TIDMTRY
RNS Number : 9609Z
TR Property Investment Trust PLC
27 May 2021
This announcement and the information contained herein is not
for publication, distribution or release in, or into, directly or
indirectly, the United States, Canada, Australia or Japan.
TR PROPERTY INVESTMENT TRUST PLC
Unaudited preliminary results for the year ended 31 March
2021
26 May 2021
TR Property Investment Trust plc, announces its full year
results for the year ended 31 March 2021 (unaudited).
Financial Highlights and Performance Year ended
31 March Year ended
2021 31 March %
(unaudited) 2020 Change
--------------------------------------- ------------- -------------- --------
Balance Sheet
Net asset value per share 417.97p 358.11p +16.7%
Shareholders' funds (GBP'000) 1,326,433 1,136,453 +16.7%
Shares in issue at the end of the year
(m) 317.4 317.4 +0.0%
Net debt(1,6) 16.5% 7.6%
Share Price
Share price 392.50p 317.50p +23.6%
Market capitalisation GBP1,246m GBP1,008m +23.6%
Year ended Year ended %
31 March 31 March Change
2021 (unaudited) 2020
------------------------------------- ----------------- ---------- -------
Revenue
Revenue earnings per share 12.25p 14.62p -16.2%
Dividends(2)
Interim dividend per share 5.20p 5.20p +0.0%
Final dividend per share 9.00p 8.80p +2.3%
Total dividend per share 14.20p 14.00p +1.4%
Performance: Assets and Benchmark
Net Asset Value total return (3,6) +20.7% -11.5%
Benchmark total return(6) +15.9% -14.0%
Share price total return(4,6) +28.3% -16.8%
Ongoing Charges(5,6)
Including performance fee +1,40% +0.80%
Excluding performance fee +0.65% +0.61%
Excluding performance fee and direct
property costs +0.63% +0.59%
1. Net debt is the total value of loan notes, loans (including
notional exposure to CFDs and Total Return Swap) less cash as a
proportion of net asset value.
2. Dividends per share are the dividends in respect of the
financial year ended 31 March 2021. An interim dividend of 5.20p
was paid in January 2021. A final dividend of 9.00p (2020: 8.80p)
will be paid on 4 August 2021 to shareholders on the register on 18
June 2021.
The shares will be quoted ex-dividend on 17 June 2021.
3. The NAV Total Return for the year is calculated by
reinvesting the dividends in the assets of the Company from the
relevant ex-dividend date. Dividends are deemed to be reinvested on
the ex-dividend date as this is the protocol used by the Company's
benchmark and other indices.
4. The Share Price Total Return is calculated by reinvesting the
dividends in the shares of the Company from the relevant
ex-dividend date.
5. Ongoing Charges are calculated in accordance with the AIC
methodology. The Ongoing Charges ratios provided in the Company's
Key Information Document are calculated in line with the PRIIPs
regulation which is different to the AIC methodology.
6. Considered to be an Alternative Performance Measure as
defined in the full report and accounts.
Chairman's Statement
Introduction
The start of this reporting period was very close to the recent
COVID-19 influenced nadir of global equity markets in March 2020.
Since then equity markets have been determinedly focused on the
future rather than reflecting on the more immediate economic data
and human tragedy of the pandemic. As a result, I'm able to report
healthy returns for the year with our net asset value ("NAV") total
return of 20.7%, well ahead of the benchmark total return of 15.9%.
The share price total return was even stronger at 28.3% as the
discount narrowed over the year.
Stock markets have taken great comfort from the huge amount of
central bank stimulus and state aid for both
corporates and individuals. Since November 2020, this sense of
support has been augmented by optimism following the announcements
and subsequent rollout of a range of vaccine programmes.
The crisis has forced a dramatic change in the way we work,
consume and relax. Over the last year our management team has
pondered not only the pace of these changes across a wide range of
property sectors but also their sustainability once the world
reverts to "the new normal".
Over the last quarter of the financial year under review and
into the start of the new one, we have seen very dramatic share
price movements as investors rotated from companies offering the
safety of secure income towards those offering greater risk,
particularly where the companies were trading at large discounts to
their asset value. Your manager's report will examine in more
detail how the portfolio structure has evolved through these
thematic rotations.
Revenue Results and Dividend
Earnings for the year were 12.25p per share, 16% lower than the
prior year earnings of 14.62p.
The headline earnings per share figure is slightly deceptive,
earnings before tax were 24% lower than the previous year, but a
significant tax refund and some further prior period withholding
tax recoveries reduced the revenue tax charge from an effective
rate of 11.3% in 2020 to just 1.9% for the financial year to March
2021. Further details of this are set out in the Manager's
Report.
The Board has announced a final dividend of 9.00p per share,
bringing the full year dividend to 14.20p per share (2020: 14.00p)
an overall increase of 1.4% on the prior year dividend. The Board
is conscious of the income aspirations of some of our investor base
and, although this dividend is not fully covered, the Company has
significant revenue reserves available. As long as the Board has a
reasonable expectation of income returning to previous levels in
the medium term, the Board is happy to maintain a modest level of
dividend progression.
Revenue Outlook
Within our portfolio, the manager anticipates income for the
year to March 2022 to be split into three broadly equal parts with
one third suffering a reduction and in some cases significant cuts
or even suspensions, a third with income returning to pre-pandemic
levels, and the balance offering some level of increase. We do not
expect total income levels to return to pre-COVID-19 levels within
the current financial year although we do expect an improvement
relative to 2020/21.
After allowing for the proposed dividend, revenue reserves will
still amount to 12.18p per share giving plenty of capacity for the
board to supplement the dividend again in 2021/22, providing a
return to pre-Covid levels can reasonably be anticipated in the
medium term.
Net Debt and Currencies
Gearing at the end of the year stood at 16.5% having started the
year at 7.6%. Gearing fluctuated considerably throughout the year,
ranging between around 7.6% and 17.8%, as market sentiment ebbed
and flowed. This demonstrates the benefit of the flexibility of our
borrowing structure, with a base level supported by our fixed
longer-term debt and the majority achieved through the revolving
credit facilities and exposure through contracts for difference
("CFDs").
Sterling reached a low against the Euro in September 2020 driven
by fears of a no deal Brexit and remained relatively weak until
January 2021. As the new year arrived and despite issues with
bureaucracy for goods flowing between the UK and Europe, Brexit
issues took a back seat in investors' minds as they focused on the
route to normalisation across the UK and Europe as the vaccine
programmes rolled out. The UK is clearly ahead of the curve in this
respect and Sterling strengthened steadily towards our year end in
March 2021.
Our policy is to maintain a hedged currency exposure in line
with the benchmark. Sterling represents around 27% of the
benchmark, therefore strengthening Sterling is a headwind to the
NAV.
Income is unhedged and around 66% of our income is received in
currencies other than Sterling, therefore stronger Sterling reduces
our income. Slightly more income is received in the first half of
the year than the second, so for the current year more was received
in a period when Sterling was weaker.
Discount and Share Repurchases
The prior year end fell only two weeks after the market lows
following the announcement of the global COVID-19 pandemic and the
shares started the new financial year at a discount of 11.3%. The
discount then moved around between 5% and 15% as market sentiment
changed through the roller coaster ride of lockdowns, easings and
vaccine news. The average over the year was 10.2% but closed at
6.1%. This closing of the discount over the year meant that the
share price return of 28.3% was well ahead of the NAV return.
No share buy-backs were made in the period, although the
discount was wide at various points during the year. Many of our
underlying stocks were also trading on wide discounts and our
manager focused our capital on those opportunities.
The Board
I am grateful to my Board colleagues and to the team at TR for
their support and commitment this year. We have met in person
whenever the law and common sense allowed and "virtually" when
necessary. Though small, I believe the Board has an excellent
balance and spread of skills and experience appropriate for the
Trust's objectives. With two relatively new members, and a change
in Chair, I have been keen to allow us all time to settle into our
roles. Even so, I am conscious of the term of our SID, Simon
Marrison whose independence, skills and commitment are exemplary.
He brings a unique contribution with his continental property
investment expertise that is highly valued by us all and that will
be hard to replace. Equally we always enjoy and benefit from the
introduction of a fresh and enquiring mind so we will start the
process of looking for his replacement later this year to allow an
orderly succession.
Environmental, Social and Governance Factors ('ESG')
This year we have added more information on our responsible
investment approach. For many years we have maintained a strong
position in terms of voting and engagement supported by our
significant stakes in a number of property companies. Our size in
this specialist area of the equity market has helped ensure that
our views are heard. This engagement has been augmented by the
strength of BMO's Corporate Governance team and their broader
engagement record. We fully intend to keep up and heighten pressure
on our investee companies to enhance their standards of governance
and we will be increasing our expectations on both the provision of
data and on the Social and Environmental outcomes that they
deliver. Any long term support for management will require
companies to exhibit positive momentum across relevant
measures.
Awards
The Trust was the winner in the Specialist Equities category of
the Citywire Investment Trust Awards. This is particularly pleasing
as we were in competition with Trusts specialising in a broad range
of equities and alternatives.
Outlook
The pandemic has had a dramatic impact on the world and on all
aspects of real estate. In some instances this was an acceleration
of trends that were well underway such as the structural shift to
omnichannel retailing. For others, such as increased remote
working, it has been a very fast gestation period of an embryonic
trend. Airport hotel occupancy and business travel will likely
suffer a long-term negative shift as companies embrace not only a
new generation of communication tools but also their environmental
credentials. The main common feature across these examples is the
difficulty in predicting the scale and permanency of this
evolution. What will be 'the new normal' for these asset classes is
the challenge for our management team as we look forward to the
post pandemic world. What we can be sure about is that the economic
backdrop is a world with hugely elevated levels of government debt,
ongoing central bank / governmental stimulus packages and higher
levels of domestic savings. All at a time when fixed income yields
are at historically low levels and much long duration sovereign
debt offers negative yields to redemption.
