TIDMARTL
RNS Number : 6573D
Alpha Real Trust Limited
23 June 2023
LEI: 213800BMY95CP6CYXK69
23 June 2023
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR "THE
GROUP")
ART ANNOUNCES ITS ANNUAL RESULTS FOR THE YEARED 31 MARCH
2023
-- NAV per ordinary share 216.8p as at 31 March 2023 (31 March 2022: 216.0p).
-- Basic earnings for the year ended 31 March 2023 of 1.1p per
ordinary share (31 March 2022: earnings of 13.3p per ordinary
share).
-- Adjusted earnings for the year ended 31 March 2023 of 7.7p
per ordinary share (31 March 2022: 4.0p per ordinary share)*.
-- Declaration of a quarterly dividend of 1.0p per ordinary
share expected to be paid on 28 July 2023.
-- Robust financial position: ART continues to adopt a cautious
approach to new investment and has conserved cash as a result of
the uncertainty that characterised the past year; this has placed
the Company on a robust financial footing making it well positioned
to take advantage of new investment opportunities.
-- Investment targets: the Company is currently focussed on
selectively increasing its loan portfolio and opportunistically
extending its wider investment strategy to target investments
offering inflation protection via index linked income adjustments
and investments that have potential for capital gains.
-- H2O Madrid: signing of a lease with anchor retailer Primark
for a new 3,000 square metre store as part of a mall
reconfiguration.
-- Diversified portfolio of secured senior and secured mezzanine
loan investments: as at 31 March 2023, the size of ART's drawn
secured loan portfolio was GBP55.4 million, representing 44.5% of
the investment portfolio.
-- The senior portfolio has an average Loan to Value ('LTV')**
of 63.5% based on loan commitments (with mezzanine loans having an
LTV range of between 48.8% and 78.6% whilst the highest approved
senior loan LTV is 72.9%).
-- Loan commitments: including existing loans at the balance
sheet date and loans committed post period end, ART's current total
committed but undrawn loan commitments amount to GBP9.4
million.
-- Cash management: during the period the Company invested GBP14
million in short term UK Treasury Bonds (Gilts) and UK Treasury
Bills to enhance returns on its liquid holdings.
* The basis of the adjusted earnings per share is provided in
note 9
** See below for more details
William Simpson, Chairman of Alpha Real Trust, commented:
"ART's investment portfolio benefits from diversification across
geographies, sectors, and asset types. As inflationary pressures
increasingly dominate the economic backdrop in which the Company
operates, ART remains on a robust financial footing and is well
placed to capitalise on new investment opportunities.
ART remains committed to growing its diversified investment
portfolio. In recent years the Company focused on reducing exposure
to direct development risk and recycling capital into cashflow
driven investments. The Company is currently focussed on its loan
portfolio and also on its wider investment strategy which targets
investments offering inflation protection via index linked income
adjustments and investments that have potential for capital
gains."
The Investment Manager of Alpha Real Trust is Alpha Real Capital
LLP.
For further information please contact:
Alpha Real Trust Limited
William Simpson, Chairman, Alpha Real Trust +44 (0) 1481 742
742
Gordon Smith, Joint Fund Manager, Alpha Real Trust +44 (0) 207
391 4700
Brad Bauman, Joint Fund Manager, Alpha Real Trust +44 (0) 207
391 4700
Panmure Gordon, Broker to the Company
Atholl Tweedie +44 (0) 20 7886 2500
Notes to editors:
About Alpha Real Trust
Alpha Real Trust Limited targets investment, development,
financing and other opportunities in real estate, real estate
operating companies and securities, real estate services,
infrastructure, infrastructure services, other asset-backed
businesses and related operations and services businesses that
offer attractive risk-adjusted total returns.
Further information on the Company can be found on the Company's
website: www.alpharealtrustlimited.com .
About Alpha Real Capital LLP
Alpha Real Capital is a value-adding international property fund
management group. Alpha Real Capital is the Investment Manager to
ART. Brad Bauman and Gordon Smith of Alpha Real Capital are joint
Fund Managers to ART. Both have experience in the real estate and
finance industries throughout the UK, Europe and Asia.
For more information on Alpha Real Capital please visit
www.alpharealcapital.com .
Company's summary and objective
Strategy
ART targets investment, development, financing and other
opportunities in real estate, real estate operating companies and
securities, real estate services, infrastructure, infrastructure
services, other asset-backed businesses and related operations and
services businesses that offer attractive risk-adjusted total
returns.
ART currently selectively focusses on asset-backed lending, debt
investments and high return property investments in Western Europe
that are capable of delivering strong risk adjusted cash flows.
The portfolio mix at 31 March 2023, excluding sundry
assets/liabilities, was as follows:
31 March 31 March
2023 2022
High return debt: 44.5% 27.3%
High return equity in
property investments: 26.5% 18.8%
Other investments: 15.2% 13.1%
Cash: 13.8% 40.8%
The Company is currently focussed on selectively increasing its
loan portfolio and opportunistically extending its wider investment
strategy to target high return property investments offering
inflation protection via index linked income adjustments and
investments that have potential for capital gains.
In a market of higher interest rates and volatility of
valuations, alternative credit remains an attractive investment
opportunity. As geared asset owners seek to refinance at current
valuations in an environment of more conservative lending criteria,
higher margins and base rates, requirements will emerge for
opportunistic capital to provide mezzanine finance at attractive
risk adjusted returns.
Dividends
The current intention of the Directors is to pay a dividend and
offer a scrip dividend alternative quarterly to all
shareholders.
Listing
The Company's shares are traded on the Specialist Fund Segment
("SFS") of the London Stock Exchange ("LSE"), ticker ARTL: LSE.
Management
The Company's Investment Manager is Alpha Real Capital LLP
("ARC"), whose team of investment and asset management
professionals focus on the potential to enhance earnings in
addition to adding value to the underlying assets, and also focus
on the risk profile of each investment within the capital structure
to best deliver attractive risk adjusted returns.
Control of the Company rests with the non-executive Guernsey
based Board of Directors.
Financial highlights
12 months 6 months 12 months
ended ended ended
31 March 30 September 31 March
2023 2022 2022
------------------------------------ ---------- -------------- ----------
Net asset value (GBP'000) 125,067 125,025 133,256
------------------------------------ ---------- -------------- ----------
Net asset value per ordinary share 216.8p 219.6 216.0p
------------------------------------ ---------- -------------- ----------
Earnings per ordinary share (basic
and diluted) 1.1p 0.4p 13.3p
------------------------------------ ---------- -------------- ----------
Earnings per ordinary share (basic
and diluted) (adjusted)* 7.7p 3.3p 4.0p
------------------------------------ ---------- -------------- ----------
Dividend per ordinary share (paid
during the period) 4.0p 2.0p 4.0p
* The adjusted earnings per share includes adjustments for the
effect of the fair value revaluation of investment property and
indirect property investments, capital element on Investment
Manager's fees, the fair value movements on financial assets and
deferred tax provisions: full analysis is provided in note 9 to the
accounts.
Chairman's statement
I am pleased to present the Company's annual report and accounts
for the year ended 31 March 2023.
ART's investment portfolio benefits from diversification across
geographies, sectors and asset types. As inflationary pressures
increasingly dominate the economic backdrop in which the Company
operates, ART remains on a robust financial footing and is well
placed to capitalise on new investment opportunities.
During the year there has been elevated volatility across the
markets in which the Company operates. Inflationary pressures and
rising central bank interest rates continue to dominate the
economic agenda. The impact of these events on real asset prices is
yet to be fully determined.
The uncertain market will offer opportunities in the medium term
for ART to grow its diversified investment portfolio. In recent
years the Company focused on recycling capital into cashflow driven
investments. The Company is currently focussed on its loan
portfolio and opportunistically extending its wider investment
strategy to target investments offering inflation protection via
index linked income adjustments and investments that have potential
for capital gains.
ART continues to adhere to its disciplined strategy and
investment underwriting principles which seek to manage risk
through a combination of operational controls, diversification and
an analysis of the underlying asset security.
Long leased assets
The Company's portfolio of long leased properties, comprising
two hotels leased to Travelodge in the UK and an industrial
facility in Hamburg, Germany, leased to a leading industrial group
are well positioned in the current inflationary environment. The
leased assets have inflation linked rent adjustments which offer
the potential to benefit from a long term, predictable, inflation
linked income stream and the potential for associated capital
growth.
Diversified secured lending investment
The Company invests in a diversified portfolio of secured senior
and mezzanine loan investments. The loans are typically secured on
predominately residential real estate investment and development
assets with attractive risk adjusted income returns. As at 31 March
2023, ART had committed GBP72.0 million across nineteen loans, of
which GBP55.4 million (excluding a GBP3.7 million provision for
Expected Credit Loss discussed below) was drawn.
The Company's debt portfolio comprises predominately floating
rate loans. Borrowing rates are typically set at a margin over Bank
of England ('BoE') Base Rate and benefit from rising interest rates
as outstanding loans deliver increasing returns as loan rates track
increases in the BoE Base Rate.
During the year, six loans totalling GBP10.7 million (including
accrued interest and exit fees) were fully repaid and a further
GBP5.2 million (including accrued interest) was received as part
repayments. Post year end, no new loans were drawn but additional
drawdowns of GBP3.3 million were made on existing loans, one loan
was fully repaid for GBP1.5 million (including accrued interest and
exit fees) and part payments for other loans were received
amounting to GBP2.3 million (including accrued interest).
As at 31 March 2023, 70.0% of the Company's loan investments
were senior loans and 30.0% were mezzanine loans. The portfolio has
an average LTV of 63.5% based on loan commitments (with mezzanine
loans having an LTV range of between 48.8% and 78.6% whilst the
highest approved senior loan LTV is 72.9%). Portfolio loans are
underwritten against value for investment loans or gross
development value for development loans as relevant and
collectively referred to as LTV in this report.
The largest individual loan in the portfolio as at 31 March 2023
is a senior loan of GBP10.3 million which represents 14.3% of
committed loan capital and 8.2% of the Company's NAV.
Three loans in the portfolio have entered receivership: ART is
closely working with stakeholders to maximise capital recovery. The
Company has considered the security on these loans (which are a
combination of a first charge and a second charge over the
respective assets and personal guarantees) and have calculated an
Expected Credit Loss ('ECL') on these three loans of approximately
GBP2.9 million; the Group have also provided for an ECL on the
remainder of the loans' portfolio for an additional GBP0.8 million:
in total, the Group have provided for an ECL of GBP3.7 million in
its consolidated accounts.
Aside from the isolated cases of receivership, illustrated
above, the Company's loan portfolio has proved to be resilient
despite the recent extended period of heightened uncertainty and
risk. In terms of debt servicing, allowing for some temporary
agreed extensions, interest and debt repayments have been received
in accordance with the loan agreements. Where it is considered
appropriate, on a case-by-case basis, underlying loan terms may be
extended or varied with a view to maximising ART's risk adjusted
returns and collateral security position. The Company's loan
portfolio and new loan targets continue to be closely reviewed to
consider the potential impact on construction timelines, building
cost inflation and sales periods.
The underlying assets in the loan portfolio as at 31 March 2023
had geographic diversification with a London and Southeast focus.
The South East of England (including London) accounted for 49%, of
which London accounted for 24%, of the committed capital within the
loan investment portfolio.
H2O, Madrid
ART has a 30% stake in a joint venture with CBRE Investment
Management in the H2O shopping centre in Madrid.
H2O occupancy, by area, as at 31 March 2023 was 92%. The
centre's visitor numbers remain below pre-Covid highs; however, a
recovery is evident. In the three months to 31 March 2023, visitor
numbers were approximately 9.4% below those in 2019 (pre-Covid) and
10.0% above 2022. Tenant sales volumes are ahead of pre-Covid
levels, with total comparable sales being approximately 12% above
2019 and 2022 levels.
During the period, a lease with anchor retailer Primark was
signed for a new 3,000 square metre store. The new store will
involve a reconfiguration of a mall area which is under
commercialised with the unit combining a number of existing vacant
units along with space currently used as communal mall area. The
store is expected to be delivered during 2024.
Other investments
Investment in listed and authorised funds
The Company invested a total of GBP6.0 million (value as at 31
March 2023: GBP4.3 million) across three investments that offered
potential to generate attractive risk adjusted returns. Current
market volatility and rises in interest rates have impacted the
capital value of these investments. The investment yield offers a
potentially accretive return to holding cash while the Company
deploys capital in opportunities in line with its investment
strategy. These funds invest in ungeared long-dated leased real
estate, debt and infrastructure.
During the year, the Company fully divested GBP5.3 million from
a further investment, delivering an 8.1% capital return over the
holding period.
Investment in UK Treasury Bonds and Treasury Bills
In February 2023, the Company invested GBP7.0 million in UK
Treasury Bills with maturity 7 August 2023 and an annualised yield
to maturity of 4.2% (value as at 31 March 2023: GBP7.0 million) and
GBP7.0 million in UK Treasury Bonds earning a 2.25% annual coupon
with maturity 7 September 2023 and an annualised yield to maturity
of 4.0% (value as at 31 March 2023: GBP7.0 million). Post year end,
on 8 June 2023, the Company invested a further GBP6.0 million in
short dated Treasury Bonds. These government backed short term
investments offer the Company enhanced returns over cash
balances.
Results and dividends
Results
Basic earnings for the year ended 31 March 2023 are GBP0.6
million (1.1 pence per ordinary share, see note 9 of the financial
statements).
Adjusted earnings, which the Board believes is a more
appropriate assessment of the operational income accruing to the
Group's activities, for the year ended 31 March 2023 are GBP4.5
million (7.7 pence per ordinary share, see note 9 of the financial
statements). This compares with adjusted earnings of GBP2.4 million
(4.0 pence per ordinary share) in the same period last year.
Earnings have improved predominantly due to a stronger performance
from the Company's loan portfolio.
The net asset value per ordinary share at 31 March 2023 is 216.8
pence per share (31 March 2022: 216.0 pence per ordinary share)
(see note 10 of the financial statements). The net positive
movement over the period reflects a combination of improved
adjusted earnings (less dividends) with positive foreign exchange
movements mitigating to a certain extent the fair value movements
in investments.
Dividends
The Board announces a dividend of 1.0 pence per ordinary share
which is expected to be paid on 28 July 2023 (ex-dividend date 6
July 2023 and record date 7 July 2023).
The dividends paid and declared in respect of the year ended 31
March 2023 totalled 4.0 pence per ordinary share representing an
annual dividend yield of 2.9% p.a. by reference to the average
closing share price over the year ended 31 March 2023.
During the period, dividends of GBP355,776 were paid in cash and
GBP2,023,584 settled by scrip issue of shares.
Scrip dividend alternative
Shareholders of the Company have the option to receive shares in
the Company in lieu of a cash dividend, at the absolute discretion
of the Directors, from time to time.
The number of ordinary shares that an Ordinary Shareholder will
receive under the Scrip Dividend Alternative will be calculated
using the average of the closing middle market quotations of an
ordinary share for five consecutive dealing days after the day on
which the ordinary shares are first quoted "ex" the relevant
dividend.
The Board has elected to offer the scrip dividend alternative to
Shareholders for the dividend for the quarter ended 31 March 2023.
Shareholders who returned the Scrip Mandate Form and elected to
receive the scrip dividend alternative will receive shares in lieu
of the next dividend. Shareholders who have not previously elected
to receive scrip may complete a Scrip Mandate Form (this can be
obtained from the registrar: contact Computershare (details
below)), which must be returned by 13 July 2023 to benefit from the
scrip dividend alternative for the next dividend.
Financing
As at 31 March 2023 the Group has one direct bank loan of EUR9.5
million (GBP8.4 million), with no financial covenant tests, to a
subsidiary used to finance the acquisition of the Hamburg property.
The loan is secured over the Hamburg property and has no recourse
to the other assets of the Group.
Further details of individual asset financing can be found under
the individual investment review sections later in this report.
Share buybacks
Under the general authority, approved by Shareholders on 6
August 2021, the Company announced a tender offer on 29 June 2022
for up to 6,428,353 ordinary shares at a price (before expenses) of
175.0 pence per share. In July 2022, a total of 5,419,016 ordinary
shares were validly tendered under the tender offer. All purchased
ordinary shares are held in treasury.
During the year, the Company additionally purchased 46,500
shares in the market at an average price of GBP1.51 per share:
these shares are held in treasury.
Post period end, the Company made no share buybacks.
As at the date of this announcement, the ordinary share capital
of the Company is 65,820,175 (including 7,717,581 ordinary shares
held in treasury) and the total voting rights in the Company is
58,102,594.
Foreign currency
The Company monitors foreign exchange exposures and considers
hedging where appropriate. Foreign currency balances have been
translated at the period end rates of GBP1: EUR1.137 or GBP1:
INR101.554, as appropriate.
Russian invasion of Ukraine and going concern
As previously stated, ART has no investments in Ukraine or
Russia, nor exposure to any companies that have investments in, or
links to, Ukraine or Russia. ART has no arrangements with any
person currently on (or potentially on) any sanctions list, or
links to Ukraine or Russia. The Board continues to monitor the
global political and economic situation regularly assessing impacts
arising from inflation and interest rates changes for a potential
material impact on ART's portfolio.
The Company has adopted a prudent short-term strategy to move to
cash conservation and a cautious approach to commitments to new
investments over this uncertain time. Alert to the impact of
potentially reducing income returns, this approach has supported a
robust balance sheet position. The Company continues to adopt this
cautious approach to new investment and is conserving cash because
of the uncertainty that has characterised the past few months; this
ensures the Company retains a robust financial footing, making it
well positioned to take advantage of new investment
opportunities.
As noted above, the Company held approximately (as at 31 March
2023) 13.8% of its assets (excluding sundry net assets) in cash and
11.2% in highly liquid UK Treasury Bonds and Bills with limited
current contractual capital commitments. While there is external
financing in the Group's investment interests, this is limited and
non-recourse to the Company; the borrowings in these special
purpose vehicles are compliant with their banking covenants. See
the investment review section for more details on relevant
investments.
Bearing in mind the nature of the Group's business and assets,
after making enquiries, with the support of revenue forecasts for
the next twelve months and considering the above, the Directors
consider that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
Strategy and outlook
ART's investment portfolio benefits from diversification across
geographies, sectors, and asset types. As inflationary pressures
increasingly dominate the economic backdrop in which the Company
operates, ART remains on a robust financial footing and is well
placed to capitalise on new investment opportunities.
ART remains committed to growing its diversified investment
portfolio. In recent years the Company focused on reducing exposure
to direct development risk and recycling capital into cashflow
driven investments. The Company is currently focussed on its loan
portfolio and also on its wider investment strategy which targets
investments offering inflation protection via index linked income
adjustments and investments that have potential for capital
gains.
William Simpson
Chairman
22 June 2023
Investment review
Portfolio overview as at 31 March 2023
Investment name
Investment Carrying Income Investment Property type Investment % of Notes*
type value return location / underlying notes portfolio(1)
p.a. security
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
High return debt (44.5%)
------------------------------------------------------------------------------------------------ -------------
Secured senior
finance
Senior secured
loans
(excluding Diversified
committed loan portfolio
but undrawn focussed on
facilities real estate
of GBP12.9 GBP38.8m 7.0% investments Senior secured
million) (2) (3) UK and developments debt 31.2% 16
Secured mezzanine finance
Diversified
loan portfolio
focussed on Secured mezzanine
Second charge real estate debt and
mezzanine GBP16.6m 16.4% investments subordinated
loans (2) (3) UK and developments debt 13.3% 16
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
High return equity in property investments (26.5%)
------------------------------------------------------------------------------------------------ ------------- ------
H2O shopping centre
Dominant Madrid
shopping centre 30% shareholding;
and separate moderately geared
Indirect GBP17.7m 6.3% development bank finance
property (EUR 20.1m) (4) Spain site facility 14.2% 12
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
Long leased industrial facility, Hamburg
Long leased
industrial complex
in major European
industrial and
logistics hub Long term moderately
GBP8.7m 6.1% with RPI linked geared bank
Direct property (5) (4) Germany rent finance facility 7.0% 13
(EUR9.9m)
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
Long leased hotel, Wadebridge
Long leased
hotel to
Travelodge,
a large UK hotel
5.3% group with CPI No external
Direct property GBP3.8m (6) UK linked rent gearing 3.1% 13
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
Long leased hotel,
Lowestoft
Long leased
hotel to
Travelodge,
a large UK hotel
5.2% group with RPI No external
Direct property GBP2.8m (6) UK linked rent gearing 2.2% 13
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
Other investments (15.2%)
------------------------------------------------------------------------------------------------ -------------
Listed and Commercial real Short to medium
authorised UK & estate, term investment
fund 6.0% Channel infrastructure in listed and
investments GBP4.3m (4) Islands and debt funds authorised funds 3.5% 15
Affordable
housing
High-yield 100% shareholding;
Residential GBP0.6 residential no external
Investment m n/a UK UK portfolio gearing 0.5% 13
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
UK Treasury 2.25% UK government
Bonds GBP7.0m (8) UK bonds - 5.6% 15
4.0%
(9)
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
UK Treasury 4.2% UK government
Bills GBP7.0m (9) UK bonds - 5.6% 15
---------------- ---------------- ------ ---------- ------------------ -------------------- ------------- ------
Cash and short-term investments (13.8%)
------------------------------------------------------------------------------------------------ -------------
GBP17.2 1.7% 'On call' and
Cash (7) m (10) UK current accounts - 13.8%
-------------------- ------------ ------ ---------- ------------------ -------------------- -------------
(1) Percentage share shown based on NAV excluding the company's
sundry assets/liabilities
(2) Including accrued interest/coupon at the balance sheet
date
(3) The income returns for high return debt are the annualised
actual finance income return over the period shown as a percentage
of the average committed
capital over the period
(4) Yield on equity over 12 months to 31 March 2023
(5) Property value including sundry assets/liabilities, net of
associated debt
(6) Annualised monthly return
(7) Group cash of GBP18.4m excluding cash held with the Hamburg
holding company of GBP1.2m
(8) Fixed annual coupon
(9) Annualised yield to maturity
(10) Weighted average interest earned on call accounts
High return debt
Overview
ART has a portfolio of secured loan investments which contribute
a diversified return to the Company's earnings position. The
portfolio comprises high return senior (first charge) loans and
mezzanine (second charge) loans secured on real estate investment
assets and developments. ART loan underwriting is supported by the
Investment Manager's asset-backed lending experience, developer and
investor relationships and knowledge of the underlying assets and
sectors, in addition to the Group's partnerships with specialist
debt providers.
