TIDMEBOX TIDMBOXE
RNS Number : 3193N
Tritax EuroBox PLC
19 May 2020
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
19 May 2020
Tritax EuroBox plc
(the "Group" or the "Company")
HALF YEAR RESULTS FOR THE SIX-MONTHSED 31 MARCH 2020
Tritax EuroBox plc (ticker: EBOX (Sterling) and BOXE (Euro)),
which invests in a high-quality portfolio of very large, prime
logistics real estate assets strategically located across
continental Europe, is today reporting its half year results for
the Group for the six-months ended 31 March 2020.
Financial h ighlights
31 March 2020 30 September Increase
2019 / (Decrease)
18.5%
Investment properties EUR816.3m EUR689.1m(1) (2)
Basic NAV per share EUR1.16 EUR1.13 2.7%
EPRA NAV per share EUR1.19 EUR1.15 3.5%
Weighted average unexpired 9.7 yrs 11.0 yrs (1.3)
lease term yrs
Loan to value (LTV) 41.8% 33.3% 8.5 pts
31 March 2020 31 December Increase
2018 / (Decrease)
Dividend per share 2.20cents 0.40cents
IFRS earnings per share 5.32 cents 2.29 cents
EPRA earnings per share 1.76 cents 0.63 cents
Adjusted earnings per share 2.25cents 0.48cents
(3)
(13.3)
Dividend cover 102.1% 115.4% pts
(7.4)
EPRA cost ratio 30.2% 37.6% pts
Total return for six months 5.7% 1.0% 4.7 pts
Robert Orr, Chairman of Tritax EuroBox plc, commented:
"The Company had a positive six months, notwithstanding the
outbreak of the COVID-19 pandemic in Europe in the final weeks of
the period. We continued to implement our strategy successfully and
delivered financial performance in line with our expectations. We
believe that the long-term structural trends that are driving
demand for logistics space remain compelling, and that changes in
consumer and corporate behaviour as a result of the pandemic should
further support occupier demand for large logistics assets. Our
balance sheet remains robust and we can take further reassurance
from the expected future cashflows from the portfolio.
The logistics sector in Europe is well-placed to thrive and we
have constructed a resilient business, with first-class assets in
excellent locations, financially strong tenants and a robust
balance sheet, making us well placed to weather the economic
disruption arising from COVID-19. Our close relationships with all
our tenants and the asset management opportunities embedded within
the portfolio should underpin continued growth in income and
capital values. We remain confident that our platform is scalable
and is underpinned by a strong and flexible capital structure."
Operational highlights: A well-positioned, high-quality
portfolio
-- Portfolio now comprises 12 assets in prime logistics
locations. We believe the average size of nearly 76,000 sqm is the
largest in the sector and a key differentiator for the Company,
given strong occupier demand and limited supply of assets of this
size
-- Strong, well-diversified base of 21 tenant partners, 80% of
whom are multi-billion Euro turnover businesses
-- Independent valuation of the portfolio of EUR819.4 million(4)
as at 31 March 2020 (30 September 2019: EUR691.7 million),
reflecting a like-for-like uplift of 2.6% in the period
-- Acquired two prime logistics assets totalling nearly 124,000
sqm in the period, for an aggregate cost of EUR104 million(5)
-- Leased vacant space at Bochum, Germany, and agreed an 88,000
sqm future extension to the property in Barcelona, Spain, enhancing
income and capital values
-- Sold a 16,400 sqm plot of non-core development land at
Bornem, Belgium, for EUR2.3 million, at a price 53% ahead of the
latest valuation (realising a profit of EUR0.8 million)
-- Further asset management activity is expected across the
portfolio including agreeing pre-let developments on a number of
zoned plots of unused land and further leasing of unoccupied space
(currently subject to rental guarantees) in Breda, Netherlands and
Strykow,Poland
-- Weighted average unexpired lease term of 9.7 years at 31
March 2020 (30 September 2019: 11 years)
-- 100% of assets are income producing(6)
-- 95% of rental income subject to an element of indexation.
-- Shares included in FTSE EPRA/NAREIT Global Real Estate Index
Series with effect from 23 March 2020
Financial highlights: well capitalised with a strong balance
sheet
-- Dividends declared in respect of the period of 2.20 cents, 102.1% covered by Adjusted EPS
-- Portfolio had a contracted annualised passing rent of EUR40.5 million as at 31 March 2020
-- All rent due over the period 1 October 2019 to 31 March 2020 has been collected
-- Debt of EUR356.5 million at 31 March 2020, giving headroom
within debt facilities of EUR68.5 million.
-- Group had EUR37.1 million of cash at the period end
-- Loan to value ("LTV") ratio of 41.8%(7) at 31 March 2020,
against the Company's medium-term target of 45% and well below
covenant limit
-- Four of the Company's five lenders approved a one year
extension of the revolving credit facility in the period, resulting
in EUR325 million of debt maturing in 2024 and EUR100 million
maturing in 2023, a weighted average maturity of 4.3 years
Current trading and outlook
Supportive market conditions: The long-term drivers of our
market remain in our favour, and we expect them to strengthen
further. We believe that the COVID-19 pandemic has stimulated
change in consumer shopping habits and will accelerate the adoption
of e-commerce platforms as consumers in continental Europe
increasingly shop online. The impact of the pandemic has further
highlighted the need for occupiers to have robust, flexible supply
chains and emphasised the importance of operating in prime
sustainable, well-located buildings.
We believe that both of these effects will drive demand for
large-scale, often automated, logistics space as occupiers seek to
strengthen their supply chain resilience and increase inventory
capacity to reduce future potential disruptions.
Robust rent collection: We continue to support tenants, where
appropriate to moderate the impact of COVID-19 on their businesses.
As at 12 May 2020, we have agreed to allow four tenants to defer
payments. All of this rent will be repaid in full on agreed payment
plans. The amount deferred beyond Financial Year 2020 represents
3.9% of the Company's annualised rental income, whilst short term
deferrals represent 2.9%.
Well-capitalised balance sheet: We have maintained a disciplined
approach to managing our balance sheet, given the lack of
visibility on the depth or duration of the crisis. The Company has
access to around EUR69 million of further drawings under the
existing unsecured revolving credit facility as well as cash
reserves of around EUR37 million.
Strong income profile: The financial strength of our tenants and
the length of leases through which they occupy our assets, further
underpinned by the high quality of the assets in prime locations,
allows us to remain confident about the income generation
capability of our portfolio. Nearly all (95%) of the Company's
rental income benefits from annual indexation increases. It remains
our intention to continue to grow dividends, supported by our
active leasing programme and predictable indexed rents.
Carefully selected portfolio with embedded value: We remain
confident that our disciplined investment selection and active
management will lead to unlocking further asset management
opportunities from our portfolio. This will underpin growth in
income and capital value to our shareholders. These initiatives are
supported by strong occupational markets which result in continued
interest in the Company's limited number of vacant units. Our focus
remains on the largest logistics assets, where we believe rental
growth will be strong and sustained. These initiatives are
supported by strong occupational markets which result in continued
interest in the Company's vacant units. Our focus remains on the
largest logistics assets, where we believe rental growth will be
strong and sustained.
Notes
(1) Includes held for sale assets
(2) Like-for-like increase of 2.6%
(3) See note 7 of the Interim financial statements for
reconciliation
(4) Including rental guarantees
(5) This excludes the capitalised acquisition costs
(6) Including licence fee income and rental guarantees
(7) As per KPI definition
FOR FURTHER INFORMATION, PLEASE CONTACT:
Tritax Group +44 (0) 20 7290 1616
Nick Preston
Mehdi Bourassi
Jefferies International Limited +44 (0) 20 7029 8000
Stuart Klein
Tom Yeadon
Kempen & Co +31 (0) 20 348 8500
Dick Boer
Thomas ten Hoedt
Akur Limited +44 (0)20 7493 3631
Anthony Richardson
Tom Frost
Siobhan Sergeant
Maitland/AMO (Communications
Adviser) +44 (0) 20 7379 5151
James Benjamin tritax-maitland@maitland.co.uk
The Company's LEI is: 213800HK59N7H979QU33.
NOTES:
Tritax EuroBox plc invests in and manages a well-diversified
portfolio of well-located continental European logistics real
estate assets that are expected to deliver an attractive capital
return and secure income to shareholders . These assets fulfil key
roles in the logistics and distribution supply-chain focused on the
most established logistics markets and on the major population
centres across core Continental European countries.
Occupier demand for continental European logistics assets is in
the midst of a major long-term structural change principally driven
by the growth of e-commerce. This is evidenced by technological
advancements, increased automation and supply-chain optimisation,
set against a backdrop of resurgent economic growth across much of
continental Europe.
The Company is targeting, on a fully invested and geared basis,
an initial Ordinary Share dividend yield of 4.75% p.a. (1) , which
is expected to increase progressively through regular indexation
events inherent in underlying lease agreements, and a total return
on the Ordinary Shares of 9.0% p.a. (1) over the medium-term. The
Company intends to pay dividends on a quarterly basis with
shareholders able to receive dividends in Sterling or Euro.
Further information on Tritax EuroBox plc is available at
www.tri taxeurobox.co.uk
1 Euro denominated returns, by reference to IPO issue price.
These are targets only and not profit forecasts. There can be no
assurances that these targets will be met and they should not be
taken as indications of the Company's expected or actual future
results.
COMPANY PRESENTATION FOR INVESTORS AND ANALYSTS
A live Company presentation of of the results presentation will
take place via a live webcast and conference call from 09:00 (UK
time).
For those who wish to access the live webcast, please register
here:
https://www.investis-live.com/tritaxeurobox/5ea856601e16cc0a00adc690/oyrd
For those who wish to access the live conference call facility,
please use the following numbers:
Dial-in: United Kingdom 0800 640 6441
Dial-in: United Kingdom (Local) 020 3936 2999
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Dial-in: All other locations +44 20 3936 2999
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Access code: 358465
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Participants will be greeted by an operator who will register
their details.
On demand recording later in the day
The recording of the Company presentation with slides will be
available for replay on demand at Tritax EuroBox's website at:
https://www.tritaxeurobox.co.uk/investors/results-centre/ by the
close of business.
The Interim Report and Accounts will today be available on the
Company's website at www.tri taxeurobox.co.uk . In accordance with
Listing Rule 9.6.1, copies of these documents will also be
submitted today to the UK Listing Authority via the National
Storage Mechanism and will be available for viewing shortly at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
CHAIRMAN'S STATEMENT
This was a positive six months for the Company, notwithstanding
the outbreak of the COVID-19 pandemic in the final weeks of the
period. We continued to implement our strategy successfully and
delivered a financial performance in line with our expectations.
Since the pandemic took hold, our priority has been ensuring the
health and wellbeing of our stakeholders and intensifying the close
communication with our tenant partners, to understand the impact on
them.
We believe that the long-term trends that are driving demand for
logistics space remain compelling and that changes in consumer and
corporate behaviour as a result of the pandemic should further
accelerate occupier demand for large logistics assets, while
restricting new supply in the short term. We have constructed a
resilient business, with first-class assets in excellent locations,
strong tenant covenants and a robust balance sheet, making us well
placed to weather the economic disruption arising from
COVID-19.
Implementing the investment strategy
The Company acquired two high-quality assets during the period.