Real estate offers a substantial margin over fixed income with
the opportunity to reflect any economic recovery through rental
growth. As a real asset it also has some inflation proofing
credentials. However, as the last fifteen months has reminded us,
sentiment can often override fundamentals in liquid equity markets
and our managers will continue to focus on the assessment of
earnings sustainability and medium term growth potential.
David Watson
Chairman
26 May 2021
Manager's Report
PERFORMANCE
The Net Asset Value total return for the year to 31 March 2021
was 20.7%, ahead of the benchmark total return of 15.9%. At the
interim stage, I reported that Continental European property
companies had significantly outperformed their UK counterparts
(returns of 11.3% v 2.1%). The second half saw the complete
reverse. The UK's performance in the second half was so strong that
the 12 month performance of 19.1% (in GBP) outperformed Continental
Europe at 18.7% (in EUR).
The initial impact of the pandemic on European real estate
equities saw the benchmark fall 36% from the pre-Covid peak of 19th
February to the trough on 18 March 2020. Our financial year
therefore started close to these depressed levels and the steady
recovery since then is reflected in the healthy figures for the
year under review. However it is worth noting that collectively the
sector remains nearly 15% below the pre-Covid peak.
This extraordinary year has clearly been like no other and the
gulf in performance of the different real estate sectors (and their
respective listed companies) requires the same adjective. The year
can be neatly divided into pre and post the vaccine
announcement.
From March to October investors focused on owning sustainable,
pandemic proof income such as residential, supermarkets and
healthcare alongside logistics, warehousing and industrial where
the underlying tenants' businesses had remained open and in many
cases were thriving. Consumer facing sectors such as retail,
restaurants, hotel and leisure were shunned. We divide our universe
of pan European real estate companies into 26 bespoke groups and
over the 7 months from the trough on 18th March 2020 our logistics
/ industrial group returned +54% , German residential +60%,
healthcare +36% whilst UK retail fell 45% and European retail
returned just 1%. London retail also suffered falling 26% as
tourism levels (both domestic and international) collapsed.
However, from November onwards we saw a complete volte face as
investors focused on the possibility of a normalising economic
outlook post the vaccine breakthrough. In our world that meant
buying back into the consumer facing sectors. Stocks exposed to
these sectors had been standing at large discounts given the
market's expectation of further asset value declines and they
enjoyed significant price recovery. Stocks such as Hammerson and
Shaftesbury, who had both carried out emergency capital raises
(more on this later), enjoyed 100% and 85% price appreciation from
their respective (pre-vaccine announcement) capital raise
prices.
The Trust was defensively positioned as we entered the pandemic
with overweights to European PRS (private rented sector)
particularly in Germany, supermarkets (UK and Nordics), healthcare
(mainly UK) and logistics / industrial across both the UK and
Europe. These exposures drove much of the relative outperformance
from March to November.
London exposed stocks suffered particularly as office workers
have not returned (we estimate office utilisation rates at c25%
versus a Continental average of over 50%) and this combined with
the collapse in tourism (both domestic and international) has
temporarily hollowed out our global city. Our UK office exposure
was concentrated in decentralised offices through CLS and McKay
whilst we avoided London retail focused names such as Capco and
Shaftesbury as well as those businesses with short occupational
leases such as Workspace.
As the 'relief / reopening / reflation' trade gathered momentum,
I closed our underweight exposure to European shopping centres,
bought back into some Central London retail and renewed our
exposure to office markets particularly those cities with the
shorter commute times. Essentially I was still shying away from the
largest two conurbations (London and Paris) whilst adding to
smaller ones such as Madrid and Dublin and maintaining exposure to
decentralised office sectors in the UK, Sweden and Germany.
The pandemic has turned much 'on its head' and in our corner of
the equity market it was the performance of Swiss property
companies which was much weaker than history would have predicted.
Traditionally a safe haven, these stocks did not initially recover
from the March lows with investors focused on the problematic
retail exposure of the largest listed companies. We continue to be
underweight the group.
Another positive surprise has been in self-storage which
reported very steady numbers through the worst of the year. Whilst
our stock selection in the UK was correct (Safestore total return
+27% versus Big Yellow +14%), the runaway success was Shurguard,
the Continental player r eturning +48%, which we didn't own. In our
defence, the stock enjoyed strong demand from index trackers as it
entered various benchmarks midyear.
Most of 2020 was an understandably subdued period for M&A
corporate activity with one particular exception, Norwegian
offices. Entra (where we were a top 20 shareholder) was the subject
of a bidding war between two Swedish listed players, Castellum and
Samhallsbyggnadsbolaget (also known as SBB). Whilst neither
successfully gained control, the share price total return was 57%,
our most successful investment in the period.
The portfolio has some gearing. This was reduced in February and
March 2020 but has subsequently returned to pre-pandemic levels.
Why have gearing in volatile times? The Trust continues to take
advantage of its closed ended structure and holds a number of
illiquid small cap stocks. These well-run companies (even when
exposed to outperforming subsectors) often suffer from limited
investor attention, being deemed too small. As a consequence, in
rising markets they often underperform their larger brethren (in
market parlance their 'beta' is less than one). Adding some gearing
helps compensate for these lower beta names. Our experience is that
over time the underlying property fundamentals will be recognised
and, if not, then the market will take them private or merge them
together. Our physical property exposure also sits outside our
benchmark and additional gearing ensures that we are not
underexposed to equities versus our benchmark given that a
proportion of capital is invested in physical property.
OFFICES
Of all the segments of the commercial real estate landscape, the
future demand for offices remains the hardest to forecast. The two
undeniable consequences of the pandemic, for this asset class, has
been the realisation that employees of corporates of all sizes can
work remotely (for long periods) if required and secondly that the
next generation of 'best in class' office accommodation will be
utilised very differently with tenants having new priorities. Built
into these demands will be the overarching need for energy
efficiency, carbon neutrality and sustainability through the life
cycle of the building.
The take up figures for the last year (across the 15 major
cities we monitor) offers little comparative value given the
inability for businesses to physically relocate in many of these
markets from March 2020. Taking London as a case in point, Savills
reported that West End take up fell from 4.4m sq ft in 2019 to 1.7m
in 2020. Office utilisation rates through 2020 and into 2021 have
varied hugely. A broad rule of thumb was that the larger the city
(and the longer the average commute time) the lower the office
utilisation rate. Generally the smaller cities also had higher
levels of commuting by private transport or where workers were
using overground public transport. Scandinavian and Swiss cities
have seen almost normalised utilisation rates whilst London and
Paris remain sub 30%. Looking forward, what is important to us is
the amount of new space which was scheduled to complete
(construction was halted for very short periods in most markets)
and whether there are signs of demand as we move into the post
vaccine period.
Looking across Europe as a whole, the combined effect of reduced
leasing activity and construction completions led to 100bps
increase in vacancy to an average of 6.9% (BNP data). This single
statistic clearly hides a wide range of levels. Unsurprisingly,
London and Paris have experienced the greatest increases from 5% to
nearly 8% but Dublin collects the wooden spoon with vacancy
increasing to over 9%. This is a good example of a small market
where a (temporary) demand strike meets a number of large
completions and refurbishments. However the historically low levels
of vacancy in many cities prior to the pandemic have insulated most
markets, with modest downward movements in prime rents recorded
across the German Big 6, Milan, Madrid, Oslo, Amsterdam and
Stockholm.
The delivery of new office buildings has also been deferred,
particularly for tall buildings. The New London Architecture's
Annual Tall Buildings Survey recorded a 27% decline in planning
applications for buildings over 20 storeys in 2020 when compared
with 2019. We were surprised that the fall wasn't larger but 73% of
all applications were in the latter part of the year and hints at
developer confidence regarding demand for new build.
Investment demand has remained very resilient almost regardless
of short-term weakness in occupational markets. The weight of
capital seeking real assets is a theme which will recur through
this report. The rise in the long end of the curve as the reflation
theme gathers momentum is proving very damaging for fixed income
structures. High quality offices - offering large lot sizes - with
secure income delivering 3.5-4% net yield is attractive versus
negative yielding sovereign bonds. Further up the risk curve,
opportunistic capital also remains very active and listed
development specialists such as Great Portland Estates and Derwent
London have found it hard to deploy capital amidst fierce
competition.
The 2021 CBRE EMEA Investor Intentions Survey highlights London
as still the most attractive city for investment in Europe with an
estimated EUR40-45bn of global equity looking to be deployed into
the market across all types of buildings. This is the highest
figure since the survey starting tracking demand in 2012. Whilst
transaction volumes slowed last year, the first two months of 2021
(traditionally a quiet time) have seen volumes reach GBP875m
greater than the same period in 2019. Part of the London attraction
is that yields didn't compress during the Brexit uncertainty making
the city look much cheaper than other big European cities. Post the
EU-UK Trade and Cooperation Agreement we expect this gap to
narrow.
RETAIL
The MSCI / IPD data for the 12 months to March 2021 saw all
retail property capital values fall 12.8% with a serious
acceleration in the decline of shopping centre values which fell
25.5% over the last 12 months. In the interims, I commented that we
felt the valuation community were behind the times due to their
requirement to look at deal evidence. Essentially, in fast moving
markets the published figures will already be out of date. Stock
markets know this and retail landlords across the globe have been
trading at very large discounts to their (no longer valid) last
published figures.
The woes of retail are well understood. The pandemic has
accelerated trends which were well established. Reopening of
economies will see footfall return to shopping centres but the
levels of sustainable rents remain the subject of market forces. In
the UK the loss of a huge number of well known brands either
through bankruptcy or retreat has resulted in average vacancy
levels in shopping centres reaching over 15% (MSCI data).
This means the negotiation boot remains firmly on the tenants'
foot and we predict a further 15% falls in rental values. The one
area where there are clear signs of price stabilisation is in
retail warehousing. Open air with plenty of free parking, this type
of retail asset sits well in an omni-channel environment where
retailer margins are maximised through click and collect.