Secured Finance
Investment Investment Carrying Income Property type Investment
type value return / underlying notes
p.a. security
================== ============== ========= ======== ================== ==============
Secured senior First charge GBP38.8m 7.0%** Diversified Secured debt
finance secured * loan portfolio
loans focussed on
real estate
investments
and developments
================== ============== ========= ======== ================== ==============
Secured mezzanine Second charge GBP16.6m 16.4%** Diversified Second charge
finance secured * loan portfolio secured debt
loans focussed on and secured
real estate subordinated
investments debt
and developments
================== ============== ========= ======== ================== ==============
* Including accrued interest/coupon at the balance sheet date
** The income returns for high return debt are the annualised
actual finance income return over the period shown as a percentage
of the average committed capital over the period
ART's portfolio of secured senior and mezzanine loan investments
have increased in scale and diversity over the past year. These
loans are typically secured on real estate investment and
development assets with attractive risk-adjusted income returns
from either current or capitalised interest or coupons.
As at 31 March 2023, ART had invested a total amount of GBP55.4
million across nineteen loans. Over the past twelve months the loan
portfolio has increased by 52.2%.
During the year, six loans totalling GBP10.7 million (including
accrued interest and exit fees) were fully repaid and a further
GBP5.2 million (including accrued interest) was received as part
repayments. Post year end, no new loans were drawn but additional
drawdowns of GBP3.3 million were made on existing loans, one loan
was fully repaid for GBP1.5 million (including accrued interest and
exit fees) and part payments for other loans were received
amounting to GBP2.3 million (including accrued interest).
Each loan will typically have a term of up to two years (one
loan has a term of four years), a maximum 75% loan to gross
development value ratio and be targeted to generate attractive
risk-adjusted income returns. As at 31 March 2023 , the portfolio
had an average LTV of 63.5% (with average approved LTV between
48.8% and 78.6% for mezzanine facilities while the highest approved
LTV for senior loans is 72.9%).
Three loans in the portfolio, with a total balance at year end
of GBP6.8 million, have entered receivership: ART is closely
working with stakeholders to maximise capital recovery. The Company
has considered the security on these loans (which are a combination
of a first charge and a second charge over the respective assets
and personal guarantees) and have calculated an Expected Credit
Loss ('ECL') on these three loans of approximately GBP2.9 million;
the Group has also provided for an ECL on the remainder of the
loans' portfolio for an additional GBP0.8 million: in total, the
Group has provided for an ECL of GBP3.7 million in its consolidated
accounts.
Current loan investment examples:
Location Total Loan type Loan term Current Underlying security
commitment (months) LTV
Senior Development Development of nine
Fleet, Hampshire GBP1,704,000 Loan 15 63.94% new build apartments
=============== ==================== ========== ======== =========================
St. Lawrence, Senior Development Development of eleven
Jersey GBP11,731,000 Loan 24 63.00% new build apartments
=============== ==================== ========== ======== =========================
Temple Fortune, Senior Development Development of eight
London GBP8,600,000 Loan 19 63.00% new build houses
=============== ==================== ========== ======== =========================
Mezzanine
Throughout Investment Refinance of a portfolio
the UK GBP12,000,000 Loan 36 61.31% of six care homes
================== =============== ==================== ========== ======== =========================
High return equity in property investments
Overview
ART continues to remain focused on investments that offer the
potential to deliver attractive risk-adjusted returns by way of
value enhancement through active asset management, improvement of
income, selective deployment of capital expenditure and the ability
to undertake strategic sales when the achievable price is accretive
to returns.
H2O Shopping Centre, Madrid
Investment Investment Carrying Income Property type Investment
type value return / underlying notes
p.a. security
=========== =========== ============ ======== ================= ===================
H2O Indirect GBP17.7m 6.3%* High-yield, 30% shareholding;
property (EUR20.1m) dominant Madrid moderately geared
shopping centre bank finance
and separate facility
development
site
=========== =========== ============ ======== ================= ===================
* Yield on equity over twelve months to 31 March 2023
ART has a 30% stake in joint venture with CBRE Investment
Management in the H2O shopping centre in Madrid. H2O was opened in
2007 and built to a high standard providing shopping, restaurants
and leisure around a central theme of landscaped gardens and an
artificial lake. H2O has a gross lettable area of approximately
54,896 square metres comprising 119 retail units. In addition to a
multiplex cinema, supermarket (let to leading Spanish supermarket
operator Mercadona) and restaurants, it has a large fashion
retailer base, including some of the strongest international
fashion brands, such as Nike, Zara, Mango, JD Sports, Cortefiel,
H&M and C&A.
In line with other shopping centres in Spain, H2O's visitor
numbers remain below the pre-Covid highs however a recovery versus
2022 is evident, a year in which Covid restriction had been largely
relaxed. In the three months to 31 March 2023, visitor numbers were
approximately 9.4% below those in 2019 (pre-Covid) and 10.0% above
2022. Tenant sales volumes are ahead of pre-Covid levels, with
total comparable sales being approximately 12% above 2019 and 2022
levels.
During the period, a lease with anchor retailer Primark was
signed for a new 3,000 square metre store. The new store will
involve a reconfiguration of a mall area which is under
commercialised with the unit combining a number of existing vacant
units along with space currently used as communal mall area. The
store is expected to be delivered during 2024.
The asset management highlights are as follows:
-- Valuation: 31 March 2023: EUR119.3 million (GBP104.9 million)
(31 March 2022: EUR121.0 million (GBP102.1 million)).
-- Centre occupancy: 92.1% by area as at 31 March 2023.
-- Weighted average lease length to next break of 2.5 years and
7.6 years to expiry as at 31 March 2023.
Long leased industrial facility, Hamburg
Investment Investment Carrying Income Property type Investment
type value return / notes
p.a. underlying
security
==================================== ================ =========== ======== ================= ====================
Industrial Direct property GBP8.7 6.1% ** High return Long leased
facility, m* industrial investment with
Werner-Siemens-Straße (EUR9.9m) facility in moderately geared,
Hamburg, Germany Hamburg Germany long term, bank
finance facility
==================================== ================ =========== ======== ================= ====================
* Property value including sundry assets/liabilities and cash, net of associated debt
** Yield on equity over twelve months to 31 March 2023
ART has an investment of EUR9.9 million (GBP8.7 million) in an
industrial facility leased to a leading international group.
The property is held freehold and occupies a site of 11.8 acres
in Billbrook, a well-established and well-connected industrial area
located approximately 8 kilometres south-east of Hamburg centre.
Hamburg is one of the main industrial and logistics markets in
Germany.
The property is leased to Veolia Umweltservice Nord GmbH, part
of the Veolia group, an international industrial specialist in
water, waste and energy management, with a 19-year unexpired lease
term. Under the operating lease, the tenant is responsible for
building maintenance and the rent has periodic inflation linked
adjustments.
The Hamburg asset is funded by way of a EUR9.5 million (GBP8.4
million) non-recourse, fixed rate, bank debt facility which matures
on 31 July 2028. The facility carries no financial covenant
tests.
This investment offers the potential to benefit from a long term
secure and predictable inflation-linked income stream which is
forecast to generate stable high single digit income returns. In
addition, the investment offers the potential for associated
capital growth from an industrial location in a major German
logistics and infrastructure hub.
Long leased hotel, Wadebridge, Cornwall
Investment Investment Carrying Income Property type Investment
type value return / notes
p.a. underlying
security
================== ================ ========= ======== ====================== ============
Hotel, Wadebridge Direct property GBP3.8 5.3% * Long leased No external
Cornwall, UK m hotel to Travelodge, gearing
a large UK
hotel group
with RPI linked
rent
================== ================ ========= ======== ====================== ============
* Annualised monthly return
In July 2022, ART acquired a hotel in Wadebridge (UK) for GBP4.3
million, including acquisition costs. As at 31 March 2023, the
property was valued at GBP3.8 million.
The hotel is a 55-bedroom property, which is held freehold and
is situated on the outskirts of Wadebridge in the county of
Cornwall. The hotel is in a well-connected location in close
proximity to the A39.
The property is leased to Travelodge Hotels Limited on a 20 year
unexpired lease term (including landlord extension option) . Under
the lease, the tenant is responsible for building maintenance.
The passing rent of GBP0.3 million p.a. has inflation linked
adjustments.
Long leased hotel, Lowestoft
Investment Investment Carrying Income Property type Investment
type value return / notes
p.a. underlying
security
================== ================ ========= ======== ====================== ============
Hotel, Lowestoft, Direct property GBP2.8 5.2% * Long leased No external
UK m hotel to Travelodge, gearing
a large UK
hotel group
with RPI linked
rent
================== ================ ========= ======== ====================== ============
* Annualised monthly return
In June 2022, ART acquired a hotel in Lowestoft (UK) for GBP3.1
million, including acquisition costs. As at 31 March 2023, the
property was valued at GBP2.8 million.
The hotel is a 47-bedroom property, which is held freehold and
occupies a site of 1.08 acres in Lowestoft, a well-established and
well connected area located in close proximity to the A47 which
runs to Norwich.
The property is leased to Travelodge Hotels Limited on an 18
year unexpired lease term (including landlord extension option) .
Under the lease, the tenant is responsible for building
maintenance.
The passing rent of GBP0.2 million p.a. has inflation linked
adjustments.
Other Investments
Listed and authorised fund investments
Investment Investment Carrying Income Property type Investment
type value return / underlying notes
p.a. * security
==================== =============== ========== ======== ================== ========================
Sequoia Economic Listed equity GBP2.2m 5.7% Listed investment FTSE 250 infrastructure
Infrastructure fund debt fund
Income Fund
Limited
==================== =============== ========== ======== ================== ========================
GCP Infrastructure Listed equity GBP1.1m 6.7% Listed investment FTSE 250 infrastructure
Investments fund fund
Limited
==================== =============== ========== ======== ================== ========================
GCP Asset Backed Listed equity GBP1.0m 6.1% Listed investment Diversified
Income Fund fund asset back
Limited debt fund
==================== =============== ========== ======== ================== ========================
Total GBP4.3m 6.0%
===================================== ========= ======== ================== ========================
*Yield on equity based on 12 months to 31 March 2023
The Company invested a total of GBP6.0 million (value as at 31
March 2023: GBP4.3 million) across three investments that offered
potential to generate attractive risk adjusted returns. Current
market volatility and rise in interest rates has impacted the
capital value of these investments. The investment yield offers a
potentially accretive return to holding cash while the Company
deploys capital in opportunities in line with its investment
strategy. These funds invest in ungeared long-dated leased real
estate, debt and infrastructure.
During the year, the Company fully divested GBP5.3 million from
a further investment, delivering an 8.1% capital return over the
holding period.
Affordable Housing
The Company's wholly owned investment, RealHousingCo Limited
("RHC") has obtained successful registration with the Regulator of
Social Housing as a For Profit Registered Provider of affordable
homes. This status provides RHC with a platform to undertake future
investment in the affordable housing sector which offers scope to
generate long term, inflation-linked returns while addressing the
chronic undersupply of affordable homes in the UK.
RHC owns a residential property located in Liverpool (UK), which
is comprised of seven units, all of which are occupied by private
individuals, each with a six month term contract. The fair value of
the Liverpool property as at 31 March 2023 was GBP0.6 million.
UK Treasury Bonds and Bills
In February 2023, the Company invested GBP7.0 million in UK
Treasury Bills with maturity 7 August 2023 and an annualised yield
to maturity of 4.2% (value as at 31 March 2023: GBP7.0 million) and
GBP7.0 million in UK Treasury Bonds earning a 2.25% annual coupon
with maturity 7 September 2023 and an annualised yield to maturity
of 4.0% (value as at 31 March 2023: GBP7.0 million). Post period
end, on 8 June 2023, the Company invested a further GBP6.0 million
in short dated Treasury Bonds. These government backed short term
investments offer the Company enhanced returns over cash
balances.
Cash balances
Investment Investment Carrying Income Property type Investment
type value return / underlying notes
p.a. security
=================== =========== ========= ======== ================== ===========
Cash and cash Cash GBP17.2m 1.7% ** 'On call' and n/a
on escrow balance current accounts
*
=================== =========== ========= ======== ================== ===========
* Group cash of GBP18.4m excluding cash held with the Hamburg holding company of GBP1.2m
** weighted average interest earned on call accounts
As at 31 March 2023, the Group had cash balances of GBP17.2
million, excluding cash held with the Hamburg holding company of
GBP1.2 million. The Group's cash is held with established banks
with strong credit ratings.
Summary
ART has a diversified portfolio focussed on asset-backed lending
and property investments in Western Europe.
The Company is currently focussed on selectively increasing its
loan portfolio and extending its wider investment strategy to
opportunistically target investments offering inflation protection
via index linked income adjustments and investments that have
potential for capital gains
Brad Bauman and Gordon Smith
For and on behalf of the Inv estment Manager
22 June 2023
Directors
William Simpson (aged 67)
Chairman
William Simpson has over 30 years' experience as a lawyer in
financial services. His focus has been on regulated and unregulated
investment vehicles, encompassing banking, finance, corporate,
investment, trust and regulatory work.
William studied law at Leeds University and practised at the Bar
in England before moving to the Cayman Islands and then the British
Virgin Islands. William was a partner at Ozannes, now Mourant, and
then managing partner of Ogier Guernsey, during which time he also
served on the Ogier Group board.
In 2017 William became an independent consultant and remains a
director of a number of Guernsey based financial services
companies. William is a member of the English and Guernsey
Bars.
Phillip Rose (aged 63)
Phillip Rose is a Fellow of the Securities Institute and holds a
Master of Law degree. He has over 40 years' experience in the real
estate, funds management and banking industries in Europe, the USA
and Australasia. He has been the Head of Real Estate for ABN AMRO
Bank, Chief Operating Officer of European shopping centre investor
and developer TrizecHahn Europe, Managing Director of retail and
commercial property developer and investor Lend Lease Global
Investment and Executive Manager of listed fund General Property
Trust.
Phillip is currently CEO of Alpha Real Capital LLP and has been
a member of the Management Committee for Hermes Property Unit Trust
and its Audit Committee, and has been a Non-Executive Director of
Great Portland Estates plc.
Jeff Chowdhry (aged 62)
Jeff is currently General Partner at Concept Ventures, an early
stage, software focused, VC fund. It is currently the largest
dedicated pre-seed fund in the UK.
He has an investment career which spans over 40 years having
held senior positions at F&C, as head of emerging markets and
BMO Asset Management where he was responsible for AUM of over $5
billion. He has specific expertise in ESG related matters.
He is an active Angel investor having backed over 30 start-up
companies and has several board advisory positions within these
rapidly growing businesses.
Melanie Torode (aged 43)
Mel Torode has 20 years' experience in the fund administration
industry specifically including private equity, property and
mezzanine debt and is an Independent Non-Executive Director.
Prior to founding Morgan Sharpe in April 2008 (a fund
administration company sold to Estera, subsequently Ocorian, in
2017), Mel was the Company Secretary of Assura Administration,
overseeing the administration of listed property funds. During the
period from 2017 to 2021, Mel held the roles of Operations
Director, Managing Director and subsequently Non-Executive of
Ocorian Guernsey.
Mel began her career at Guernsey International Fund Managers
(now Northern Trust), working on large private equity funds and
European holding companies, moving to Mourant International Finance
Administration (now State Street) where she spent more than two
years concentrating primarily on listed property funds.
Peter Griffin (aged 64)
Peter Griffin has over 30 years' experience in financial
services and is a qualified chartered accountant.
He is currently a director of Handelsbanken Alternatives Fund
Limited, an investment company listed on The International Stock
Exchange.
Peter previously had various senior roles in the trust services
industry in the Channel Islands and Isle of Man.
Directors' and Corporate Governance report
The Directors present their report and financial statements of
the Group for the year ended 31 March 2023.
Principal activities and status
During the year, the Company, an authorised closed-ended
Guernsey registered investment company, carried on business as an
investment company, investing in direct property, development,
financing and other opportunities in real estate, real estate
operating companies and securities, real estate services,
infrastructure, infrastructure services, other asset-backed
businesses and related operations and services businesses.
The Company's shares are traded on the Specialist Fund Segment
("SFS") of the London Stock Exchange ("LSE").
Business review, results and dividend
A review of the business during the year is contained in the
Chairman's Statement.
The results for the year to 31 March 2023 are set out in the
financial statements. On 24 February 2023, the Company declared a
dividend of 1.0p per share, which was paid to shareholders on 6
April 2023. The intention of the Company is to pay a dividend
quarterly.
Share buybacks
Under the general authority, approved by Shareholders on 6
August 2021, the Company announced a tender offer on 29 June 2022
for up to 6,428,353 ordinary shares at a price (before expenses) of
175.0 pence per share. In July 2022, a total of 5,419,016 ordinary
shares were validly tendered under the tender offer. All purchased
ordinary shares are held in treasury.
During the year, the Company additionally purchased 46,500
shares in the market at an average price of GBP1.51 per share:
these shares are held in treasury. Post period end, the Company
made no share buybacks. As at the date of this announcement, the
ordinary share capital of the Company is 65,820,175 (including
7,717,581 ordinary shares held in treasury) and the total voting
rights in the Company is 58,102,594.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company
sought shareholders' approval to enable a scrip dividend
alternative to be offered to ordinary shareholders whereby they
could elect to receive additional ordinary shares in lieu of a cash
dividend, at the absolute discretion of the Directors, from time to
time. This was approved by shareholders at the extraordinary
general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will
receive under the scrip dividend alternative will be calculated
using the average of the closing middle market quotations of an
ordinary share for five consecutive dealing days after the day on
which the ordinary shares are first quoted "ex" the relevant
dividend.
The Board elected to offer the scrip dividend alternative to
shareholders for the dividend for the quarter ended 31 December
2022: for this period, scrip dividend alternative elections were
received in respect of 52,402,023 shares of the Company, which has
resulted in the issue of 401,545 new ordinary shares in April
2023.
Further details on dividends are given in note 8 of the
financial statements.
Corporate governance
As a Guernsey registered company traded on SFS , the Company is
not required to comply with the UK Corporate Governance Code ("UK
Code"). However, as a company authorised by the Guernsey Financial
Services Commission ("GFSC"), it is required to follow the
principles and guidance set out in the Finance Sector Code of
Corporate Governance issued by the GFSC and effective from 1
January 2012 (amended in February 2016 and November 2021)
("Guernsey Code"). Compliance with the Guernsey Code and general
principles of good corporate governance are reviewed by the Board
at least annually and, at the date of signing these financial
statements, the Board is satisfied that the Company is fully
compliant with the Guernsey Code. The Guernsey Code is available
for consultation on the GFSC website: www.gfsc.gg.
The Board
Biographies of the Directors are set out above.