We bought our first property in the Netherlands, which is the
logistics gateway to Europe. This newly developed asset is located
between the major North Sea ports of Antwerp and Rotterdam, in an
area with strong occupier demand. Two of the four units on the site
are let to Abbott Logistics, part of US-listed life science company
Abbot Laboratories. We also acquired an asset in a prime location
in Strykow near Lodz, Poland, comprising two modern logistics units
and development land. The existing tenants include Arvato, part of
the German Bertelsmann Group, which provides logistics services to
H&M from the building. These initiatives are supported by
strong occupational markets which result in continued interest in
the Company's limited number of vacant units. Our focus remains on
the largest logistics assets, where we believe rental growth will
be strong and sustained.
The acquisitions mean that at the period end, the portfolio
comprised 12 prime logistics assets across continental Europe,
giving us exposure to Germany, Italy, Poland, Spain, Belgium and
the Netherlands. The average property size is 76,000 sqm, which we
believe is the largest in the sector. This is an important
differentiator for us, given that across the market there is strong
tenant demand and constrained supply of the very large assets of
the type we own. These very large, often automated, properties act
as the nucleus of the occupier's supply chain. They typically
benefit from significant capital expenditure and as a result
occupiers are prepared to commit to long leases.
At the period end, the portfolio benefited from contracted
annual rental income of EUR40.5 million and a weighted average
unexpired lease term of 9.7 years, giving us a significant,
long-term and growing income stream.
Extracting value from the portfolio
The Manager has continued to demonstrate its strong asset
management credentials, as it unlocks the value inherent in the
portfolio by leveraging its deep sector knowledge and close working
relationships with our tenant partners. During the period, we
signed an agreement with Mango to fund the extension of our
Barcelona property by 88,000 sqm in 2021. This gives us an
attractive yield on cost and will enhance the asset's income and
capital value. We also agreed a value-enhancing letting and a lease
restructure on improved terms at Bochum, Germany. Finally, we sold
a plot of land, unsuitable for large scale logistics development,
at our property at Bornem in Belgium for a significant profit over
acquisition cost and valuation.
There remain several attractive opportunities to add further
value by letting vacant units, currently under rent guarantees and
utilising unused or adjacent land within the portfolio. In
addition, indexation events embedded in the leases provide regular
compounding annual increases in income.
A favourable market
As noted above, we believe that our market remains favourable
for asset owners and the long-term structural changes we have seen,
such as the accelerating growth of e-commerce, will continue to
drive demand for the largest logistics assets. At the same time,
vacancy rates and the supply of new development sites for these
properties remain low across continental Europe. The supply
shortage is most acute in large format buildings benefiting from
strong transportation links and near densely populated areas. This
supply/demand imbalance has put upward pressure on rental levels
across our chosen markets.
COVID-19 is also likely to tighten the supply of large-scale
logistics space even further, at least in the near term. Developers
are now facing delays with completing construction of existing
projects and permissions for new developments are also being
delayed.
The response to COVID-19 is likely to increase demand for large
logistics assets in prime locations. During the pandemic, many
consumers have turned to online shopping for the first time,
particularly in Southern Europe which previously had seen low
e-commerce penetration, which should accelerate the ongoing shift
to e-commerce.
The pandemic has also highlighted the need for robust and
flexible supply chains and shown the importance of operating from
prime, well-located buildings. Companies may look to protect
themselves from future supply chain disruption by bringing
manufacturing back to Europe and by holding more inventory at a
national or regional level.
Debt financing and cash flow
The Company continues to operate with a prudent level of debt
finance, utilising our EUR425 million revolving credit facility
("RCF") provided by a syndicate of five banks. In November 2019,
four of our five banks agreed to extend the RCF by one year. As a
result, the maturity of our debt increased to an average of 4.3
years at the period end, with no debt maturing before 2023.
At 31 March 2020, we had drawn EUR356.5 million against the RCF,
giving a loan to value ("LTV") ratio of 41.8%(1) (30 September
2019: EUR235.5 million drawn and 33.3% LTV). This gives us
substantial headroom within our facility and we continue to operate
well within our covenants.
Approximately two-thirds of our tenant partners pay us monthly
in advance, with the remaining third paying quarterly, with due
dates spread throughout the periods. We have received all rents due
in respect of the period, and as at 30 April 2020 had agreed to
delay payment of EUR1.6 million or 15.7% of the April to June 2020
quarter's rent until 2021, with a further 3.4% of the quarter's
rent still under negotiation. The Company has the additional
security of 14 rental deposits and bank guarantees and seven parent
company guarantees across the portfolio.
Financial results
At the period end, the basic NAV attributable to owners of the
Company was EUR490.88 million or EUR1.16 per share (30 September
2019: EUR477.3 million or EUR1.13 per share). The EPRA NAV was
EUR502.97 million or EUR1.19 per share (30 September 2019: EUR484.2
million or EUR1.15 per share).
IFRS earnings per share ("EPS") was 5.32 cents and EPRA EPS was
1.76 cents. Adjusted EPS, which adjusts for non-cash items in the
income statement and includes rent guarantees and licence fees, was
2.25 cents. The Board considers Adjusted EPS to be the most
appropriate measure when considering dividend distributions.
Dividends and total returns
On 14 February 2020, we declared an interim dividend of 1.10
cents per share, in respect of the three months to 31 December
2019. We have today declared a second interim dividend for the
period of 1.10 cents per share, which will be paid on or around 15
June 2020, to shareholders on the register as at 29 May 2020. The
dividends declared in respect of the first half year therefore
totalled 2.20 cents per share and were fully covered by Adjusted
EPS. The total return for the period was 5.7%, putting us on track
for our full-year target of 9% per annum.
Our focus remains on progressively increasing the dividend once
there is more visibility on the effects of the crisis.
EPRA index inclusion
Having satisfied the eligibility criteria, the Company was added
to the FTSE EPRA/NAREIT Global Real Estate Index Series on 23 March
2020. This index series is widely followed by global real estate
investors and should help us to continue to broaden our shareholder
base and increase the liquidity of our shares.
Board and governance
We were delighted to welcome Eva-Lotta Sjöstedt as a
Non-Executive Director with effect from 10 December 2019. Her
appointment has further strengthened the Board, which now comprises
four independent Non-Executive Directors, including me as Chairman.
Eva-Lotta brings an in-depth knowledge of global retail, supply
chain and digital transformation strategy, which is already adding
value to the Board's discussions and decisions.
Current trading and outlook
The global spread of COVID-19 means we are in a period of
prolonged uncertainty. It is not possible to know how long the
pandemic will last or its impact on the global economy. Even so, we
are continuing to see good interest in our vacant units and are
having positive conversations with potential occupiers.
We have a well-diversified group of tenants and we are confident
they remain financially robust. The outbreak of the virus has
reinforced the importance of having strong tenant relationships and
through ongoing communication we are able to understand any
operational or cash flow impact on them and work collaboratively to
provide support and assistance where possible. The Manager's close
working relationships with our tenants has stood us in good stead
here.
All of our tenants continue to operate their properties,
although some are operating at reduced capacity due to lower
business volumes or government restrictions. This continued usage,
alongside the significant investment that our tenants have made in
our buildings, demonstrates that these are key operating assets for
their businesses, as well as being essential in providing the goods
and services that the underlying customers continue to require.
It is the strength and diversity of our occupier base and the
high quality of our portfolio that gives us continued confidence
regarding our ability to generate long-term income to pay dividends
to our investors.
In conclusion, since IPO we have constructed a resilient and
prudently financed business, underpinned by outstanding assets let
to strong tenant partners. Our market fundamentals remain
favourable and the Company is well-placed to negotiate the current
economic disruption. COVID-19 is likely to accelerate occupier
demand while further tightening supply, creating further upward
pressure on rents and demand from tenants for longer leases, so as
to secure their supply chains. We have identified an attractive
pipeline of acquisition opportunities, with the potential to
generate robust returns in the market conditions we expect to
prevail and look forward to executing on these opportunities when
conditions allow.
Robert Orr
Chairman
18 May 2020
Notes
1 As per the KPI definition
MANAGERS REPORT
A high-quality and growing portfolio
We acquire large, modern assets that provide highly flexible
warehouse space. This makes them attractive to a wide range of
occupiers, allowing them to configure the space to their needs,
adjust how they use it as their requirements change and accommodate
the latest automated technology. In a number of cases the assets we
have bought include plots of undeveloped land, allowing us to
accommodate the future growth of the occupiers.
BIG: 49%(1) of our assets are over 100,000 sqm. The average size
of our assets is 76,000sqm.
MODERN : 86%(1) of our portfolio has been built since 2016. The
average age of our assets is 3.5 years.
HIGHLY SPECIFIED: 45%(1) of our portfolio is automated, with the
remaining 55% being high-quality, flexible distribution space.
WELL LOCATED : 100%(1) of our portfolio is located in key
logistics locations within our target investment markets throughout
continental Europe.
(1) By value.
During the period, the Company made further good strategic
progress, growing the portfolio with two high-quality assets that
further diversify the portfolio by tenant and geography, and which
present several asset management opportunities. We also continued
to extract value from the existing portfolio, through various
property extension and leasing initiatives.
Strong market fundamentals continue The Company operates in a
market with strong fundamentals. While the dynamics of each country
in continental Europe are different, there are common themes of
rising occupational demand, constrained supply, growing rents and
improving lease terms. As noted in the Chairman's Statement, we
believe these trends will accelerate once the impact of the
COVID-19 pandemic is fully understood, and that investors in the
logistics sector may benefit from higher demand and tighter supply
as a result, positively impacting on returns.
Structural changes are driving occupational demand
To ensure the sustainability of their business models, logistics
property occupiers are responding to profound structural and
operational changes in their markets. In particular, they must
focus on meeting the needs of modern consumers, optimising their
supply chains to reduce costs and ensuring they occupy sustainable
assets that will be fit for purpose for many years to come.
Meeting the needs of modern consumers
Online sales are increasing rapidly in many continental European
countries. These trends have been prevalent in the US and UK for
many years and are now spreading rapidly across continental Europe.
Overall, the effect of these changes in Europe has lagged the UK
and US markets; however, we expect this gap to narrow more quickly
as a result of COVID-19.
The move to online shopping is one of the key drivers of
occupational demand for large logistics assets. Faced with the high
costs of occupying physical shops and rising online spending,
retailers are looking to consolidate their operations and have a
combined in-store and online "omnichannel" presence. We are already
seeing signs that the COVID-19 pandemic is accelerating this trend,
with many consumers, particularly older ones, trying e-commerce for
the first time as they cannot visit physical stores, creating new
converts to online shopping. The pandemic is also leading to
retailers reconsidering their physical shop portfolios, with stores
that were struggling prior to the pandemic potentially being
uneconomic to reopen. Retailers will therefore be increasingly
shifting to the omnichannel approach.
A sophisticated and modern supply chain is fundamental to the
success of the omnichannel model, with ever-increasing reliance on
very large, flexible, modern logistics properties enabling
retailers to offer consumers access to their entire product range
and then quickly, flexibly and cheaply deliver those orders and
manage returns. As consumers increasingly demand faster and more
flexible delivery, occupiers need larger, flexible, more efficient
properties that enable shorter throughput and the ability to add
capacity to grow their operations.
As an additional change to the way the omnichannel retail model
works, we see the contraction of shop portfolios and the final mile
distribution functions overlapping and merging. Post crisis we
expect that there will be even more redundant retail space that
lends itself to satisfying the demand for final mile delivery
solutions. We believe that final mile delivery is likely to
continue to evolve as supply chains, technology and consumer habits
alter.
Optimising supply chains
While online retail is a major driver of demand for the
logistics sector, many businesses find themselves with persistent
pressure on their supply chain overheads, making the efficiencies
and lower costs offered by large flexible logistics buildings
highly appealing.
