the same time, the portfolio valuation before accounting adjustments remained £397.0 million, and the accounting increase in investment property mainly reflects the decline in the guaranteed-rent uplift asset rather than a fresh improvement in the assets. The negotiation with VW over roughly 68 properties has still not become a binding agreement, so the quarter does not close the 2028 question. It does sharpen the right way to read the company: a very stable rent-collection business, with very little open cash and high dependence on turning the next long lease into a clear refinancing path.
The company owns 85 UK properties, all leased to VW Group under one master lease. Seventy-four properties are freehold and 11 are long leasehold, and the assets are used as showrooms and sales locations for Volkswagen Group brands. Economically, this is a simple income property structure: a single tenant, a triple-net contract, indexed rent, limited overhead and a cash waterfall that prioritizes the bond.
That simplicity is also the risk. This is not an income property company with hundreds of tenants and assets that can be freely sold one by one. The key items are the VW contract, collateral value within the contractual restrictions, and the ability to refinance Series A before July 2028. That was the center of the prior 2025 annual analysis, and the first quarter does not replace it. It only gives a more current view of how much cash moves through the structure before the contractual question is resolved.
The most important update is still the update that did not happen. The tenant has not exercised its right to give notice for extending the option, and the company is still negotiating with VW Group over roughly 68 properties. The rent range remains £17 million to £19 million per year, with no agreed terms, signed document or certainty that the discussions will become binding. As long as that remains true, clean collection does not solve the income base that needs to support the refinancing.
AFFO rose through adjustments that are not all owner-accessible cash
At the income-statement level, the quarter is not weak. Rental income rose to £8.519 million, up 3.3% year over year, and operating profit before investment-property fair-value changes rose to £8.332 million. Finance expense fell to £2.371 million, down 5.7%, as the bond principal continues to amortize. Those figures fit a predictable rent business.
Net profit declined to £4.658 million from £5.610 million in the prior-year quarter. The decline did not come from rent, but mainly from the reversal in the fair-value movement of a financial asset: a £1.248 million loss this quarter versus an £845 thousand gain in the prior-year quarter. That is why authority-method FFO, which neutralizes fair-value movements among other items, rose to £4.983 million.
The bigger jump sits in management AFFO, which rose to £6.926 million from £3.932 million. This is where the discipline matters. The measure includes £927 thousand from movement in the rent-smoothing asset and another £1.016 million from deferred tax provision. These are legitimate management adjustments, but they are not the same as free cash. The company itself notes that FFO does not represent operating cash flow and does not reflect cash held by the company or its distribution capacity.
| First-quarter metric | 2025 | 2026 | What it means |
|---|---|---|---|
| Rental income | £8.249 million | £8.519 million | The indexation mechanism is still working |
| Net profit | £5.610 million | £4.658 million | Financial fair-value movements weighed on the bottom line |
| Authority-method FFO | £3.975 million | £4.983 million | Recurring performance looks better than reported profit |
| Management AFFO | £3.932 million | £6.926 million | Part of the improvement comes from adjustments, not open cash |
| Operating cash flow | £5.170 million | £10.601 million | Most of the jump reflects tax and VAT timing |
The line that explains the gap is cash flow before current tax and VAT. Adjustments needed to present operating cash flow totaled £9.317 million versus £8.824 million in the prior-year quarter, an improvement of only 5.6%. Operating cash flow jumped by 105% mainly because current tax payments fell almost to zero and the VAT movement shifted from a £1.217 million outflow to a £1.289 million inflow.
The payment waterfall left £18 thousand in open cash
The company has to be read through all-in cash flexibility after actual cash uses: operating cash flow, less restricted-account deposits, property investment, interest, principal repayment, bond buybacks and dividends paid during the period. No cash dividend was paid during the first quarter, but a £900 thousand dividend was declared and paid in April, and on May 29, 2026, the board approved an additional £850 thousand dividend. Even a strong operating-cash quarter therefore has to be read against cash uses that already exist right after the balance-sheet date.
For the period itself, the result is sharp: £10.601 million of operating cash flow became only an £18 thousand increase in cash and cash equivalents. That happened because £2.156 million moved into restricted cash, £2.203 million was paid as interest, £4.144 million was used for bond principal repayment, and another £2.118 million went to bond buybacks.
This is the structure that supports the bond: current payments move through dedicated accounts, and restricted cash balances are far larger than the open cash balance. At the end of March, the company had £169 thousand of cash and cash equivalents, compared with £14.935 million of current restricted cash and another £19.672 million of restricted cash and investments for the bond. Bondholder protection is built inside restricted accounts, while equity-level free flexibility remains very narrow.
This continues the conclusion from the prior cash-waterfall analysis: comfortable AFFO does not mean abundant open cash. The difference in the first quarter is that the gap appears even when operating cash flow is very high. If open cash barely grows after a quarter like this, every distribution or bond buyback needs to be read as a choice inside a restricted structure, not as proof of broad excess cash.
The accounting property value rose without a new portfolio uplift
Investment property totaled £385.189 million at the end of March, slightly above £384.262 million at the end of 2025. Superficially, that looks like a valuation increase. In practice, the fair value of the real estate before adjustments remained £397.035 million, exactly where it was at the end of 2025. The accounting movement comes from the decline in the guaranteed-rent uplift asset, from £12.773 million at the end of 2025 to £11.846 million at the end of March.
The meaning is straightforward: the quarter does not add new proof that the market attributes a higher value to the assets. It mostly releases another piece of the accounting gap between the asset value and the rent-smoothing asset. The investment-property note remains materially the same: the properties are leased above market rent, and the shortening of the lease term affects asset value. As long as the lease extension is not signed, a £397.0 million portfolio value is an important reference point, but not a refinancing solution by itself.
The covenants also provide comfortable room without solving 2028. Equity stood at about £201 million versus a £90 million threshold, adjusted net financial debt to adjusted NOI stood at 5.06 versus a ceiling of 13, adjusted net financial debt to net CAP stood at 48% versus a ceiling of 80%, and debt service coverage stood at 1.35 versus a 1.05 threshold. These are strong numbers relative to the deed of trust. The weak point is not compliance today, but the rent base, value and funding route when the final repayment date arrives in July 2028.
Conclusions
The first quarter strengthens a mixed but clear conclusion. The operating business works: the tenant pays, indexation lifts rent, debt declines, covenants are comfortable and restricted accounts support bondholders. Stronger AFFO and operating cash still do not translate into meaningful open cash flexibility, and the accounting property movement does not signal a fresh improvement in pre-adjustment portfolio value. This is not a breakthrough quarter. It shows a system operating as designed, with very little room outside the payment waterfall.
The strongest counter-thesis is that this structure is good enough: VW is still paying, collateral is strong, the rating remains high, and covenants of 5.06 debt to NOI and 48% debt to net CAP are not pressure numbers. That is a serious argument, and it explains why this is not an immediate liquidity story. The next few quarters will be decided by three items: whether the VW extension becomes binding, whether the new rent base supports the 2028 refinancing, and whether the company continues to distribute cash or buy back bonds without weakening the safety margin the structure is trying to build.
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