TIDMDRIP
RNS Number : 4032Q
Drum Income Plus REIT PLC
18 June 2020
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
18 June 2020
Drum Income Plus REIT Plc
(the "Company")
LEI: 213800FG3PJGQ3KQH756
HALF-YEAR RESULTS
Drum Income Plus REIT plc (LSE: DRIP) announces its half-year
results for the six months ended 31 March 2020.
Enquiries:
Drum Real Estate Investment Management (Investment
Manager)
Bryan Sherriff 0131 285 0050
Cantor Fitzgerald Europe (Financial Adviser and
Corporate Broker)
Robert Peel (Corporate Finance) 020 7894 7719
Richard Sloss (Sales) 0131 257 4626
----------------
Dickson Minto W.S. (Sponsor)
Douglas Armstrong 020 7649 6823
----------------
Weber Shandwick (Financial PR)
Richard Bright 0131 556 6649
Nick Oborne 020 7067 0721
----------------
JTC (UK) Limited (Company Secretary) 0203 846 9777
----------------
Chairman's Statement
INTRODUCTION
Drum Income Plus REIT was established in May 2015 to provide
investors with a regular dividend income, together with the
prospect of income and capital growth over the longer term, by
investing in regional real estate assets. I am pleased to present
this interim report for the six month period ended 31 March
2020.
Since my Annual Statement a few short months ago, the world has
been struck by the global pandemic virus known as COVID-19.
Hundreds of thousands of people have died around the world, and the
UK has not escaped, with tens of thousands of deaths to date
recorded.
Economies have been hard hit, and recessions are inevitable -
globally, nationally and locally. Real estate funds will not escape
the challenges which the country's lockdown has brought, and,
further, which recession will bring, but our initial focus has been
to ensure where possible the health and safety of everyone who
enters or works in our properties. I would like to thank especially
our investment managers and property managers for their sterling
efforts in this regard in what have been the most testing of
circumstances.
The Net Asset Value has fallen by 6.2% in the 6 months to March
2020, largely due to a fall in the valuation of the retail and
shopping centre assets. As announced last month, the quarterly
dividend has been suspended for the next two quarters in order to
preserve cash, and the position will be reviewed for the September
2020 quarter, which is also the Company's year end.
Inevitably, some of our tenants will be experiencing large
losses of revenues, especially those within the retail sector, and
as landlords in these unprecedented times we will be as flexible as
we can be in negotiating terms with those who request to do so,
whilst at the same time optimizing income and protecting the value
of our shareholders' assets. At the time of writing we have secured
more than 75% of rental income which is payable during the lockdown
period with further monthly payments expected, but perhaps bigger
challenges lie ahead in the next couple of quarters, as it is
likely that rent collections will remain under pressure until
trading conditions begin to improve for tenants. The real estate
portfolio is of course protected to a certain extent by the quality
and length of many of the leases in place.
Hugh Little
Chairman
18 June 2020
Investment Adviser's Report
MARKET VIEW
The impact of Covid-19 and the lockdown on the UK Commercial
property market is unprecedented and its effects will continue to
shape the market even once we exit lockdown. While the UK did not
enter lockdown until the 24th March, social distancing was already
shaping footfall, occupier appetite and rents across all sectors
from mid-March and is apparent in the data from the quarter to
March 2020. Going forward, we expect COVID-19 uncertainty will
continue to affect the market and corresponding values over the
next six to nine months with some market commentators anticipating
that there will be a return to more normal conditions by the end of
March 2021 (assuming a vaccine is in place).
The Board and the Manager are taking every precaution to
safeguard the health and wellbeing of staff, occupiers and
stakeholders. We are continually monitoring our assets in light of
the outbreak of Covid-19 and our primary focus through this
exceptionally challenging period is to ensure that the portfolio is
well positioned to begin its recovery once the COVID-19 "lockdown"
restrictions are lifted and our tenants can begin to generate
income again. We are focused on preserving the long-term value and
financial strength of the Company.
However, Covid-19 has had and will continue to have a material
impact upon the trading performance of the Company. In common with
all valuations being carried out at this time, the March 2020
valuation report is subject to a material uncertainty clause and
further valuation and NAV reductions are likely as rent collections
will continue to remain under pressure until trading conditions for
tenants begin to improve.