Affordability is the eternal watchword and whilst there are some
parks with very high rents (often fashion retailer led) the
majority will see modest declines in rental values. Occupancy cost
ratios are also not burdened by escalating service charges.
Across Europe, the picture is more nuanced. Valuers are even
more conservative than their UK counterparts and capitalisation
rates are yet to move materially. In some countries, retailers have
been given huge amounts of government support and as a result
rental delinquency is generally lower than in the UK. In addition,
many shopping centres are anchored by hypermarkets (which have
remained open) and not department stores (a UK/ US concept no
longer fit for purpose beyond a handful of tourist destinations
such as Selfridges and Galeries Lafayette). There have been lower
levels of retailer bankruptcy across Continental Europe and we put
this down to two factors: less overrenting and the UK insolvency
legislation. On this latter point, a huge number of UK retailers
have taken advantage of the CVA (company voluntary administration)
to force landlords (generally a large creditor) to accept corporate
reconstructions which unduly damage their interests. A recent High
Court ruling involving the overly indebted retailer New Look,
reinforced this tenant friendly legislation.
Investors remain very circumspect towards this asset class.
Income insecurity has resulted in investors requiring much higher
initial yields. CBRE estimate that UK prime shopping centre yields
have moved from 4.5% to 7% in the last 5 years with poorer
secondary schemes in the high teens or literally unsaleable. Retail
warehousing has bucked the depressing trend at least from an
investor perspective. Investors are increasingly confident that
they are able to measure tenant affordability and this is the key
to determining pricing. In the last couple of months we have seen
competitive bidding for a number of retail warehouse schemes,
something not seen since 2018.
DISTRIBUTION AND INDUSTRIAL
UK industrial and logistics take up hit a record 59.7m sq ft in
2020. Whilst the pandemic suppressed demand in many other parts of
the property market, it clearly stimulated logistics and business
activity which utilised industrial property. Amazon again accounted
for a sizeable (20%) portion of the activity and it was this XL
segment (250,000 + sq ft) which was the major beneficiary of the
surging online demand. The online share of retail sales rose from
19.2% in 2019 to 27.9% in 2020 hitting a new high of 36.3% in
January 2021 as we returned to lockdown. This will scale back as we
reopen but the boost to online scale and efficiency is here to
stay. Supply has responded but has been more than matched by this
demand. As a consequence, supply has fallen to 73.4m sq ft, down 6%
on the year, and this tightening has occurred in every size
bracket.
Rental growth continues to march on but there has been a
broadening of growth rates across the regions. Greater London and
the East Midlands recorded growth of over 7% whilst average rates
across the country at 3.9%. Such strong rental growth, the secure
income and the positive outlook has driven both domestic and
international buyers to pay record prices for this sector whether
it is last mile urban units, XL big boxes or terraces of well
located industrial units. Prime yields are 3.5 to 4% and even short
income is not deterring investors as evidenced by the sale of our
Bristol distribution unit at 4.5% initial yield with 3.5 years
unexpired.
The same picture of rude health is evident across Continental
Europe. According to BNP, take up increased 14% across the 6
largest European economies and vacancy rates dropped to 5.5%, their
lowest and all against a backdrop of a sharp contraction in GDP.
Again it was a surge in e-commerce and home delivery which drove
demand. Prime yields across Europe tightened 25bps in 2020,
matching the UK with no signs of decompression even as the long end
of the curve rises. Investment demand is truly global with US and
Asian institutional capital competing with more domestic long term
capital all determined to participate in this structural shift.
RESIDENTIAL
As expected the sector has remained highly resilient during the
pandemic. The majority of our investments are in German and Swedish
housing where rents are subject to state control. The remaining
exposure is Finland and the UK where rents are open-market. The
former offer greater security with rents tied to indexation whilst
the latter offers more opportunity to capture market growth but
with the commensurate risk if vacancy rises and market rents fall.
During the crisis, the security of income and very high occupancy
levels resulted in the sector retaining its popularity. German
housing has experienced price rises in virtually all its
sub-markets.
As explained earlier, Berlin remained the outlier as the State
of Berlin imposed a 5-year rent freeze (Mietendeckel). The
subsequent Constitutional Court ruling, which confirmed that rent
controls are determined at the Federal, not State level, came just
after the year end in mid-April. We are pleased with this outcome
and the share prices of both Deutsche Wohnen (4.4% of net assets)
and Phoenix Spree (2.5% of net assets) responded positively. New
construction of apartments in Berlin had all but dried up as
developers awaited the outcome of the appeal. Berlin remains the
cheapest capital city in Western Europe in which to rent an
apartment (if you can find one). The desire of a left-wing local
authority to keep it that way regardless of the side effect of
shutting out new migrants through the consequential collapse in the
supply of new homes has been suitably rebuffed.
ALTERNATIVES
This group encompasses sectors that have thrived (supermarkets,
healthcare, self-storage) in the crisis and those which have not
(student accommodation, hotels).
Share price performance was an amplified reflection of not only
the underlying property performance but also the dramatic shift in
investor sentiment. Self storage share prices have traditionally
performed poorly in slowing economic conditions as the income is
considered short term and volatile. However the pandemic has
focused investors' minds on the emerging strength of this sector
where a small group of operators (mostly listed companies) have the
financial muscle to dominate the price comparison websites. Another
emerging trend has been the increasing business usage of a product
traditionally seen as the domain of private customers. Businesses
have seen the merits of immediate, hassle free access to short or
longer term storage. The supply chain disruption during the
pandemic heightened the need for space as the mantra became 'a
little more just in case and a little less just in time'. Our self
storage group returned +46% from the low point (18th March 2020) to
the end of October. However, from November 2020 to the end of March
2021 they have collectively returned just +4.1%. A classic example
of a switch in sentiment as investors rotated away from the 'Covid
relative winners' group into the value names which had
underperformed and looked very cheap on historic metrics.
In another 'alternatives' sub-sector we experienced the complete
reverse. Student accommodation businesses suffered a collapse in
income and Unite (our only exposure) led the field in refunding
rents which was the correct PR strategy but depleted their top
line. The well documented difficulties for students through the
last two academic years and the complete inability for many
overseas students to enroll physically impacted investor sentiment
with the sub-sector falling 46% between 19th February and 18th
March 2020 and then staging a weak recovery of just +17% from then
to the end of October. Whilst this performance compares poorly with
self storage, since the beginning of November the sub-sector has
rallied 30% as the likelihood of the reopening of tertiary
education improved.
Supermarkets have continued to attract investor attention. Our
exposure is through Supermarket Income REIT (UK) and Cibus (Sweden
and Finland). Supermarket Income REIT raised a total of GBP490m in
three separate transactions through the year and now has a market
cap of over GBP900m. Cibus also raised capital (SEK 900m) in two
tranches to make further acquisitions. The larger supermarket
operators have been able to attract customers through their online
network which the hard discounters (Lidl, Aldi) are not able to
offer. Volumes and margins will normalise post the pandemic but
these operators have had the opportunity to prove the resilience of
their omni-channel model which utilises last mile distribution from
their network of stores. It is one of the few parts of the retail
landscape where physical stores are truly integral to the online
journey.
DEBT AND EQUITY MARKETS
Property companies remained busy on debt refinancings throughout
the pandemic and the huge amount of central bank support and
government stimulus ensured a healthy, liquid market where pricing
did not weaken. According to EPRA, EUR15.2bn was raised in 2019 at
an average coupon of 1.8% and 2020 saw EUR15.6bn at a cost of 1.6%.
These figures are not directly comparable as the mix of debt
offerings in each period was different but they are a clear
indicator as to the health and price stability in the debt markets.
German residential companies were again busy with Vonovia raising
EUR2.5bn in four transactions borrowing 10-year money at 1%. Later
in October, Gecina, Europe's largest office REIT raised EUR200m in
a 2034 term bond at 0.86%.
Early in the crisis, we saw a number of strong businesses
trading at premiums raise equity capital for opportunistic
expansion. This was in sectors with clear underlying demand, namely
healthcare (Assura, Aedifica, Primary Health Properties),
self-storage (Big Yellow), logistics/ industrial (LondonMetric,
Segro, VGP ), supermarkets (Supermarket Income REIT, Cibus) and
German residential (Vonovia, ADO Properties, LEG). The Autumn saw
opportunistic raises in Sweden and Norway (Balder, Klovern and
Norwegian Properties) a region which had experienced low levels of
lockdown restrictions. More recently in February and March this
year we saw renewed activity in the UK, as the vaccine rollout
improved sentiment, with raises from Target Healthcare, LXI, Tritax
Eurobox and Supermarket Income REIT again. Continental European
raises in 2021 have so far been confined to healthcare (Cofinimmo)
and student accommodation (Xior).
Post the summer we saw the beginning of an expected surge of
more defensive raises as companies finally came under cashflow and
valuation pressure. In the end it was just a handful of retail
focused names who had been mismanaging their balance sheets long
before the pandemic. Hammerson's GBP600m raise effectively
recapitalised the balance sheet with a 24 for 1 rights issue
accompanied by the (previously announced) departure of the CEO
completing the overdue C-suite shuffle of Chair, CEO and CFO. In
late October, Shaftesbury announced a GBP300m placing and open
offer. Looking back their timing was spectacularly unfortunate as
the announcement of the first vaccines came less than a fortnight
later.