As a result, occupiers are choosing to consolidate to fewer,
larger and more modern distribution assets. This provides them with
economies of scale and the opportunity to automate processes which
would not be possible in a number of smaller disparate properties,
helping them to improve their systems and reduce costs. Larger
units also tend to be taller, allowing for mezzanine floors and
more efficient automated racking and storage systems.
Another emerging impact of the COVID-19 pandemic is the
alteration of business supply chains, following the disruption seen
over the last few months. The reliance of many companies on the
"Just-in-Time" supply model, with long, complex supply lines, is
likely to reduce.
We understand that there is likely to be a renewed focus on
relocating production, manufacturing and assembly closer to Europe
from Asia, hence allowing more flexibility and control of shipping
and distribution. We also expect to see companies holding higher
levels of inventory, which will protect them from future supply
shocks and disruption.
The need for sustainable assets
Sustainability is increasingly central to our tenants' corporate
strategies, reflecting the potential cost savings, the desire to be
good corporate citizens and the need to respond to growing consumer
awareness of sustainability issues. By occupying assets built with
state-of-the-art design and materials, and which incorporate
low-carbon technologies and energy efficiency, they can minimise
their environmental footprint and optimise their use of natural
resources. Sustainable assets are also more attractive from an
investment perspective, offering lower obsolescence, lower running
costs and greater long-term appeal to occupiers and investors.
Supply remains constrained
In continental Europe, prime logistics locations are typically
close to densely populated conurbations.
There are comparatively few sites in these locations which can
accommodate very large logistics facilities and the associated
requirements for labour, power and transport links. Municipalities
are also often reluctant to zone for the largest properties,
instead preferring to consent for smaller unit development.
At the same time, the difficulty of acquiring suitable new land
for logistics means that many developers are exhausting their
logistics land banks. These factors, combined with a lack of
speculative development over the last decade, mean that occupiers
have few choices.
The consequence is that logistics vacancies in continental
Europe are at, or near, all-time lows.
European take-up and new completions
Take-up across Europe has been consistently strong since 2016,
averaging 21 million sqm per annum as companies adjust their supply
chains to adopt e-commerce. While the level of completions has
increased as occupiers seek logistics buildings with the quality
and standards to meet these operations, it has not kept up with the
level of demand.
Rental growth is evident
Strong occupier demand and constrained supply, combined with
rising land prices and raw material and labour costs, mean there is
pressure for rents to increase. Until recently, falling investment
yields meant developers could offset rising costs by selling the
finished property at a higher value. However, as rental multiples
in the sector plateau, developers are demanding higher rents to
maintain their profitability on projects.
Approximately only 10% of total operational costs are accounted
for by supply chain costs, and industry-standard metrics indicate
that only 0.75% of total operational costs are logistics real
estate occupancy (source: Savills). We believe, therefore, that
occupiers have capacity to absorb higher rental costs as the
economies and associated efficiency benefits, such as lower
transportation costs, ensure that higher rental levels are
sustainable in the longer term.
Improving lease terms
Another important effect now evident in some European markets is
the improvement of lease terms in favour of the property owner. In
most of Europe it is usual for there to be occupier-friendly lease
clauses, such as restricted indexation provisions, expenditure
which must be met by the landlord and options to renew leases on
terms favourable to the occupier. Leases have also been relatively
short, with a typical length of five years.
However, with strong demand for strategically important assets,
occupiers are increasingly keen to retain long-term control of
their properties, particularly given their often substantial
investment in fitting out and automation. They are therefore
signing longer leases to secure their occupation and amortise these
costs over a longer period. Longer leases also suit international
companies who want to harmonise their lease obligations across
geographies. The trend to longer leases is evidenced by our
portfolio, which has a weighted average unexpired lease term
(WAULT) of 9.7 years.
This move towards longer leases is also expected to be
reinforced after the COVID-19 crisis, as companies look to further
secure their supply chains.
We are also increasingly able to negotiate better indexation
clauses and more advantageous renewal options. These improvements
in lease terms help to improve the value of the assets.
Investment demand is robust
The dynamics of the occupational market, despite any short-term
COVID effects, mean that investment demand is strong and looks set
to remain so. Competition has been fierce for openly marketed
opportunities, so effective sourcing requires a different strategy,
acquiring suitable assets directly from sellers. We expect a period
of stability as the impact of the COVID-19 crisis is absorbed, and
once investor confidence has been restored, we expect the positive
sentiments surrounding the logistics markets to lead to renewed
investment activity in the logistics sector.
European Logistics Offer Significant Yield Premium
Q1 2020 prime logistics yields remained stable across most
markets. Despite continually falling yields in the logistics sector
over the past years, these yields have maintained a constant yield
premium over the risk-free European bond yield.
Hand picking a high-quality and well-diversified portfolio
During the period, we strengthened the Company's portfolio with
the addition of two investments, at an aggregate cost of EUR104
million. We continued to exercise strong capital discipline, with
these acquisitions having an average net initial yield of 5.3% and
an average unexpired lease term of 4.5 years. Following these
acquisitions, the Company has now substantially invested its
available equity and debt capital. Since IPO, the Company has
invested EUR772.9 million to acquire its portfolio of 12 prime
income-producing assets.
Both the assets acquired in the period were classified as
Value-Add, reflecting the asset management opportunities they
present through leasing vacant units and developing unused
land.
The property at Breda was our first acquisition in the key
logistics market of the Netherlands. The second asset, in Poland,
is in the core logistics location of Strykow, near Lodz.
When properties are acquired with vacant space, the Company aims
at negotiating a rental guarantee to compensate for the lack of
income, this may be either cash or non-cash. In the cases where a
purchase of a property includes cover for a vacant period by way of
a rental guarantee, the rental guarantee is recognised within
Adjusted Earnings in line with our income focused strategy.
At the period end, in line with its investment strategy, the
Company's portfolio was well diversified by building size and
tenant, with assets situated in the core European countries of
Belgium, Germany, Italy, the Netherlands, Poland and Spain.
The portfolio has several attractive characteristics.
Modern
The portfolio has several attractive characteristics. The assets
are modern, with 86% (by income) of the portfolio having been built
in the last four years. This helps to ensure that the buildings
meet the latest operational and sustainability needs of
occupiers.
Large
Significantly, the assets are large, with nearly 50% of the
portfolio (by income) being in excess of 100,000 sqm and an average
size of nearly 76,000 sqm.
As noted in the Chairman's Statement, we believe this is the
largest average size in our sector and is an important advantage
for the Company, given that occupier demand for logistics space is
concentrated on these very large units and on the smaller "last
mile" facilities, with lower demand for mid-sized boxes.
Income
The portfolio has been constructed to deliver secure, long-term
and growing income. Around three quarters of the Company's 21
tenant partners are multi-billion Euro businesses, including some
of the world's best-known companies. These businesses have strong
balance sheets, helping them to navigate difficult economic
circumstances, and they operate in a wide range of different
industries.
The portfolio income is also secured on long leases. Nearly 90%
of income is secured for five years or more, resulting in a
weighted average unexpired lease term at the period end of 9.7
years, well ahead of the minimum targeted by the Company of five
years. The unexpired lease terms at the period end ranged up to
16.7 years.
Some 95% of the Company's rent includes an element of annual
indexation, with rental uplifts being either fixed or indexed to
local inflation, thus offering the regular compounding of income
that supports the Company's dividend growth policy.
We also look for opportunities to capture market rental growth,
which we expect to exceed indexation, through asset management
initiatives.
Secure and diverse
income(1)
1. Mango 19%
---------------------------- ----
2. Amazon 15%
---------------------------- ----
3. Action 10%
---------------------------- ----
4. Castorama 8%
---------------------------- ----
5. Cummins 8%
---------------------------- ----
6. ID Logistics 6%
---------------------------- ----
7. Avarto 5%
---------------------------- ----
8. Hanseatische Immobilien 4%
---------------------------- ----
9. HAVI 3%
---------------------------- ----
10. Abbott 3%
---------------------------- ----
Long-term income(1)
1. <5 years 13%
---------------- ----
2. 5-10 years 48%
---------------- ----
3. 10-15 years 20%
---------------- ----
4. >15 years 19%
---------------- ----
1 By Value
Growing income(2)
1. Fixed 23%
----------------- ----
2. Index Linked 71%
----------------- ----
3. No Uplift 6%
----------------- ----
(2) By Income
CAPTURING EMBEDDED VALUE
When sourcing acquisitions for the Company, we look favourably
on assets that have embedded value creation potential, for example
through leasing activity or utilising unused or adjacent land. We
work proactively with the Company's tenants to secure initiatives
that drive rental income and capital values, supporting the
Company's delivery of secure long-term income and an attractive
total return.
Land sale
During the period, we completed the sale of a 16,400 sqm plot of
non-core development land at Bornem, Belgium. This plot sat outside
our core strategy, as it is better suited to smaller industrial
unit development rather than large-scale logistics development. The
sale receipt reflected a 53% net increase on the latest
valuation.
Leasing opportunities
In January 2020, the Company completed a lease on the vacant
unit of 8,335 sqm at its property in Bochum, Germany. The new lease
is for a five-year term from 1 February 2020, at a headline rent
which is some 7% higher than the previous rental guarantee and the
passing rent at the neighbouring units, now demonstrating both the
rental growth evident in this market and the reversionary potential
of the remainder of the building. The lease contains attractive
indexation provisions, with full annual indexation reflecting 100%
of the German Consumer Price Index. The lease also further
diversifies the Company's tenant base, adding Recht Logistik GmbH,
an established German logistics and transportation company based in
Nord Rhein Westphalia. The Bochum asset is now fully let.
As noted earlier, the Company has vacant space at both the
assets acquired during the period in Breda and Strykow, and sees
further value creation potential from leasing these units, which
are currently subject to rental guarantees.
Expansion opportunities
In November 2019, the Company agreed to fund an 88,000 sqm
extension to its global distribution centre at Lliçà d'Amunt,
Barcelona, let to Mango, one of the world's leading fashion
retailers. The capital commitment is estimated at EUR30.5 million
and will generate an attractive yield on cost.
We expect construction to start no sooner than Autumn 2021, once
all necessary permissions have been obtained and in line with
Mango's strategic objectives and development programme. The
extension forms part of accommodating the continued growth of
Mango's global e-commerce operations, which is expected to further
increase post COVID-19, combining the in-store and online
fulfilment functions, increasing this facility's gross internal
area to over 274,000 sqm.
On practical completion, which is targeted for Spring 2023, the
extension will be incorporated into the existing full repairing and
insuring lease that started in December 2016 on a 30-year term. The
unexpired lease term on completion of the extension will be
approximately 14 years to the first tenant break option in 2036,
with further break options in 2039 and 2042. The rent is subject to
annual upward-only indexation.
As part of the extension agreement, the Company and Mango will
work together to optimise and reduce energy consumption within the
existing building and the extension, to improve the property's
environmental performance. The extension will therefore help to
future-proof this high-specification asset, as well as improving
rental income and its capital value.
Further asset management activity is expected across the
portfolio, including agreeing pre-let developments on a number of
zoned plots of unused land. These include the development land
acquired with the asset at Strykow, Poland, where there is the
potential to invest EUR15.0 million to fund the construction of a
building with a gross internal area of approximately 22,400 sqm.
The Company has entered into a funding agreement with the vendor to
bring forward this development.
In Belgium, assets at Bornem and Rumst have over 60,000 sqm of
zoned land with potential to develop approximately a further 28,000
sqm of warehouse space.