As announced in the March 2020 NAV statement our rental
collection statistics were solid and a clearer picture of the
impact of Covid-19 will emerge as we monitor rent collections for
the 28 May Scottish quarter and the 25 June English quarter in the
coming weeks.
The political issues last year of Brexit and a General Election
have for the minute been forgotten as we deal with the impact of
Covid-19. Whilst the General Election is behind us and we now have
a Government with a majority the transition facing the UK as we
deal with Brexit is yet to be understood. The latest data confirms
that investment transaction levels across all sectors in the UK are
showing a downward trajectory. With the impact of Covid-19, rents
are also under pressure as tenants try to secure Government
assistance, however, unemployment is rising and this will
undoubtedly have an impact on the affordability of rents in due
course.
Social distancing is a new phenomenon, however, it is one we all
need to adapt to in order for the lockdown restrictions to be
removed safely. Occupiers and Landlords will have to alter how
buildings and occupied space are operated.
Aside from many potential occupiers now taking a 'wait-and-see'
approach to acquiring space, the more physical aspect of not being
able to undertake viewings has put the majority of requirements on
hold.
We envisage the majority of these requirements being deferred by
at least a quarter, if not more. However, the situation is
constantly evolving, and encouragingly, we are now starting to see
more 'virtual' viewings, enabling occupiers to shortlist buildings
ready to make a decision post-lockdown.
While some companies will use technology to enable employees to
work from home post-Covid-19, it is our belief that the office is
more important to people than ever for face-to-face meetings,
collaboration and knowledge sharing. An office with an attractive
design and culture is also an important component for the
attraction and retention of staff.
Homeworking will continue, but we are sociable creatures, so
office life will, too. Many employees will look forward to getting
back to the sense of community and the increased social
interaction. The challenge lies in how to adapt workplaces. There
is going to be substantially more awareness and interest on the
part of employees, in terms of the quality of the spaces that they
are occupying.
Landlords and occupiers alike, are likely to invest in new
contactless technologies to reduce disease transmission, resulting
in employees rarely needing to touch the building with their hands.
Office doors will open automatically using motion sensors and
facial recognition, while lifts - and even a coffee - can be
ordered from a smartphone.
Some requirements may start to shrink as businesses realise that
a percentage of their staff can now work from home, but the
converse is that other requirements may increase as social
distancing may require office occupational densities to be reduced.
Office desks have shrunk over the years, but we may see a reversal
of that, as people may not want to sit so close together.
Ultimately, occupiers will demand more flexibility, some
occupiers will require shorter leases and maybe we will see core
space on a more traditional lease whilst occupiers add extra floor
space on more flexible arrangements. Nothing is certain yet, and it
is only as we start to come out of lockdown and employees start to
return to the office, that we will really know to what extent
things have changed.
Below are some highlights of the portfolio performance:
-- Following the refurbishment of one terrace at Burnside
Industrial Estate we have successfully concluded 3 lettings, with
one unit out of 6 remaining vacant.
-- Significant work has been undertaken over the last 2 years to
secure a new 10 year lease to SDS at Monteith House although the
start date has been delayed due to Covid-19
-- We have appealed the planning refusal at Eastern Avenue Retail Park, Gloucester.
-- 3 Lochside Way continues to be a strong performing asset and remains fully let
-- Gosforth Shopping Centre continues to produce a strong rental
income for the Company but the value has been reduced due to the
market sentiment and lack of transactional evidence for Shopping
Centres, albeit almost 50% of the income at Gosforth is payable by
Sainsbury's.
DIFFERENTIATED INVESTMENT STRATEGY
In terms of investment focus the Company will continue to invest
when funds are available in well located regional property where
the basic fundamentals of supply and demand are favourable. The
Company is stock selection driven, although the macro top down
analysis will always be a feature of the investment process.
The Investment Adviser believes that income will remain a large
component of market return over the next few years.