These game changing announcements immediately altered
expectations and there is nowhere better to illustrate the point
than the corporate saga at Unibail-Rodamco-Westfield (URW). URW had
announced a EUR9bn 'Reset' plan comprising EUR3.5bn capital raise,
dividend cancellation and a planned EUR4bn of disposals. A group of
activist shareholders lead by Leon Bressler (the CEO of Unibail
from 1992 to 2006) launched a campaign to oppose these AGM
proposals and launch an alternative strategy which did not include
a deeply discounted capital raise. They proposed the sale of the US
(ex Westfield) portfolio and a return to their roots as an owner of
prime European shopping centres. Their timing was fortunate, with
the 10th November AGM coming just after the vaccine announcement
and the improvement in investor sentiment even for deeply indebted
businesses. Essentially convincing investors that they didn't need
to put 'good money after bad' and that the self help strategy would
succeed. They were successful in their campaign and shareholders
voted against the 'Reset' plan. This led to the departure of the
Chairman, CEO and CFO and the promotion of existing senior managers
to the Board. The share price, which had troughed at EUR35 per
share, subsequently doubled amidst the closing of short positions.
This corporate tale neatly encapsulates the dramatic change in
investor sentiment (and pricing of previously unloved businesses)
which we saw from November onwards.
INVESTMENT ACTIVITY - PROPERTY SHARES
Turnover (purchases and sales divided by two) totalled GBP468m
equating to 36% of the average net assets over the period. This was
broadly in line with last year's equivalent figure (32%) which
itself was well ahead of the year to March 2019 (20%). It has
therefore been two years of elevated portfolio rotation due to
market volatility.
The rapid reduction in leverage in February and March 2020 was
followed by a swift reinvestment in the portfolio which occurred in
April and May as share prices recovered from their March lows and
this reinvestment was boosted by our participation in the majority
of the large number of offensive capital raises as described
earlier.
Whilst a number of sought after businesses were standing at
premiums to asset value and therefore were able to raise capital
accretively, the 'Covid' world meant that another smaller cohort of
companies required emergency (defensive) capital raises. After
Hammerson's raise in September came Shaftesbury's GBP300m raise at
400p per share, a 20% discount to the undisturbed share price and
55% below where it had started 2020. We didn't own Shaftesbury
prior to the capital raise but took the opportunity to participate.
Given that part of the company's rationale for the raise was to
give comfort to their banks and secure waivers over potential
covenant breaches, one wonders if the Board would have felt so
pressurised just a few days later. The share price finished our
financial year at 641p which reflects the enormous change in
sentiment around the reopening of the economy.
Private equity continues to stalk listed property companies and
I reiterate the statement made many times in these reports over the
last decade - if the listed market persistently undervalues its
companies, private capital won't be shy about buying it. This year
we have seen various firms build positions in listed companies:
Brookfield (British Land), KKR (Great Portland Estates) and
Starwood (RDI, CA Immo). It is the latter which has been most
active with its stakes. Having acquired 30% of RDI from its South
African based parent company, it launched an agreed bid for the
remainder in February. The interesting point is that the offer
(recommended by the Board at 121p) was 20% below the last published
asset value but 30% ahead of the undisturbed share price. The board
were acknowledging two things - firstly that the asset valuation
was historic and likely to fall further and secondly that the mixed
portfolio, whilst on the road to improvement under refreshed
management, was set to trade perpetually at a discount to its asset
value. The exit price therefore looked a fair one.
The precedent has been set and other small, deeply discounted
companies should look to merge and generate improved operational
metrics for their shareholders.
The corporate activity around Entra in Norway (covered earlier)
was an important contributor to performance given our holding (2.5%
of net assets).
The interest in listed real estate continues to strengthen as we
move into the Spring with a range of existing companies taking the
opportunity to raise capital whilst their shares trade at premiums
to their asset value. This was capped in March by the first major
IPO for over 3 years. CTP, a Central European logistics
owner/developer raised EUR1bn with the founder diluting from 100%
ownership to 83%. The company has a market cap of EUR5.6bn.
INVESTMENT ACTIVITY - DIRECT PROPERTY PORTFOLIO
The physical property portfolio returned 2.8% with a capital
return of -0.7% and an income return of 3.4% for the 12 months to
March 2021. In what was a difficult year for real estate the
portfolio remained resilient with rent collection in excess of 90%
for all four quarters and with only limited concessions given to
two retail tenants.
During the period the Trust sold its freehold interest in the
Yodel Distribution Centre in North Bristol for GBP10m which
reflected a net initial yield of 4.5% and a capital value of GBP200
per sq ft. This followed the successful regearing of the lease at
the beginning of 2020. The sale was concluded at a 25% premium to
the September 2020 valuation and is 118% above the July 2014
purchase price.
The Trust also had a successful period of asset management
completing a number of leases including the letting of the vacant
restaurant unit at The Colonnades. The 3,500 sq ft unit has been
let to Happy Lamb Hot Pot on a 20 year lease. Happy Lamb is the
latest edition of a hugely successful Asian and US chain which
produces authentic Mongolian hot pot cuisine. This is their third
restaurant opening after Holborn and Birmingham. This letting
concludes a 10 year transformation of this Bayswater asset where we
have added 16,000 sq ft of new retail space (bringing exciting
brands like Graham & Green and 1 Rebel to the area) as well as
doubling the Waitrose footprint from 20,000 to 40,000 sq ft.
At Wandsworth, following the successful granting of planning in
November 2019, we have continued to work with Wandsworth Borough
Council and the Greater London Authority to deliver the complex and
detailed s.106 agreement. As anticipated this will take time.
Meanwhile, we continue to let any of units on the estate which come
vacant on short term leases. The demand for industrial space has
continued to grow over the past 12 months and central London is no
exception. New rents across the estate are in the high GBP20s per
sq ft and post the year end we have let the only vacancy to Sweaty
Betty, the highly successful UK leisure and fashion retailer.
REVENUE AND REVENUE OUTLOOK
Revenue earnings for the current year of 12.25p were 16% lower
than the prior year.
Earnings were enhanced by a tax refund and some further prior
period withholding tax recoveries which reduced the revenue tax
charge rate to only 1.9%. The most significant contribution by far
was a tax refund and interest thereon resulting from the final
settlement of our long running FII GLO claim with HMRC. The tax
refund and interest amounted to GBP1.7m, and that, together with
the ability to release some associated provisions meant an overall
contribution of 0.71p to the revenue account.
Long standing investors may recall that this claim was first
mentioned in our reports for the year ended March 2010 following a
change in UK tax law that all overseas dividend receipts were
non-taxable in the UK from 1 July 2009. There were various
challenges running through the European courts that this treatment
of overseas dividends should be applied to earlier periods. These
have ultimately had some degree of success and last year HMRC
announced that they would settle on the open computations. We
reached agreement with HMRC on our own open computations just
before the financial year end and the tax repayment has been
received.
In addition to the tax refund received we were able to reinstate
losses which had been utilised for the relevant periods. These will
now be available going forward, although use will be subject to
current restrictions.
Our underlying income over the year fell by around 24%. Some
companies cancelled dividends payable early in the financial year
in reaction to the COVID-19 pandemic, or reduced distributions and
this was documented in the Interim Report. The second half saw a
similar level of income reduction as that seen in the first half.
In addition, in the final quarter of the year some of our overseas
income was impacted by sterling strength.
The longer-term outlook is still not clear. The UK has rolled
out a successful vaccination programme and at the time of writing
the easing of restrictions is progressing along the government
roadmap timetable. This has enabled us to be a little more
confident about our UK earnings with all companies (excluding some
small cap retail focused businesses) recommencing dividends for
FY22.
There have been clear real estate winners and losers and the
portfolio remains well positioned towards those sectors which have
maintained robust earnings through the pandemic. Our exposure to
index-linked income remains high and we will see dividend increases
here alongside those names exposed to buoyant conditions such as
industrial and logistics. Other areas will remain under
pressure.
On balance we expect the income from our portfolio to increase
over the current financial year as both the UK and Continental
Europe experience strong post vaccine recoveries. However, it
should be noted that stronger sterling would reduce the income from
our overseas holdings and any reductions in gearing would also lead
to lower income.
GEARING AND DEBT
The Chairman has already commented on gearing levels and also
highlighted the benefits of our flexible borrowing structure.
This flexibility has been crucial in such a volatile year. Our
gearing oscillated in a 10% range as we responded to the dramatic
changes in market sentiment through the year. Over the period we
utilised both our revolving loan facilities and our CFD capability
in order to achieve this.
We increased the capacity on our ICBC loan facility during the
year and the remaining loans were renewed at existing levels. We
did see small increases on margins on some renewals. We also looked
at the potential to take out new or extend our longer-term debt.
Our Euro denominated loan note is due for repayment in 2026 and the
Sterling note in 2031, however the flexibility of the short- term
facilities is valuable in more volatile markets and has certainly
worked well for us in the current year.
We continue to explore new options in all markets.
OUTLOOK
As economies emerge from the grip of the pandemic, investors
have focused on assessing whether the damage (or growth) was
temporary, longer lasting or permanent. Real estate investors are
no exception and the range of premiums / discounts to net asset
values of listed companies highlights the breadth of expectations
across the property spectrum. The difficulty is that there is no
precedent for the profile of recovery in tenant demand across so
much of this asset class. Clearly existing structural shifts have
been accelerated and new ones have emerged which may prove more
permanent than the markets currently expect. All of this
uncertainty leads us to focus on income sustainability and those
markets where - if demand does return - supply is constrained.
Whilst tenant demand is hard to gauge we do benefit from a
benign financing environment. Debt markets are as accommodating as
they have ever been, even if the long end of the curve is rising.
We see no reason for margins to widen in the near term.
Inflationary pressures are building and fixed income asset values
reflect these expectations. Property offers income which is tied
either directly (index-linked) or indirectly (rental growth) to
economic expansion. Our intention is to remain focused on areas
where that income is both sustainable and where it offers
growth.