The Directors' interests in the shares of the Company as at 31
March 2023 are set out below:
Number of ordinary Number of ordinary
shares shares
31 March 2023 31 March 2022
----------------- ------------------- -------------------
Phillip Rose 978,999 953,872
----------------- ------------------- -------------------
Jeff Chowdhry 5,000 5,000
----------------- ------------------- -------------------
Melanie Torode - -
----------------- ------------------- -------------------
William Simpson 30,000 18,000
----------------- ------------------- -------------------
Peter Griffin - -
Post year end, Phillip Rose increased his shareholding in ART to
985,696 ordinary shares.
Non-executive directors are not appointed for specified terms;
appointments of Board members can be terminated at any time without
penalty and the Company's Articles of Association ("Articles")
require each Director to retire and submit himself/herself to
re-election by the shareholders at every third year. In addition,
the Board believes that continuity and experience add to its
strength.
The Annual General Meeting of the Company will take place on 7
September 2023. At this meeting, Jeff Chowdhry will retire and
submit himself for re-election. The remainder of the Board
recommend his re-appointment.
Individual Directors may seek independent legal advice in
relation to their duties on behalf of the Company.
Operations of the Board
The Board has determined that its role is to consider and
determine the following principal matters which it considers are of
strategic importance to the Company:
1) Review the overall objectives for the Company and set the
Company's strategy for fulfilling those objectives within an
appropriate risk framework
2) Consider any shifts in strategy that it considers may be
appropriate in light of market conditions
3) Review the capital structure of the Company including
consideration of any appropriate use of gearing both for the
Company and in any joint ventures in which the Company may invest
from time to time
4) Appoint the Investment Manager, Administrator and other
appropriately skilled service providers and monitor their
effectiveness through regular reports and meetings
5) Review key elements of the Company's performance including
Net Asset Value and payment of dividends.
At Board meetings, the Board ensures that all the strategic
matters are considered and resolved by the Board. Certain issues
associated with implementing the Company's strategy are delegated
either to the Investment Manager or the Administrator. Such
delegation is over minor incidental matters and the Board
continually monitors the services provided by these independent
agents. The Board considers matters that are significant enough to
be of strategic importance and are therefore reserved solely for
the Board (e.g. all acquisitions, all disposals, significant
capital expenditure, leasing and decisions affecting the Company's
financial gearing).
The Board meets at least quarterly and as required from time to
time to consider specific issues reserved for decision by the
Board, as noted above.
At the Board's quarterly meetings, it considers papers
circulated in advance including reports provided by the Investment
Manager and the Administrator. The Investment Manager's report
comments on:
-- The property and debt markets of the UK and Europe including
recommendations for any changes in strategy that the Investment
Manager considers may be appropriate
-- Performance of the Group's portfolio and key asset management initiatives
-- Transactional or lending activity undertaken over the
previous quarter and being contemplated for the future
-- The Group's financial position including relationships with
bankers, borrowers and lenders.
These reports enable the Board to assess the success with which
the Group's investment strategy and other associated matters are
being implemented and also consider any relevant risks and to
consider how they should be properly managed.
The Company's service providers issue reports on their own
internal controls and these reports are considered by the Board
periodically.
In between its regular quarterly meetings, the Board has also
met on a number of occasions during the year to approve specific
transactions and for other matters.
Board and Directors' appraisals
The Board carries out an annual review of its composition and
performance (including the performance of individual Directors) and
that of its standing committees. Such appraisal includes reviewing
the performance and composition of the Board (and whether it has an
appropriate mix of knowledge, skills and experience), the
relationships between the Board and the Investment Manager and
Administrator, the processes in place and the information provided
to the Board and communication between Board members.
Board Meeting attendance
The table below shows the attendance at Board meetings during
the year to 31 March 2023:
No of
meetings
attended
------------------ ----------
Phillip Rose 4
------------------ ----------
Jeff Chowdhry 12
------------------ ----------
Melanie Torode 14
------------------ ----------
William Simpson 16
------------------ ----------
Peter Griffin 17
------------------ ----------
No. of meetings
during the year 17
Directors' and officers' insurance
An appropriate level of Directors' and officers' insurance is
maintained whereby Directors are indemnified against liabilities to
third parties to the extent permitted by Guernsey company law.
Board Committees
The Board has established three standing committees, all of
which operate under detailed terms of reference, copies of which
are available on request from the Company Secretary.
Audit and Risk Committee
The Audit and Risk Committee consists of Peter Griffin
(Chairman), Jeff Chowdhry and William Simpson. The Board is
satisfied that Peter Griffin continues to have the requisite recent
and relevant financial experience to fulfil his role as Chairman of
the Audit and Risk Committee.
Role of the Committee
The role of the Audit and Risk Committee, which meets at least
twice a year, includes:
-- The engagement, review of the work carried out by and the
performance of the Group's external auditor
-- To monitor and review the independence, objectivity and
effectiveness of the external auditor
-- To develop and apply a policy for the engagement of the
external audit firm to provide non-audit services
-- To assist the Board in discharging its duty to ensure that
financial statements comply with all legal requirements
-- To review the Group's financial reporting and internal
control policies and to ensure that the procedures for the
identification, assessment and reporting of risks are adequate
-- To review regularly the need for an internal audit function
-- To monitor the integrity of the Group's financial statements,
including its annual and half-year reports and announcements
relating to its financial performance, reviewing the significant
financial reporting issues and judgements which they contain
-- To review the consistency of accounting policies and practices
-- To review and challenge where necessary the financial results
of the Group before submission to the Board.
The Audit and Risk Committee makes recommendations to the Board
which are within its terms of reference and considers any other
matters as the Board may from time to time refer to it.
Members of the Audit and Risk Committee may also, from time to
time, meet with the Group's independent property valuers to discuss
the scope and conclusions of their work.
Committee meeting attendance
No of
meetings
attended
------------------ ----------
William Simpson 4
------------------ ----------
Jeff Chowdhry 3
------------------ ----------
Peter Griffin 4
------------------ ----------
No. of meetings
during the year 4
Policy for non audit services
The Committee has adopted a policy for the provision of
non-audit services by the Company's external auditor, BDO Limited,
and reviews and approves all material non-audit related services in
accordance with the need to ensure the independence and objectivity
of the external auditor. No services, other than audit-related
ones, were carried out by BDO Limited during the year.
Internal audit
The Board relies upon the systems and procedures employed by the
Investment Manager and the Administrator which are regularly
reviewed and are considered to be sufficient to provide it with the
required degree of comfort. Therefore, the Board continues to
believe that there is no need for an internal audit function,
although the Audit and Risk Committee considers this annually,
reporting its findings to the Board.
Nomination Committee and attendance
The Nomination Committee consists of William Simpson (Chairman),
Phillip Rose and Melanie Torode.
The Committee's principal task is to review the structure, size
and composition of the Board in relation to its size and position
in the market and to make recommendations to fill Board vacancies
as they arise and it meets at least annually. It met once during
the year and all Committee members were present.
Remuneration Committee and attendance
The Remuneration Committee consists of Melanie Torode
(Chairman), Jeff Chowdhry and William Simpson.
The Board has approved formal terms of reference for the
Committee and a copy of these is available on request from the
Company Secretary.
As the Company comprises only non-executive directors, the
Committee's main role is to determine their remuneration within the
cap set out in the Company's Articles. No meeting was held during
the year.
Remuneration report
The aggregate fees payable to the Directors are limited to
GBP200,000 per annum under the Company's Articles. The annual fees
payable to each Director, which were last reviewed in 2019, have
been increased by 10% with effect from 1 April 2022. The fees
payable to the Directors are expected to reflect their expertise,
responsibilities and time spent on the business of the Group,
taking into account market equivalents, the activities, the size of
the Group and market conditions. Under their respective appointment
letters, each Director is entitled to an annual fee together with a
provision for reimbursement for any reasonable out of pocket
expenses.
During the year the Directors received the following emoluments
in the form of fees from Group companies:
Year ended Year ended
31 March 2023 31 March 2022
GBP GBP
------------------- --------------- ---------------
David Jeffreys* - 18,000
------------------- --------------- ---------------
Phillip Rose 27,500 25,000
------------------- --------------- ---------------
Jeff Chowdhry 27,500 25,000
------------------- --------------- ---------------
William Simpson 39,500 25,000
------------------- --------------- ---------------
Peter Griffin** 27,500 12,500
------------------- --------------- ---------------
Melanie Torode*** 52,633 55,476
------------------- --------------- ---------------
Total 174,633 160,976
* retired on 30 September 2021
** appointed on 30 September 2021
*** This comprises GBP27,500 for the ART's directorship plus
fees for directorships of ART's subsidiaries and joint ventures
Internal control and risk management
The Board understands its responsibility for ensuring that there
are sufficient, appropriate and effective systems, procedures,
policies and processes for internal control of financial,
operational, compliance and risk management matters in place in
order to manage the risks which are an inherent part of business.
Such risks are managed rather than eliminated in order to permit
the Company to meet its financial and other objectives.
The Board reviews the internal procedures of both its Investment
Manager and its Administrator upon which it is reliant. The
Investment Manager has a schedule of matters which have been
delegated to it by the Board and upon which it reports to the Board
on a quarterly basis. These matters include quarterly management
accounts and reporting both against key financial performance
indicators and its peer group. Further, a compliance report is
produced by the Administrator for the Board on a quarterly
basis.
The Company maintains a risk management framework which
considers the non-financial as well as financial risks and this is
reviewed by the Audit and Risk Committee prior to submission to the
Board.
Investment management agreement
The Company has an agreement with the Investment Manager. This
sets out the Investment Manager's key responsibilities, which
include proposing a property investment strategy to the Board,
identifying property investments to recommend for acquisition and
arranging appropriate lending facilities. The Investment Manager is
also responsible to the Board for all issues relating to property
asset management.
Substantial shareholding
Shareholders with holdings of more than 3 per cent of the voting
rights of the Company as at 25 May 2023 were as follows:
Name of investor Number of %
voting rights held
---------------------------------- --------------- -------
Alpha Global Property Securities
Fund Pte. Ltd 25,068,417 43.15%
---------------------------------- --------------- -------
Rockmount Ventures Ltd 24,487,030 42.14%
---------------------------------- --------------- -------
Shareholder relations
The Board places high importance on its relationship with its
shareholders, with members of the Investment Manager's Investment
Committee making themselves available for meetings with key
shareholders and sector analysts. Reporting of these meetings and
market commentary is received by the Board on a quarterly basis to
ensure that shareholder communication fulfils the needs of being
useful, timely and effective. One or more members of the Board and
the Investment Manager will be available at the Annual General
Meeting to answer any questions that shareholders attending may
wish to raise.
Directors' Responsibilities Statement
The Directors are responsible for preparing the annual report
and the financial statements in accordance with the applicable law
and regulations.
Company law requires the Directors to prepare financial
statements for each financial year, which give a true and fair view
of the state of affairs of the Group at the end of the year and of
the profit or loss of the Group for that year.
In preparing those financial statements, the Directors are
required to:
1) select suitable accounting policies and then apply them consistently;
2) make judgements and estimates that are reasonable and prudent;
3) state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
4) prepare the financial statements on the going concern basis
unless it is appropriate to assume that the Group will not continue
in business.
So far as each of the Directors is aware, there is no relevant
information of which the Group's auditor is unaware, and they have
taken all the steps they ought to have taken as Directors to make
themselves aware of any relevant information and to establish that
the Group's auditor is aware of that information.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and which enable them to ensure
that the financial statements comply with the Companies (Guernsey)
Law, 2008. They are also responsible for safeguarding the assets of
the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group can be
outlined as follows:
-- Rental income, fair value of investment properties (directly
or indirectly held) and fair value of the Group's equity
investments are affected, together with other factors, by general
economic conditions and/or by the political and economic climate of
the jurisdictions in which the Group's investments and investment
properties are located.
-- The Group's loan investments are exposed to credit risk which
arise by the potential failure of the Group's counter parties to
discharge their obligations when falling due; this could reduce the
amount of future cash inflows from financial assets on hand at the
balance sheet date; the Group receives regular updates from the
relevant investment manager as to the performance of the underlying
investments and assesses their credit risk as a result.
Russian invasion of Ukraine and going concern
As previously stated, ART has no investments in Ukraine or
Russia, nor exposure to any companies that have investments in, or
links to, Ukraine or Russia. ART has no arrangements with any
person currently on (or potentially on) any sanctions list, or
links to Ukraine or Russia. The Board continues to monitor the
global political and economic situation regularly assessing impacts
arising from inflation and interest rates changes for a potential
material impact on ART's portfolio.
The Company has adopted a prudent short-term strategy to move to
cash conservation and a cautious approach to commitments to new
investments over this uncertain time. Alert to the impact of
potentially reducing income returns, this approach has supported a
robust balance sheet position. The Company continues to adopt this
cautious approach to new investment and is conserving cash because
of the uncertainty that has characterised the past few months; this
ensures the Company retains a robust financial footing, making it
well positioned to take advantage of new investment
opportunities.
As noted above, the Company held approximately (as at 31 March
2023) 13.8% of its assets (excluding sundry net assets) in cash and
11.2% in highly liquid UK Treasury Bonds and Bills with limited
current contractual capital commitments. While there is external
financing in the Group's investment interests, this is limited and
non-recourse to the Company; the borrowings in these special
purpose vehicles are compliant with their banking covenants. See
the investment review section for more details on relevant
investments.
Bearing in mind the nature of the Group's business and assets,
after making enquiries, with the support of revenue forecasts for
the next twelve months and considering the above, the Directors
consider that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
Annual General Meeting
The AGM of the Company will be held in Guernsey at 9.00 am on 7
September 2023 at Floor 2, Trafalgar Court, Les Banques, St Peter
Port, Guernsey. The meeting will be held to receive the Annual
Report and Financial Statements, re-elect Directors and propose the
reappointment of the auditor and that the Directors be authorised
to determine the auditor's remuneration.
Independent Auditor
BDO Limited has expressed its willingness to continue in office
as auditor.
By order of the Board,
William Simpson Peter Griffin
Director Director
22 June 2023
Directors' statement pursuant to the Disclosure Guidance and
Transparency Rules
Each of the Directors, whose names and functions are listed in
the Directors' and corporate governance report confirm that, to the
best of each person's knowledge and belief:
-- The financial statements, prepared in accordance with IFRSs
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group, and
-- The Chairman's statement and the investment review include a
fair review of the development and performance of the business and
the position of the Group and provides a description of the
principal risks and uncertainties that the Group faces.
By order of the Board,
William Simpson Peter Griffin
Director Director
22 June 2023
Independent Auditor's Report
To the Members of Alpha Real Trust Limited
Opinion on the financial statements
In our opinion, the financial statements of Alpha Real Trust
Limited ("the Parent Company") and its subsidiaries (the
"Group"):
-- give a true and fair view of the state of the Group's affairs
as at 31 March 2023 and of its profit for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements of the Group for the
year ended 31 March 2023 which comprise the Consolidated Statement
of Comprehensive Income, Consolidated Balance Sheet, Consolidated
Cash Flow Statement, Consolidated Statement of Changes in Equity
and notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRS as adopted by the European
Union
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. Our audit opinion
is consistent with the additional report to the audit
committee.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors' assessment of the Group ability to
continue to adopt the going concern basis of accounting
included:
-- Obtaining those charged with governance and directors'
assessment in respect of going concern and challenging this, based
on our knowledge of the Group, with both those charged with
governance and management;
-- Challenging the directors' cash flow forecasts for the twelve
months from the approval of these financial statements by stress
testing future income and expenditure and the impact on the going
concern assessment;
-- Consideration of the cash available together with the
expected annual running expenses of the Group and determining
whether these assumptions were reasonable based on our knowledge of
the Group; and
-- Reviewing the minutes of meetings of those charged with
governance, the RNS announcements and the compliance reports for
indication of any events or conditions which may impact on going
concern.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Key audit matters (2023 Property Valuations
and 2022)
Loans advanced and IFRS 9 'Financial
Instruments'
Group financial statements as a whole
Materiality
GBP2,023,000 (2022: GBP2,136,000) based
on 1.5% (2022: 1.5%) of total assets
-----------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
We tailored the scope of our audit taking into account the
nature of the Group's investments, involvement of the Investment
Manager, the accounting and reporting environment and the industry
in which the Group operates.
The Group consists of the Parent Company, numerous subsidiaries
and a joint venture entity. We concluded that the most effective
audit approach to the Group due to the same accounting processes
and control environment, with the exception of the joint venture
structure, was to audit the consolidated financial statements as if
they were one entity, during which we have performed audit
procedures on all key risk areas. The materiality applied was based
on the consolidated financial information (see Materiality section
below).
For the H2O joint venture entity, we assessed the main property
holding company within this structure to be a significant
component. This component was subject to a full scope audit and was
completed by a component auditor who is part of the BDO
Network.
Our involvement with component auditors
For the work performed by component auditors, we determined the
level of involvement needed in order to be able to conclude whether
sufficient appropriate audit evidence has been obtained as a basis
for our opinion on the Group financial statements as a whole. Our
involvement with component auditors included the following:
We issued group instructions to the component auditor of the H20
joint venture and reviewed the key risk areas of their work. In
addition to the work performed by the component auditor, we have
also performed our own audit procedures on the property valuation
and other significant balances.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How the scope of our audit addressed
the key audit matter
Property Valuations (notes 2.(b)(a), Independent valuations
12, 13, 26)
For all independent property
The Group holds several investment valuations, we evaluated the
properties within its subsidiaries competence of the external valuers,
and the joint venture structure. which included consideration
of their qualifications and expertise.
The directors have valued all We discuss their terms of engagement
properties based on independent with the valuers to determine
RICS valuations performed by independent whether there were any matters
valuers. that might have affected their
objectivity or may have imposed
Such property valuations are a scope limitations upon their
highly subjective area as the work.
valuers make judgements as to
property yields, quality of tenants, We read the valuation reports
development costs and other variables for the properties and discussed
to arrive at the current open the basis of the property valuations
market value of the property. with the valuers to understand
the process undertaken by them
Any input inaccuracies or unreasonable and confirmed that the valuations
bases used in the valuation judgements were prepared in accordance with
(such as in respect of estimated professional valuation standards
rental value and yield profile and applicable accounting standards.
applied) could result in a material
misstatement of the Consolidated We have considered the reasonableness,
Statement of Comprehensive Income and where appropriate agreed
and the Consolidated Balance Sheet, through to supporting documentation
and we therefore determined this (for example, on a sample basis,
to be a key audit matter. rental income) of the inputs
used by the valuers in the valuations,
such as the terms of void periods,
rent free periods and other assumptions
that impact the value.
Key observations
Based on the procedures performed,
we consider that the judgements
made in the property valuations
are reasonable.
------------------------------------------------------------------
Loans advanced and IFRS 9 "Financial Through challenge, discussion
instruments" (notes 2.(b)(b), and review of example scenarios,
16) we gained a detailed understanding
of, and evaluated, the expected
credit loss methodology applied
The Group's activities include by management. This was undertaken
advancing senior loans and mezzanine with reference to accounting
loans secured over real estate standards and industry practice.
assets. The amounts advanced represent
a material balance in the financial We then tested the methodology
statements and IFRS 9 requires used in determining the amortised
losses to be recognised on an cost amount and recognition of
expected, forward-looking basis, any impairment loss. Our testing
reflecting the Group's view of included:
potential future economic events.
* reviewing the methodology, including key assumptions
As a result, the Group's IFRS and parameters, to check it is in line with IFRS 9
9 methodology incorporates a number and appropriate, given our understanding of the loans
of estimates to determine the advanced;
expected credit loss provisions,
and we therefore considered this
to be a key audit matter.
* obtaining and reviewing all loan agreements to
confirm the appropriateness of all loans except two
being classified as stage 3 due to the repayable on
demand feature.
* obtaining and challenging, through discussion, the
updates made to the existing methodology to
appropriately reflect the changes in the economy.
* obtaining underlying supporting documentation, on a
sample basis, we tested the inputs that drive the
economic scenario applied to the loans.
* obtaining third party confirmation on a sample of
loans to confirm the year end balance.
* undertaking procedures to check that the expected
credit loss model applied by management was
mathematically accurate;
* challenging management's expected credit loss on
three individual loans which had entered into true
default and the manual adjustments made over the
mechanical model. This included obtaining and
considering support for expected returns, expenses
payable and any security in place over the underlying
assets the loans are secured on.
Key observations
Based on the procedures performed,
we consider the estimates used
in the determination of the expected
credit losses were reasonable
------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements
2023 2022
GBP GBP
------------------------- -----------------------
Materiality 2,023,000 2,136,000
------------------------- -----------------------
Basis for 1.5% of total assets 1.5% of total assets
determining
materiality
------------------------- -----------------------
Rationale Due to it being an investment fund with the
for the benchmark objective of long-term capital growth with
applied investment values being a key focus of users
of the financial statements.
--------------------------------------------------
Performance
materiality 1,517,250 1,602,000
------------------------- -----------------------
Basis for 75% of materiality
determining
performance This was determined using our professional
materiality judgement and took into account the complexity
of the group and our long-standing knowledge
of the engagement together with a history
of minimal misstatements.