INVESTMENT STRATEGY
The strategy continues to remain focussed on constructing and
managing a quality diversified portfolio of real estate assets
which offer the opportunity to increase rental value, income
security and capital value via the Investment Adviser's expertise
in entrepreneurial asset management and risk-controlled
development. The Investment Adviser targets commercial real estate
assets with the following characteristics:
-- sector agnostic - opportunity driven;
-- lot sizes of between GBP2 million and GBP15 million, in regional locations;
-- offer the opportunity to add value via the Investment Adviser's proactive asset management;
-- situated in significant regional conurbations that have scope
for physical improvement or improved asset management; and
-- which the Investment Adviser considers to be mispriced and/or
properties which are subject to substandard lease lengths and
voids.
RISK MANAGEMENT AND SUSTAINABILITY
The Investment Adviser considers and monitors risk through all
aspects of the investment process. Risks identified prior to the
acquisition of an asset are highlighted to the Board and considered
by the Directors prior to approval of the purchase. These risks are
then monitored by the Investment Adviser and reviewed at each
quarterly Board meeting of the Company.
Sustainable investment is relevant in considering suitable
investments for the Company and is a factor considered by the
Investment Adviser when analysing risk. The Investment Adviser
seeks to avoid depreciation in valuation caused by external
environmental factors and also seeks to be aware of the need for
buildings to deliver the future requirements of occupiers.
Bryan Sherriff
Investment Manager
18 June 2020
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2020
Six months ended Six months ended Year ended
31 March 2020 31 March 2019 30 September 2019
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Revenue Capital
Total Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
========================================================== =========================== =============================
Capital gains/(losses)
on investments
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Held at fair value (2,093) (2,093) - (714) (714) - (3,133) (3,133)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Revenue
Rental income - 2,088 2,205 - 2,205 4,249 - 4,249
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Total Income/ expense
2,088 (2,093) (5) 2,205 (714) 1,491 4,249 (3,133) 1,116
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Expenditure
Investment
Adviser's fees 2
(114) - (114) (192) - (192) (335) - (335)
Property expenses
(360) - (360) - - - - - -
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Other expenses (220) - (220) (668) - (668) (1,193) - (1,193)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Total expenditure
(694) - (694) (860) - (860) (1,528) - (1,528)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Profit / (loss) before
finance
costs and taxation
1,394 (2,093) (699) 1,345 (714) 631 2,721 (3,133) (412)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Net finance costs
Interest receivable - - - - - - - -
-
Interest payable
(335) - (335) (298) - (298) (657) - (657)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Profit / (loss) before
taxation 1,059 (2,093) (1,034) 1,047 (714) 333 2,064 (3,133) (1,069)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Taxation - - - - - - - - -
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Profit / (loss)
for the period 1,059 (2,093) (1,034) 1,047 (714) 333 2,064 (3,133) (1,069)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Total comprehensive
profit / (loss)
for the period 1,059 (2,093) (1,034) 1,047 (714) 333 2,064 (3,133) (1,069)
=============================== ============ =========== ========= ======== ====== ======== ========== =======
Basic and diluted
earnings per
ordinary share
2.77p (5.48)p (2.71)p 2.74p (1.87)p 0.87p 5.40p (8.02)p (2.80)p
=============================== ============ =========== ========= ======== ====== ======== ========== =======
The total column of this statement represents the Group's
Condensed Consolidated Statement of Comprehensive Income, prepared
in accordance with IFRS. There are no other gains or losses for the
period other than the total comprehensive profit reported
above.
The supplementary revenue return and capital return columns are
prepared under guidance published by the Association of Investment
Companies.
No operations were acquired or discontinued during the period.
All revenue and capital items in the above statement are derived
from continuing operations.