In the near term, we aim to maintain the exposure to the private
rented residential sector (particularly in Germany and Sweden) as
the market continues to undervalue not only the quality of those
earnings but also the steady growth profile. There is risk - in
Germany - that a left wing coalition government would amend the
current federal law resulting in local cities getting more control
over rents. However the rent freeze in Berlin (over the last 18
months) resulted in a reduction in the number of available
apartments as well as a slowing in the pace of new apartment
delivery. We trust that common sense will prevail over political
dogma. Elsewhere, undervalued income streams are evident in
supermarkets and in parts of the healthcare market. Alongside
index-linked sustainability we will also maintain exposure to the
greatest growth opportunities. The structural shifts in retail
behaviour are still ongoing. Evolution in the speed of delivery and
post pandemic supply chain dynamics will drive growth across the
logistics landscape from 'big box' to 'last mile'. We will continue
to own the developers where we see increases in the value of
landbanks as well as growing development margins. Investor demand
for the end product shows no sign of abating.
Office markets will remain volatile. Businesses will spend time
working out their requirements in a post pandemic world.
Interaction and collaboration will drive office usage. Tasks that
can be fulfilled without physical interaction will be timetabled
for remote working. A new balance will develop with one sure fire
certainty, the premium being attached to best in class newly built
space with complete environmental credentials. Developers will
respond to this demand and we expect an acceleration in buildings
being identified for refurbishment earlier than previously
envisaged. Obsolescence of the existing office stock will
accelerate.
Post the year end in early May, St Modwen Properties announced
that an offer of 542p per share from Blackstone, a 24% premium to
the last published NAV had the support of the board. This company
has a large strategic landbank, a high quality logistics portfolio
and a growing housebuilding unit and whilst it was trading close to
its asset value, private equity clearly feels it is undervalued.
This is a reminder, as stated in a number of previous reports, that
the depth of both equity and debt availability underpins listed
company valuations.
Marcus Phayre-Mudge
Fund Manager
26 May 2021
Investment Objective and Benchmark
The Company's Objective is to maximise shareholders' total
return by investing in the shares and securities of property
companies and property related businesses internationally and also
in investment property located in the UK.
The benchmark is the FTSE EPRA/NAREIT Developed Europe Capped
Net Total Return Index in Sterling. The index, calculated by FTSE,
is free-float based and as at 31 March 2021 had 105 constituent
companies. The index limits exposure to any one company to 10% and
reweights the other constituents pro-rata. The benchmark website
www.epra.com contains further details about the index and
performance.
Business Model
The Company's business model follows that of an externally
managed investment trust.
The Company has no employees. Its wholly non-executive Board of
Directors retains responsibility for corporate strategy; corporate
governance; risk and control assessment; the overall investment and
dividend policies; setting limits on gearing and asset allocation
and monitoring investment performance.
The Board has appointed BMO Investment Business Limited as the
Alternative Investment Fund Manager ("AIFM") with portfolio
management delegated to Thames River Capital LLP. Marcus
Phayre-Mudge acts as Fund Manager to the Company on behalf of
Thames River Capital LLP and Alban Lhonneur is Deputy Fund Manager.
George Gay is the Direct Property Manager and Joanne Elliott the
Finance Manager. They are supported by a team of equity and
portfolio analysts.
Further information in relation to the Board and the
arrangements under the Investment Management Agreement can be found
in the Report of the Directors in the full Annual Report and
Accounts.
In accordance with the Alternative Investment Fund Managers
Directive ("AIFMD"), BNP Paribas has been appointed as Depositary
to the Company. BNP Paribas also provide custodial and
administration services to the Company. Company secretarial
services are provided by Link Company Matters.
The specific terms of the Investment Management Agreement are
set out in the full Annual Report and Accounts.
Strategy and Investment Policies
The investment selection process seeks to identify well managed
companies of all sizes. The Manager generally regards future growth
and capital appreciation potential more highly than immediate yield
or discount to asset value.
Although the investment objective allows for investment on an
international basis, the benchmark is a Pan-European Index and the
majority of the investments will be located in that geographical
area. Direct property investments are located in the UK only.
As a dedicated investor in the property sector the Company
cannot offer diversification outside that sector, however, within
the portfolio there are limitations, as set out below, on the size
of individual investments held to ensure diversification within the
portfolio.
Asset allocation guidelines
The maximum holding in the stock of any one issuer or of a
single asset is limited to 15% of the portfolio at the point of
acquisition. In addition, any holdings in excess of 5% of the
portfolio must not in aggregate exceed 40% of the portfolio.
The Manager currently applies the following guidelines for asset
allocation:
UK listed equities 25 - 50%
Continental European listed
equities 45 - 75%
Direct Property - UK 0 - 20%
Other listed equities 0 - 5%
Listed bonds 0 - 5%
Unquoted investments 0 - 5%
Gearing
The Company may employ levels of gearing from time to time with
the aim of enhancing returns, subject to an overall maximum of 25%
of the portfolio value.
In certain market conditions the Manager may consider it prudent
not to employ gearing on the balance sheet at all, and to hold part
of the portfolio in cash.
The current asset allocation guideline is 10% net cash to 25%
net gearing (as a percentage of portfolio value).
Property Valuation
Investment properties are valued every six months by an external
independent valuer. Valuations of all the Group's properties as at
31 March 2021 have been carried out on a "RCIS Red Book" basis and
these valuations have been adopted in the accounts.
Allocation of costs between Revenue & Capital
On the basis of the Board's expected long-term split of returns
in the form of capital gains and income, the Group charges 75% of
annual base management fees and finance costs to capital. All
performance fees are charged to capital.
Holdings in the Investment Companies
It is the Board's current intention to hold no more than 15% of
the portfolio in listed closed-ended investment companies.
Some companies investing in commercial or residential property
are structured as listed externally managed closed-ended investment
companies and therefore form part of our investment universe.
Although this is not a model usually favoured by our Fund Manager,
some investments are made in these structures in order to access a
particular sector of the market or where the management team is
regarded as especially strong. If these companies grow and become a
larger part of our investment universe and/or new companies come to
the market in this format the Manager may wish to increase exposure
to these vehicles. If the Manager wishes to increase investment to
over 15%, the Company will make an announcement accordingly.
Key Performance Indicators
The Board assesses the performance of the Manager in meeting the
Trust's objective against the following Key Performance Indicators
("KPIs"):
KPI Board monitoring and outcome
Net Asset Value Total Return
relative to the benchmark * The Board reviews the performance in detail at each
The Directors regard the out-performance meeting and discusses the results and outlook with
of the Company's net asset the Manager.
value total return in performance
in comparison with the benchmark
as being an overall measure Outcome
of value delivered to the 1 year 5 years
shareholders' over the longer-term. ------- --------
NAV Total Return* (Annualised) 20.7% 7.7%
------- --------
Benchmark Total Return
(Annualised) 15.9% 4.3%
------- --------
* NAV Total Return is calculated by
re-investing the dividends in the assets
and the Company from the relevant ex-dividend
date. Dividends are deemed to be re-invested
on the ex-dividends date for the benchmark.
------------------------------------------------------------------
Delivering a reliable dividend
which is growing over the * The Board reviews statements on income received to
longer term date and income forecasts at each meeting.
The principal objective of
the Company is a total return Outcome
objective, however, the Fund 1 year 5 years
Manager also aims to deliver ------- --------
a reliable dividend with growth Compound Annual Dividend
over the longer term. Growth* 1.4% 11.2%
------- --------
Compound Annual RPI 1.5% 2.6%
------- --------
* The final dividend in the time series
divided by the initial dividend in the
period raised to the power of 1 divided
by the number of years in the series.
------------------------------------------------------------------
The Discount or Premium at
which the Company's shares * The Board takes powers at each AGM to buy-back and
trade compared with Net Asset issue shares. When considering the merits of share
Value buy-back or issuance, the Board looks at a number of
Whilst expectation of investment factors in addition to the short and longer-term
performance is a key driver discount or premium to NAV to assess whether action
of the share price discount would be beneficial to shareholders overall.
or premium to the Net Asset Particular attention is paid to the current market
Value of an investment trust sentiment, the potential impact of any share buy-back
over the longer-term, there activity on the liquidity of the shares and on
are periods when the discount Ongoing Charges over the longer term.
can widen. The Board is aware
of the vulnerability of a Outcome
sector-specialist trust to 1 year 5 years
a change of investor sentiment ------- --------
towards that sector, or to Average discount* 10.2% 6.3%
periods of wider market uncertainty, ------- --------
and the impact that can have Total number of shares Nil Nil
on the discount. repurchased
------- --------
* Average daily discount throughout the
period of share price to NAV with income.
Source: Bloomberg.
------------------------------------------------------------------
Level of Ongoing Charges
The Board is conscious of * Expenses are budgeted for each financial year and the
expenses and aims to deliver Board reviews regular reports on actual and forecast
a balance between excellent expenses throughout the year.
service and costs.
Outcome
The AIC definition of Ongoing 1 year 5 years
Charges includes any direct ------- --------
property costs in addition Ongoing charges excluding
to the management fees and performance fees 0.65% 0.65%
all other expenses incurred ------- --------
in running a publicly listed Ongoing charges excluding
company. As no other investment performance fees and
trusts hold part of their Direct Property Costs 0.63% 0.62%
portfolio in direct property ------- --------
(they either hold 100% of
their portfolio as property
securities or as direct property), * The ongoing charges are competitive when compared to
in addition to Ongoing Charges the peer group.
as defined by the AIC, this
statistic is shown without
direct property costs to allow
a clearer comparison of overall
administration costs with
other funds investing in securities.
The Board monitors the Ongoing
Charges, in comparison to
a range of other Investment
Trusts of similar size, both
property sector specialists
and other sector specialists.
------------------------------------------------------------------
Investment Trust Status
The Company must continue * The Board reviews financial information and forecasts
to operate in order to meet at each meeting which set out the requirements
the requirements for Section outlined in Section 1158.
1158 of the Corporation Tax
Act 2010.
* The Directors believe that the conditions and ongoing
requirements have been met in respect of the year to
31 March 2021 and that the Company will continue to
meet the requirements.
------------------------------------------------------------------
The KPIs are considered to be Alternative Performance Measures
as defined in the full annual report and accounts.