--------------------------------------------------
Specific materiality
We also determined that for sensitive fees including: management
fees, performance fees, legal fees, directors' fees and audit fees,
a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the
economic decisions of users. As a result, we determined materiality
for these items based on 10% (2022: 10%) of materiality being
GBP202,300 (2022: GBP213,000). We further applied a performance
materiality level of 75% (2022: 75%) of specific materiality to
ensure that the risk of errors exceeding specific materiality was
appropriately mitigated.
Component materiality
We set materiality for the significant component of the Group
based on a percentage of 90% (2022: 90%) of Group materiality
dependent on the size and our assessment of the risk of material
misstatement of that component. Component materiality was set at
GBP1,820,700 (2022: GBP1,922,400). In the audit of that component,
we further applied a performance materiality level of 75% (2022:
75%) of the component materiality to our testing to ensure that the
risk of errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP60,690 (2022:
GBP64,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the Annual
Report and Financial Statements, other than the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Other Companies (Guernsey) Law, 2008 reporting
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- proper accounting records have not been kept by the Parent Company; or
-- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for
the purposes of our audit.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement within the Directors' and Corporate Governance Report,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
Based on our understanding of the Group and the industry in
which it operates, we identified that the principal risks of
non-compliance with laws and regulations related to its investment
activities, and we considered the extent to which non-compliance
might have a material effect on the Group's financial
statements.
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and have a direct
impact on the preparation of the financial statements. We
determined that the most significant frameworks which are directly
relevant to specific assertions in the financial statements are
those that relate to the reporting framework such as IFRS as
adopted by the EU and the Companies (Guernsey) Law, 2008. We
evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
management override of controls), and determined that the principal
risks were related to revenue recognition in relation to the rental
income from properties held, revenue recognition in relation to
loan interest from loans advanced and management bias and judgement
involved in accounting estimates, specifically in relation to the
valuation of properties and the expected credit loss provisions
(the response to which are detailed in our key audit matters
above).
We communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members and the
component auditor, and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the
audit.
Audit procedures performed by the engagement team to respond to
the risks identified included:
-- Discussion with and enquiry of management and those charged
with governance concerning known or suspected instances of
non-compliance with laws and regulations and fraud;
-- Obtaining an understanding of the internal control
environment in place to prevent and detect irregularities;
-- Reading minutes of meetings of those charged with governance,
correspondence with the Guernsey Financial Services Commission,
internal compliance reports, complaint registers and breach
registers to identify and consider any known or suspected instances
of non-compliance with laws and regulations and fraud;
-- Recalculating loan interest income based on the underlying loan agreements; and
-- Recalculating the rental income based on the lease agreements
and required accounting by IFRS as adopted by the EU and comparing
to that of management.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
https://www.frc.org.uk/auditorsresponsibilities . This
description forms part of our auditor's report.
The engagement director on the audit resulting in this
independent auditor's opinion is Simon Hodgson
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Section 262 of the Companies (Guernsey)
Law, 2008. Our audit work has been undertaken so that we might
state to the Parent Company's members those matters we are required
to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
.......................................................
Simon Hodgson
For and on behalf of BDO Limited
Chartered Accountants and Recognised Auditor
Place du Pré, Rue du Pré
St Peter Port, Guernsey
Date: 22 June 2023
Consolidated statement of comprehensive income
For the year ended For the year ended
31 March 2023 31 March 2022
------------------------------------------- ------- ------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Income
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Revenue 3 6,653 - 6,653 5,456 - 5,456
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Change in the revaluation
of investment property 13 - (548) (548) - 1,195 1,195
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Gains/(losses) on financial
assets and liabilities held
at fair value through profit
or loss 25 528 (1,597) (1,069) 601 (214) 387
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Total income 7,181 (2,145) 5,036 6,057 981 7,038
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Expenses
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Expected credit losses 16 (232) (881) (1,113) (1,262) (1,310) (2,572)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Property operating expenses 3 (87) - (87) (64) - (64)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Investment Manager's fee 24 (2,354) - (2,354) (2,270) - (2,270)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Other administration costs 4 (943) - (943) (962) - (962)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Total operating expenses (3,616) (881) (4,497) (4,558) (1,310) (5,868)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Operating profit 3,565 (3,026) 539 1,499 (329) 1,170
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Share of profit/(loss) of
joint ventures and associates 12 1,012 (569) 443 1,215 500 1,715
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Gain on joint venture in
arbitration 14 - - - - 5,868 5,868
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Finance income 5 255 - 255 4 - 4
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Finance costs 6 (201) (201) (402) (198) (52) (250)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Profit/(loss) before taxation 4,631 (3,796) 835 2,520 5,987 8,507
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Taxation 7 (130) (74) (204) (82) (265) (347)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Profit/(loss) for the year 4,501 (3,870) 631 2,438 5,722 8,160
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Other comprehensive income/(expense)
for the year
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Items that may be classified
to profit and loss in subsequent
periods
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Exchange differences arising
on translation
of foreign operations - 1,253 1,253 - (124) (124)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Other comprehensive expense
for the year - 1,253 1,253 - (124) (124)
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Total comprehensive income/(expense)
for the year 4,501 (2,617) 1,884 2,438 5,598 8,036
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Earnings per ordinary share
(basic & diluted) 9 1.1p 13.3p
------------------------------------------- ------- --------- --------- --------- --------- --------- ---------
Adjusted earnings per ordinary
share (basic & diluted) 9 7.7p 4.0p
The total column of this statement represents the Group's
statement of comprehensive income, prepared in accordance with
IFRS. The revenue and capital columns are supplied as supplementary
information permitted under IFRS. All items in the above statement
derive from continuing operations.
The accompanying notes form an integral part of the financial
statements.
Consolidated balance sheet
Notes 31 March 2023 31 March 2022
GBP'000 GBP'000
------------------------------ ------ -------------- --------------
Non-current assets
------------------------------ ------ -------------- --------------
Investment property 13 23,496 15,984
------------------------------ ------ -------------- --------------
Investment in joint ventures
and associates 12 17,654 17,193
------------------------------ ------ -------------- --------------
Loans advanced 16 16,051 13,093
------------------------------ ------ -------------- --------------
57,201 46,270
------------------------------ ------ -------------- --------------
Current assets
------------------------------ ------ -------------- --------------
Joint venture in arbitration 14 - 5,868
------------------------------ ------ -------------- --------------
Investments held at fair
value 15 18,310 10,990
------------------------------ ------ -------------- --------------
Derivatives held at fair
value through profit or
loss 25 - 88
------------------------------ ------ -------------- --------------
Loans advanced 16 39,385 23,341
------------------------------ ------ -------------- --------------
Collateral deposit 17 1,143 936
------------------------------ ------ -------------- --------------
Trade and other receivables 18 414 13,711
------------------------------ ------ -------------- --------------
Cash and cash equivalents 18,455 41,250
------------------------------ ------ -------------- --------------
77,707 96,184
------------------------------ ------ -------------- --------------
Total assets 134,908 142,454
------------------------------ ------ -------------- --------------
Current liabilities
------------------------------ ------ -------------- --------------
Trade and other payables 19 (986) (971)
------------------------------ ------ -------------- --------------
Corporation tax 7 (34) (12)
------------------------------ ------ -------------- --------------
Bank borrowings 20 (30) (29)
------------------------------ ------ -------------- --------------
Derivatives held at fair
value through profit or
loss 25 (171) -
------------------------------ ------ -------------- --------------
(1,221) (1,012)
------------------------------ ------ -------------- --------------
Total assets less current
liabilities 133,687 141,442
------------------------------ ------ -------------- --------------
Non-current liabilities
------------------------------ ------ -------------- --------------
Bank borrowings 20 (8,271) (7,921)
------------------------------ ------ -------------- --------------
Deferred tax 7 (349) (265)
------------------------------ ------ -------------- --------------
(8,620) (8,186)
------------------------------ ------ -------------- --------------
Total liabilities (9,841) (9,198)
------------------------------ ------ -------------- --------------
Net assets 125,067 133,256
------------------------------ ------ -------------- --------------
Equity
------------------------------ ------ -------------- --------------
Share capital 21 - -
------------------------------ ------ -------------- --------------
Special reserve 22 60,550 68,243
------------------------------ ------ -------------- --------------
Translation reserve 22 452 (801)
------------------------------ ------ -------------- --------------
Capital reserve 22 40,147 44,017
------------------------------ ------ -------------- --------------
Revenue reserve 22 23,918 21,797
------------------------------ ------ -------------- --------------
Total equity 125,067 133,256
------------------------------ ------ -------------- --------------
Net asset value per ordinary
share 10 216.8p 216.0p
The financial statements were approved by the Board of Directors
and authorised for issue on 22 June 2023 . They were signed on its
behalf by William Simpson and Peter Griffin.
William Simpson Peter Griffin
Director Director
The accompanying notes form an integral part of the financial
statements.
Consolidated cash flow statement
For the year For the year
ended ended
31 March 2023 31 March 2022
GBP'000 GBP'000
----------------------------------------------- --------------- ---------------
Operating activities
----------------------------------------------- --------------- ---------------
Profit for the year after taxation 631 8,160
----------------------------------------------- --------------- ---------------
Adjustments for:
----------------------------------------------- --------------- ---------------
Change in revaluation of investment property 548 (1,195)
----------------------------------------------- --------------- ---------------
Net losses/(gains) on financial assets
and liabilities held at fair value through
profit or loss 1,069 (387)
----------------------------------------------- --------------- ---------------
Taxation 204 347
----------------------------------------------- --------------- ---------------
Share of profit of joint ventures and
associates (443) (1,715)
----------------------------------------------- --------------- ---------------
Gain on joint venture in arbitration - (5,868)
----------------------------------------------- --------------- ---------------
Interest receivable on loans to third
parties (5,328) (4,528)
----------------------------------------------- --------------- ---------------
Expected credit losses 1,113 2,572
----------------------------------------------- --------------- ---------------
Finance income (255) (4)
----------------------------------------------- --------------- ---------------
Finance costs 402 250
----------------------------------------------- --------------- ---------------
Operating cash flows before movements
in working capital (2,059) (2,368)
----------------------------------------------- --------------- ---------------
Movements in working capital:
----------------------------------------------- --------------- ---------------
Movement in trade and other receivables (381) 8
----------------------------------------------- --------------- ---------------
Movement in trade and other payables 8 219
----------------------------------------------- --------------- ---------------
Cash flows used in operations (2,432) (2,141)
----------------------------------------------- --------------- ---------------
Loan interest received 1,811 2,717
----------------------------------------------- --------------- ---------------
Loans granted to third parties (18,832) (24,722)
----------------------------------------------- --------------- ---------------
Cash returned from/(paid in) escrow for
loans to be granted post year end 1,928 (13,683)
----------------------------------------------- --------------- ---------------
Loans repaid by third parties 14,097 20,406
----------------------------------------------- --------------- ---------------
Interest received 255 4
----------------------------------------------- --------------- ---------------
Interest paid (186) (183)
----------------------------------------------- --------------- ---------------
Tax paid (96) (113)
----------------------------------------------- --------------- ---------------
Cash flows used in operating activities (3,455) (17,715)
----------------------------------------------- --------------- ---------------
Investing activities
----------------------------------------------- --------------- ---------------
Acquisition of investments - (10,998)
----------------------------------------------- --------------- ---------------
Redemption of investments 5,290 -
----------------------------------------------- --------------- ---------------
Investment in UK Treasury Bonds and Bills (13,948) -
----------------------------------------------- --------------- ---------------
Acquisition of investment property (7,407) -
----------------------------------------------- --------------- ---------------
Investment in joint ventures - (84)
----------------------------------------------- --------------- ---------------
Dividend income from joint ventures 700 959
----------------------------------------------- --------------- ---------------
Dividend income from investments 419 267
----------------------------------------------- --------------- ---------------
Capital return from joint venture in 5,868 -
arbitration
----------------------------------------------- --------------- ---------------
Capital return from joint venture - 1,263
----------------------------------------------- --------------- ---------------
Collateral deposit (increase)/decrease (207) 170
----------------------------------------------- --------------- ---------------
Cash flows used in investing activities (9,285) (8,423)
----------------------------------------------- --------------- ---------------
Financing activities
----------------------------------------------- --------------- ---------------
Share buyback (9,553) (339)
----------------------------------------------- --------------- ---------------
Share buyback costs (49) (2)
----------------------------------------------- --------------- ---------------
Share issue costs (115) (63)
----------------------------------------------- --------------- ---------------
Cash (paid)/received on maturity of foreign
exchange forward (47) 72
----------------------------------------------- --------------- ---------------
Ordinary dividends paid (356) (452)
----------------------------------------------- --------------- ---------------
Cash flows used in financing activities (10,120) (784)
----------------------------------------------- --------------- ---------------
Net decrease in cash and cash equivalents (22,860) (26,922)
----------------------------------------------- --------------- ---------------
Cash and cash equivalents at beginning
of year 41,250 68,213
----------------------------------------------- --------------- ---------------
Exchange translation movement 65 (41)
----------------------------------------------- --------------- ---------------
Cash and cash equivalents at end of year 18,455 41,250
The accompanying notes form an integral part of the financial
statements.
Consolidated statement of changes in equity
For the year Special Translation Capital Revenue Total
ended 31 March 2022 reserve reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2021 66,655 (677) 38,295 21,803 126,076
--------- ------------ --------- --------- ---------
Total comprehensive income
for the year
--------- ------------ --------- --------- ---------
Profit for the year - - 5,722 2,438 8,160
--------- ------------ --------- --------- ---------
Other comprehensive expense
for the year - (124) - - (124)
--------- ------------ --------- --------- ---------
Total comprehensive (expense)/income
for the year - (124) 5,722 2,438 8,036
--------- ------------ --------- --------- ---------
Transactions with owners
--------- ------------ --------- --------- ---------
Cash dividends - - - (452) (452)
--------- ------------ --------- --------- ---------
Scrip dividends 1,992 - - (1,992) -
--------- ------------ --------- --------- ---------
Share issue costs (63) - - - (63)
--------- ------------ --------- --------- ---------
Share buyback (339) - - - (339)
--------- ------------ --------- --------- ---------
Share buyback costs (2) - - - (2)
--------- ------------ --------- --------- ---------
Total transactions with
owners 1,588 - - (2,444) (856)
--------- ------------ --------- --------- ---------
At 31 March 2022 68,243 (801) 44,017 21,797 133,256
--------- ------------ --------- --------- ---------
Notes 21, 22
--------- ------------ --------- --------- ---------
For the year Special Translation Capital Revenue Total
ended 31 March 2023 reserve reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2022 68,243 (801) 44,017 21,797 133,256
--------- ------------ --------- --------- ---------
Total comprehensive income
for the year
--------- ------------ --------- --------- ---------
(Loss)/profit for the year - - (3,870) 4,501 631
--------- ------------ --------- --------- ---------
Other comprehensive income
for the year - 1,253 - - 1,253
--------- ------------ --------- --------- ---------
Total comprehensive (expense)/income
for the year - 1,253 (3,870) 4,501 1,884
--------- ------------ --------- --------- ---------
Transactions with owners
--------- ------------ --------- --------- ---------
Cash dividends - - - (356) (356)
--------- ------------ --------- --------- ---------
Scrip dividends 2,024 - - (2,024) -
--------- ------------ --------- --------- ---------
Share issue costs (115) - - - (115)
--------- ------------ --------- --------- ---------
Share buyback (9,553) - - - (9,553)
--------- ------------ --------- --------- ---------
Share buyback costs (49) - - - (49)
--------- ------------ --------- --------- ---------
Total transactions with
owners (7,693) - - (2,380) (10,073)
--------- ------------ --------- --------- ---------
At 31 March 2023 60,550 452 40,147 23,918 125,067
--------- ------------ --------- --------- ---------
Notes 21, 22
--------- ------------ --------- --------- ---------
The accompanying notes form an integral part of the financial
statements.
Notes to the financial statements for the year ended 31 March
2023
1. General information
The Company is a limited liability, closed-ended investment
company incorporated in Guernsey. The address of the registered
office is given below. The nature of the Group's operations and its
principal activities are set out in the Chairman's Statement. The
financial statements were approved and authorised for issue on 22
June 2023 and signed by William Simpson and Peter Griffin on behalf
of the Board.
2. (a) Significant accounting policies
A summary of the principal accounting policies is set out below.
The policies have been consistently applied for all periods
presented unless otherwise stated.
The preparation of financial statements in conformity with IFRS,
as adopted by the EU, requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the accounting policies. The
areas involving a high degree of judgement or complexity, or areas
where the assumptions and estimates are significant to the
financial statements are disclosed in this note.
Basis of preparation
These financial statements have been prepared in accordance with
IFRS, which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and
International Accounting Standards and Standards Interpretations
Committee's interpretations approved by the International
Accounting Standards Committee ("IASC") that remain in effect, and
to the extent that they have been adopted by the European
Union.
Russian invasion of Ukraine and going concern
As previously stated, ART has no investments in Ukraine or
Russia, nor exposure to any companies that have investments in, or
links to, Ukraine or Russia. ART has no arrangements with any
person currently on (or potentially on) any sanctions list, or
links to Ukraine or Russia. The Board continues to monitor the
global political and economic situation regularly assessing impacts
arising from inflation and interest rates changes for a potential
material impact on ART's portfolio.
The Company has adopted a prudent short-term strategy to move to
cash conservation and a cautious approach to commitments to new
investments over this uncertain time. Alert to the impact of
potentially reducing income returns, this approach has supported a
robust balance sheet position. The Company continues to adopt this
cautious approach to new investment and is conserving cash because
of the uncertainty that has characterised the past few months; this
ensures the Company retains a robust financial footing, making it
well positioned to take advantage of new investment
opportunities.
As noted above, the Company held approximately (as at 31 March
2023) 13.8% of its assets (excluding sundry net assets) in cash and
11.2% in highly liquid UK Treasury Bonds and Bills with limited
current contractual capital commitments. While there is external
financing in the Group's investment interests, this is limited and
non-recourse to the Company; the borrowings in these special
purpose vehicles are compliant with their banking covenants. See
the investment review section for more details on relevant
investments.
Bearing in mind the nature of the Group's business and assets,
after making enquiries, with the support of revenue forecasts for
the next twelve months and considering the above, the Directors
consider that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
(a) Adoption of new and revised Standards
A few amendments and interpretations of existing standards apply
to the Group's financial year but these did not have a significant
impact on the financial statements of the Company.
(b) Standards and Interpretations in issue and not yet
effective
At the date of authorisation of these financial statements,
there are a number of standards and interpretations, which have not
been applied in these financial statements that were in issue but
not yet effective. The Directors anticipate that the adoption of
these standards and interpretations will not have a material impact
on the financial statements of the Group.
Basis of consolidation
(a) Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and the subsidiary undertakings
controlled by the Company, made up to 31 March each year. Control
is achieved where the Company has power over the investee, exposure
or rights, to variable returns from its involvement with the
investee and the ability to use its power to affect the amount of
the investor's returns.
The results of subsidiary undertakings acquired or disposed of
during the year are included within profit or loss in the
consolidated statement of comprehensive income from the effective
date of acquisition or up to the effective date of disposal as
appropriate.
When necessary, adjustments are made to the financial statements
of subsidiary undertakings to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
ART holds a number of direct property investments through
subsidiary undertakings. The Group is actively involved in the
management of these property investments and its investment plans
do not include specified exit strategies for these investments. As
a result, ART plans to hold these property investments
indefinitely. ART reports its investment properties at fair value
in its financial statements but this is not the primary measurement
attribute used by management to evaluate the performance of these
investments. In addition, ART holds a number of loans through
subsidiary undertakings and management do not measure the
performance of these on a fair value basis. In consequence,
management have concluded that ART does not meet the definition of
an investment entity and the subsidiaries have been consolidated
into the Group's balance sheet, rather than being carried at fair
value.
When a partial disposal of a subsidiary occurs which causes the
entity to no longer be controlled and hence no longer a subsidiary,
the Company derecognises the subsidiary and recognises the retained
interest initially at fair value.
When calculating the profit or loss on disposal the Company
measures the retained interest at fair value and includes this in
the fair value of the consideration received. The profit or loss on
disposal is the difference between the fair value of the
consideration received and the carrying value of the assets and
liabilities disposed of, as reduced by transactions costs incurred
and any foreign currency gains or losses recycled on disposal as
per the foreign currency accounting policy in respect of group
companies.
(b) Joint ventures and associates
The Group applies IFRS 11 to its joint arrangement. Under IFRS
11 investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights
and obligations of each investor. The Group has assessed the nature
of its joint arrangements and determined them to be joint ventures.
Joint ventures are accounted for using the equity method.