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Condensed Consolidated Statement of Financial Position
As at 31 March 2020
As at As at 31 As at 30
31 March September
March
2020 2019 2019
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
========================== ====== ============================== ======================== ========================
Non-current assets
Investment properties 5 52,870 56,771 54,880
========================== ====== ============================== ======================== ========================
52,870 56,771 54,880
========================== ====== ============================== ======================== ========================
Current assets
Trade and other
receivables 2,282 2,378 2,643
========================== ====== ============================== ======================== ========================
Cash and cash equivalents 542 1,060 510
========================== ====== ============================== ======================== ========================
2,824 3,438 3,153
========================== ====== ============================== ======================== ========================
Total assets 55,695 60,209 58,033
========================== ====== ============================== ======================== ========================
Non-current liabilities
Bank loan 6 (22,592) - (22,559)
========================== ====== ============================== ======================== ========================
(22,592) - (22,559)
========================== ====== ============================== ======================== ========================
Current liabilities
Trade and other
payables (2,822) (2,463) (3,014)
========================== ====== ============================== ======================== ========================
Bank loan - (22,731) -
========================== ====== ============================== ======================== ========================
Total liabilities (25,414) (25,194) (25,573)
========================== ====== ============================== ======================== ========================
Net assets 30,280 35,015 32,460
========================== ====== ============================== ======================== ========================
Equity and reserves
Called up equity
share capital 8 3,820 3,820 3,820
Share premium 5,335 5,335 5,335
Special distributable
reserve 21,840 21,840 21,840
Capital reserve (7,806) (3,294) (5,713)
Revenue reserve 7,091 7,314 7,178
========================== ====== ============================== ======================== ========================
Equity shareholders'
funds 30,280 35,015 32,460
========================== ====== ============================== ======================== ========================
Net asset value
per ordinary share 7 79.26p 91.66p 84.97p
========================== ====== ============================== ======================== ========================
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Company number: 9511797
The condensed consolidated interim financial statements on pages
12 to 21 were approved by the Board of Directors on 18 June 2020
and were signed on its behalf by:
Hugh Little
Chairman
Condensed Consolidated Statement of Changes in Equity
For the six months to 31 March 2020 (unaudited)
Share Special
capital Share distributable Capital Revenue Total
account premium reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ============= =============== ====================== ========== ============ ===========
As at 30 September 2019 3,820 5,335 21,840 (5,713) 7,178 32,460
======================= ============= =============== ====================== ========== ============ ===========
Profit and total
comprehensive
profit for the period: - - - (2,093) 1,059 (1,034)
======================= ============= =============== ====================== ========== ============ ===========
Transactions with
owners
recognised in equity: - - - - - -
Issue of ordinary share
capital
Issue costs - - - - - -
Dividends paid - - - - (1,146) (1,146)
======================= ============= =============== ====================== ========== ============ ===========
As at 31 March 2020 3,820 5,335 21,840 (7,806) 7,091 30,280
======================= ============= =============== ====================== ========== ============ ===========
For the six months to
31
March 2019 (unaudited)
Share Special
capital Share distributable Capital Revenue Total
account premium reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ============= =============== ====================== ========== ============ ===========
As at 30 September 2018 3,820 5,335 21,840 (2,580) 7,406 35,821
======================= ============= =============== ====================== ========== ============ ===========
Profit and total
comprehensive
profit for the period: - - - (714) 1,047 333
======================= ============= =============== ====================== ========== ============ ===========
Transactions with
owners
recognised in equity: - - - - - -
Issue of ordinary share
capital
Issue costs - - - - - -
Dividends paid - - - - (1,139) (1,139)
======================= ============= =============== ====================== ========== ============ ===========
As at 31 March 2019 3,820 5,335 21,840 (3,294) 7,314 35,015
======================= ============= =============== ====================== ========== ============ ===========
Condensed Consolidated Cash Flow Statement
For the six months ended 31 March 2020
Six months Six months Year ended
ended 31 March ended 31 30 September
March
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
======================================== ================================= ==================== ================
Cash flows from operating activities
Profit/(Loss) before tax (1,034) 333 (1,069)
Adjustments for:
Interest payable 291 306 657
Amortised loan costs 32 - 16
Unrealised revaluation (loss)
/ gain on property portfolio 2,053 714 3,133
======================================== ================================= ==================== ================
Operating cash flows before working
capital changes 1,342 1,353 2,737
Increase / (decrease) in trade
and other receivables 361 320 6
Increase/ (decrease) in trade
and other payables (192) (155) 60
======================================== ================================= ==================== ================
Net cash inflow from operating
activities 1,511 1,518 2,803
======================================== ================================= ==================== ================
Cash flows from investing activities
Rent free debtor movement 40 20 -
Property capitalised costs (83) (171) (489)
======================================== ================================= ==================== ================
Net cash outflow from investing
activities (43) (151) (489)
======================================== ================================= ==================== ================
Cash flows from financing activities
Bank loan drawn down net of arrangement - - -
fees
Issue of ordinary share capital - - -
Interest received - - -
Interest paid (291) (306) (651)
Equity dividends paid (1,145) (1,140) (2,292)
======================================== ================================= ==================== ================
Net cash (outflow) / inflow from
financing activities (1,436) (1,446) (2,943)
======================================== ================================= ==================== ================
Net increase / (decrease) in cash
and cash equivalents 32 (79) (629)
Opening cash and cash equivalents 510 1,139 1,139
======================================== ================================= ==================== ================
Closing cash and cash equivalents 542 1,060 510
======================================== ================================= ==================== ================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
1. INTERIM RESULTS
The condensed consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards ('IFRS') and IAS 34 'Interim Financial Reporting' as
adopted by the European Union and the accounting policies set out
in the statutory accounts of the Group for the year ended 30
September 2019. The condensed consolidated financial statements do
not include all of the information required for a complete set of
IFRS financial statements and should be read in conjunction with
the financial statements of the Group for the year ended 30
September 2019, which were prepared under IFRS as adopted by the
European Union. There have been no significant changes to
management judgements and estimates.