In total, the pre-let development initiatives identified within
the portfolio could add up to EUR6.1 million of annual income over
the medium term.
Our big responsibility
Sustainability is increasingly central to our tenants' corporate
strategies. We are committed to minimising the Company's
environmental impact, while enhancing the lives of those who work
in the Company's buildings and live in the surrounding communities.
The Company therefore aims to own assets that are environmentally
sustainable and promote healthy lives. Table 1 below shows the
sustainability and energy performance rating of the assets.
Sustainable buildings are important to us and to our tenants as
the lower required capex and lower energy consumption due to
sustainable building materials not only improves our ecological
footprint, but also will result in higher returns in the
future.
During the period, we have continued to enhance the portfolio's
sustainability performance. Examples include:
-- agreeing a sustainable refurbishment and extension at the
Barcelona asset let to Mango (see above);
-- progressing with 4,193 mWh of renewable energy generation at
4 assets, following an assessment of the entire portfolio for the
feasibility of installing photovoltaic panels;
-- progressing LED lighting upgrades at Rumst A and B; and
-- installing two electric car charging stations, a solar
carport for power generation and energy controlling at the asset
let to HAVI Logistics in Wunstorf, Germany.
As a result of our activities, 77% of the portfolio now has LED
lighting.
We have also introduced nature and wellbeing measures at 64% of
the portfolio. During the period, we installed a kestrel pole at
Wunstorf for natural rodent control, as well as introducing
beehives and a pool of bicycles for employees, so they could leave
their cars at home.
Sustainability certified assets within our portfolio
Environmental legislative frameworks and EPC policies vary
significantly across Europe. For example, currently Poland do not
use a rating system and Belgium doesn't have legislation in place.
However, we have good energy performance across the portfolio, as
well as high Building Certifications in BREEAM and DGNB
demonstrating the strong sustainability credentials of our
assets.
Table 1
Country Property Tenant Green Building Certificate
------------ ------------ ------------- ---------------------------
Spain Barcelona Mango EPC A
------------ ------------ ------------- ---------------------------
Italy Rome Amazon BREEAM Very Good
------------ ------------ ------------- ---------------------------
Belgium Bornem Various None
------------ ------------ ------------- ---------------------------
Belgium Rumst Cummins None
------------ ------------ ------------- ---------------------------
Germany Peine Action DGNB Gold
------------ ------------ ------------- ---------------------------
Germany Bochum Various In progress
------------ ------------ ------------- ---------------------------
Germany Wunstorf Havi DNBG Gold
------------ ------------ ------------- ---------------------------
Poland Lodz Castorama None
------------ ------------ ------------- ---------------------------
Germany Hammersbach ID Logistics In progress
------------ ------------ ------------- ---------------------------
Germany Bremen Various DGNB Gold
------------ ------------ ------------- ---------------------------
Poland Strykow Various None
------------ ------------ ------------- ---------------------------
Netherlands Breda Abbott BREEAM Very Good
------------ ------------ ------------- ---------------------------
Portfolio valuation
The portfolio was independently valued by JLL as at 31 March
2020, in accordance with the RICS Valuation - Global Standards. The
portfolio's total value at the period end was EUR819.4 million(1)
(30 September 2019: EUR691.7 million). This reflected a
like-for-like valuation increase of 2.6% during the period. In line
with market practice since the COVID-19 outbreak, the valuer's
report noted material uncertainty relating to property valuations
in the current environment. This uncertainty can arise from
difficulties with inspecting properties due to the outbreak or
reduced access to evidential data, such as comparable transactions.
While all property valuations necessarily incorporate some
uncertainty, the COVID-19 outbreak is unprecedented, and its full
impact is not yet clear.
This valuation is calculated after an assumed EUR15.38 million
of real estate transaction tax ("RETT"), which would arise if the
assets were sold outside a corporate structure. It is market
practice in Europe to buy and sell assets such as these via a
corporate structure, in which case some or all of the RETT
attributed to the portfolio would not be payable.
(1) Including rental guarantees
Debt financing
The Company has a EUR425 million revolving credit facility
("RCF") provided by a group of five lenders - HSBC, BNP Paribas,
Bank of America Merrill Lynch, Bank of China and Banco de Sabadell.
During the period, four of the five lenders agreed to a one-year
extension of the facility. As a result, EUR100 million of debt
matures in 2023, with the remaining EUR325 million now maturing in
2024. The facility is unsecured, providing operational flexibility
for the Company.
At the period end, the Company had drawn EUR356.5 million
against the RCF (30 September 2019: EUR235.5 million). This
resulted in an LTV ratio of 41.8% at that date (30 September 2019:
33.3%). This compares with the medium-term target of 45% and the
maximum permitted by the Company's investment policy of 50%.
The Company has considerable financial headroom. At the period
end, the Company had EUR37.07 million of cash and EUR68.5 million
undrawn against the RCF. The Company also has relatively limited
future cash commitments. These comprise its operating expenses,
which are more than covered by rent receipts, and a potential
payment of EUR13.6 million at the earliest in September 2020 in
relation to the development in Strykow, Poland, which is contingent
on certain pre-let conditions being met. No funding for the
extension to the Barcelona property is due before September
2021.
The Company's primary debt covenants relate to LTV (maximum of
65%), interest cover (minimum of 1.5 times) and gearing ratio
(maximum of 150%). LTV as at balance sheet date was 41.8% (see Key
Performance Indicators) (43.6% as per Debt agreement definition),
interest cover for the period was 4.95 times (3.45 times as per
Debt agreement definition) and gearing ratio was 72.5%. The Company
is therefore in a robust financial position.
The Company's hedging strategy includes using interest rate caps
to benefit from current low interest rates, while minimising the
effect of a significant rise in underlying interest rates. The
Company therefore holds three interest rate caps which hedge EUR300
million of its borrowing, resulting in 84% of debt being subject to
interest cap, with a total weighted average interest cap of
0.67%.
FINANCIAL RESULTS
Comparative period
The comparative period for this set of results is the six months
from 1 July 2018 to 31 December 2018. Given the growth in the
portfolio since that period, it is not meaningful to draw
comparisons between items in the income statement. The commentary
below therefore considers financial performance in the current
period on a standalone basis.
Performance
Rental income for the period was EUR17.41 million (December
2018: EUR4.94 million).
The Company's operating and administrative costs were EUR5.00
million (December 2018: EUR1.81 million), which primarily
comprised:
-- the Management Fee payable to the Manager of EUR2.07 million
(December 2018: EUR0.90 million) which includes all asset
management costs, and is reduced by all non-recoverable property
management costs;
-- a fee for running an SGR structure in Italy, which ensures
the Italian property holding company is exempt from corporation and
income tax;
-- the Company running costs, including accounting, tax and audit; and
-- the Directors' fees.
The EPRA cost ratio was 30.2% (December 2018: 37.6%). We expect
the EPRA cost ratio to decrease over time, as the portfolio grows
and the Company benefits from economies of scale.
Total interest expenses for the period were EUR3.47 million
(December 2018: EUR0.68 million) representing a weighted average
cost of debt of 2.32%.
The profit before tax for the period was EUR27.82 million
(December 2018: a loss of EUR6.44 million), with Adjusted Earnings
for the period of EUR9.49 million (December 2018: EUR1.39
million).
The current taxation charge for the period was 0.81% of the
Company's net property income. This charge for the period is
exceptionally low, due to conservative assumptions in the prior
year and the utilisation of tax losses.
The taxation charge is primarily incurred in the local
jurisdictions in which the Company invests. As an HMRC-approved
investment trust, the Company is exempt from UK corporation tax on
its chargeable gains. The Company is also exempt from UK
corporation tax on dividend income received, whether from UK or
non-UK companies, provided the dividends fall within one of the
exempt classes under the Corporation Tax Act 2009.
The corporation tax rate in future periods will depend primarily
on the jurisdictions where the Company acquires assets, given the
differing tax rates across continental Europe. The Company does not
use any structures designed to artificially reduce its tax
liabilities and looks to pay the appropriate level of tax where it
is due.
Basic earnings per share ("EPS") for the period was 5.32 cents
(December 2018: (loss of 2.29 cents). EPRA EPS, which excludes the
valuation movement, was 1.76 cents (December 2018: 0.63 cents).
Given the Company's income focus, the Board has adopted adjusted
EPS as a key performance indicator. This adjusts the income shown
in the Company Statement of Comprehensive Income to reflect the
underlying cash movements and/or "earnings" that are not going
through the IFRS Comprehensive Income, including rental guarantee
or licence fee. Adjusted EPS for the period was 2.25 cents
(December 2018: 0.48 cents). More information about the calculation
of basic, EPRA and adjusted EPS can be found in note 7 to the
financial statements.
Dividends
Since the start of the period, the Company has declared the
following dividends:
Declared Amount per In respect of three months Paid/to be
share to paid
10 December 1.00 cent 1 July to 30 September 15 January
2019 2019 2020
----------- ------------------------------ --------------
14 February 1.10 cents 1 October 2019 to 31 December 27 March 2020
2020 2019
----------- ------------------------------ --------------
19 May 2020 1.10 cents 1 January 2020 to 31 March 15 June 2020
----------- ------------------------------ --------------
The total dividend for the period was EUR9.30 million and was
102.1% covered by adjusted earnings of EUR9.49 million.
Cash flow
The Company benefits from stable, growing and long-term cash
flows. Cash from operations in the period was a net inflow of
EUR16.92 million (December 2018: net outflow of EUR6.98
million).
Net assets
The EPRA NAV per share at 31 March 2020 was EUR1.19 (30
September 2019: EUR1.15), after adjusting for the deferred tax and
fair value adjustments recognised against our interest rate
derivatives. The basic NAV per share at that date was EUR1.16 (30
September 2019: EUR1.13).
Related-party transactions
Transactions with related parties in the period included the
Management Fee paid to the Manager, the Directors' fees. More
information can be found in note 17 to the financial
statements.
Alternative Investment Fund Manager ("AIFM)
The Company is an Alternative Investment Fund within the meaning
of the AIFMD and has appointed the Manager as its AIFM. The Manager
is authorised and regulated by the Financial Conduct Authority as a
full scope AIFM.
LOOKING FORWARD
The Company is in a strong position to navigate the impact of
the COVID-19 pandemic. It has a portfolio of outstanding assets let
to robust tenants and has considerable headroom within its debt
facilities and covenants, as well as cash on the balance sheet at
the period end. None of the Company's debt facilities are due for
refinancing before 2023. The Company's financial structure has been
designed to benefit from economies of scale and we aim to help the
Company achieve critical scale, when capital market conditions
allow it to resume its growth strategy.
From a debt perspective, the Company will aim to obtain a credit
rating in the short to medium term. An investment grade rating
would automatically reduce the cost of debt by 25 to 30 basis
points (dependant on LTV) under the current terms of the RCF. It
should also open new borrowing possibilities, including access to
the bond markets.
Nick Preston
Fund Manager
Key Performance Indicators
KPI and definition Relevance to strategy Performance
--------------------------- ------------------------------- ----------------------------
1. Dividend The dividend reflects 2.20 cents/share
Dividends paid to our ability to deliver for the six months
shareholders and declared a growing income stream to 31 March 2020
in relation to the from our portfolio (31 December 2018:
period. and is a key element 0.40 cents/share)
of our Total Return.
The Company's dividend
target set at IPO
is, once fully invested
and geared, 4.75%
per annum by reference
to the IPO issue price,
equating to 5.37 cents
per annum.