The Group also applies IAS 28: this standard defines an
associate as an entity over which an investor exercises significant
influence. Under IAS 28 significant influence is the power to
participate in the financial and operating policy decisions of the
investee but is not control or joint control of those policies and,
where an entity holds 20% or more of the voting power (directly or
through subsidiaries) of an investee, it is presumed that the
investor has significant influence unless it can be clearly
demonstrated that this is not the case. Associates are accounted
for using the equity method.
Under the equity method of accounting, interests in joint
ventures and associates are initially recognised at cost and
adjusted thereafter to recognise the Group's share of the
post-acquisition profits or losses and movements in other
comprehensive income. When the Group's share of losses in a joint
venture or associate equals or exceeds its interests in the joint
venture or associate (which includes any long-term interests that,
in substance, form part of the Group's net investment in the joint
venture or associate) the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of
the joint venture or associate.
Unrealised gains on transactions between the Group and its joint
ventures or associates are eliminated to the extent of the Group's
interest in the joint ventures or associates. Unrealised losses are
also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
(c) Joint venture in arbitration
The Galaxia joint venture was classified as joint venture in
arbitration and, historically, it was included within the financial
statements based on its estimate of realisable value to the Group:
in the prior year, the Group completed the full recovery of the
capital invested in the joint venture and received the full amount
due under the award.
Presentation of statement of comprehensive income
In order to better reflect the activities of an investment
company and in accordance with guidance issued by the Association
of Investment Companies ("AIC"), supplementary information, which
analyses the statement of comprehensive income between items of a
revenue and capital nature, has been presented alongside the
statement of comprehensive income.
Revenue recognition
Rental income and service charge income from investment property
leased out under an operating lease are recognised within profit or
loss in the statement of comprehensive income on a straight line
basis over the term of the lease. Lease incentives granted are
recognised as an integral part of the net consideration for the use
of the property and are therefore also recognised on the same
straight line basis. Rental revenues are accounted for on an
accruals basis. Therefore, deferred revenue generally represents
advance payments from tenants. Revenue is recognised when it is
probable that the economic benefits associated with the transaction
will flow to the Group and the amount of revenue can be measured
reliably. Upon early termination of a lease by the lessee, the
receipt of a surrender premium, net of dilapidations and
non-recoverable outgoings relating to the lease concerned, is
immediately recognised as revenue.
Interest income is accrued on a time basis, by reference to the
principal outstanding and the effective interest rate
applicable.
Other income is recognised when received.
Leasing
(a) Company as a lessor
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
(b) Company as a lessee
Under IFRS 16, all leases are recorded on the balance sheet as
liabilities, at the present value of the future lease payments,
along with an asset reflecting the right to use the asset over the
lease term.
The Group owns no leasehold property.
Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group
entities are measured in the currency of the primary economic
environment in which the entity operates (the "functional
currency"). The consolidated financial statements are presented in
Sterling, which is the Company's functional and presentation
currency .
(b) Transactions and balances
Transactions in currencies other than the functional currency
are recorded at the rates of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Gains and losses arising on retranslation are included in profit or
loss for the year.
(c) Group companies
The results and financial position of all the Group entities
that have a functional currency which differs from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the balance sheet date;
(ii) income and expenses for each statement of comprehensive
income are translated at the average exchange rate prevailing in
the period; and
(iii) all resulting exchange differences are recognised within other comprehensive income.
On consolidation, the exchange differences arising from the
translation of the net investment in foreign entities are taken to
equity. When a foreign operation is sold, such exchange differences
are recognised within profit or loss in the statement of
comprehensive income as part of the gain or loss on sale.
For Euro based balances the year end exchange rate used is
GBP1:EUR1.137 (2022: GBP1:EUR1.185) and the average rate for the
year used is GBP1:EUR1.158 (2022: GBP1:EUR1.176). The year-end
exchange rate used for Indian rupee (INR) balances is
GBP1:INR101,554 (2022: GBP1:INR99.678) and the average rate for the
year used is GBP1:INR96,816 (2022: GBP1:INR101.813).
Expenses
All expenses are accounted for on an accruals basis and include
fees and other expenses paid to the Administrators, the Investment
Manager and the Directors. In respect of the analysis between
revenue and capital items, presented within profit or loss in the
statement of comprehensive income, all expenses have been presented
as revenue items except expenses which are incidental to the
acquisition of an investment property which are included within the
cost of that investment property. The Investment Manager's
performance fee is charged to the capital column within profit or
loss in the statement of comprehensive income in order to reflect
that the fee is due primarily to the capital performance of the
Group.
Taxation
The Company is exempt from Guernsey taxation on income derived
outside of Guernsey and bank interest earned in Guernsey. A fixed
annual fee of GBP1,200 was payable to the States of Guernsey in
respect of this exemption for the year. No charge to Guernsey
taxation arises on capital gains. The Group is liable to foreign
tax arising on activities in the overseas subsidiaries. The Group
holds investments in Spain (H2O), owned through investment entities
in Luxembourg and the Netherlands, in Germany (Hamburg), owned
through a Guernsey subsidiary and in the United Kingdom, owned
directly by a UK subsidiary (Liverpool and Travelodge Hotels in
Lowestoft and Wadebridge). The Group may therefore be liable to
taxation in these overseas jurisdictions.
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income and expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been substantively enacted at the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible timing differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the year
when the liability is settled or the asset realised. Deferred tax
is charged or credited within profit or loss in the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Dividends
Dividends are recognised as a liability in the Group's financial
statements in the period in which they become obligations of the
Group.
Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation, is initially recognised at cost
being the fair value of consideration given including related
transaction costs.
After initial recognition at cost and/or upon commencement of
construction, investment property is carried at its fair value
based on half yearly professional valuations made by independent
valuers or based on Directors' valuations. The independent valuers'
valuations are in accordance with standards complying with the
Royal Institution of Chartered Surveyors Appraisal and Valuation
manual and the International Valuation Standards Committee.
Gains or losses arising from changes in fair value of investment
property are included within profit or loss in the statement of
comprehensive income in the period in which they arise. Investment
property is treated as acquired when the Group assumes the
significant risks and returns of ownership and as disposed of when
these are transferred to the buyer.
All costs directly associated with the purchase of an investment
property and all subsequent expenditures qualifying as acquisition
costs are capitalised.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, which is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the
Company.
The investing policy means the Group may invest in real estate
opportunities unconstrained by geography, but with a particular
focus on the UK and Europe. At present, for management purposes,
the Group is organised into one main operating segment being
Europe.
The Group's revenue generated in the UK was GBP5,729,000 and in
Germany was GBP924,000 (Year ended 31 March 2021: GBP4,617,000 in
the UK and GBP839,000 in Germany).
The Group's non-current assets are located in the following
countries:
Country 2023 2022
GBP'000 GBP'000
--------- --------- ---------
UK 22,360 13,836
--------- --------- ---------
Germany 16,271 15,359
--------- --------- ---------
Spain 17,654 17,075
--------- --------- ---------
India - 5,868
--------- --------- ---------
Total 56,285 52,138
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument. The Group shall offset
financial assets and financial liabilities if the Group has a
legally enforceable right to set off the recognised amounts and
interests and intends to settle on a net basis.
(a) Financial assets
Under IFRS 9, on initial recognition, a financial asset is
classified as measured at:
-- Amortised cost;
-- Fair value through other comprehensive income ("FVOCI") - debt investment;
-- FVOCI - equity investment; or
-- Fair value through profit or loss ("FVTPL").
The classification of financial assets under IFRS 9 is generally
based on the business model in which a financial asset is managed
and its contractual cash flow characteristics.
The Group only has financial assets that are classified as
amortised cost or FVTPL.
(a) (i) Financial assets held at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are initially measured at
fair value plus transaction costs that are directly attributed to
its acquisition, unless it is a trade receivable without a
significant financing component which is initially measured at its
transaction price.
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses as detailed in (b) below.
Cash deposits with banks that cannot be accessed within a period
of three months are not considered to be cash and cash
equivalents.
(a) (ii) FVTPL
All financial assets not classified as measured at amortised
cost or FVOCI are measured at FVTPL which includes derivative
financial assets. Financial assets at FVTPL are initially and
subsequently measured at fair value.
Fair value measurement
The Group measures certain financial instruments such as
derivatives and non-financial assets such as investment property,
at fair value at the end of each reporting period, using recognised
valuation techniques and following the principles of IFRS 13. In
addition, fair values of financial instruments measured at
amortised cost are disclosed in the financial statements.
Fair value is 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. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- in the principal market for the asset or liability
or
-- in the absence of a principal market, in the most
advantageous market for the asset or liability.
The Group must be able to access the principal or the most
advantageous market at the measurement date. The fair value of an
asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic best
interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs significant to
the fair value measurement as a whole:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
(a) (iii) Impairment of financial assets
(i) Trade receivables
Under IFRS 9 for trade receivables, including lease receivables,
the Group has elected to apply the simplified model as the trade
receivables all have a maturity of less than one year and do not
contain a significant financing component. Under the simplified
approach the requirement is to always recognise lifetime ECL. Under
the simplified approach practical expedients are available to
measure lifetime ECL but forward looking information must still be
incorporated. Under the simplified approach there is no need to
monitor significant increases in credit risk and entities will be
required to measure lifetime ECLs at all times.
The directors have concluded that any ECL on trade receivables
would be highly immaterial to the financial statements due to the
low credit risk of the relevant tenants.
(ii) Other receivables
The directors have concluded that any ECL on other receivables
would be highly immaterial to the financial statements due to:
-- collateral being held in the form of a security deposit for
the Group's hedging strategy which can be called back at any time
with no capital loss should the Group decide to terminate its
foreign exchange contracts before their contractual maturity;
-- The credit risk of the underlying banks which are utilised by
the law firms by whom cash on escrow is kept before completion of a
given senior or mezzanine loan.
The remaining other receivables are immaterial to the financial
statements and therefore no assessment of the ECL has been
completed.
(iii) Loans advanced
Despite the loans having a set repayment term, all but two of
the loans have a repayable on demand feature so the Group may call
for an early repayment of their principal, interest and applicable
fees at any time.
Considering the 'on demand' clause, the Group concluded that the
loans are in stage 3 of the IFRS 9 model as should the loans be
called on demand the borrowers would technically be in default as
repayment would only be possible on demand if the property had
already been sold.
The two loans that have a repayment term have an immaterial
lifetime ECL and hence no detailed analysis of whether those loans
has suffered a significant increase in credit risk has been
performed.
(b) Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
issued and its characteristics. Although the Group uses derivative
financial instruments in economic hedges of currency and interest
rate risk, it does not hedge account for these transactions.
Unless otherwise indicated, the carrying amounts of the Group's
financial liabilities are a reasonable approximation of their fair
values.
(b) (i) Derivatives at fair value through profit or loss
This category comprises only 'out-of-the-money' financial
derivatives. They are carried in the balance sheet at fair value
with changes in fair value recognised within profit or loss in the
statement of comprehensive income. Other than derivative financial
instruments, the Group does not have any liabilities held for
trading nor has it designated any other financial liabilities as
being at fair value through profit or loss.
The fair value of the Group's derivatives is based on the
valuations as described in note 25.
(b) (ii) Financial liabilities measured at amortised cost
Other financial liabilities include the following items:
-- Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method;
-- Bank borrowings which are initially recognised at fair value
net of attributable transaction costs incurred. Such interest
bearing liabilities are subsequently measured at amortised cost
using the effective interest rate method.
(b) (iii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Company or Group has extinguished its contractual obligations,
it expires or is cancelled. Any gain or lo ss on derecognition is
taken to profit or loss in the statem ent of comprehensive
income.
(c) Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares and class A
shares are classified as equity instruments. For the purposes of
the disclosures given in note 25 (capital risk part) the Group
considers all its share capital, share premium and all other
reserves as equity. The Group is not subject to any externally
imposed capital requirements.
(d) Effective interest rate method
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or liability and of
allocating interest income or expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all fees on
points paid or receive d that form an int egral part of the
effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset or
liability, or, where appropriate, a shorter period.
2. (b) Significant accounting estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
(a) Investment property
The Group uses the valuations carried out by its independent
valuers as the fair value of its investment properties, whenever
possible. The valuations are based upon assumptions including
future rental income, anticipated maintenance costs, future
development costs and the appropriate discount rate. The valuers
also make reference to market evidence of transaction prices for
similar properties. Investment property which is in the course of
construction is carried at cost plus associated costs and this has
been considered by the Directors to represent fair value at the
balance sheet date: upon commencement of construction, valuations
will be carried out by independent valuers.
As at the year ended 31 March 2023, the following valuations
have been carried out:
(a) (i) Independent valuations
Independent valuations were carried out for the following
investment properties:
-- The directly owned properties located in Hamburg (Germany),
Liverpool (UK), Lowestoft and Wadebridge (Travelodge Hotels in UK)
(notes 13 and 26);
-- An indirectly owned property located in Madrid (Spain), held
through CBRE H2O Rivas Holding NV (note 12).
A sensitivity analysis of these investment properties'
valuations is provided in notes 12 and 26.
(b) Loans advanced - ECLs
The Group has calculated the lifetime ECLs of the loans advanced
using the following three scenarios:
1. Credit criteria unchanged or strengthened since inception and
expectation of repayment in full;
2. Credit criteria weakened since inception but expectation of full recovery;
3. Credit criteria significantly weakened and potential for repayment to not be fully achieved.
The criteria referred to above incorporate the following:
-- Progress of development against plan;
-- Borrower's financial position;
-- Property market data.
In calculating the recoverable amounts under the three
scenarios, the Directors have taken into account the available
collateral under the loan agreements including charges over
property and other guarantees.
Three loans in the portfolio have entered receivership: ART is
closely working with stakeholders to maximise their capital
recovery. The Company has considered the security on these loans
(which are a combination of a first charge over the assets and
personal guarantees) and have calculated an Expected Credit Loss
('ECL') on these three loans of approximately GBP2.9 million; the
Group have also provided for an ECL on the remainder of the loans'
portfolio for an additional GBP0.8 million: in total, the Group
have provided for an ECL of GBP3.7 million in its consolidated
accounts.
3. Revenue
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------------------------- ----------- -----------
Rental income 1,267 821
----------------------------------------------- ----------- -----------
Service charge income 52 52
----------------------------------------------- ----------- -----------
Rental revenue 1,319 873
----------------------------------------------- ----------- -----------
Interest receivable on loans to third parties 5,328 4.528
----------------------------------------------- ----------- -----------
Interest revenue 5,328 4,528
----------------------------------------------- ----------- -----------
Other income 6 55
----------------------------------------------- ----------- -----------
Other revenue 6 55
----------------------------------------------- ----------- -----------
Total 6,653 5,456
At 31 March 2023, the Group recognised non recoverable property
operating expenditure as follows:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------------ ----------- -----------
Service charge income 52 52
------------------------------------------------ ----------- -----------
Property operating expenditure (87) (64)
------------------------------------------------ ----------- -----------
Non recoverable property operating expenditure (35) (12)
The Group recognises rental revenue from its investment in one
residential property located in Liverpool, UK and three commercial
properties: a long leased industrial facility in Hamburg, Germany,
and two Travelodge Hotels located in Lowestoft and Wadebridge in
the UK.
The Hamburg property is leased to Veolia Umweltservice Nord
GmbH, part of the Veolia group, an international industrial
specialist in water, waste and energy management, with a 24-year
unexpired lease term. Under the operating lease, the tenant is
responsible for building maintenance and the rent has periodic
inflation linked adjustments.
The Liverpool residential property is comprised of seven units,
six of which are occupied by private individuals with a six month
term contract with one unit being vacant at 31 March 2023.
The Travelodge Hotels in Lowestoft (47-bedroom property) and in
Wadebridge (55-bedroom property) are leased to Travelodge Hotels on
an 18 year and 20 year unexpired lease term ( (including landlord
extension option) , respectively.
At 31 March 2023, the Group had contracted with its tenants for
the following future minimum lease payments:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
---------------------------------------- ----------- -----------
Within one year 1,407 816
---------------------------------------- ----------- -----------
In the second to fifth years inclusive 5,617 3,265
---------------------------------------- ----------- -----------
After five years 16,187 12,048
---------------------------------------- ----------- -----------
Total 23,211 16,129
4. Other administration costs
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Auditors' remuneration for audit services 107 96
------------------------------------------- ----------- -----------
Accounting and administrative fees 334 400
------------------------------------------- ----------- -----------
Non-executive directors' fees 175 161
------------------------------------------- ----------- -----------
Other professional fees 327 305
------------------------------------------- ----------- -----------
Total 943 962
5. Finance income
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
-------------------------- ----------- -----------
Bank interest receivable 255 4
-------------------------- ----------- -----------
Total 255 4
6. Finance costs
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------- ----------- -----------
Interest on bank borrowings 201 198
----------------------------- ----------- -----------
Foreign exchange loss 201 52
----------------------------- ----------- -----------
Total 402 250
The above finance costs arise on financial liabilities measured
at amortised cost using the effective interest rate method. No
other losses have been recognised in respect of financial
liabilities at amortised cost other than those disclosed above.
7. Taxation
(a) Parent Company
The Parent Company is exempt from Guernsey taxation on income
derived outside of Guernsey and bank interest earned in Guernsey. A
fixed annual fee of GBP1,200 (31 March 2022: GBP1,200) was payable
to the States of Guernsey in respect of this exemption for the
year. No charge to Guernsey taxation arises on capital gains. The
Group is liable to foreign tax arising on activities in its
overseas subsidiaries. The Company has investments, subsidiaries
and joint venture operations in Luxembourg, the United Kingdom,
Germany, the Netherlands, Spain and Cyprus.
(b) Group
The Group's tax expense for the year comprises:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
-------------- ----------- -----------
Deferred tax 74 265
-------------- ----------- -----------
Current tax 130 82
-------------- ----------- -----------
Tax Expense 204 347
The charge for the year can be reconciled to the profit per the
consolidated statement of comprehensive income as follows:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------------------- ----------- -----------
Tax expense reconciliation
----------------------------------------- ----------- -----------
Profit before taxation 835 8,507
----------------------------------------- ----------- -----------
Less: income not taxable (11,660) (15,343)
----------------------------------------- ----------- -----------
Add: expenditure not deductible 11,185 8,000
----------------------------------------- ----------- -----------
Un-provided deferred tax asset movement 284 (738)
----------------------------------------- ----------- -----------
Total 644 426
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
-------------------------- ----------- -----------
Analysed as arising from
-------------------------- ----------- -----------
Cyprus entities 226 352
-------------------------- ----------- -----------
Dutch entity 73 69
-------------------------- ----------- -----------
Luxembourg entities 243 -
-------------------------- ----------- -----------
German investment 102 5
-------------------------- ----------- -----------
UK investments - -
-------------------------- ----------- -----------
Total 644 426
Tax at domestic rates applicable to profits in the countries
concerned is as follows:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------- ----------- -----------
Cypriot taxation at 12.50% 28 44
------------------------------------------- ----------- -----------
Dutch taxation at 20% 15 14
------------------------------------------- ----------- -----------
Luxembourg entities at an average rate of
29.22% * 71 23
------------------------------------------- ----------- -----------
German taxation at 15.825% 16 1
------------------------------------------- ----------- -----------
UK taxation at 20% - -
------------------------------------------- ----------- -----------
Total 130 82
------------------------------------------- ----------- -----------
*The taxation incurred in Luxembourg in 2022, mainly related to
the net wealth tax charge.
The tax liability for the Group at year end can be analysed as
follows:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------- ----------- -----------
Cyprus entities - -
--------------------- ----------- -----------
Dutch entity 4 4
--------------------- ----------- -----------
Luxembourg entities 23 1
--------------------- ----------- -----------
German investment 7 7
--------------------- ----------- -----------
UK investments - -
--------------------- ----------- -----------
Total 34 12
--------------------- ----------- -----------
(c) Deferred taxation
The following is the deferred tax recognised by the Group and
movements thereon:
Revaluation of Accelerated tax Tax Losses Other temporary Total
Investment Property depreciation differences
GBP'000
GBP'000 GBP'000 GBP'000
GBP'000
------------------- ----------------------- ----------------------- ----------- ----------------------- ---------
At 31 March 2021 - - (267) 267 -
------------------- ----------------------- ----------------------- ----------- ----------------------- ---------
Release to income 265 - (69) 69 265
------------------- ----------------------- ----------------------- ----------- ----------------------- ---------
At 31 March 2022 265 - (336) 336 265
------------------- ----------------------- ----------------------- ----------- ----------------------- ---------
Release to income 84 - (19) 19 84
------------------- ----------------------- ----------------------- ----------- ----------------------- ---------
At 31 March 2023 349 - (355) 355 349
Certain deferred tax assets and liabilities have been offset.