The condensed consolidated financial statements have been
prepared on the going concern basis. In assessing the going concern
of accounting the Directors have had regard to the guidance issued
by the Financial Reporting Council. After making enquiries, and
bearing in mind the nature of the Group's business and assets, the
Directors consider that the Group has adequate resources to
continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the financial statements.
2. INVESTMENT ADVISER'S FEE
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
===================== ========== ========== ============
Investment Adviser's
fee 114 192 335
===================== ========== ========== ============
Total 114 192 335
===================== ========== ========== ============
The Investment Management fee is calculated as 0.7% per annum of
the net assets of the Group. The Investment Management Agreement
may be terminated by either party by giving not less than 12
months' notice.
3. EARNINGS PER SHARE
Six months Six months Year ended
ended 31 ended 31 30 September
March 2020 March 2020 2019
Pence per Pence per Pence per
GBP'000 share GBP'000 share GBP'000 share
Revenue earnings 1,060 2.77 1,047 2.74 2,064 5.40
Capital earnings (2,093) (5.48) (714) (1.87) (3,133) (8.20)
Total earnings (1,034) (2.71) 333 0.87 (1,069) (2.80)
Weighted average
number of shares
in issue 38,201,990 38,201,990 38,201,990
Earnings for the period to 31 March 2020 should not be taken as
a guide to the results for the period to 30 September 2020.
4. DIVIDS
A first interim dividend of 1.5p in respect of the quarter ended
31 December 2019 was paid on 18 February 2020 to shareholders on
the register on 7 February 2020.
5. INVESTMENT PROPERTIES
As at As at
31 March 30 September
2020 2019
GBP'000 GBP'000
========================================= ========================== ============
Opening fair value 54,880 57,351
Purchases - -
Capitalised costs 129 678
Amortisation of lease costs (21) (16)
Revaluation movement (2,118) (3,133)
========================================= ========================== ============
Closing fair value 52,870 54,880
========================================= ========================== ============
Changes in the valuation of investment
properties As at As at
31 March 30 September
2019 2019
GBP'000 GBP'000
========================================= ========================== ============
Unrealised gain / (loss) on revaluation
of investment properties (2,093) (3,133)
========================================= ========================== ============
The properties were valued at GBP53,300,000 as at 31 March 2020
(31 March 2019: GBP57,300,000; 30 September 2019:
GBP55,350,000) by Savills (UK) Limited ('Savills'), in their
capacity as external valuers.
The valuation report was undertaken in accordance with the RICS
Valuation - Professional Standards VPS4 (1.5) Fair Value and VPGA1
Valuations for Inclusion in Financial Statements, which adopt the
definition of Fair Value adopted by the International Accounting
Standards Board.
Fair value is based on an open market valuation (the price that
would be received to sell an asset, or paid to transfer a
liability, in an orderly transaction between market participants at
the measurement date), provided by Savills on a quarterly basis,
using recognised valuation techniques as set out in the accounting
policies and note 9 of the consolidated financial statements of the
Group for the year ended 30 September 2019. There were no
significant changes to the valuation process, assumptions or
techniques used during the period.
In common with all valuations being carried out at this time,
the quarterly valuation report is subject to a material uncertainty
clause.