--------------------------- ------------------------------- ----------------------------
2. Total Return (TR) TR measures the ultimate 5.7%
TR reflects the change outcome of our strategy, for the six months
in the EPRA net asset which is to create to
value over the period value for our shareholders 31 March 2020
plus dividends paid. through our portfolio (31 December 2018:
and to deliver a secure 1.0%)
and growing income
stream. The Company's
medium-term TR target
is 9% per annum.
--------------------------- ------------------------------- ----------------------------
3. Basic Net Asset Basic Net Asset Value EUR490.88m/ EUR1.16/share
Value is the net value of as at 31 March 2020
Net asset value in the Company under (EUR477.27m/EUR1.13/share
IFRS GAAP. IFRS. as at 30 September
2019)
--------------------------- ------------------------------- ----------------------------
4. Adjusted Earnings Adjusted EPS reflects EUR9.49m/2.25 cents/share
Per Share (EPS) our ability to generate for the six months
Post-tax adjusted earnings from our to
EPS attributable to portfolio, which ultimately 31 March 2020
shareholders, adjusted underpins our dividend (31 December 2018:
for other earnings payments. EUR1.39m/0.48 cents/share)
not supported by cash
flows or not included
in IFRS Comprehensive
Income.
See note 7.
--------------------------- ------------------------------- ----------------------------
5. Loan to value The LTV measures the 41.8%
ratio (LTV) prudence of our financing
strategy, balancing
the additional returns
and portfolio diversification
that come with using
debt against the need
to successfully manage
risk. The Company
maintains a conservative
level of aggregate
borrowings, with a
medium-term LTV target
of 45% and a limit
of 50% (in each case,
calculated at the
time of borrowing).
The proportion of at 31 March 2020
our gross asset value
(including cash) that
is funded by borrowings.
(30 September 2019:
33.3%)
--------------------------- ------------------------------- ----------------------------
6. Weighted average The WAULT is a key 9.7% years
unexpired lease term measure of the quality at 31 March 2020
(WAULT) of our portfolio, (30 September
The average unexpired as long lease terms 2019: 11.0 years)
lease term of the underpin the security
property of our income stream.
portfolio, weighted We look to maintain
by annual passing a WAULT of greater
rents. than five years across
the portfolio, reflecting
the typical lease
lengths in continental
Europe.
--------------------------- ------------------------------- ----------------------------
7. Dividend cover Dividend cover is 102.1%
Dividends paid and an indication of how for the six months
proposed to shareholders sustainable a dividend to
in relation to the is. 31 March 2020
financial period, (31 December 2018:
as a percentage of 115.4%)
adjusted earnings.
--------------------------- ------------------------------- ----------------------------
8. Interest cover Interest cover is 4.95% times
The ratio of net property a measure of our ability for the six months
income to the interest to meet our interest to 31 March 2020
incurred in the period. payments. (31 December 2018:
7.2 times)
--------------------------- ------------------------------- ----------------------------
9. Like-for-like Like-for-like rental 1.7%/EUR0.42m
rental growth growth measures our This is comparing
The growth in the ability to grow our the annualised passing
net rental income rental income over rent at the Balance
of the element of time. Sheet date against
the portfolio that the annualised passing
has been consistently rent at previous interim
in operation and not date December 2018
under development
during the two full
preceding periods.
--------------------------- ------------------------------- ----------------------------
EPRA Performance Indicators
KPI and definition Relevance to strategy Performance
------------------------------ ---------------------------- --------------------------------
1. EPRA NAV The EPRA NAV reflects EUR502.97m/
Basic NAV adjusted our ability to grow EUR1.19/share
for mark-to-market the portfolio and as at 31 March 2020
valuation of derivatives. to add value to it (30 September 2019:
throughout the lifecycle EUR484.21m/EUR1.15/share)
of our assets.
------------------------------ ---------------------------- --------------------------------
2 EPRA Earnings A key measure of the EUR7.45m/ 1.76 cents/share
Earnings from operational Group's underlying for the six months
activities. results and an indication period to
of the extent to which 31 March 2020
current dividend payments (31 December 2018:
are supported by earnings. EUR1.82m/0.63 cents/share)
------------------------------ ---------------------------- --------------------------------
3. EPRA Net Initial This measure should 4.1%
Yield (NIY) make it easier for as at 31 March 2020
Annualised rental investors to judge (30 September 2019:
income based on the for themselves how 4.5%)
cash rents passing the valuations of
at the balance sheet portfolios compare.
date, less non-recoverable
property operating
expenses, divided
by the market value
of the property, increased
with (estimated) purchasers'
costs.
------------------------------ ---------------------------- --------------------------------
4. EPRA 'Topped-up' This measure should 4.7%
NIY make it easier for as at 31 March 2020
This measure incorporates investors to judge (30 September 2019:
an adjustment to the for themselves how 4.8%)
EPRA NIY in respect the valuations of
of the expiration portfolios compare.
of rent-free periods
(or other unexpired
lease incentives such
as discounted rent
periods and step rents).
------------------------------ ---------------------------- --------------------------------
6. EPRA Vacancy Rate A "pure" (%) measure 5.5%
Estimated Market Rental of investment property for the six months
Value (ERV) of vacant space that is vacant, period to
space divided by ERV based on ERV. 31 March 2020
of the whole portfolio. (31 December 2018:
6.0%)
------------------------------ ---------------------------- --------------------------------
7. EPRA Cost Ratio A key measure to enable 30.2%
Administrative and meaningful measurement for the six months
operating costs (including of the changes in period to
costs of direct vacancy) a company's operating 31 March 2020
divided by gross rental costs. (31 December 2018:
income. 37.6%)
8.
------------------------------ ---------------------------- --------------------------------
9. EPRA Triple Net Makes adjustments EUR490.88m/ EUR1.16/share
Asset Value (NNNAV) to EPRA NAV to provide as at 31 March 2020
EPRA NAV adjusted stakeholders with (30 September 2019:
to include the fair the most relevant EUR477.27m/EUR1.13/share)
values of (i) financial information on the
instruments, (ii) current fair value
debt and (iii) deferred of all the assets
taxes. and liabilities within
a real estate company.
------------------------------ ---------------------------- --------------------------------
PRINCIPAL RISKS AND EMERGING UNCERTAINTIES
The Audit Committee, which assists the Board with its
responsibilities for managing risk, considers that the principal
risks and uncertainties as presented on pages 96 to 101 of our 2019
Annual Report, dated 9 December 2019, were largely unchanged during
the period. However, this is not to say that certain risks have not
increased or decreased in probability or impact during the
period.
In particular, the global economy and financial markets are
currently being severely impacted by the COVID-19 pandemic. This is
likely to have an adverse effect on the magnitude and/or likelihood
of a number of the principal risks set out below, particularly in
respect of our property, operational and financial risks.
Property risks
1. The default of one or more of our tenants would reduce
revenue and may affect our ability to pay dividends and/or lead to
a breach of our banking covenants.
2. The performance and valuation of the portfolio are affected
by the market, which is inherently subjective and uncertain. A
change in property valuations may lead to a breach of our banking
covenants.
3. Our due diligence may not identify all risks and liabilities
in respect of a property acquired. An adverse change in the future
valuation of that asset may lead to a decrease in our Net Asset
Value and affect our ability to meet our target returns.
4. Our ability to grow the portfolio may be restricted by the
availability of suitable assets at acceptable prices in targeted
countries in Continental Europe.
5. We may have concentration of risk, in particular exposure to
country risk, if there are significant economic or political
changes in countries where the Company has invested or the
Eurozone, which could have an adverse impact on the income derived
from said countries and on the valuation of those assets. This
could lead to weaker performance of the portfolio.
6. Development activities involve a higher degree of risk than
investment in standing investments, such as general construction
risks, cost overruns or developer/contractor default. This could
reduce the value of our portfolio if any of the risks associated
materialised.
Operational risks
1. The Company's performance will, to a large extent, depend on
the Manager's abilities to source adequate assets, and to actively
manage these assets.
2. Termination of the Investment Management Agreement would
severely affect our ability to manage our operations and may have a
negative impact on the Company's share price.
Financial risks
1. Our use of floating rate debt will expose the Company to
underlying interest rate movements. Any adverse movement in Euribor
could affect our profitability and ability to pay dividends.
2. A lack of debt funding at appropriate rates may restrict our
ability to grow, by making us unable to pursue suitable investment
opportunities. This may impair our ability to reach our targeted
returns.
3. Failure to operate within our debt covenants could lead to a
default and debt funding being recalled. This may result in us
selling assets to repay loan commitments.
Taxation risks
1 If the Company fails to maintain approval as an Investment
Trust its income and gains will be subject to UK corporation tax
and it will be unable to designate dividends as interest
distributions.
2 A change in local taxation status or tax legislation in any of
the countries we invest in may lead to increased tax charges for
the Company, resulting in lower profits and returns to
Shareholders.
Political risks
1 There is continuing uncertainty relating to the world economy,
including Brexit, combined with political uncertainty in many
countries. This could have a negative effect on the performance of
the Company over both the short and longer term.
2 The economy in Europe may be impacted or demand for European
property may decrease, leading to potentially lower valuations.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the financial year and that have materially
affected the financial position or performance of the entity
during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
Approved by the Board on 18 May 2020
and signed on its behalf by:
Robert Orr
Director
INDEPENT REVIEW REPORT TO TRITAX EUROBOX PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2020 which comprises condensed group
statement of comprehensive income, condensed consolidated statement
of financial position, condensed group statement of changes in
equity, condensed group cash flow statement and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2020 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the half
yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Emphasis of matter - material valuation uncertainty
We draw attention to note 9 to the condensed financial
statements which states that the external valuation of the Group's
investment properties is reported on the basis of 'material
valuation uncertainty' as per VPS 3 and VPGA 10 of the RICS Red
Book Global and consequently that less certainty should be attached
to the valuation than would normally be the case.