The following is the analysis of the deferred tax balances (after
offset) for financial reporting purposes available for offset
against future profits.
2023 2022
GBP'000 GBP'000
-------------------------- --------- ---------
Deferred tax liabilities 704 601
-------------------------- --------- ---------
Deferred tax assets (355) (336)
-------------------------- --------- ---------
Total 349 265
At the balance sheet date the Group has unused tax losses of
GBP0.9 million (2022: GBP0.9 million). Due to the unpredictability
of future taxable profits, the Directors believe it is not prudent
to recognise a deferred tax asset for the unused tax losses at the
year end.
Unused tax losses in Luxembourg, Spain, Germany and the United
Kingdom can be carried forward indefinitely. Unused tax losses in
the Netherlands can be carried forward for nine years. Unused tax
losses in Cyprus can be carried forward for five years.
A deferred tax liability has been provided for in relation to
the Hamburg investment property in Germany.
8. Dividends
Dividend reference period Shares Dividend Paid Date of
payment
'000 per share GBP
Quarter ended 31 December
2021 12,545 1.0p 125,450 6 April 2022
---------------------------- ------- ---------- -------- -------------
Quarter ended 31 March
2022 12,433 1.0p 124,333 20 July 2022
---------------------------- ------- ---------- -------- -------------
Quarter ended 30 June 26 October
2022 5,316 1.0p 53,161 2022
---------------------------- ------- ---------- -------- -------------
Quarter ended 30 September 6 January
2022 5,283 1.0p 52,832 2023
---------------------------- ------- ---------- -------- -------------
Total 355,776
---------------------------- ------- ---------- -------- -------------
On 6 April 2023, the Company paid a dividend for the quarter
ended 31 December 2022 of GBP52,990 (1.0p per share).
The Company will pay a dividend for the quarter ended 31 March
2023 on 28 July 2023.
In accordance with IAS 10, the dividends for quarters ended 31
December 2022 and 31 March 2023 have not been included in these
financial statements as the dividends were declared or paid after
the year end. The current intention of the Directors is to pay a
dividend quarterly.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company
sought shareholders' approval to enable a scrip dividend
alternative to be offered to ordinary shareholders whereby they
could elect to receive additional ordinary shares in lieu of a cash
dividend, at the absolute discretion of the Directors, from time to
time. This was approved by shareholders at the extraordinary
general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will
receive under the scrip dividend alternative will be calculated
using the average of the closing middle market quotations of an
ordinary share for five consecutive dealing days after the day on
which the ordinary shares are first quoted "ex" the relevant
dividend.
During the year, the Board elected to offer the scrip dividend
alternative to shareholders for every quarterly dividend, which
resulted in the issue of 1,481,479 new ordinary shares. These
shares are rank pari passu in all respects with the Company's
existing issued ordinary shares.
The Board also elected to offer the scrip dividend alternative
to shareholders for the dividend for the quarter ended 31 December
2022: elections were received in respect of 52,402,023 shares of
the Company, which has resulted in the issue of 401,545 new
ordinary shares in April 2023. These shares have been issued at a
price of 130.5 pence each and were rank pari passu in all respects
with the Company's existing issued ordinary shares. These new
shares have been admitted to trading on the SFS of the LSE on 6
April 2023.
9. Earnings per share
The calculation of the basic, diluted and adjusted earnings per
share is based on the following data:
Year Year
ended ended
31 March 31 March
2023 2022
--------------------------------------------- ---------- ----------
Ordinary Ordinary
share share
--------------------------------------------- ---------- ----------
Earnings per statement of comprehensive
income (GBP'000) 631 8,160
--------------------------------------------- ---------- ----------
Basic and diluted earnings pence per share 1.1 13.3
--------------------------------------------- ---------- ----------
Earnings per statement of comprehensive
income (GBP'000) 631 8,160
--------------------------------------------- ---------- ----------
Net change in the revaluation of investment
properties 548 (1,195)
--------------------------------------------- ---------- ----------
Gain on joint venture in arbitration - (5,868)
--------------------------------------------- ---------- ----------
Movement in fair value of investments 1,338 302
--------------------------------------------- ---------- ----------
Movement in fair value of foreign exchange
forward contract 259 (88)
--------------------------------------------- ---------- ----------
Net change in the revaluation of the joint
ventures' investment property 569 (500)
--------------------------------------------- ---------- ----------
Expected credit losses 881 1,310
--------------------------------------------- ---------- ----------
Deferred tax 74 265
--------------------------------------------- ---------- ----------
Foreign exchange loss 201 52
--------------------------------------------- ---------- ----------
Adjusted earnings 4,501 2,438
--------------------------------------------- ---------- ----------
Adjusted earnings (pence per share) 7.7 4.0
--------------------------------------------- ---------- ----------
Weighted average number of shares ('000s) 58,606 61,311
The adjusted earnings are presented to provide what the Board
believes is a more appropriate assessment of the operational income
accruing to the Group's activities. Hence, the Group adjusts basic
earnings for income and costs which are not of a recurrent nature
or which may be more of a capital nature.
10. Net asset value per share
31 March 31 March
2023 2022
-------------------------------- --------- ---------
Net asset value (GBP'000) 125,067 133,256
-------------------------------- --------- ---------
Net asset value per ordinary
share 216.8p 216.0p
-------------------------------- --------- ---------
Total number of shares ('000s) 57,701 61,685
11. Investment in subsidiary undertakings
A list of the significant investments in subsidiaries as at 31
March 2023, including the name, country of incorporation and the
proportion of ownership interest is given below.
Name of subsidiary undertaking Class % of class Country Principal
of shares/units held with of activity
voting incorporation
rights
------------------------------- ----------------- ----------- --------------- ----------------
Luxco 111 SARL Ordinary 100 Luxembourg Holding Company
shares
------------------------------- ----------------- ----------- --------------- ----------------
Skyred International SARL Ordinary 100 Luxembourg Holding Company
shares
------------------------------- ----------------- ----------- --------------- ----------------
KMS Holding NV Ordinary 100 Netherlands Holding Company
shares
------------------------------- ----------------- ----------- --------------- ----------------
ART Germany 1 Ltd Ordinary 100 Guernsey Property
shares Company
------------------------------- ----------------- ----------- --------------- ----------------
Realhousingco Ltd Ordinary 100 United Property
shares Kingdom Company
------------------------------- ----------------- ----------- --------------- ----------------
ART Lowestoft Ltd Ordinary 100 United Property
shares Kingdom Company
------------------------------- ----------------- ----------- --------------- ----------------
ART Wadebridge Ltd Ordinary 100 United Property
shares Kingdom Company
During the year, the Group completed the liquidation of Iron
Bridge Finance Luxembourg SARL .
Post year end, the Group has commenced the voluntary liquidation
process for the non-significant Cypriot structure comprising Alpha
Tiger Cyprus Holdings Limited, Alpha Tiger Cyprus Investments No. 2
Limited and Alpha Tiger Cyprus Investments No. 3 Limited.
12. Investment in joint ventures and associates
The movement in the Group's share of net assets of the joint
ventures and associates can be summarised as follows:
H2O SPHL Total H2O SPHL Total
-------------------------- --------- --------- --------- --------- --------- ---------
31 March 31 March 31 March 31 March 31 March 31 March
2023 2023 2023 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------- --------- --------- ---------
As at 1 April 17,075 118 17,193 16,000 1,761 17,761
-------------------------- --------- --------- --------- --------- --------- ---------
Additions - - - - 84 84
-------------------------- --------- --------- --------- --------- --------- ---------
Group's share of
joint venture and
associate profits
before fair value
movements and dividends 1,012 - 1,012 1,162 53 1,215
-------------------------- --------- --------- --------- --------- --------- ---------
Fair value adjustment
for investment property (569) - (569) 58 442 500
-------------------------- --------- --------- --------- --------- --------- ---------
Dividends paid by
joint venture and
associate to the
Group (582) - (582) - (959) (959)
-------------------------- --------- --------- --------- --------- --------- ---------
Capital return - (118) (118) - (1,263) (1,263)
-------------------------- --------- --------- --------- --------- --------- ---------
Foreign exchange
movements 718 - 718 (145) - (145)
-------------------------- --------- --------- --------- --------- --------- ---------
As at 31 March 17,654 - 17,654 17,075 118 17,193
The Group's investments in joint ventures can be summarised as
follows:
-- Joint venture investment in the H2O shopping centre in
Madrid, Spain: the Group holds a 30% equity investment in CBRE H2O
Rivas Holding NV ('CBRE H2O'), a company based in the Netherlands,
which in turn owns 100% of the Spanish entities that are owners of
H2O. CBRE H2O is a Euro denominated company hence the Group
translates its share of this investment at the relevant year end
exchange rate with movements in the period translated at the
average rate for the period. As at 31 March 2023, the carrying
value of ART's investment in CBRE H2O was GBP17.7 million (EUR20.1
million) (31 March 2022: GBP17.1 million (EUR20.2 million)).
-- Joint venture investment in the Phase 1000 of Cambourne
Business Park, Cambridge, UK: the Group held a 10% equity
investment in the Scholar Property Holdings Limited ('SPHL') group,
owner of the property. In August 2022, ART received the final
liquidation proceeds for GBP118,000 and, in September 2022, SPHL
was dissolved.
Foreign exchange movement is recognised in other comprehensive
income.
The investment in CBRE H2O is deemed to be significant and
material for the Group; its financial information can be summarised
as follows:
H2O H2O
-------------------------------------- ----------- -----------
Statement of comprehensive Year ended Year ended
income 31 March 31 March
2023 2022
GBP'000 GBP'000
-------------------------------------- ----------- -----------
Revenue 10,546 10,802
-------------------------------------- ----------- -----------
Change in the revaluation
of investment property (1,895) 193
-------------------------------------- ----------- -----------
Total income 8,651 10,995
-------------------------------------- ----------- -----------
Operating expenses (4,938) (5,036)
-------------------------------------- ----------- -----------
Operating profit 3,713 5,959
-------------------------------------- ----------- -----------
Finance costs (1,730) (1,258)
-------------------------------------- ----------- -----------
Profit before taxation 1,983 4,701
-------------------------------------- ----------- -----------
Taxation (508) (633)
-------------------------------------- ----------- -----------
Profit for the period 1,475 4,068
-------------------------------------- ----------- -----------
Other comprehensive income/(expense) - -
-------------------------------------- ----------- -----------
Total comprehensive income/(expense) 1,475 4,068
H2O H2O
----------------------------- ---------- ----------
Balance sheet 31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------- ---------- ----------
Investment property 104,943 102,084
----------------------------- ---------- ----------
Non-current assets 104,943 102,084
----------------------------- ---------- ----------
Trade debtors 2,160 2,230
----------------------------- ---------- ----------
Other debtors 418 399
----------------------------- ---------- ----------
Cash 10,787 9,629
----------------------------- ---------- ----------
Current assets 13,365 12,258
----------------------------- ---------- ----------
Trade and other payables (4,185) (3,955)
----------------------------- ---------- ----------
Bank borrowings (283) (119)
----------------------------- ---------- ----------
Current liabilities (4,468) (4,074)
----------------------------- ---------- ----------
Bank borrowings (54,994) (53,348)
----------------------------- ---------- ----------
Non-current liabilities (54,994) (53,348)
----------------------------- ---------- ----------
Net assets 58,846 56,920
----------------------------- ---------- ----------
Equity 51,728 51,728
----------------------------- ---------- ----------
Capital and revenue reserve 7,118 5,192
----------------------------- ---------- ----------
Total equity 58,846 56,920
The fair value of the H2O property in Madrid (Spain) of EUR119.3
million (GBP104.9 million) (31 March 2022: EUR121.0 million
(GBP102.1 million)) has been arrived at on the basis of an
independent valuation carried out at the balance sheet date by
Savills Aguirre Newman Valoraciones y Tasaciones S.A. ("Savills
Aguirre"), an independent valuer not connected to the Group.
The valuation basis used is fair value as defined by the Royal
Institution of Chartered Surveyors Appraisal and Valuations
Standards ("RICS"). The approved RICS definition of fair value is
"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".
The fair value of the H2O property is based on unobservable
inputs. The following methods, assumptions and inputs were used to
estimate fair value of H2O:
31 March 2023 - H2O Shopping centre, Madrid (Spain)
---------------------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant unobservable inputs Weighted
investment amount / (square meters) average/Value
property fair value
'000
------------ -------------- ---------------- --------------------- ------------------------------------------------ --------------
Gross Estimated Rental Value ('ERV') per sqm p.
Europe GBP104,943 51,825 Discounted cash flow a. EUR169.0
(EUR119,320)
------------ -------------- ---------------- --------------------- ------------------------------------------------ --------------
Discount rate 8.75%
Sensitivity analysis for the 31 March 2023 valuation of the H2O
shopping centre:
31 March 2023
--------------------------------- --------------- ------------------ --------------- ------------------
Significant unobservable inputs Change applied Fair value change Change applied Fair value change
EUR'000 EUR'000
--------------------------------- --------------- ------------------ --------------- ------------------
ERV -10% -EUR7,760 +10% +EUR4,760
--------------------------------- --------------- ------------------ --------------- ------------------
Discount rate -1% +EUR7,090 +1% -EUR9,340
31 March 2022 - H2O Shopping centre, Madrid (Spain)
---------------------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant unobservable inputs Weighted
investment amount / (square meters) average/Value
property fair value
'000
------------ -------------- ---------------- --------------------- ------------------------------------------------ --------------
Gross Estimated Rental Value ('ERV') per sqm p.
Europe GBP102,084 51,825 Discounted cash flow a. EUR178.6
(EUR120,970)
------------ -------------- ---------------- --------------------- ------------------------------------------------ --------------
Discount rate 8.25%
On 6 December 2021, SPHL disposed of its subsidiary holding
Phase 1000 of Cambourne Business Park, Cambridge (UK).
The CBRE H2O group bank borrowings represent the EUR62.8 million
provided by Aareal Bank to Alpha Tiger Spain 1, SLU less the
balance of unamortised deferred finance costs of EUR0.3 million.
This loan carries an interest rate of EURIBOR plus 190 basis
points, matures on 18 May 2024 and is secured by a first charge
mortgage against the Spanish property. The borrowings are
non-recourse to the Group's other investments.
13. Investment property
31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Fair value of investment property at 1 April 15,984 14,918
----------------------------------------------- --------- ---------
Additions 7,407 -
----------------------------------------------- --------- ---------
Fair value adjustment in the year (548) 1,195
----------------------------------------------- --------- ---------
Foreign exchange movement 653 (129)
----------------------------------------------- --------- ---------
Fair value of investment property at 31 March 23,496 15,984
Investment property is represented by a property located in
Hamburg (Werner-Siemens-Straße), Germany, a residential property
located in Liverpool, UK and two hotels located in the UK.
The fair value of the Hamburg property of EUR18.5 million
(GBP16.3 million) (31 March 2022: EUR18.2 million (GBP15.4
million)) has been arrived at on the basis of an independent
valuation carried out at the balance sheet date by Cushman &
Wakefield ('C&W') (note 26).
During the year, the Group acquired two UK hotels leased to
Travelodge Hotels Limited, the United Kingdom's largest independent
hotel brand. On 1 June 2022, ART acquired a hotel located in
Lowestoft for GBP3.1 million (including acquisition costs) and, on
29 July 2022, ART acquired a hotel located in Wadebridge for GBP4.3
million (including acquisition costs).
The fair values of the two UK hotels of GBP3.8 million (located
in Wadebridge) and GBP2.8 million (located in Lowestoft) have been
arrived at on the basis of an independent valuation carried out at
the balance sheet date by C&W.
The fair value of the Liverpool residential property of GBP0.6
million (31 March 2022: GBP0.6 million) has been arrived at on the
basis of an independent valuation carried out at the balance sheet
date by ASL Chartered Surveyors & Valuers ('ASL').
C&W and ASL are independent valuers and are not connected to
the Group.
The valuation basis used is fair value as defined by the Royal
Institution of Chartered Surveyors Appraisal and Valuations
Standards ("RICS"). The approved RICS definition of fair value is
"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".
Foreign exchange movement is recognised in other comprehensive
income.
14. Joint venture in arbitration
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------------- ---------- ---------
As at 1 April 5,868 -
--------------------------- ---------- ---------
Final proceeds receivable - 5,868
--------------------------- ---------- ---------
Capital return (5,868) -
--------------------------- ---------- ---------
As at 31 March - 5,868
In February 2022, the Supreme Court of India issued an order
concluding the litigation regarding the Company's Galaxia
investment, a 50:50 joint venture with Logix in relation to an 11.2
acre development site located in NOIDA, the National Capital
Region, India.
As part of a prior court ruling, Logix were permitted to sell
the Galaxia site to raise capital for the award. The sale completed
and the funds lodged by the purchaser with the Supreme Court have
since been repatriated to ART in return for ART's subsidiary and
Logix relinquishing their title interests.
The Company has commenced the liquidation process for the
Cypriot structure which had been holding the Galaxia investment and
estimates completion by the end of June 2023.
15. Investments held at fair value
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------------------------- --------- ---------
Non-current
--------------------------------------- --------- ---------
As at 1 April - 31
--------------------------------------- --------- ---------
Movement in fair value of investments - -
--------------------------------------- --------- ---------
Transfer to current - (31)
--------------------------------------- --------- ---------
As at 31 March - -
--------------------------------------- --------- ---------
Current
--------------------------------------- --------- ---------
As at 1 April 10,990 -
--------------------------------------- --------- ---------
Additions 13,948 10,998
--------------------------------------- --------- ---------
Redemptions (5,290) -
--------------------------------------- --------- ---------
Movement in fair value of investments (1,338) (39)
--------------------------------------- --------- ---------
Transfer from non-current - 31
--------------------------------------- --------- ---------
As at 30 September / 31 March 18,310 10,990
The investments, which are disclosed as current investments held
at fair value, are as follows:
-- Sequoia Economic Infrastructure Income Fund Limited ('SEQI'),
a listed fund: the market value of SEQI as at 31 March 2023 was
GBP2.2 million ( 31 March 2022: GBP2.8 million);
-- GCP Infrastructure Investments Limited ('GCP') a listed fund:
the market value of GCP as at 31 March 2023 was GBP1.1 million ( 31
March 2022: GBP1.4 million);
-- GCP Asset Backed Income Fund Limited ('GABI'): the market
value of GABI as at 31 March 2023 was GBP1.0 million ( 31 March
2022: GBP1.5 million);
-- In February 2023, ART invested GBP7.0 million in UK Treasury
Bonds: the market value of UK Treasury Bonds as at 31 March 2023
was GBP7.0 million;
-- In February 2023, ART invested GBP7.0 million in UK Treasury
Bills: the market value of UK Treasury Bills as at 31 March 2023
was GBP7.0 million;
-- Europip (participating redeemable preference shares): Europip
distributed its final liquidation proceeds to ART in August 2022
for GBP28,086; post year end, Europip completed its liquidation
process and was dissolved.
-- HLP (participating redeemable preference shares): HLP
provides quarterly valuations of the net asset value of its shares;
the net asset value of the investment as at 31 March 2023 was nil
(31 March 2022: nil).
During the year, the Group's investment in the Commercial Long
Income PAIF ('CLIP') was fully redeemed for GBP5.3 million. ARC is
the Authorised Corporate Director and Alternative Investment Fund
Manager of CLIP and TIME Investments, a subsidiary of ARC, is the
Investment Manager.
16. Loans advanced
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Non-current
------------------------------------------------- --------- ---------
Loans granted to third parties 15,530 12,882
------------------------------------------------- --------- ---------
Interest receivable from loans granted to third
parties 521 211
------------------------------------------------- --------- ---------
Total loans at amortised cost 16,051 13,093
------------------------------------------------- --------- ---------
Loans at fair value through profit or loss - -
------------------------------------------------- --------- ---------
Total non-current loans 16,051 13,093
------------------------------------------------- --------- ---------
Current
------------------------------------------------- --------- ---------
Loans granted to third parties 40,187 22,945
------------------------------------------------- --------- ---------
Interest receivable from loans granted to third
parties 2,279 2,473
------------------------------------------------- --------- ---------
Total loans at amortised cost 42,466 25,418
------------------------------------------------- --------- ---------
Loans at fair value through profit or loss 604 495
------------------------------------------------- --------- ---------
Expected credit losses (3,685) (2,572)
------------------------------------------------- --------- ---------
Total current loans 39,385 23,341
As at 31 March 2023, the Group had granted a total of GBP55.4
million (31 March 2022: GBP36.4 million) of senior and mezzanine
loans to third parties. These comprised nineteen loans to UK
entities, which assisted with the purchase of property
developments, predominantly residential, in the UK. These
facilities typically range from a 6 to 36 month term and entitle
the Group to a weighted average overall return on the investment of
16.4% for mezzanine loans and 7.0% for senior loans.