Principal and Emerging Risks and Uncertainties
In delivering long-term returns to shareholders, the Board must
also identify and monitor the risks that have been taken in order
to achieve that return. The Board has included below details of the
principal and emerging risks and uncertainties facing the Company
and the appropriate measures taken in order to mitigate these risks
as far as practicable.
The Board also considers new and emerging risks adding
appropriate monitoring and mitigation measures accordingly.
The impact of the COVID-19 pandemic, the response of financial
markets, the unknown duration of the pandemic and ongoing impact on
economies around the world together with operational changes in
response to government guidelines continues to increase some of the
risks listed below in comparison with prior years.
Risk Identified Board monitoring and mitigation
Share price performs poorly in
comparison to the underlying NAV * The Board monitors the level of discount or premium
The shares of the Company are at which the shares are trading over the short and
listed on the London Stock Exchange longer-term.
and the share price is determined
by supply and demand. The shares
may trade at a discount or premium * The Board encourages engagement with the
to the Company's underlying NAV shareholders. The Board receives reports at each
and this discount or premium may meeting on the activity of the Company's brokers, PR
fluctuate over time. agent and meetings and events attended by the Fund
Manager.
* The Company's shares are available through the BMO
share schemes and the Company participates in the
active marketing of these schemes. The shares are
also widely available on open architecture platforms
and can be held directly through the Company's
registrar.
* The Board takes the powers to buy-back and to issue
shares at each AGM.
-------------------------------------------------------------
Poor investment performance of
the portfolio relative to the * The Manager's objective is to outperform the
benchmark benchmark. The Board regularly reviews the Company's
The Company's portfolio is actively long-term strategy and investment guidelines and the
managed. In addition to investment Manager's relative positions against these.
securities the Company also invests
in commercial property and accordingly,
the portfolio may not follow or * The Management Engagement Committee reviews the
outperform the return of the benchmark Manager's performance annually. The Board has the
powers to change the Manager if deemed appropriate.
-------------------------------------------------------------
Market risk
* The Board receives and considers a regular report
Both share prices and exchange from the Manager detailing asset allocation,
rates may move rapidly and adversely investment decisions, currency exposures, gearing
impact the value of the Company's levels and rationale in relation to the prevailing
portfolio. market conditions.
Although the portfolio is diversified
across a number of geographical * The report considers the potential impact of Brexit
regions, the investment mandate and the Manager's response in positioning the
is focused on a single sector portfolio.
and therefore the portfolio will
be sensitive towards the property
sector, as well as global equity * The report considers the current and potential future
markets more generally. impact of the COVID-19 pandemic and the ongoing
implication for the property market and valuations
Property companies are subject overall and by each sector.
to many factors which can adversely
affect their investment performance,
these include the general economic
and financial environment in which
their tenants operate, interest
rates, availability of investment
and development finance and regulations
issued by governments and authorities.
Although we have now exited the
European Union the structure of
our future relationship with Continental
Europe is still evolving and there
could be an impact on occupation
across each sector.
The COVID-19 global pandemic dominated
the financial year. This has changed
the way we live and work, creating
unprecedented uncertainty regarding
the impact on economies and property
markets around the world both
in the short and longer term.
Any strengthening or weakening
of Sterling will have a direct
impact as a proportion of our
Balance Sheet is held in non-GBP
denominated currencies. The currency
exposure is maintained in line
with the benchmark and will change
over time. As at 31 March 2021,
72.1% of the Trust's exposure
lies to currencies other than
GBP.
-------------------------------------------------------------
The Company is unable to maintain
dividend growth * The Board receives and considers regular income
Lower earnings in the underlying forecasts.
portfolio putting pressure on
the Company's ability to grow
the dividend could result from * Income forecast sensitivity to changes in FX rates is
a number of factors: also monitored.
-- lower earnings and distributions
in investee companies. Companies * The Company has substantial revenue reserves which
in some property sectors continue can be drawn upon when required.
to be negatively impacted by the
COVID-pandemic. Companies in some
sectors cancelled reduced dividends * The Board will continue to monitor the impact of
during the last financial year COVID-19 and the long term implications for income
precautionary measure to protect generation.
their balance in the short term.
Although most have returned paying
dividends, some are at a lower
level than previously and others
are continuing to withhold dividends;
-- prolonged vacancies in the
direct property portfolio and
lease or rental renegotiations
as a result of COVID-19;
-- strengthening Sterling reducing
the value of overseas dividend
receipts in Sterling terms. The
Company has seen a material increase
in the level of earnings in recent
years. A significant factor in
this was the weakening of Sterling
following the Brexit decision.
Sterling strengthened in the last
quarter of the financial year.
This may continue or reverse again
in the near or medium term as
the longer term implications of
Brexit and the COVID-19 pandemic
the impact on the UK and European
economies understood. Strengthening
of Sterling would lead fall in
earnings;
-- adverse changes in the tax
treatment of dividends other income
received by the Company; and
-- changes in the timing of dividend
receipts from
investee companies.
-------------------------------------------------------------
Accounting and operational risks
Disruption or failure of systems * Third party service providers produce periodic
and processes underpinning the reports to the Board on their control environments
services provided by third parties and business continuation provisions on a regular
and the risk that these suppliers basis.
provide a sub-standard service.
The impact of the COVID-19 pandemic * The Management Engagement Committee considers the
and the operational response from performance of each of the service providers on a
the manager and service providers regular basis and considers their ongoing appointment
has been closely monitored. and terms and conditions.
* The Custodian and Depository are responsible for the
safeguarding of assets. In the event of a loss of
assets the Depository must return assets of an
identical type or corresponding amount unless able to
demonstrate that the loss was the result of an event
beyond their reasonable control.
* Monitoring the quality and timeliness of service as
service providers respond to COVID-19 regulations and
guidelines, in particular with widespread home
working and consideration of the durability of the
arrangements. Many organisations are now planning to
incorporate home working into their operational
structure as a permanent feature.
-------------------------------------------------------------
Financial risks
The Company's investment activities * Details of these risks together with the policies for
expose it to a variety of financial managing these risks are found in the Notes to the
risks which include counterparty Financial Statements in the full Annual Reports and
credit risk, liquidity risk and Accounts.
the valuation of financial instruments.
Any impact of the COVID-19 pandemic
has been considered.
-------------------------------------------------------------
Loss of Investment Trust Status
The Company has been accepted * The Investment Manager monitors the investment
by HM Revenue & Customs as an portfolio, income and proposed dividend levels to
investment trust, subject to continuing ensure that the provisions of CTA 2010 are not
to meet the relevant eligibility breached. The results are reported to the Board at
conditions. As such the Company each meeting.
is exempt from capital gains tax
on the profits realised from the
sale of investments. * The income forecasts are reviewed by the Company's
tax advisor through the year who also reports to the
Any breach of the relevant eligibility Board on the year-end tax position and reports on CTA
conditions could lead to the Company 2010 compliance.
losing investment trust status
and being subject to corporation
tax on capital gains realised
within the Company's portfolio.
-------------------------------------------------------------
Legal, regulatory and reporting
risks * The Board receives regular regulatory updates from
Failure to comply with the London the Manager, Company Secretary, legal advisors and
Stock Exchange Listing Rules and the Auditors. The Board considers these reports and
Disclosure Guidance and Transparency recommendations and takes action accordingly.
rules; failure to meet the requirements
under the Alternative Investment
Funds Directive, the provisions * The Board receives an annual report and update from
of the Companies Act 2006 and the Depository.
other UK, European and overseas
legislation affecting UK companies.
Failure to meet the required accounting * Internal checklists and review procedures are in
standards or make appropriate place at service providers.
disclosures in the Interim and
Annual Reports.
-------------------------------------------------------------
Inappropriate use of gearing
Gearing, either through the use * The Board receives regular reports from the Manager
of bank debt or through the use on the levels of gearing in the portfolio. These are
of derivatives may be utilised considered against the gearing limits set in the
from time to time. Whilst the Investment Guidelines and also in the context of
use of gearing is intended to current market conditions and sentiment. The cost of
enhance the NAV total return, debt is monitored and a balance sought between term,
it will have the opposite effect cost and flexibility.
when the return of the Company's
investment portfolio is negative
or where the cost of debt is higher
than the return from the portfolio.
-------------------------------------------------------------
Personnel changes at Investment
Manager * The Chairman conducts regular meetings with the Fund
Loss of portfolio manager or other Management team.
key staff.
* The fee basis protects the core infrastructure and
depth and quality resources. The fee structure
incentivises good outperformance and is fundamental
in the ability to retain key staff.
-------------------------------------------------------------
Statement of Directors' responsibilities in relation to the
Group financial statements
The Directors are responsible for preparing the Annual Report,
the Strategic Report, the Directors Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and applicable law
and have elected to prepare the Parent Company financial statements
on the same basis. In addition the Group financial statements are
required under the UK Disclosure Guidance and Transparency Rules to
be prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the Group's profit or loss for that period. In preparing each of
the Group and Parent Company financial statements, the Directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, as regards the group
financial statements, International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
Each of the Directors confirms that to the best of their
knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Group and Parent Company and the undertakings included in
the consolidation taken as a whole; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
The Directors consider the annual report and accounts, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group's
position and performance, business model and strategy.