Our conclusion is not modified in respect of this matter.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group/ company are
prepared in accordance with International Financial Reporting
Standards as adopted by the EU. The directors are responsible for
preparing the condensed set of financial statements included in the
half-yearly financial report in accordance with IAS 34 as adopted
by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
David Neale
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
19 May 2020
Condensed Group Statement of Comprehensive Income for the period
from 1 October 2019 to 31 March 2020
Note Period from 1 October Period from
2019 to 1 July
31 March 2018 to
2020 31 December
(unaudited) 2018
EURm (unaudited)
EURm
---------------------------------------------------------------------- --------------------- ------------
Rental income 4 17.41 4.94
Service charge income 4 2.60 0.46
Other income 4 0.17 -
------------------------------------------------------------------ --------------------- ------------
Gross property income 4 20.18 5.40
Direct property costs (3.02) (0.51)
------------------------------------------------------------------ --------------------- ------------
Net property income 17.16 4.89
------------------------------------------------------------------ --------------------- ------------
Fair value gain/(loss) on investment properties 9 19.35 (8.04)
Gain on disposal of investment property 0.81 -
Administrative and other expenses (5.00) (1.81)
------------------------------------------------------------------ --------------------- ------------
Operating profit/(loss) 32.32 (4.96)
------------------------------------------------------------------ --------------------- ------------
Finance expense 5 (4.61) (1.13)
Effect of foreign exchange differences 0.04 -
Changes in fair value of interest rate derivatives 13 0.07 (0.35)
------------------------------------------------------------------ --------------------- ------------
Profit before taxation 27.82 (6.44)
Taxation 6 (5.35) (0.18)
------------------------------------------------------------------ --------------------- ------------
Profit/(loss) for the period 22.47 (6.62)
------------------------------------------------------------------ --------------------- ------------
Total comprehensive income/(loss) for the period attributable to:
Shareholders of the Company 22.47 (6.56)
Non-controlling interests 19 - (0.06)
22.47 (6.62)
------------------------------------------------------------------ --------------------- ------------
Earnings Per Share (EPS) (expressed in cents per share)
EPS - basic and diluted 7 5.32 (2.29)
------------------------------------------------------------------ --------------------- ------------
Condensed Consolidated Statement of Financial Position as at 31
March 2020
31 March 30 September
2020 2019
(unaudited) (audited)
Note EURm EURm
--------------------------------------------------- ------ ------------ --------------
Non-current assets
Investment properties 9 816.25 687.58
Derivative financial instruments 13 0.19 0.12
Trade and other receivables 10 1.17 1.17
Deferred tax assets 1.07 0.59
--------------------------------------------------- ------ ------------ --------------
Total non-current assets 818.68 689.46
Current assets
Assets held-for-sale 9 - 1.52
Trade and other receivables 10 21.14 31.75
Cash and cash equivalents 37.07 17.90
--------------------------------------------------- ------ ------------ --------------
Total current assets 58.21 51.17
--------------------------------------------------- ------ ------------ --------------
Total assets 876.89 740.63
--------------------------------------------------- ------ ------------ --------------
Current liabilities
Trade and other payables (13.40) (16.72)
Income tax liability (0.57) (1.06)
--------------------------------------------------- ------ ------------ --------------
Total current liabilities (13.97) (17.78)
Non-current liabilities
Loans and borrowings 11 (352.66) (231.95)
Deferred tax liabilities (10.40) (5.18)
Other liabilities 12 (7.81) (7.28)
Tenant deposit (1.17) (1.17)
--------------------------------------------------- ------ ------------ --------------
Total non-current liabilities (372.04) (245.58)
--------------------------------------------------- ------ ------------ --------------
Total liabilities (386.01) (263.36)
--------------------------------------------------- ------ ------------ --------------
Net assets 490.88 477.27
--------------------------------------------------- ------ ------------ --------------
Equity
Share capital 15 4.23 4.23
Share premium reserve 131.23 131.21
Retained earnings 355.42 341.83
--------------------------------------------------- ------ ------------ --------------
Total equity 490.88 477.27
--------------------------------------------------- ------ ------------ --------------
Net Asset Value (NAV) per share (expressed in Euro per share)
Basic NAV 16 1.16 1.13
EPRA NAV 16 1.19 1.15
--------------------------------------------------- ------ ------------ ------------
Condensed Group Statement of Changes in Equity
Share Retained
capital Share premium earnings Total
(Unaudited) Note EURm EURm EURm EURm
--------------------------------- ----- --------- ------------- --------- ------
At 1 October 2019 4.23 131.21 341.83 477.27
Net profit for the period - - 22.47 22.47
--------------------------------- ----- --------- ------------- --------- ------
Total comprehensive income - - 22.47 22.47
Contributions and distributions:
Associated share issue costs - 0.02 - 0.02
Dividends paid - - (8.88) (8.88)
--------------------------------- ----- --------- ------------- --------- ------
Total contributions and
distributions - - (8.88) (8.88)
--------------------------------- ----- --------- ------------- --------- ------
At 31 March 2020 4.23 131.23 355.42 490.88
--------------------------------- ----- --------- ------------- --------- ------
Share Retained
capital Share premium earnings Total
(Audited) Note EURm EURm EURm EURm
--------------------------------- ----- --------- ------------- --------- ------
At 1 July 2018 0.06 - - 0.06
Net profit for the period - - 20.72 20.72
--------------------------------- ----- --------- ------------- --------- ------
Total comprehensive income - - 20.72 20.72
Contributions and distributions:
New share capital subscribed 4.23 470.10 - 474.33
Associated share issue costs - (9.35) - (9.35)
Share premium cancelled
by special resolution - (329.54) 329.54 -
Cancellation of preference
shares 15 (0.06) - - (0.06)
Dividends paid 8 - - (8.43) (8.43)
--------------------------------- ----- --------- ------------- --------- ------
Total contributions and
distributions 4.17 131.21 321.11 456.49
--------------------------------- ----- --------- ------------- --------- ------
At 30 September 2019 4.23 131.21 341.83 477.27
--------------------------------- ----- --------- ------------- --------- ------
Share Share Retained Non-controlling
capital premium earnings interest Total
(Unaudited) Note EURm EURm EURm EURm EURm
-------------------------------------- ---- -------- -------- --------- --------------- ------
At 1 July 2018 0.06 - - 0.06
Loss for the period - - (6.56) (0.06) (6.62)
-------------------------------------- ---- -------- -------- --------- --------------- ------
Total comprehensive income - - (6.56) (0.06) (6.62)
Contributions and distributions:
New share capital subscribed 3.00 336.33 - - 339.33
Associated share issue costs - (6.79) - - (6.79)
Share premium cancelled by
special
Resolution - (329.54) 329.54 - -
Cancellation of preference
shares 15 (0.06) - - - (0.06)
Non-controlling interest
in acquisition
of subsidiary 19 - - - 1.69 1.69
-------------------------------------- ---- -------- ------------------- --------------- ------
Total contributions and distributions 2.94 - 329.54 1.69 334.17
-------------------------------------- ---- -------- ------------------- --------------- ------
At 31 December 2018 3.00 - 322.98 1.63 327.61
-------------------------------------- ---- -------- ------------------- --------------- ------
The 1 cent shares listed on the Main Market of the London Stock
Exchange on 9 July 2018 were issued for EUR1.13 (or GBP1.00).
Following a Special Resolution of Tritax EuroBox plc the High Court
cancelled this share premium on 25 September 2018. This resulted in
the full balance being transferred into distributable reserves.
Condensed Group Cash Flow Statement
For the period from 1 October 2019 to 31 March 2020
Period from
1 October Period from
2019 to 31 1 July 2018
March 2020 to 31 December
(unaudited) 2018 (unaudited)
Note EURm EURm
-------------------------------------------- ----- ------------------ ------------------
Cash flows from operating activities
Profit/(loss) for the period 22.47 (6.62)
Gain on disposal (0.81) -
Changes in fair value of investment
properties (19.35) 8.04
Changes in fair value of interest
rate derivatives (0.07) 0.35
Tax expense 4.88 0.18
Finance expense 3.96 1.12
Accretion of tenant lease incentive 4 (1.26) -
Decrease/(increase) in trade and
other receivables 10.78 (27.51)
(Decrease)/increase in trade and
other payables (3.68) 17.46
-------------------------------------------- ----- ------------------ ------------------
Cash generated from operations 16.92 (6.98)
Tax paid (0.63) (0.21)
Interest paid - (0.40)
-------------------------------------------- ----- ------------------ ------------------
Net cash flow generated by/(used
in) operating activities 16.29 (7.59)
-------------------------------------------- ----- ------------------ ------------------
Investing activities
Purchase of investment properties (101.05) (478.27)
Disposal of assets held-for-sale 2.33 -
Improvements to investment properties (6.47) -
and development expenditure
-------------------------------------------- ----- ------------------ ------------------
Net cash flow used in investing activities (105.19) (478.27)
-------------------------------------------- ----- ------------------ ------------------
Financing activities
Proceeds from issue of Ordinary Share
capital - 339.33
Cost of share issues 0.02 (6.79)
Loans received 11 121.00 174.00
Loan arrangement fees paid 11 (0.73) (2.60)
Loan interest paid (3.37) -
Interest rate cap premium paid 13 - (1.85)
Non-controlling interest - 1.69
Dividends paid to equity holders 8 (8.88) -
-------------------------------------------- ----- ------------------ ------------------
Net cash flow generated from financing
activities 108.04 503.78
-------------------------------------------- ----- ------------------ ------------------
Net movement in cash and cash equivalents
for the period 19.14 17.92
Cash and cash equivalents at start 17.90 -
of the period
Unrealised foreign exchange gains 0.03 -
-------------------------------------------- ----- ------------------ ------------------
Cash and cash equivalents at end
of the period 37.07 17.92
-------------------------------------------- ----- ------------------ ------------------
Notes to the Consolidated Accounts
1. Basis of preparation
These condensed financial statements for the six months ended 31
March 2020 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Services Authority
and with IAS 34 'Interim Financial Reporting', as adopted by the
European Union. They were approved for issue on 18 May 2020. These
condensed financial statements are unaudited and do not constitute
statutory accounts for the purposes of the Companies Act 2006.
The comparative financial information presented herein for the
period to 30 September 2019 for the Condensed Consolidated
Statement of Financial Position or 31 December 2018 for other
primary statements does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for that period has been delivered to the
Registrar of Companies. The auditor's report on those accounts for
the period from 1 July 2018 to 30 September 2019 was not qualified,
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report,
and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
1.1 Going concern
The Directors have prepared cash flow forecasts for the Group
for a period of 18 months from 31 March 2020 of these condensed
financial statements. These forecasts include the Directors'
assessment of the impact of Covid-19 on the Group, and plausible
downside scenarios.
The Group's property portfolio is let to 21 tenants across over
12 properties in 6 European countries. The Group's largest tenant
represents 20% of contracted rent at 31 March 2020 and the top 5
tenants together represent 64%.
As at the date of approval of these condensed financial
statements, the Group has not experienced a significant increase in
rent arrears compared to the equivalent period last year. However,
as a result of Covid-19, a number of the Group's tenants have
requested deferral or a re-profiling of rent payments. Such
requests are considered on a case by case basis and based on the
merits of such request and the circumstances of the tenant.
The Directors have considered the risk that further tenants
either request deferrals or become insolvent and hence no rent is
paid. The Directors have assessed each tenant's risk based on
experience, knowledge of the tenant and discussions to date on rent
deferrals. Following this assessment the Directors have modelled a
severe but plausible downside scenario, where 35% of rental income
is unpaid for an 18 months' duration, which forecasts that the
Group will continue to have sufficient cash resources to meet its
liabilities as they fall due, and will continue to meet its debt
covenants, which are set out in further detail below.
The Group has an unsecured revolving credit facility, which does
not require any repayment until 2023. The loan includes financial
covenants for loan-to-value ("LTV"), interest cover ratio ("ICR")
and gearing. These covenants have been complied with throughout the
year and up to the date of approval of these financial
statements.
The LTV covenant is measured quarterly based on the property
valuation as used in the consolidated financial statements. Based
on the most recent valuation the Group retained headroom against a
covenant limit, reporting 44% against the limit of 65%.
The gearing covenant is measured quarterly based on consolidated
total net borrowings to consolidated shareholders' funds. Based on
the most recent reporting the Group retained headroom against the
covenant limit, reporting 73% against the limit of 150%.
The ICR covenant is measured as the ratio of the Group's
consolidated earnings before income and tax, subject to certain
adjustments, to consolidated net finance costs in respect of any
measurement period, by reference to accounting income. Based on the
most recent reporting the Group retained headroom against the
covenant limit, reporting 345% against the limit of 150%.
As a result of the above considerations the Directors have
prepared these financial statements on a going concern basis.
2. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
2.1. Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Business combinations
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. Under IFRS 3, a business is defined as an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends, lower costs or other economic benefits directly
to investors or other owners, members or participants. A business
will usually consist of inputs, processes and outputs. Therefore,
the Group accounts for an acquisition as a business combination
where an integrated set of activities is acquired in addition to
the property.