All senior and mezzanine loans granted by the Group are secured
asset backed real estate loans. Senior loans have a first charge
security and mezzanine loans have a second charge security on the
property developments.
Loans at fair value through profit or loss represents loans that
failed the 'solely payment of principal and interest' criteria of
IFRS 9 to be measured at amortised cost: this is due to a loan
facility agreement's clause that links those loans to a return
other than interest.
Movement in expected credit losses can be summarised as
follows:
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------------------- --------- ---------
Opening balance of ECL (2,572) -
--------------------------------- --------- ---------
Movement for the year (revenue) (232) (1,262)
--------------------------------- --------- ---------
Movement for the year (capital) (881) (1,310)
--------------------------------- --------- ---------
Closing balance of ECL (3,685) (2,572)
Three loans in the portfolio have entered receivership: ART is
closely working with stakeholders to maximise their capital
recovery. The Company has considered the security on these loans
(which are a combination of a first charge over the assets and
personal guarantees) and have calculated an ECL on these three
loans of approximately GBP2.9 million (31 March 2022: GBP2.2
million); the Group have also provided for an ECL on the remainder
of the loans' portfolio for an additional GBP0.8 million (31 March
2022: GBP0.4 million): in total, the Group have provided for an ECL
of GBP3.7 million (31 March 2022: GBP2.6 million) in its
consolidated accounts.
Loans maturity of the total GBP55.4 million loans granted by the
Group at year end, can be analysed as follows:
Less than Between Between Over 24 Total
6 months 6 to 12 12 to months GBP'm
GBP'm months 24 months GBP'm
GBP'm GBP'm
------------- ---------- --------- ----------- -------- -------
Non-current - - 5,754 10,297 16,051
------------- ---------- --------- ----------- -------- -------
Current 13,725 25,660 - - 39,385
------------- ---------- --------- ----------- -------- -------
Despite all of the loans having a set repayment term all but two
of the loans have a repayable on demand feature so the Group may
call for an early repayment of their principal, interest and
applicable fees at any time.
Considering the 'on demand' clause, the Group concluded that the
loans are in stage 3 of the IFRS 9 model as should the loans be
called on demand the borrowers would technically be in default as
repayment would only be possible on demand if the property had
already been sold.
One of the loans without a repayable on demand clause amounts to
GBP3.8 million, matured during the year but was extended to 31
December 2023; the second loan without a repayable on demand clause
amounts to GBP10.3 million and matures on 1 April 2025; both loans
remain in stage 1 of the IFRS 9 model. These two loans have an
immaterial lifetime ECL and hence no detailed analysis of whether
those loans has suffered a significant increase in credit risk has
been performed.
As at 31 March 2023, ART's total undrawn loan commitments
amounted to GBP12.9 million.
Post year end, no new loans were drawn but additional drawdowns
of GBP3.3 million were made on existing loans, one loan was fully
repaid for GBP1.5 million (including accrued interest and exit
fees) and part payments for other loans were received amounting to
GBP2.3 million (including accrued interest).
17. Collateral deposit
31 March 2023 31 March 2022
GBP'000 GBP'000
-------------------- -------------- --------------
Collateral deposit 1,143 936
The collateral deposit of GBP1.1 million (31 March 2022: GBP0.9
million) is a cash deposit with Barclays Bank PLC ('Barclays') in
Guernsey in relation to the foreign exchange forward contract
entered into by the Group at year end: this cash has been placed on
deposit to match the maturity of the contract.
18. Trade and other receivables
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------- --------- ---------
Current
--------------- --------- ---------
Trade debtors 295 14
--------------- --------- ---------
VAT - 9
--------------- --------- ---------
Other debtors 119 13,688
--------------- --------- ---------
Total 414 13,711
The balance of other debtors as at 31 March 2022 represented
funds held in escrow for two loan investments to be granted post
year end: one of these loans completed in April 2022 for GBP11.8
million whilst the other loan investment for GBP1.9 million was
aborted so the cash was returned to the Group.
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. See note
2(a)(a)(iii) 'financial instruments' for more details.
19. Trade and other payables
31 March 31 March
2023 2022
GBP'000 GBP'000
---------------------------------- --------- ---------
Trade creditors 51 60
---------------------------------- --------- ---------
Deferred revenue 106 1
---------------------------------- --------- ---------
Investment Manager's fee payable 589 610
---------------------------------- --------- ---------
Accruals 229 277
---------------------------------- --------- ---------
VAT 5 -
---------------------------------- --------- ---------
Other creditors 6 23
---------------------------------- --------- ---------
Total 986 971
Trade creditors and accruals primarily comprise amounts
outstanding for trade purchases and ongoing costs. The Group has
financial management policies in place to ensure that all payables
are paid within the credit time frame.
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
20. Bank borrowings
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------ --------- ---------
Current liabilities: interest payable 30 29
------------------------------------------ --------- ---------
Total current liabilities 30 29
------------------------------------------ --------- ---------
Non-current liabilities: bank borrowings 8,271 7,921
------------------------------------------ --------- ---------
Total liabilities 8,301 7,950
------------------------------------------ --------- ---------
The borrowings are repayable as follows:
------------------------------------------ --------- ---------
Interest payable 30 29
------------------------------------------ --------- ---------
On demand or within one year - -
------------------------------------------ --------- ---------
In the second to fifth years inclusive - -
------------------------------------------ --------- ---------
After five years 8,271 7,921
------------------------------------------ --------- ---------
Total 8,301 7,950
Movements in the Group's bank borrowings are analysed as
follows:
31 March 31 March
2023 2022
GBP'000 GBP'000
---------------------------------------- --------- ---------
As at 1 April 7,921 7,973
---------------------------------------- --------- ---------
Amortisation of deferred finance costs 15 15
---------------------------------------- --------- ---------
Foreign exchange movement 335 (67)
---------------------------------------- --------- ---------
As at 31 March 8,271 7,921
As at 31 March 2023, bank borrowings represent the Nord LB (a
German bank) loan for EUR9.5 million (GBP8.4 million) (31 March
2022: EUR9.5 million (GBP8.0 million)), less unamortised deferred
finance costs (GBP0.1 million): this loan was used to partly fund
the acquisition of the investment property in Hamburg
(Werner-Siemens-Straße), Germany. This loan is composed of two
tranches of EUR4.9 million and EUR4.6 million, which bear a 1.85%
and 2.7% fixed rate respectively and that are due to mature in
August 2028.
The borrowings are non-recourse to ART and the facility carries
no financial covenant tests. The fair value of bank borrowings at
the balance sheet date is EUR8.0 million (GBP7.0 million).
Foreign exchange movement is recognised in other comprehensive
income/(expense).
The tables below set out an analysis of net debt and the
movements in net debt for the year ended 31 March 2023 and prior
year.
Other Derivatives Liabilities
assets from
financing activities
------------------------------ --------- ------------ ------------------------ ---------
Cash Foreign Interest Borrowings Total
GBP'000 exchange payable GBP'000 GBP'000
forward GBP'000
GBP'000
------------------------------ --------- ------------ ---------- ------------ ---------
Net asset/(debt) as at
1 April 2022 41,250 88 (29) (7,921) 33,388
------------------------------ --------- ------------ ---------- ------------ ---------
Cash movements (22,861) (47) 186 - (22,722)
------------------------------ --------- ------------ ---------- ------------ ---------
Non cash movements
------------------------------ --------- ------------ ---------- ------------ ---------
Foreign exchange adjustments 66 - 14 (335) (255)
------------------------------ --------- ------------ ---------- ------------ ---------
Unrealised gain on foreign
exchange forward contract - (212) - - (212)
------------------------------ --------- ------------ ---------- ------------ ---------
Loan fee amortisation and
other costs - - - (15) (15)
------------------------------ --------- ------------ ---------- ------------ ---------
Interest charge - - (201) - (201)
------------------------------ --------- ------------ ---------- ------------ ---------
Net asset/(debt) as at
31 March 2023 18,455 (171) (30) (8,271) 9,983
------------------------------ --------- ------------ ---------- ------------ ---------
Other Derivatives Liabilities
assets from
financing activities
------------------------------ --------- ------------ ------------------------ ---------
Cash Foreign Interest Borrowings Total
GBP'000 exchange payable GBP'000 GBP'000
forward GBP'000
GBP'000
------------------------------ --------- ------------ ---------- ------------ ---------
Net asset/(debt) as at
1 April 2021 68,213 - (29) (7,973) 60,211
------------------------------ --------- ------------ ---------- ------------ ---------
Cash movements (26,922) 72 183 - (26,667)
------------------------------ --------- ------------ ---------- ------------ ---------
Non cash movements
------------------------------ --------- ------------ ---------- ------------ ---------
Foreign exchange adjustments (41) - 15 67 41
------------------------------ --------- ------------ ---------- ------------ ---------
Unrealised gain on foreign
exchange forward contract - 16 - - 16
------------------------------ --------- ------------ ---------- ------------ ---------
Loan fee amortisation and
other costs - - - (15) (15)
------------------------------ --------- ------------ ---------- ------------ ---------
Interest charge - - (198) - (198)
------------------------------ --------- ------------ ---------- ------------ ---------
Net asset/(debt) as at
31 March 2022 41,250 88 (29) (7,921) 33,388
------------------------------ --------- ------------ ---------- ------------ ---------
21. Share capital
Number
of shares
-------------------- ---------- ------------ -----------
Authorised
-------------------- ---------- ------------ -----------
Ordinary shares Unlimited
of no par value
-------------------- ---------- ------------ -----------
Ordinary Ordinary Ordinary
-------------------- ---------- ------------ -----------
Issued and fully treasury external total
paid
-------------------- ---------- ------------ -----------
At 1 April 2021 2,044,420 60,701,587 62,746,007
-------------------- ---------- ------------ -----------
Share issue for
scrip dividend - 1,191,144 1,191,144
-------------------- ---------- ------------ -----------
Shares bought back 207,645 (207,645) -
-------------------- ---------- ------------ -----------
At 1 April 2022 2,252,065 61,685,086 63,937,151
-------------------- ---------- ------------ -----------
Share issue for
scrip dividend - 1,481,479 1,481,479
-------------------- ---------- ------------ -----------
Shares bought back 5,465,516 (5,465,516) -
-------------------- ---------- ------------ -----------
At 31 March 2023 7,717,581 57,701,049 65,418,630
The Company has one class of ordinary shares. The Company has
the right to reissue or cancel the remaining treasury shares at a
later date.
Under the general authority, approved by Shareholders on 6
August 2021, the Company announced a tender offer on 29 June 2022
for up to 6,428,353 ordinary shares at a price (before expenses) of
175.0 pence per share. In July 2022, a total of 5,419,016 ordinary
shares were validly tendered under the tender offer. All purchased
ordinary shares are held in treasury.
During the year, the Company additionally purchased 46,500
shares in the market at an average price of GBP1.51 per share:
these shares are held in treasury.
As at 31 March 2023, the ordinary share capital of the Company
was 65,418,630 (including 7,717,581 ordinary shares held in
treasury) and the total voting rights in the Company was
57,701,049.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company
sought shareholders' approval to enable a scrip dividend
alternative to be offered to ordinary shareholders whereby they
could elect to receive additional ordinary shares in lieu of a cash
dividend, at the absolute discretion of the Directors, from time to
time. This was approved by shareholders at the extraordinary
general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will
receive under the scrip dividend alternative will be calculated
using the average of the closing middle market quotations of an
ordinary share for five consecutive dealing days after the day on
which the ordinary shares are first quoted "ex" the relevant
dividend.
During the year, the Board elected to offer the scrip dividend
alternative to shareholders for every quarterly dividend, which
resulted in the issue of 1,481,479 new ordinary shares. These
shares are rank pari passu in all respects with the Company's
existing issued ordinary shares.
The Board also elected to offer the scrip dividend alternative
to shareholders for the dividend for the quarter ended 31 December
2022: elections were received in respect of 52,402,023 shares of
the Company, which has resulted in the issue of 401,545 new
ordinary shares in April 2023. These shares have been issued at a
price of 130.5 pence each and were rank pari passu in all respects
with the Company's existing issued ordinary shares. These new
shares have been admitted to trading on the SFS of the LSE on 6
April 2023.
Post period end, the Company made no share buybacks.
As at the date of this announcement, the ordinary share capital
of the Company is 65,820,175 (including 7,717,581 ordinary shares
held in treasury) and the total voting rights in the Company is
58,102,594.
22. Reserves
The movements in the reserves for the Group are shown above.
Special reserve
The special reserve is a distributable reserve to be used for
all purposes permitted under Guernsey company law, including the
buy-back of shares and payment of dividends.
Translation reserve
The translation reserve contains exchange differences arising on
consolidation of the Group's overseas operations. These amounts may
be subsequently reclassified to profit or loss.
Capital reserve
The capital reserve contains increases and decreases in the fair
value of the Group's investment property, gains and losses on the
disposal of property, gains and losses arising from indirect
property investment at fair value together with expenses allocated
to capital.
Revenue reserve
Any surplus arising from net profit after tax is taken to this
reserve, which may be utilised for the buy-back of shares and
payment of dividends.
23. Events after the balance sheet date
Post year end, on 8 June 2023, the Company invested a further
GBP6.0 million in short dated Treasury Bonds.
Post year end, no new loans were drawn but additional drawdowns
of GBP3.3 million were made on existing loans, one loan was fully
repaid for GBP1.5 million (including accrued interest and exit
fees) and part payments for other loans were received amounting to
GBP2.3 million (including accrued interest).
In April 2023, scrip dividend alternative elections were
received in respect of 52,402,023 shares of the Company, which has
resulted in the issue of 401,545 new ordinary shares.
On 6 April 2023, the Company paid a dividend for the quarter
ended 31 December 2022 of GBP52,990 (1.0p per share).
24. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions. ARC is the Investment Manager to the Company under the
terms of the Investment Manager Agreement and is thus considered a
related party of the Company. The management agreement with the
Investment Manager will expire on 21 December 2027.
The Investment Manager is entitled to receive a fee from the
Company at an annual rate of 2 per cent of the net assets of the
Company, payable quarterly in arrears. During the year a total of
GBP2.4 million (31 March 2022: GBP2.3 million), net of rebates, was
billed by ARC to ART. As at 31 March 2023, a total of GBP0.6
million (31 March 2022: GBP0.6 million) was outstanding.
The Investment Manager is also entitled to receive an annual
performance fee calculated with reference to total shareholder
return ("TSR"), whereby the fee is 20 per cent of any excess over
an annualised TSR of 15 per cent subject to a rolling 3 year high
water mark. As at 31 March 2023, no performance fee was due to ARC
(31 March 2022: nil).
Prior to the 70% disposal of the H2O property, ARC had a
management agreement directly with the H2O property company, Alpha
Tiger Spain 1, SLU ('ATS1') under which it earned a fee of 0.9% per
annum based upon the gross assets of ATS1. In order to avoid double
counting of fees, ARC provided a rebate to the Company of a
proportion of its fee equivalent to the value of the Group's net
asset value attributable to the H2O investment. Subsequent to the
sale of ATS1 to CBRE H2O Rivas Holding NV ('CBRE H2O'), ARC has
been appointed as Asset Manager to ATS1 and Investment Manager to
CBRE H2O. ARC has agreed to rebate to ART all of the fees charged
by ARC directly to CBRE H2O and ATS1 that relate to the Company's
30% share in CBRE H2O.
The Company had invested in CLIP, where ARC is the Authorised
Corporate Director and Alternative Investment Fund Manager and TIME
Investments, a subsidiary of ARC, is the Investment Manager. ARC
rebated fees earned in relation to the Company's investment in
CLIP.
The Company had invested in Europip (now dissolved), where
ARPIA, a subsidiary of ARC, was the Investment Adviser. ARC rebated
fees earned in relation to the Company's investment in Europip.
Total rebates for the year were GBP0.5 million (31 March 2022:
GBP0.6 million).
Details of the Investment Manager's fees for the year are
disclosed on the face of the consolidated statement of
comprehensive income and the balance payable at 31 March 2023 is
provided in note 19.
Alpha Global Property Securities Fund Pte. Ltd, a company
registered in Singapore, owned directly by the partners of ARC,
held 25,060,728 shares in the Company at 31 March 2023 (31 March
2022: 24,162,566). ARC did not hold any shares in the Company at 31
March 2023 (31 March 2022: nil).
The following, being partners of ARC, have interests in the
following shares of the Company at 31 March 2023:
31 March 2023 31 March 2022
Number of shares Number of shares
held held
-------------- ------------------ ------------------
Brian Frith - -
-------------- ------------------ ------------------
Phillip Rose 978,999 953,872
-------------- ------------------ ------------------
Brad Bauman 60,092 58,367
Post year end, Phillip Rose and Brad Bauman increased their
shareholdings in ART to 985,696 and 60,553 ordinary shares,
respectively.
Details of the Directors' fees and share interests in the
Company are included in the Directors Report.
Karl Devon-Lowe, a partner of ARC, received fees of GBP5,000 (31
March 2022: GBP5,000) in relation to directorial responsibilities
on a number of the Company's subsidiary companies.
During the year, a total of GBP96,300 (31 March 2022: GBP96,300)
was billed by Ocorian Administration (Guernsey) Limited to ART and
GBP14,400 was outstanding at year end (31 March 2022:
GBP22,800).
25. Financial instruments risk exposure and management
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group from which
financial instrument risk arises, are as follows:
Financial assets and
liabilities carrying value
---------------------------------------- ------------------------------
31 March 31 March
2023 2022
GBP'000 GBP'000
---------------------------------------- -------------- --------------
Financial assets at fair value through
profit or loss
---------------------------------------- -------------- --------------
Investments held at fair value 18,310 10,990
----------------------------------------- -------------- --------------
Foreign exchange forward contract - 88
----------------------------------------- -------------- --------------
Loans advanced 604 495
----------------------------------------- -------------- --------------
Total financial assets at fair value
through profit or loss 18,914 11,573
----------------------------------------- -------------- --------------
Financial assets at amortised cost
---------------------------------------- -------------- --------------
Loans advanced 58,517 35,939
----------------------------------------- -------------- --------------
Expected credit losses (3,685) -
---------------------------------------- -------------- --------------
Collateral deposit 1,143 936
----------------------------------------- -------------- --------------
Trade and other receivables 414 13,711
----------------------------------------- -------------- --------------
Cash and cash equivalents 18,455 41,250
----------------------------------------- -------------- --------------
Total loans and receivables 74,844 91,836
----------------------------------------- -------------- --------------
Total financial assets 93,758 103,409
----------------------------------------- -------------- --------------
Financial liabilities at fair value
through profit or loss
---------------------------------------- -------------- --------------
Foreign exchange forward contract (171) -
---------------------------------------- -------------- --------------
Financial liabilities at amortised
cost
---------------------------------------- -------------- --------------
Trade and other payables (excluding
VAT and deferred revenue) (874) (971)
----------------------------------------- -------------- --------------
Bank borrowings (8,301) (7,950)
----------------------------------------- -------------- --------------
Total financial liabilities (9,346) (8,921)
----------------------------------------- -------------- --------------
Net changes in realised and unrealised gains or losses on
financial instruments at fair value through profit or loss can be
summarised as follows:
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------ --------- ---------
Unrealised gains and losses on financial
assets and liabilities held at fair
value through profit or loss
------------------------------------------ --------- ---------
Unrealised (loss)/gain on foreign
exchange forward contract (212) 16
--------- ---------
Movement in fair value of investments (1,338) (302)
--------- ---------
Movement in fair value of loans advanced 109 71
--------- ---------
Undistributed investment income - 263
--------- ---------
Realised gains and losses on financial
assets and liabilities held at fair
value through profit or loss
--------- ---------
Realised (loss)/profit on foreign
exchange forward contract (47) 72
--------- ---------
Dividend received from investments
held at fair value 361 267
--------- ---------
Distributed investment income 58 -
--------- ---------
Net gains on financial assets and
liabilities held at fair value through
profit or loss (1,069) 387
--------- ---------
Net interest income can be summarised as follows:
31 March 31 March
2023 2022
GBP'000 GBP'000
-------------------------------------- --------- ---------
Bank interest receivable 255 4
--------------------------------------- --------- ---------
Interest receivable on loans granted
to third parties 5,328 4,528
--------------------------------------- --------- ---------
Expected credit losses (232) (1,262)
--------------------------------------- --------- ---------
Interest on bank borrowings (201) (198)
--------------------------------------- --------- ---------
Net interest income 5,150 3,072
--------------------------------------- --------- ---------
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function.
The overall objective of the Board is to set polices that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below.
Project monitoring
Projects are monitored through regular Project Control Meetings
held with development partners to discuss progress and monitor
risks. The Investment Manager attends these meetings and reports to
the Board on a quarterly basis.
Credit risk
Credit risk arises when a failure by counter parties to
discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the balance sheet
date.