By order of the Board
David Watson
Chairman
26 May 2021
Group Statement of Comprehensive Income
For the year ended 31 March 2021 (unaudited)
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
Return Return Return Return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Income
Investment
income 36,557 - 36,557 47,112 - 47,112
Other operating
income 67 - 67 35 - 35
Gross rental
income 3,185 - 3,185 3,415 - 3,415
Service charge
income 1,051 - 1,051 1,786 - 1,786
Gains/(losses)
on investment
held at fair
value - 196,582 196,582 - (153,614) (153,614)
Net movement
on foreign
exchange; investment
and loan notes - (3,144) (3,144) - 11,296 11,296
Net movement
on foreign
exchange; cash
and cash equivalents - (1,474) (1,474) - 302 302
Net returns
on contacts
for difference 3,320 17,978 21,298 5,724 (41,276) (35,552)
Net return
on total return
swap - (188) (188) - (3,808) (3,808)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Total Income 44,180 209,754 253,934 58,072 (187,100) (129,028)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Expenses
Management
and performance
fees (1,556) (14,328) (15,884) (1,570) (7,392) (8,962)
Direct property
expenses, rent
payable and
service charge
costs (1,321) - (1,321) (1,984) - (1,984)
Other administrative
expenses (1,231) (604) (1,835) (1,398) (615) (2,013)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Total operating
expenses (4,108) (14,932) (19,040) (4,952) (8,007) (12,959)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Operating profit/(loss) 40,072 194,822 234,894 53,120 (197,550) (145,244)
Finance costs (416) (1,969) (2,385) (814) (2,443) (3,257)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Profit/(loss)
from operations
before tax 39,656 192,853 232,509 52,306 (197,550) (145,244)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Taxation (767) 2,667 1,900 (5,912) 3,149 (2,763)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Total comprehensive
income 38,889 195,520 234,209 46,394 (194,401) (148,007)
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
Earnings/(loss)
per Ordinary
share 12.25p 61.61p 73.86p 14.62p (61.26)p (46.64)p
------------------------- ---------- ----------- ----------- ---------- ------------ ------------
The Total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The Revenue Return and Capital Return columns are
supplementary to this and are prepared under guidance published by
the Association of Investment Companies. All items in the above
statement derive from continuing operations.
The Group does not have any other income or expense that is not
included in the above statement therefore "Total comprehensive
income" is also the profit for the year.
All income is attributable to the shareholders of the parent
company.
Group and Company Statement of Changes in Equity
Group
Capital Retained
Share Capital Share Premium Redemption Earnings
For the year ended Ordinary Account Reserve Ordinary Total
31 March 2021 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
Total comprehensive
income - - - 234,409 234,409
Dividends paid - - - (44,429) (44,429)
----------------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
----------------------------- ------------- ------------- ----------- --------- ---------
Company
Capital Retained
Share Capital Share Premium Redemption Earnings
For the year ended Ordinary Account Reserve Ordinary Total
31 March 2021(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------- ----------- --------- ----------
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
Total comprehensive
income - - - 234,409 234,409
Dividends paid - - - (44,429) (44,429)
----------------------------- ------------- ------------- ----------- --------- ----------
At 31 March 2021 79,338 43,162 43,971 1,159,962 1,326,433
----------------------------- ------------- ------------- ----------- --------- ----------
Group
Capital Retained
Share Capital Share Premium Redemption Earnings
For the year ended Ordinary Account Reserve Ordinary Total
31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019 79,338 43,162 43,971 1,161,783 1,328,254
Total comprehensive
income - - - (148,007) (148,007)
Dividends paid - - - (43,794) (43,794)
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
--------------------- ------------- ------------- ----------- --------- ---------
Company
Capital Retained
Share Capital Share Premium Redemption Earnings
For the year ended Ordinary Account Reserve Ordinary Total
31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019 79,338 43,162 43,971 1,161,783 1,328,254
Total comprehensive
income - - - (148,007) (148,007)
Dividends paid - - - (43,794) (43,794)
At 31 March 2020 79,338 43,162 43,971 969,982 1,136,453
--------------------- ------------- ------------- ----------- --------- ---------
Group and Company Balance Sheets
as at 31 March 2021 (unaudited)
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- --------- --------- ----------- -----------
Non-current assets
Investments held
at fair value 1,400,516 1,400,516 1,155,295 1,155,295
Investments in subsidiaries - 43,312 - 50,429
------------------------------------- --------- --------- ----------- -----------
1,400,516 1,443,828 1,155,295 1,205,724
-------------------------------------
Deferred taxation
asset 686 686 - -
------------------------------------- --------- --------- ----------- -----------
1,401,202 1,444,514 1,155,295 1,205,724
Current assets
Debtors 60,990 60,520 60,094 59,972
Cash and cash equivalents 29,114 29,112 40,129 40,127
------------------------------------- --------- --------- ----------- -----------
90,104 89,632 100,223 100,099
Current liabilities (107,280) (150,120) (59,711) (110,016)
------------------------------------- --------- --------- ----------- -----------
Net current (liabilities)/assets (17,176) (60,488) 40,512 (9,917)
Total assets less
current liabilities 1,384,026 1,384,026 1,195,807 1,195,807
Non-current liabilities (57,593) (57,593) (59,354) (59,354)
------------------------------------- --------- --------- ----------- -----------
Net assets 1,326,433 1,326,433 1,136,453 1,136,453
------------------------------------- --------- --------- ----------- -----------
Capital and reserves
Called up share capital 79,338 79,338 79,338 79,338
Share premium account 43,162 43,162 43,162 43,162
Capital redemption
reserve 43,971 43,971 43,971 43,971
Retained earnings 1,159,962 1,159,962 969,982 969,982
------------------------------------- --------- --------- ----------- -----------
Equity shareholders'
funds 1,326,433 1,326,433 1,136,453 1,136,453
------------------------------------- --------- --------- ----------- -----------
Net Asset Value per:
Ordinary share 417.97p 417.97p 358.11p 358.11p
------------------------------------- --------- --------- ----------- -----------
Group and Company Cash Flow Statements
for the year ended 31 March 2021 (unaudited)
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ----------- ---------- -----------
Reconciliation of profit/(loss)
from operations before tax to
net cash outflow from operating
activities
Profit/(loss) from operations
before tax 232,509 231,844 (145,244) (145,244)
Finance costs 2,385 2,385 3,257 3,257
(Gains)/losses on investments
and derivatives held at fair
value through profit or loss (214,372) (207,255) 198,698 198,711
Net movement on foreign exchange;
cash and cash equivalents and
loan notes (179) (179) 859 859
(Increase)/decrease in accrued
income (102) (102) 584 584
Sales of investments 353,167 353,167 316,841 316,841
Purchases of investments (370,496) (370,496) (383,674) (383,674)
Decrease/(increase) in sales
settlement debtor 4,753 4,753 (1,417) (1,417)
(Decrease)/increase in purchase
settlement creditor (5,781) (5,781) 4,501 4,501
(Increase)/decrease in other
debtors (11,436) (11,436) 4,447 4,447
Increase/(decrease) in other
creditors 2,451 (4,001) 2,047 2,034
Scrip dividends included in investment
income and net returns on contracts
for difference (8,489) (8,489) (3,818) (3,818)
---------------------------------------- ---------- ----------- ---------- -----------
Net cash outflow from operating
activities before interest and
taxation (15,590) (15,590) (2,919) (2,919)
Interest paid (2,607) (2,607) (3,421) (3,421)
Taxation paid (1,915) (1,915) (2,321) (2,321)
---------------------------------------- ---------- ----------- ---------- -----------
Net cash outflow from operating
activities (20,112) (20,112) (8,661) (8,661)
Financing activities
Equity dividends paid (44,429) (44,429) (43,794) (43,794)
Drawdown of loans 55,000 55,000 40,000 40,000
Net cash from/(used in) financing
activities 10,571 10,571 (3,794) (3,794)
---------------------------------------- ---------- ----------- ---------- -----------
Decrease in cash (9,541) (9,541) (12,455) (12,455)
Cash and cash equivalents at
start of year 40,129 40,127 52,282 52,280
Net movement in foreign exchange;
cash and cash equivalents (1,474) (1,474) 302 302
---------------------------------------- ---------- ----------- ---------- -----------
Cash and cash equivalents at
end of year 29,114 29,112 40,129 40,127
---------------------------------------- ---------- ----------- ---------- -----------
Note
Dividends received 38,224 38,224 52,003 53,003
Interest received 45 45 37 37
Notes to the Preliminary Announcement
1 Accounting policies
The financial statements for the year ended 31 March 2021 have
been prepared on a going concern basis, in accordance with International
Financial Reporting Standards (IFRSs) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and in conformity
with the requirements of the Companies Act 2006. The financial
statements have also been prepared in accordance with the Statement
of Recommended Practice (SORP), "Financial Statements of Investment
Trust Companies and Venture Capital Trusts," to the extent that
it is consistent with IFRS.
In assessing Going Concern the Board has made a detailed assessment
of the ability of the Company and the Group to meet its liabilities
as they fall due, including stress and liquidity tests which considered
the effects of substantial falls in investment valuations, substantial
reductions in revenues received and reductions in market liquidity
including the effects and potential effects of the current and
likely ongoing economic impact caused by the Coronavirus pandemic.
The Board is satisfied with the operational resilience of service
providers despite COVID-19 and continues to monitor their performance
throughout the pandemic.
In light of the testing carried out, the liquidity of the level
1 assets held by the Company and the significant net asset value
position, and despite the net current liability position of the
Group and Parent Company (which could be mitigated by the sale
of liquid level 1 investments), the Directors are satisfied that
the Company and Group have adequate financial resources to continue
in operation for at least the next 12 months following the signing
of the financial statements and therefore it is appropriate to
adopt the going concern basis of accounting.
The Group and Company financial statements are expressed in Sterling,
which is their functional and presentational currency. Sterling
is the functional currency because it is the currency of the primary
economic environment in which the Group operates. Values are rounded
to the nearest thousand pounds (GBP'000) except where otherwise
indicated.