Where such acquisitions are not judged to be the acquisition of
a business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred tax relating to pre-acquisition
property valuation gains arises.
In the current period all acquisitions were accounted for as
asset acquisitions as none of the acquisitions included the
acquisition of an integrated set of activities.
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in European Big Box
assets. The Directors consider that these properties have similar
economic characteristics and as a result these individual
properties have been reported as a single operating segment.
2.2. Estimates
Fair valuation of investment property
The fair value of investment property is determined, by an
independent property valuation expert, to be the estimated amount
for which a property should exchange on the date of the valuation
in an arm's length transaction. Properties have been valued on an
individual basis. The valuation expert uses recognised valuation
techniques, applying the principles of both IAS 40 and IFRS 13.
The valuations have been prepared in accordance with the Royal
Institution of Chartered Surveyors ("RICS") Valuation - Global
Standards July 2017 ("the Red Book"). Factors reflected include
current market conditions, annual rentals, lease lengths and
location. The significant methods and assumptions used by valuers
in estimating the fair value of investment property are set out in
note 9.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent
with those applied in the Group's consolidated financial statements
for the period ended 30 September 2019 and are expected to be
applied consistently during the year ending 30 September 2020. The
following accounting policies have been adopted during this
period.
3.1. Put option liabilities
Liabilities for put options held by non-controlling interests
are initially and subsequently recognised at the present value of
the exercise price of the option. This is taken to be the
non-controlling interests proportionate share of the current market
value of investment property, the carrying amount of other net
assets plus the present value of anticipated payments to be made by
the Group under dividend guarantees to the non-controlling
interest.
Changes in the carrying amount of the put liability are
recognised within finance expenses in the Group Statement of
Comprehensive Income.
3.2. Standards in issue and effective from 1 January 2019
IFRS 16: Leases
The Directors have assessed the impact on the financial
statements of this standard. As the Group does not hold any
material operating or leasehold agreements as lessee, the impact of
IFRS 16 is immaterial.
IFRIC 23: Uncertainty over income tax treatments
The Directors have considered the impact on the financial
statements of this standard. There is no material impact to the
Group as a result of the recognition and measurement requirements
of IFRIC 23.
3.3. New standards issued but not yet effective
Amendments to IFRS 3 Business Combinations (subject to EU
endorsement) effective for financial years commencing on or after 1
January 2020 provides a revised framework for evaluating a business
and introduces an optional 'concentration test'. The amendment will
impact the assessment and judgements used in determining whether
future property transactions represent an asset acquisition or
business combination. As a result of the amendment it is expected
that future transactions are more likely to be treated as an asset
acquisition.
Amendments to IAS 1 Presentation of Financial Statements
effective for financial years commencing on or after 1 January 2020
are designed to address concerns about existing presentation and
disclosure requirements and to encourage entities to use judgement
in the application of IAS 1 when considering the layout and content
of their financial statements. The amendments clarify the
definition of material and how it should be applied. It is expected
that the amendments will not have a significant impact on the
entity's financial statements. However, it could potentially impact
how materiality judgements are made in practice, by elevating the
importance of how the information is organised in the financial
statements.
Amendments to References to the Conceptual Framework in IFRS
Standards were endorsed by the European Commission for use in the
European Union. The effective date is for annual periods beginning
on or after 1 January 2020. The Amendments update some of the
references and quotations in IFRS Standards and Interpretations so
that they refer to the revised Conceptual Framework or specify the
version of the Conceptual Framework to which they refer.
4. Gross property income
Period from Period from
1 October 2019 1 July 2018
to 31 March to 31 December
2020 (unaudited) 2018
EURm (unaudited)
EURm
-------------------------------- ------------------ ----------------
Rental income 16.15 4.49
Spreading of tenant incentives 1.26 0.45
-------------------------------- ------------------ ----------------
Gross rental income 17.41 4.94
-------------------------------- ------------------ ----------------
Service charges recoverable 2.60 0.46
Other income 0.17 -
-------------------------------- ------------------ ----------------
Gross property income 20.18 5.40
-------------------------------- ------------------ ----------------
The Group derives property income from the following
countries:
Gross property income The
Belgium Germany Spain Italy Poland Netherlands Total
(unaudited) EURm EURm EURm EURm EURm EURm EURm
---------------------------- ---------- ---------- -------- -------- --------- ------------- --------
Period ended 31 March 2020 2.92 6.57 4.18 3.53 2.64 0.34 20.18
---------------------------- ---------- ---------- -------- -------- --------- ------------- --------
Period ended
31 December 2018 0.88 0.67 2.25 1.60 - - 5.40
---------------------------- ---------- ---------- -------- -------- --------- ------------- --------
The future minimum lease payments under non-cancellable
operating leases receivable by the Group are as follows:
Between 1 Between 2 Between 3 Between 4
Less than 1 and 2 years and 3 years and 4 years and 5 years More than 5
(Unaudited) year EURm EURm EURm EURm EURm years EURm Total EURm
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -----------
31 March 2020 37.14 37.76 37.79 36.87 34.65 205.57 389.78
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -----------
31 December
2018 21.73 24.04 24.08 24.14 23.67 195.11 312.77
--------------- ------------- ------------- ------------- ------------- ------------- ------------- -----------
The Group's investment properties are leased mainly to single
tenants, some of which have guarantees attached, under the terms of
a commercial property lease. The majority have rent indexation that
are linked to either RPI/CPI or fixed uplifts.
There are three tenants representing more than 10% of rental
income during the period (EUR3.82 million, EUR3.09 million and
EUR2.02 million). As at 31 March 2020, three tenants represented
more than 10% of passing rent.
5. Finance expense
Period from 1 October 2019 to Period from
31 March 1 July 2018 to
2020 31 December
(unaudited) 2018
EURm (unaudited)
EURm
----------------------------------------------
Interest payable on loans and bank borrowings 2.58 0.52
Commitment fees payable on bank borrowings 0.89 0.16
Loss on remeasurement of put option 0.64 -
Bank fees 0.06 0.36
Amortisation of loan arrangement fees 0.44 0.09
---------------------------------------------- ----------------------------------------------------- ---------------
Total finance expense 4.61 1.13
---------------------------------------------- ----------------------------------------------------- ---------------
The total interest payable on financial liabilities carried at
amortised cost comprises interest and commitment fees payable on
bank borrowings of EUR3.47 million and amortisation of loan
arrangement fees of EUR0.44 million. The amount capitalised into
the loan in the period for the former was nil and EUR0.73 million
for the latter (see note 11).
6. Taxation
Tax charge in the Group Statement of Comprehensive Income
Period from 1 October 2019 to Period from
31 March 1 July 2018 to
2020 31 December
(unaudited) 2018
EURm (unaudited)
EURm
----------------------
Current taxation:
UK taxation - -
Overseas taxation 0.14 0.18
Deferred taxation:
UK taxation - -
Overseas taxation 5.21 -
---------------------- ----------------------------------------------------- ---------------
Total tax change 5.35 0.18
---------------------- ----------------------------------------------------- ---------------
The UK corporation tax charge of EURnil reflects the Company's
intention to declare sufficient "qualifying interest distributions"
to fully offset its "qualifying interest income" in the period, in
accordance with its status as an Investment Trust Company
("ITC").
7. Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Group by the weighted average number of Ordinary Shares in
issue during the period. As at 31 March 2020 there are no dilutive
or potentially dilutive equity arrangement in existence.
The calculation of EPS is based on the following:
For the period ended 31 March 2020 (unaudited) Weighted
Net profit average
attributable number of
to Ordinary Ordinary Earnings
Shareholders Shares(1) per share
EURm '000 Cent
------------------------------------------------ ------------------------- ------------ -----------
Basic EPS 22.47 422,727 5.32
Adjustments to remove:
Deferred tax charge 5.21
Changes in fair value of investment
properties (note 9) (19.35)
Changes in fair value of interest rate
derivatives (note 12) (0.07)
Gain on disposal of investment properties (0.81)
------------------------------------------------ ------------------------- ------------ -----------
EPRA EPS 7.45 422,727 1.76
------------------------------------------------ ------------------------- ------------ -----------
Adjustments to include/(exclude):
Licence fee receivable on forward funded
developments 0.50
Rental income recognised in respect
of fixed uplifts (1.26)
Rental guarantee receipts excluded from
property income-settled via cash (2) 1.15
Rental guarantee receipts excluded from
property income-settled via contracted
liability settlement (2) 0.54
Amortisation of loan arrangement fees 0.44
Unrealised foreign exchange currency
loss 0.03
Loss on remeasurement of put option 0.64
------------------------------------------------ ------------------------- ------------ -----------
Adjusted EPS 9.49 422,727 2.25
------------------------------------------------ ------------------------- ------------ -----------
1 Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2 This is offset against the cost of investment properties.
The calculation of EPS is based
on the following:
Weighted
Net (loss)/profit Average
attributable number
to Ordinary of Ordinary Earnings
For the period ended 31 December 2018 Shareholders Shares(1) per share
(unaudited) EURm '000 Cent
Basic EPS (6.57) 286,885 (2.29)
Adjustments to remove:
Changes in fair value of investment
properties (note 9) 8.04
Changes in fair value of interest rate
derivatives (note 12) 0.35
------------------------------------------------ ------------------------- ------------ -------------
EPRA EPS 1.82 286,885 0.63
------------------------------------------------ ------------------------- ------------ -------------
Adjustments to include/(exclude):
Rental income recognised in respect
of fixed uplifts (0.60)
Amortisation of loan arrangement fees 0.09
Rental guarantee receipts excluded from
property income (2) 0.08
------------------------------------------------ ------------------------- ------------ -------------
Adjusted EPS 1.39 286,885 0.48
------------------------------------------------ ------------------------- ------------ -------------
1 Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2 This is offset against the cost of investment properties.
Adjusted Earnings is a performance measure used by the Board to
assess the level of the Group's dividend payments. The metric
mainly adjusts EPRA earnings for:
i. Exclusion of non-cash items credited or charged to the Group
Statement of Comprehensive Income, such as fixed rental uplift
adjustments and amortisation of loan arrangement fees;
ii. Inclusion of licence fees which relates to cash received
from developers during development periods, in order to access the
land; and
iii. Inclusion of rental guarantee adjustments relate to
acquired assets with properties which have had an income guarantee
attached to them as part of the acquisition of the asset. The
rental guarantee is released (through a cash movement or contracted
liability settlement) as distributable income over the period of
the lease which it is intended to cover or lease break - however,
this release does not go through rental income in the Group
Statement of Comprehensive Income, and as such an adjustment is
made to recognise the receipt.
8. Dividends paid
Period 1 October Period from
2019 to 31 March 1 July 2018
2020 to 31 December
EURm 2018 EURm
------------------------------------ ------------------ ----------------
Final dividend in respect of period
ended 30 September 2019 at 1.00
cent per Ordinary Share (30 June
2018: nil) 4.23 -
First interim dividend in respect
of year ended 30 September 2020
at 1.10 cent per Ordinary Share
(30 June 2018: nil) 4.65 -
------------------------------------ ------------------ ----------------
Total dividends paid 8.88 -
------------------------------------ ------------------ ----------------
Total dividends paid for the period 2.10 cent Nil cent
------------------------------------ ------------------ ----------------
Total dividends unpaid but declared 1.10 cent 0.40 cent
for the period
------------------------------------ ------------------ ----------------
Total dividends declared for the 2.20 cent 0.40 cent
period
------------------------------------ ------------------ ----------------
On 19 May 2020, the Directors of the Company declared a second
interim dividend in respect of the year ended 30 September 2020 of
1.10 cent per Ordinary Share, which will be payable on or around 15
June 2020 to Shareholders on the register on 29 May 2020.