At 31 March 2023, trade and other receivables past due but not
impaired amounted to nil (31 March 2022: nil).
The carrying amount of financial assets recorded in the
financial statements, which is net of impairment losses, represents
the Group's maximum exposure to credit risk.
The Group policy is to maintain its cash and cash equivalent
balances with a number of financial institutions as a means of
diversifying credit risk. The Group monitors the placement of cash
balances on an ongoing basis and has policies to limit the amount
of credit exposure to any financial institution. The Group's cash
is held with established international banks such as Barclays PLC,
BGL BNP Paribas, Lloyds PLC, RBS International and Santander
International.
With regards to the investment property business, a property
advisor monitors the tenants in order to anticipate and minimise
the impact of default by occupational tenants. Where possible,
tenants' risk is mitigated through rental guarantees. The Group
meets with tenants frequently and monitors their financial
performance closely.
The Group owns a portfolio of secured real estate loans and
mezzanine loan investments. These loans are typically secured on
real estate investment and development assets with attractive
risk-adjusted income returns. The Group receives monthly updates
from its investment advisors regarding the credit worthiness of the
borrowers and values of the real estate investment and development
assets, which the loans are secured on, and assesses the
recoverability of each loan investment.
As at 31 March 2023, three loans in the portfolio have entered
receivership: ART is closely working with stakeholders to maximise
their capital recovery. The Company has considered the security on
these loans (which are a combination of a first charge over the
assets and personal guarantees) and have calculated an ECL on these
two loans of approximately GBP2.9 million; the Group have also
provided for an ECL on the remainder of the loans' portfolio for an
additional GBP0.8 million: in total, the Group have provided for an
ECL of GBP3.7 million in its consolidated accounts.
With regards to its other investments, the Group receives
regular updates from the relevant Investment Manager as to the
performance of the underlying investments and assesses credit risk
as a result.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. An unmatched position
potentially enhances profitability but can also increase the risk
of losses. The Group has procedures with the object of minimising
these risks such as maintaining sufficient cash and other highly
liquid current assets. Cash and cash equivalents are placed with
financial institutions on a short term basis reflecting the Group's
desire to maintain a high level of liquidity in order to enable
timely completion of investment transactions.
The following table illustrates the contractual maturity
analysis of the Group's financial liabilities.
Within 1-2 years 2-5 years Over 5 Total Total carrying
31 March 2023 1 year GBP'000 GBP'000 years GBP'000 amount
GBP'000 GBP'000 GBP'000
--------------------- --------- ---------- ---------- --------- --------- ---------------
Trade and other
payables 985 - - - 985 985
--------------------- --------- ---------- ---------- --------- --------- ---------------
Interest payable
on bank borrowings 189 189 567 64 1,009 30
--------------------- --------- ---------- ---------- --------- --------- ---------------
Bank borrowings - - - 8,271 8,271 8,271
--------------------- --------- ---------- ---------- --------- --------- ---------------
Foreign exchange
forward contract 171 - - - 171 171
--------------------- --------- ---------- ---------- --------- --------- ---------------
Total 1,345 189 567 8,335 10,436 9,457
Within 1-2 years 2-5 years Over 5 Total Total carrying
31 March 2022 1 year GBP'000 GBP'000 years GBP'000 amount
GBP'000 GBP'000 GBP'000
--------------------- --------- ---------- ---------- --------- --------- ---------------
Trade and other
payables 971 - - - 971 971
--------------------- --------- ---------- ---------- --------- --------- ---------------
Interest payable
on bank borrowings 181 181 544 243 1,149 29
--------------------- --------- ---------- ---------- --------- --------- ---------------
Bank borrowings - - - 7,921 7.921 7,921
--------------------- --------- ---------- ---------- --------- --------- ---------------
Total 1,152 181 544 8,164 10,041 8,921
Market risk
(a) Foreign exchange risk
The Group operates in India, Germany and Spain and is exposed to
foreign exchange risk arising from currency exposures with respect
to Indian Rupees and Euros. Foreign exchange risk arises from
recognised monetary assets and liabilities.
The Group's policy is, where possible, to allow Group entities
to settle liabilities denominated in their functional currency with
the cash generated from their own operations in that currency.
On 29 April 2022 the Group had entered into a six month contract
to hedge EUR12.0 million of its Euro exposure in the balance sheet;
this contract terminated on 31 October 2022 and, on the same date,
the Group entered into a six month contract to hedge EUR13.0
million of its Euro exposure in the balance sheet; this contract
matured on 28 April 2023. At that point, the Group entered into
another six month contract to hedge EUR12.0 million of its Euro
exposure in the balance sheet; this contract will mature on 31
October 2023.
The Board monitors the Group's exposure to foreign currencies on
a quarterly basis as part of its Risk Management review.
A strengthening of the Euro by 5 cents would increase the net
assets by GBP1,213,000 (2022: GBP1,106,000). A weakening of the
Euro by 5 cents would decrease net assets by GBP1,111,000 (2022:
GBP1,016,000).
(b) Cash flow and fair value interest rate risk
The Group's interest rate risk arose primarily from bank
borrowings. The Group is not directly exposed to interest rate risk
related to bank borrowings: the bank debt of ART Germany 1 Ltd,
owner of the Hamburg investment property in Germany, bears a fixed
coupon until maturity in 2028 (note 20).
The Group holds significant cash balances and loan assets which
accrue interest based on variable interest rates.
The Group's cash flow is periodically monitored by the
Board.
The sensitivity analysis below is based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated - for example, changes in interest
rate and changes in market value .
For the Group, a decrease of 25 basis points in interest rates
would result in a GBP0.2 million decrease in post-tax profits
(2022: GBP0.1 million decrease). An increase of 25 basis points in
interest rates would result in a GBP0.2 million increase in
post-tax profits (2022: GBP0.1 million increase).
(c) Price risk
The Group has invested in the ordinary shares of GCP, SEQI and
GABI, which are closed ended investment funds traded on the LSE so
are subject to market fluctuation.
The Group has invested in UK Treasury Bonds and Treasury Bills.
UK Treasury Bonds are traded on the LSE so are subject to market
fluctuation. UK Treasury Bills are an over-the-counter instrument
so not traded on an exchange and were bought from Barclays Bank
PLC: they are a zero-coupon discount instrument, priced at a
discount to par with a locked-in yield, which then move towards par
at maturity.
The Group has performed a sensitivity analysis on the values of
the investments in GCP, SEQI and GABI: if the share prices of these
investments were to fall by 10% the resulting total investment
value of these funds would be GBP3.9 million; if the share prices
of these investments were to increase by 10% the resulting total
investment value of these funds would be GBP4.8 million.
(d) Fair values
The following methods and assumptions were used to estimate fair
values:
-- Cash and short-term deposits, trade receivables, trade
payables, and other current liabilities approximate their carrying
amounts due to the short-term maturities of these instruments.
-- The fair value of the foreign exchange forward contract is
determined by reference to the year end forward market rate and
based on observable inputs; this investment is therefore deemed to
be a level 2 financial asset.
-- The fair values of the ART's investments in the SEQI, GCP and
GABI shares, which are traded daily on the LSE, are based upon the
market value of the shares at the balance sheet date.
-- The fair values of the ART's investments in UK Treasury Bonds
, which are traded regularly, are based upon the market value of
those instruments at the balance sheet date.
-- The fair values of the ART's investments in UK Treasury Bills
, are based upon the market value of those instruments provided by
Barclays Bank PLC at the balance sheet date.
-- The fair value of the HLP investment is based upon the price
provided by the issuer for the relevant share class owned: this is
calculated by reference to the net asset value of the investment
and principally driven by the fair value of HLP's underlying
property investments. This net asset value is therefore mainly
based on unobservable inputs and is deemed to be level 3 financial
assets (see note 26).
-- The loans advanced at fair value have been valued based on
the discounted cash flow of the respective instruments. Due to the
short time since inception and to maturity there has not been a
material movement in discount rates or cashflows.
-- The fair value of bank borrowings has been calculated based
on the discounted cash flows of the Nord LB bank loan up to
maturity date in July 2028; the fair value of bank borrowings at
the balance sheet date is EUR9.5 million (GBP8.4 million).
As a result the carrying values less impairment provision of
loans and receivables and financial liabilities measured at
amortised cost are approximate to their fair values.
Capital risk management
The Board's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt.
The Board regularly reviews the adequacy of the Group's level of
borrowings by monitoring its compliance with the relevant bank
covenants.
26. Fair value measurement
IFRS 13 requires disclosure of the fair value measurement of the
Group's assets and liabilities, the related valuation techniques,
the valuations' recurrence and the inputs used to assess and
develop those measurements.
The Group discloses fair value measurements by level of the
following fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the asset or
liability is categorised is determined on the basis of the lowest
input that is significant to the fair value measurement. Assets and
liabilities are classified in their entirety into one of the three
levels.
Investment property is valued on a recurring basis: half
yearly.
The Group's valuers derive the fair value of the investment
property by applying the methodology and valuation guidelines as
set out by the Royal Institution of Chartered Surveyors in the
United Kingdom.
The valuation approach for investment property available to rent
is based on discounting the future net income receivable from
properties to arrive at the net present value of that future income
stream. Future net income comprises the rent secured under existing
leases, less any known or expected non-recoverable costs and the
current market rent attributable to vacant units. The consideration
basis for this calculation excludes the effects of any taxes on the
net income. The discount factors used to calculate fair value are
consistent with those used to value similar properties, with
comparable leases in each of the respective markets. A decrease in
the net rental income or an increase in the discount rate will
decrease the fair value of the investment property.
The investments and loans advanced held at fair value and
derivative contracts are valued quarterly.
The fair value of the investments in the ordinary shares of GCP,
SEQI and GABI, which are traded on the LSE, is based upon the mid
price of the ordinary shares at the balance sheet date.
The fair value of the investments in UK Treasury Bonds which are
traded on the LSE, is based upon the market price of those
instruments at the balance sheet date.
The fair value of the investments in UK Treasury Bills, is based
upon the market valuation of those instruments provided by Barclays
Bank PLC at the balance sheet date.
The following table shows an analysis of the fair values of
assets and liabilities recognised in the balance sheet by level of
the fair value hierarchy described above:
Assets and liabilities measured at fair
value
----------------------------------------------
Level 1 Level 2 Level 3 Total
---------- ---------- ---------- ----------
31 March 2023 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ----------
Assets measured at fair
value
--------------------------- ---------- ---------- ---------- ----------
Non-current
--------------------------- ---------- ---------- ---------- ----------
Investment property (note
13) - - 23,496 23,496
--------------------------- ---------- ---------- ---------- ----------
Loans advanced - - 604 604
--------------------------- ---------- ---------- ---------- ----------
Current
--------------------------- ---------- ---------- ---------- ----------
Investments held at fair
value (note 15) 18,310 - - 18,310
--------------------------- ---------- ---------- ---------- ----------
Liabilities measured at
fair value
--------------------------- ---------- ---------- ---------- ----------
Current
--------------------------- ---------- ---------- ---------- ----------
Foreign exchange forward
contract - (171) - (171)
Assets and liabilities measured at fair
value
----------------------------------------------
Level 1 Level 2 Level 3 Total
---------- ---------- ---------- ----------
31 March 2022 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ----------
Assets measured at fair
value
--------------------------- ---------- ---------- ---------- ----------
Non-current
--------------------------- ---------- ---------- ---------- ----------
Investment property (note
13) - - 15,984 15,984
--------------------------- ---------- ---------- ---------- ----------
Loans advanced - - 495 495
--------------------------- ---------- ---------- ---------- ----------
Current
--------------------------- ---------- ---------- ---------- ----------
Investments held at fair
value (note 15) 5,696 5,263 31 10,990
--------------------------- ---------- ---------- ---------- ----------
Foreign exchange forward
contract - 88 - 88
The carrying amounts of the Group's financial liabilities and
assets not carried at fair value through profit or loss are a
reasonable approximation of their fair values due to either their
short term nature or short period of time since they were
acquired.
The Group determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation (based on
the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
Movements in level 3 of the fair value measurements, during the
year ended 31 March 2023 and prior year, can be summarised as
follows:
Loans advanced Investment Investments Total
property held at fair
value
----------------------------
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------------- ---------- ------------- -------
At 1 April 2022 495 15,984 10,990 27,469
---------------------------- --------------- ---------- ------------- -------
Additions - 7,407 13,948 21,355
---------------------------- --------------- ---------- ------------- -------
Redemptions - - (5,290) (5,290)
---------------------------- --------------- ---------- ------------- -------
Fair value adjustment 109 (548) (1,338) (1,777)
---------------------------- --------------- ---------- ------------- -------
Effect of foreign exchange - 653 - 653
---------------------------- --------------- ---------- ------------- -------
At 31 March 2023 604 23,496 18,310 42,410
---------------------------- --------------- ---------- ------------- -------
Loans advanced Investment Investments Total
property and held at fair
asset held value
for sale
----------------------------
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------------- ------------- ------------- -------
At 1 April 2021 467 14,918 31 15,416
---------------------------- --------------- ------------- ------------- -------
Additions - - 10,998 10,998
---------------------------- --------------- ------------- ------------- -------
Fair value adjustment 28 1,195 (39) 1,184
---------------------------- --------------- ------------- ------------- -------
Effect of foreign exchange - (129) - (129)
---------------------------- --------------- ------------- ------------- -------
At 31 March 2022 495 15,984 10,990 27,469
---------------------------- --------------- ------------- ------------- -------
There were no transfers between level 1 and level 2 fair value
measurements and no transfers into or out of level 3 fair value
measurements during the year ended 31 March 2023 and prior
year.
The fair value of investment property is based on unobservable
inputs and it is therefore disclosed as level 3.
The following methods, assumptions and inputs were used to
estimate fair values of investment property:
31 March 2023 - Hamburg (Werner-Siemens-Straße), Germany
----------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant unobservable inputs Value
investment amount / (acres)
property fair value
'000
------------ -------------- --------- ---------------------- ------------------------------------------------- --------
Gross Estimated Rental Value ('ERV') per sqm p.
Europe EUR18,500 11.8 Discounted cash flow a. EUR70.9
(GBP16,271)
---------------------------------------------------------------------------------------------------- --------- --------
Discount rate 5.70%
Sensitivity analysis for the 31 March 2023 valuation of the
Hamburg investment property:
31 March 2023
--------------------------------- --------------- ------------------ --------------- ------------------
Significant unobservable inputs Change applied Fair value change Change applied Fair value change
EUR'000 EUR'000
--------------------------------- --------------- ------------------ --------------- ------------------
ERV -10% -EUR1,940 +10% +EUR1,800
--------------------------------- --------------- ------------------ --------------- ------------------
Discount rate -1% +EUR1,400 +1% -EUR1,300
31 March 2022 - Hamburg (Werner-Siemens-Straße), Germany
----------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant unobservable inputs Value
investment amount / (acres)
property fair value
'000
------------ -------------- --------- ---------------------- ------------------------------------------------- --------
Gross Estimated Rental Value ('ERV') per sqm p.
Europe EUR18,200 11.8 Discounted cash flow a. EUR67.4
(GBP15,359)
---------------------------------------------------------------------------------------------------- --------- --------
Discount rate 4.90%
31 March 2023 - Travelodge Hotel, Wadebridge, UK
----------------------------------------------------------------------------------------------------------------------
Class of Carrying amount / Area Valuation Significant Weighted
investment fair value (square meters) technique unobservable average/Value
properties '000 inputs
------------------ ------------------ ----------------- ------------------ ------------------ -------------------
UK GBP3,800 1,572 Comparable Comparable Not applicable
transactions evidence
analysis
31 March 2023 - Travelodge Hotel, Lowestoft, UK
----------------------------------------------------------------------------------------------------------------------
Class of Carrying amount / Area Valuation Significant Weighted
investment fair value (square meters) technique unobservable average/Value
properties '000 inputs
------------------ ------------------ ----------------- ------------------ ------------------ -------------------
UK GBP2,800 1,259 Comparable Comparable Not applicable
transactions evidence
analysis
A sensitivity analysis has been considered for the Travelodge
Hotels in Wadebridge and Lowestoft: if the value of comparable
transactions were to drop by 10% due to adverse market conditions,
the values of the Wadebridge and Lowestoft assets would be
GBP3,420,000 and GBP2,520,000, respectively; if instead the value
of comparable transactions were to increase by 10% due to positive
market conditions, the values of the Wadebridge and Lowestoft
assets would be GBP4,180,000 and GBP3,080,000, respectively.
31 March 2023 - Liverpool, UK
----------------------------------------------------------------------------------------------------------------------
Class of Carrying amount / Area Valuation Significant Weighted
investment fair value (square meters) technique unobservable average/Value
properties '000 inputs
------------------ ------------------ ----------------- ------------------ ------------------ -------------------
UK GBP625 475 Comparable Comparable Not applicable
transactions evidence
analysis
31 March 2022 - Liverpool, UK
----------------------------------------------------------------------------------------------------------------------
Class of Carrying amount / Area Valuation Significant Weighted
investment fair value (square meters) technique unobservable average/Value
properties '000 inputs
------------------ ------------------ ----------------- ------------------ ------------------ -------------------
UK GBP625 475 Comparable Comparable Not applicable
transactions evidence
analysis
No sensitivity analysis has been provided for the Liverpool
property since immaterial to the Group.
Directors and Company information
Directors
William Simpson (Chairman)
Jeff Chowdhry
Peter Griffin
Phillip Rose
Melanie Torode
Registered office
Floor 2, Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 4LY
Investment Manager
Alpha Real Capital LLP
Level 6, 338 Euston Road
London NW1 3BG
Administrator and secretary
Ocorian Administration (Guernsey) Limited
Floor 2, Trafalgar Court
Les Banques, St Peter Port
Guernsey GY1 4LY
Broker
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Independent valuers in the UK
Cushman & Wakefield
No 1 Colmore Square
Birmingham B4 6AJ
Independent valuers in Spain
Savills Aguirre Newman
Paseo de la Castellana, 81
Madrid, 28046
Spain
Independent valuers in Germany
Cushman & Wakefield
Rathenauplatz, 1
Frankfurt, 60313
Germany
Independent Auditor
BDO Limited
Place du Pré, Rue du Pré
St Peter Port
Guernsey GY1 3LL
Tax advisors in Europe
KPMG LLP
15 Canada Square
London E14 5GL
Ernst & Young LLP
1 More London Riverside
London SE1 2AF
Legal advisors in Guernsey
Carey Olsen
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
Legal advisors in the UK
Norton Rose
3 More London Riverside
London SE1 2AQ
Legal advisors in Spain
Ashurst LLP
Alcalá, 44
Madrid, 28014
Spain
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Shareholder information
Further information on the Company, compliant with the SFS
regulations, can be found at the Company's website:
www.alpharealtrustlimited.com
Dividends
Ordinary dividends are declared and paid quarterly. Shareholders
who wish to have dividends paid directly into a bank account rather
than by cheque to their registered address can complete a mandate
form for this purpose. Mandates may be obtained from the Company's
Registrar. Where dividends are paid directly to shareholders' bank
accounts, dividend vouchers are sent directly to shareholders'
registered addresses.
Shareholders who have not previously elected to receive scrip
may complete a Scrip Mandate Form, which can be obtained from the
Company's Registrar.
Share price
The Company's Ordinary Shares are listed on the SFS of the
LSE.
Change of address
Communications with shareholders are mailed to the addresses
held on the share register. In the event of a change of address or
other amendment, please notify the Company's Registrar under the
signature of the registered holder.
Investment Manager
The Company is advised by Alpha Real Capital LLP which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom.
Financial calendar
Financial Reporting/ Dividend Ex-dividend Record Last Share Payment
reporting Meeting period date date date for certificates date
dates election posted
to scrip (if applicable)
dividend
(if applicable)
--------------- ----------- -------------- ------------ ----------- ---------------- ---------------- ---------
Annual report 7 Quarter 6 7 13 27 28
published July ended July July July July July
and dividend 2023 31 March 2023 2023 2023 2023 2023
announcement 2023
--------------- ----------- -------------- ------------ ----------- ---------------- ---------------- ---------
Annual General 7
Meeting September
2023
--------------- ----------- -------------- ------------ ----------- ---------------- ---------------- ---------
Trading 15 Quarter 28 29 12 26 27
update September ending September September October October October
statement 2023 30 June 2023 2023 2023 2023 2023
(Quarter 2023
1)
--------------- ----------- -------------- ------------ ----------- ---------------- ---------------- ---------
Half year 24 Quarter 7 8 9 23 24
report November ending December December January January January
2023 30 September 2023 2023 2024 2024 2024
2023
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END
FR FTMRTMTJTBRJ
(END) Dow Jones Newswires
June 23, 2023 02:00 ET (06:00 GMT)
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