2 Investment income
Year ended
31 March Year ended
2021 31 March
(unaudited) 2020
GBP'000 GBP'000
-------------------------------------------------------------------------------- ---------------- ---------------
Dividends from UK listed investments 3,753 4,911
Dividends from overseas listed investments 18,656 26,631
Scrip dividends from listed investments 7,482 3,370
Property income distributions 6,666 12,200
------------------------------------------------------------------------------------- ---------------- ---------------
36,557 47,112
------------------------------------------------------------------------------------- ---------------- ---------------
3. Earnings/(loss) Per Share
Earnings/(loss) per Ordinary share
The earnings/(loss) per Ordinary share can be analysed between
revenue and capital, as below:
Year ended
31 March Year ended
2021 31 March
(unaudited) 2020
GBP'000 GBP'000
-------------------------------------------------------------------------------- ---------------- ---------------
Net revenue profit 38,889 46,394
Net capital profit/(loss) 195,520 (194,401)
------------------------------------------------------------------------------------- ---------------- ---------------
Net total profit/(loss) 234,409 (148,007)
------------------------------------------------------------------------------------- ---------------- ---------------
Weighted average number of
shares in issue during the
year 317,350,980 317,350,980
------------------------------------------------------------------------------------- ---------------- ---------------
pence pence
-------------------------------------------------------------------------------- ---------------- ---------------
Revenue earnings per share 12.25 14.62
Capital earnings/(loss) per
share 61.61 (61.26)
------------------------------------------------------------------------------------- ---------------- ---------------
Earnings/(loss) per Ordinary
share 73.86 (46.64)
------------------------------------------------------------------------------------- ---------------- ---------------
The Group has no securities in issue that could dilute the return
per Ordinary share. Therefore the basic and diluted return per
Ordinary share are the same.
4 Net Asset Value Per Ordinary Share
Net asset value per Ordinary share is based on the net assets attributable
to Ordinary shares of GBP1,326,433,000 (2020:
GBP1,136,453,000) and on 317,350,980 (2020: 317,350,980) Ordinary
shares in issue at the year end.
5 Share capital changes
During the year, the Company made no market purchases for cancellation
of Ordinary shares of 25p each (2020: none).
Since 1 April 2021 no Ordinary shares have been purchased and cancelled.
6 Status of preliminary announcement
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2021
or 2020. The financial information for 2020 is derived from the
statutory accounts for 2020 which have been delivered to the registrar
of companies.
The auditor has reported on the 2020 accounts; their report was
(i) unqualified, (ii) contained an emphasis of matter paragraph
in respect of the valuation of direct property investments, as
the independent external valuations for the property investments
were reported on the basis of 'material valuation uncertainty'
due to the potential economic effect of the Coronavirus pandemic.
(iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The auditor's report for the statutory accounts for 2021 is not
expected to contain an emphasis of matter paragraph. The statutory
accounts for 2021 will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement
and will be delivered to the registrar of companies in due course.
7 Fair value of financial assets and financial liabilities
Financial assets and financial liabilities are carried in the Balance
Sheet either at their fair value (investments) or the balance sheet
amount is a reasonable approximation of fair value (due from brokers,
dividends and interest receivable, due to brokers, accruals and
cash at bank).
Fair value hierarchy disclosures
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in an active market for identical
assets.
Level 2 - valued by reference to valuation techniques using observable
inputs other than quoted prices within Level 1.
Level 3 - valued by reference to valuation techniques using inputs
that are not based on observable market data.
The valuation techniques used by the Group are explained in the
accounting policies in notes 1 (f) and 1 (g) in the full Annual
Report and Accounts.
The table below sets out fair value measurements using IFRS 13
fair value hierarchy.
Financial assets/(liabilities) at fair value through profit or
loss
Level 1 Level 2 Level 3 Total
At 31 March 2021 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- --------- ----------
Equity investments 1,315,977 - 1,468 1,317,445
Investment properties - - 83,071 83,071
Contracts for difference - (141) - (141)
Foreign exchange forward
contracts - (1,107) - (1,107)
------------------------------ ---------- --------- --------- ----------
1,315,977 (1,248) 84,539 1,399,268
------------------------------ ---------- --------- --------- ----------
Level 1 Level 2 Level 3 Total
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- --------- ----------
Equity investments 1,060,103 - 682 1,060,785
Investment properties - - 94,510 94,510
Contracts for difference - 8,698 - 8,698
Total return swap - (3,808) - (3,808)
Foreign exchange forward
contracts - (5,609) - (5,609)
------------------------------ ---------- --------- --------- ----------
1,060,103 (719) 95,192 1,154,576
------------------------------ ---------- --------- --------- ----------
The table above represents the Group's fair value hierarchy. The
Company's fair value hierarchy is identical except for the inclusion
of the fair value of the investment in Subsidiaries which at 31
March 2021 was GBP43,312,000 (2020: GBP50,429,000). These have
been categorised as level 3 in both years. The movement in the
year of GBP7,117,000 (2020: GBP13,000) is the change in fair value
in the year, which includes a distribution from a subsidiary company
of GBP6,435,000 and the release of a corporation tax provision
of GBP348,000 in a subsidiary company. The total financial assets
at fair value for the Company at 31 March 2021 was GBP1,443,828,000
(2020: GBP1,214,422,000).
Reconciliation of movements in financial assets categorised as
level 3
As at 31 March 2021 (unaudited)
31 March Appreciation/ 31 March
2020 Purchases Sales (Depreciation) 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unlisted equity
investments 682 - - 786 1,468
------------------------ --------- ---------- ---------- ---------------- ---------
Investments properties
-Mixed use 52,623 315 (303) (4,658) 47,977
-Office & Industrial 41,887 150 (10,000) 3,057 35,094
------------------------ --------- ---------- ---------- ---------------- ---------
94,510 465 (10,303) (1,601) 83,071
------------------------ --------- ---------- ---------- ---------------- ---------
95,192 465 (10,303) (815) 84,539
------------------------ --------- ---------- ---------- ---------------- ---------
All appreciation/(depreciation) as stated above relates to movements
in fair value of unlisted equity investments and investment properties
held at 31 March 2021.
The Group held one unquoted investment at the year end.
Transfers between hierarchy levels
There were no transfers during the year between any of the levels.
Key assumptions used in value in use calculations are explained
in the accounting policies in the full Annual Report and Accounts.
8 Business segment reporting
Gross
revenue Gross
31 March revenue
Valuation
31 March
Valuation Net appreciation/ 2021 2021 31 March
31 March Net additions/
2020 (disposals) (depreciation) (unaudited) (unaudited) 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- --------------- ------------------ -------------- -------------- -----------
Listed
investments 1,060,103 58,477 197,397 1,315,977 36,403 46,964
Unlisted
investments 682 - 786 1,468 154 148
Contracts
for
difference 8,698 (26,817) 17,978 (141) 3,320 5,724
Total return
swap (3,808) 3,996 (188) - - -
------------- ---------- --------------- ------------------ -------------- -------------- -----------
Total
investments
segment 1,065,675 35,656 215,973 1,317,304 39,877 52,836
Direct
property
segment 94,510 (9,838) (1,601) 83,071 4,236 5,201
------------- ---------- --------------- ------------------ -------------- -------------- -----------
1,160,185 25,818 214,372 1,400,375 44,113 58,037
------------- ---------- --------------- ------------------ -------------- -------------- -----------
In seeking to achieve its investment objective, the Company invests
in the shares and securities of property companies and property
related businesses internationally and also in investment property
located in the UK. The Company therefore considers that there are
two distinct reporting segments, investments and direct property,
which are used for evaluating performance and allocation of resources.
The Board, which is the principal decision maker, receives information
on the two segments on a regular basis. Whilst revenue streams
and direct property costs can be attributed to the reporting segments,
general administrative expenses cannot be split to allow a profit
for each segment to be determined. The assets and gross revenues
for each segment are shown above.
The property costs included within the Group Statement of Comprehensive
Income are GBP1,321,000 (2020: GBP1,984,000) and deducting these
costs from the direct property gross revenue above would result
in net income of GBP2,915,000 (2020: GBP3,217,000) for the direct
property reporting segment.
9 Dividends
An interim dividend of 5.20p was paid in January 2021. A nal dividend
of 9.00p (2020: 8.80p) will be paid on 4 August 2021 to shareholders
on the register on 18 June 2021. The shares will be quoted ex-dividend
on the 17 June 2021.
10 Annual Report and AGM
The Annual Report will be posted to shareholders in June 2021 and
will be available thereafter from the Company Secretary at the
Registered Office, 11 Hanover Street, London, W1S 1QY.
The Annual General Meeting of the Company will be held in July
2021.
This announcement and the information contained herein is not
for publication, distribution or release in, or into, directly or
indirectly, the United States, Canada, Australia or Japan and does
not constitute, or form part of, an offer of securities for sale in
or into the United States, Canada, Australia or Japan.
The securities referred to in this announcement have not been
and will not be registered under the U.S. Securities Act of 1933,
as amended (the "Securities Act") and may not be offered or sold in
the United States unless they are registered under the Securities
Act or pursuant to an available exemption therefrom. The Company
does not intend to register any portion of securities in the United
States or to conduct a public offering of the securities in the
United States. The Company will not be registered under the U.S.
Investment Company Act of 1940, as amended, and investors will not
be entitled to the benefits of that Act.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the
securities referred to herein in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to
registration, exemption from registration or qualification under
the securities law of any such jurisdiction.
The contents of this announcement include statements that are,
or may be deemed to be "forward-looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "may", "will" or
"should". They include the statements regarding the target
aggregate dividend. By their nature, forward-looking statements
involve risks and uncertainties and readers are cautioned that any
such forward-looking statements are not guarantees of future
performance. The Company's actual results and performance may
differ materially from the impression created by the
forward-looking statements. The Company undertakes no obligation to
publicly update or revise forward-looking statements, except as may
be required by applicable law and regulation (including the Listing
Rules). No statement in this announcement is intended to be a
profit forecast.
For further information please contact:
Marcus Phayre-Mudge
Fund Manager
TR Property Investment Trust plc
Telephone: 020 7011 4711
Reg Hoare and Florence Mayo
ENGINE MHP
Telephone: 020 3128 8572
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END
FR AFMMTMTTTTFB
(END) Dow Jones Newswires
May 27, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Tr Property Investment (LSE:TRY)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Tr Property Investment (LSE:TRY)
Storico
Da Apr 2023 a Apr 2024