6. BANK LOAN
As at As at As at
31 March 31 March 30 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
============================= ================================= ==================== ============
Principal amount outstanding 22,760 22,760 22,760
============================= ================================= ==================== ============
Set up costs (168) (29) (201)
============================= ================================= ==================== ============
Total 22,592 22,731 22,559
============================= ================================= ==================== ============
On 30 September 2019 the Group entered into a GBP25 million
secured 3 year revolving credit facility agreement with the Royal
Bank of Scotland ("the Bank"). The interest rate on the facility is
1.75% plus LIBOR per annum.
As part of the loan agreement the Bank has a standard security
over properties currently held by the Group, with an aggregate
value of GBP53,300,000 at 31 March 2020. The fair value of
investments held as security adjusted for lease incentives of
GBP429,987 was GBP52,870,013.
Under the financial covenants related to this loan, the Group
has to ensure that for Drum Income Plus Limited:
-- the interest cover, being the rental income as a percentage
of finance costs, is at least 250%;
-- the loan to value ratio, being the value of the loan as a
percentage of the aggregate market value of the relevant
properties, must not exceed 50%.
Breach of the financial covenants, subject to various cure
rights, may lead to the loans falling due to repayment earlier than
the final maturity date stated above. The Group has complied with
all the loan covenants during the period.
7. NET ASSET VALUE
The Group's net unit value per ordinary share of 79.26 pence (31
March 2019 91.66 pence; 30 September 2019 84.97 pence) is based on
equity shareholders' funds of GBP30,280,000 (31 March 2019
GBP35,015,000; 30 September 2019 GBP32,460,000) and on 38,201,990
ordinary shares being the number of shares in issue at the period
end.
8. SHARE CAPITAL
Six Year to Six Year to
months 30 months 30
to 31 September to 31 September
March 2019 March 2019
2020 2020
Shares Shares GBP'000 GBP'000
=================== =================== ========================== ===================== =========================
Issued and fully
paid
Opening total
issued
ordinary shares
of 10p each 38,201,990 38,201,990 3,820 3,820
Issued during the - - - -
period
=================== =================== ========================== ===================== =========================
Closing total
issued
ordinary shares 38,201,990 38,201,990 3,820 3,820
=================== =================== ========================== ===================== =========================
There is one class of share.
9. INVESTMENT IN SUBSIDIARY
The Group's results consolidate those of Drum Income Plus
Limited, a wholly owned subsidiary of Drum Income Plus REIT plc,
incorporated in England & Wales (Company Number: 09515513).
Drum Income Plus Limited was incorporated on 28 March 2015,
acquired on 19 August 2015 and began trading on 19 January 2016,
when it transferred in the ownership of the entirety of the Group's
property portfolio. Drum Income Plus Limited continues to hold all
the investment properties owned by the Group and is also the party
which holds the Group's borrowings.
10. RELATED PARTY TRANSACTIONS AND FEES PAID TO DRUM REAL ESTATE
INVESTMENT MANAGERS
The Directors are considered to be related parties. No Director
had an interest in any transactions which are, or were, unusual in
their nature or significant to the nature of the Group.
The Directors of the Group received fees for their services.
Total fees for the six months ended 31 March 2020 were GBP35,000
(six months ended 31 March 2019: GBP42,000; twelve months ended 30
September 2019: GBP75,000) of which GBPnil (31 March 2019: GBPnil;
30 September 2019: GBPnil) remained payable at the period end.
Under the terms of the agreements amongst the Group, R&H
Fund Services (Jersey) Limited (the "AIFM"), Drum Real Estate
Investment Management Limited (the "Investment Adviser"), the Group
paid to the AIFM a fixed fee of GBP15,000 per annum plus annual
portfolio management fee of 0.7% per annum of the net assets of the
Group. The AIFM agreed that the annual portfolio management fee
would be paid to the Investment Adviser, in accordance with the
terms of the agreements.
The AIFM and the Investment Advisors are considered to be
related parties.
The management agreements are terminable by any party on 12
months' written notice, provided that such notice shall expire no
earlier than the fourth anniversary of Admission.
As per the prospectus published in April 2015, the Investment
Adviser agreed to reduce its portfolio management fee under the
AIRM agreement to the extent necessary to ensure that the core
annual expenses of the Group did not exceed 2.0% of the Group's net
assets. Certain expenses (in particular marketing, broking and some
loan related costs) fall outwith the ongoing charges calculation,
resulting in the ongoing charges ration being 2.0% of net
assets.
R&H Fund Services (Jersey) Limited received GBP8,000 in
relation to the six months ended 31 March 2020 (six months ended 31
March 2019: GBP8,000; twelve months ended 30 September 2019:
GBP15,000) of which GBP32,000 (31 March 2019: GBP24,000; 30
September 2019: GBP32,000) remained payable at the period end.
11. COMMITMENTS
The Group did not have any contractual commitments to refurbish,
construct or develop any investment property, or for repair,
maintenance or enhancements as at 31 March 2020 (31 March 2019:
nil, 30 September 2019: nil).
12. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Group is engaged in a
single unified business, being property investment, and in one
geographical area, the United Kingdom, and that therefore the Group
has no segments. The Board of Directors, as a whole, has been
identified as constituting the chief operating decision maker of
the Group. The key measure of performance used by the Board to
assess the Group's performance is the total return on the Group's
net asset value. As the total return on the Group's net asset value
is calculated based on the IFRS net asset value per share as shown
at the foot of the Consolidated Statement of Financial Position,
the key performance measure is that prepared under IFRS. Therefore,
no reconciliation is required between the measure of profit or loss
used by the Board and that contained in the financial
statements.
13. FAIR VALUE MEASUREMENTS
The fair value measurements for assets and liabilities are
categorised into different levels in the fair value hierarchy based
on the inputs to valuation techniques used. These different levels
have been defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date.
Level 2 - inputs, other than quoted prices included within Level
1, that are observable for the asset or liability, either directly
or indirectly.
Level 3 - unobservable inputs for the asset or liability.
Value is the Directors' best estimate, based on advice from
relevant knowledgeable experts, use of recognised valuation
techniques and on assumptions as to what inputs other market
participants would apply in pricing the same or similar instrument.
All investment properties are included in Level 3.
There were no transfers between levels of the fair value
hierarchy during the six months ended 31 March 2020.
14. INTERIM REPORT STATEMENT
The Company's auditor has not audited or reviewed the Interim
Report to 31 March 2020 pursuant to the Auditing Practices Board
guidance on 'Review of Interim Financial Information'. These are
not full statutory accounts in terms of Section 434 of the
Companies Act 2006 and are unaudited. Statutory accounts for the
year ended 30 September 2019, which received an unqualified audit
report and which did not contain a statement under Section 498 of
the Companies Act 2006, have been lodged with the Registrar of
Companies. No full statutory accounts in respect of any period
after 30 September 2019 have been reported on by the Company's
auditor or delivered to the Registrar of Companies.
Statement of Principal Risks and Uncertainties
The risks, and the way in which they are managed, are described
in more detail under the heading 'Principal risks' within the
Strategic Report in the Group's Annual Report and Accounts for the
year ended 30 September 2019. The Group's principal risks and
uncertainties have changed materially since the date of that report
as a direct result of the global health crisis and the attendant
economic, social, financial and market crises and are expected to
remain heightened for a considerable period, including the rest of
the Group's financial year. This is having a significant impact on
capital values and income from the portfolio, as well as an impact
on the regulatory environment in which the Company operates. The
operational risks of the Company have also been exacerbated by the
health crisis and resilience is being examined on an ongoing basis
but has been sound to date both in the management of the portfolio
and of the Company.
Statement of Directors' Responsibilities in Respect of the
Interim Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union and gives a true and fair view of the assets,
liabilities, financial position and profit of the Group;
-- the Chairman's Statement and Investment Adviser's Review
(together constituting the Interim Management Report) include a
fair review of the information required by the Disclosure and
Transparency Rules ('DTR') 4.2.7R, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed set of
consolidated financial statements;
-- the Statement of Principal Risks and Uncertainties above is a
fair review of the information required by DTR 4.2.7R; and
-- the Chairman's Statement and Investment Adviser's Review
together with the condensed set of consolidated financial
statements include a fair review of the information required by DTR
4.2.8R, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
Company during the period, and any changes in the related party
transactions described in the last Annual Report that could do
so.
On behalf of the Board
Hugh Little
Chairman
18 June 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BBGDLXBBDGGI
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