Out of EUR9.30 million dividends declared for the period, none
is designated as interest distribution.
9. Investment properties
The Group's investment property has been valued at fair value by
Jones Lang LaSalle Limited ("JLL"), an accredited independent
valuer with a recognised and relevant professional qualification
and with recent experience in the locations and categories of the
investment properties being valued. The valuations have been
prepared in accordance with the RICS Valuation - Global Standards
July 2017 ("the Red Book") and incorporate the recommendations of
the International Valuation Standards which are consistent with the
principles set out in IFRS 13. In forming its opinion, JLL makes a
series of assumptions, which are typically market related, such as
net initial yields and expected rental values and are based on the
Valuer's professional judgement and the current tenancy of the
properties.
The valuations are the ultimate responsibility of the Directors.
Accordingly, the critical assumptions used in establishing the
independent valuation are reviewed by the Board.
All corporate acquisitions during the period have been treated
as asset purchases rather than business combinations.
During the period, the following investment properties were
acquired:
Location Date acquired
--------------------------- -----------------
Breda, the Netherlands(--) 23 December 2019
--------------------------- -----------------
Strykow Lodz, Poland(--) 3 February 2020
--------------------------- -----------------
-- Acquired based on asset deal.
Investment properties
Investment properties Investment properties Total
completed EURm under construction EURm EURm
-------------------------------- ------------------------------- ------------------------ -----------------------
As at 1 October 2019 665.75 21.83 687.58
Acquisition of properties 105.22 - 105.22
Improvements to investment
properties 0.35 - 0.35
License fees and rental
guarantees recognised (3.90) - (3.90)
Development expenditure - 6.22 6.22
Fixed rental uplift and tenant
lease incentives1 1.71 - 1.71
Amortisation on rental uplift
and tenant lease incentives1 (0.28) - (0.28)
Transfer from investment
properties under construction
to completed 28.05 (28.05) -
Change in fair value during the
period2 19.35 - 19.35
-------------------------------- ------------------------------- ------------------------ -----------------------
As at 31 March 2020 816.25 - 816.25
-------------------------------- ------------------------------- ------------------------ -----------------------
1 This balance arises as a result of the IFRS treatment of
leases with fixed or minimum rental uplifts and rent free periods,
which requires the recognition of rental income on a straight line
basis over the lease term or lease break. The difference between
this and cash receipts changes the carrying value of the property
against which revaluations are measured (also see note 6).
2 Included in the fair value change in the period were
unrealised gains of EUR20.55 million and unrealised losses of
EUR1.20 million.
Investment
Investment properties Investment
properties under properties
completed construction Total
----------------------------------------
EURm EURm EURm
---------------------------------------- ----------- ------------- -----------
At 1 July 2018 - - -
Acquisition of properties 649.00 5.22 654.22
Improvements to investment properties 0.72 - 0.72
License fees and rental guarantees (2.59) (1.37) (3.96)
Development expenditure - 16.28 16.28
Fixed rental uplift and tenant lease
incentives (1) 4.24 - 4.24
Amortisation on rental uplift and
tenant lease incentives (1) (0.25) - (0.25)
Transfer to assets held-for-sale
(2) (1.52) - (1.52)
Change in fair value during the period3 16.15 1.70 17.85
---------------------------------------- ----------- ------------- -----------
As at 30 September 2019 665.75 21.83 687.58
---------------------------------------- ----------- ------------- -----------
1 This balance arises as a result of the IFRS treatment of
leases with fixed or minimum rental uplifts and rent free periods,
which requires the recognition of rental income on a straight line
basis over the lease term or lease break. The difference between
this and cash receipts changes the carrying value of the property
against which revaluations are measured (also see note 6).
2 The Group has identified one of its investment properties as
held-for-sale in accordance with IFRS 5. The carrying value at the
Balance Sheet date was EUR1.52 million (2018: EURnil).
3 Included in the fair value change in the period were
unrealised gains of EUR45.53 million and unrealised losses of
EUR27.68 million.
30 September
31 March 2020 2019
EURm EURm
--------------------------------------------- ------------- ------------
Investment properties in Balance Sheet 816.25 687.58
Assets held-for-sale - 1.52
Rental guarantee held in separate receivable 3.13 2.57
--------------------------------------------- ------------- ------------
Total external valuation of investment
properties 819.38 691.67
--------------------------------------------- ------------- ------------
As at 31 March 2020, the Group had no capital commitments in
relation to forward funded pre-let development assets (30 September
2019: EUR5.99 million). The Group agreed terms to extend the
Barcelona and Strykow assets for EUR30.5 million and EUR13.6
million respectively, subject to certain conditions being met.
These costs are not provided for in the Statement of Financial
Position. Capital commitments represent costs to bring the asset to
completion under the developer's funding agreements which include
the developer's margin.
Valuation risk
There is risk to the fair value of real estate assets that are
part of the portfolio of the Group, comprising variation in the
yields that the market attributes to the real estate investments
and the market income that may be earned.
Real estate investments can be impacted adversely by external
factors such as the general economic climate, supply and demand
dynamics in the market, competition and increase in operating
costs.
In particular, the outbreak of the Coronavirus (COVID-19),
declared by the World Health Organization as a "Global Pandemic" in
March 2020 has impacted global financial markets and global
economy. The unknown future impact that COVID-19 might have on the
real estate market led to the valuations to be reported on the
basis of 'material valuation uncertainty' as per VPS 3 and VPGA 10
of the RICS Red Book Global, given the unknown future impact that
COVID-19 might have on the real estate market. Consequently, less
certainty should be attached to the valuation than would normally
be the case.
Besides asset specific characteristics, general market
circumstances affect the value and income from investment
properties such as the cost of regulatory requirements related to
investment properties, interest rate levels and the availability of
financing.
The Manager of the Group has implemented a portfolio strategy
with the aim to mitigate the above stated real estate risk. By
diversifying in regions, risk categories and tenants, it is
expected to lower the risk profile of the portfolio.
Fair value hierarchy
The Group considers that all of its investment properties and
investment properties under construction fall within Level 3 of the
fair value hierarchy as defined by IFRS 13. There have been no
transfers between Level 1 and Level 2 during any of the periods,
nor have there been any transfers between Level 2 and Level 3
during any of the periods.
The valuations have been prepared on the basis of Market Value
("MV"), which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
MV as defined in the RICS Valuation Standards is the equivalent
of fair value under IFRS.
Sensitivities of measurement of significant unobservable
inputs
As set out within significant accounting estimates and
judgements above, the Group's property portfolio valuation is open
to estimation uncertainty and is inherently subjective in
nature.
Unobservable input: net initial yield
The net initial yield is defined as the initial net income as a
percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase (average: 4.68% or range: 4.12%-
5.88%).
As a result the following sensitivity analysis has been prepared
for investment properties:
-0.50% net -0.25% net +0.25% net +0.50% net
initial yield initial yield initial yield initial yield -5.00% ERV +5.00% ERV
EURm EURm EURm EURm EURm EURm
-------------------- ------------- ------------- ------------- ------------- ---------- ------------------------
(Decrease)/increase
in the fair value
of investment
properties as at 31
March 2020 98.45 46.40 (41.56) (79.07) (19.03) 19.08
-------------------- ------------- ------------- ------------- ------------- ---------- ------------------------
10. Trade and other receivables
31 March 30 September
2020 2019
(unaudited) (audited)
Non-current trade and other
receivables EURm EURm
----------------------------- ------------- -------------
Cash in public institutions 1.17 1.17
----------------------------- ------------- -------------
The cash in public institutions is a deposit of EUR1.17 million
given by the tenant for the property in Barcelona, Spain.
31 March 2020 30 September
(unaudited) 2019 (audited)
Current trade and other receivables EURm EURm
-------------------------------------- ------------- ---------------
Trade receivables 1.86 1.97
Prepayments, accrued income and other
receivables 8.14 7.39
Escrow cash - 6.79
VAT receivable* 11.14 15.60
-------------------------------------- ------------- ---------------
21.14 31.75
-------------------------------------- ------------- ---------------
* VAT receivable relates mainly to VAT reclaim due on the
purchase of the property in Italy EUR9 million (30 September 2019:
EUR12 million).
11. Loans and borrowings
As at 31 March 2020, all of the Group's debt facility
commitments are floating term. The LTV across all drawn debt was
44% against a target of 45% (with a limit of 65% in the RCF). The
Group has been in compliance with all of the financial covenants of
the Group's bank facilities as applicable throughout the period
covered by these financial statements.
The Group had available headroom of EUR68.50 million under its
bank borrowings (30 September 2019: EUR189.50 million).
Any associated fees in arranging the loan and borrowings that
are unamortised as at the period end are offset against amounts
drawn on the facilities as shown in the table below:
30 September
31 March 2020 2019
(unaudited) (audited)
EURm EURm
--------------------------------------------- ------------- ------------
Bank borrowings at the beginning of the
period 231.95 -
Bank borrowings drawn in the period 121.00 321.00
Bank borrowings repaid in the period - (85.50)
Loan issue costs paid (0.73) (4.03)
Non-cash amortisation of loan issue costs 0.44 0.48
--------------------------------------------- ------------- ------------
Non-current liabilities: loan and borrowings 352.66 231.95
--------------------------------------------- ------------- ------------
Maturity of loans and borrowings 31 March 2020 (unaudited)
---------------------------------
Total debt
Drawn Undrawn available
EURm EURm EURm
Repayable between one and two years - - -
Repayable between two and three years - - -
Repayable between three and four years 83.88 16.12 100.00
Repayable between four and five years 272.62 52.38 325.00
Repayable in over five years - - -
--------------------------------------- -------- --------- ------------
356.50 68.50 425.00
--------------------------------------- -------- --------- ------------
Maturity of loans and borrowings 30 September 2019 (unaudited)
---------------------------------
Drawn Undrawn Total debt
EURm EURm available
EURm
--------------------------------------- -------- --------- ------------
Repayable between one and two years - - -
Repayable between two and three years - - -
Repayable between three and four years - - -
Repayable between four and five years 235.50 189.50 425.00
Repayable in over five years - - -
--------------------------------------- -------- --------- ------------
235.50 189.50 425.00
--------------------------------------- -------- --------- ------------
12. Other liabilities
The Group's properties in Germany are held in subsidiaries in
which the Group holds 94.9% or 89.9% of the shares. As part of the
purchase agreements, the Group issued put options to the minority
shareholders. The options are exercisable ten years after
acquisition and would require the Group to acquire all shares held
by the minority shareholder at the then market value. Prior to the
option date the Group has guaranteed a fixed dividend to the
minority shareholder. If this is not met by the subsidiary, then
the Company is required to settle this obligation.
13. Derivative financial instruments
To mitigate the interest rate risk that arises as a result of
entering into variable rate loans, a number of interest rate caps
have been taken out in respect of the Group's variable rate debt to
cap the rate to which three month Euribor can rise. Each cap runs
coterminous to the initial term of the respective loans.
As at the period end the Group had notional value of interest
rate caps of EUR300 million to act as a hedge against the EUR425
million revolving credit facility.
The weighted average capped rate, excluding any margin payable,
for the Group as at the period end was 0.67%. The total premium
payable in the period towards securing the interest rate caps was
nil (30 September 2019: EUR2.47 million).
30 September
31 March 2020 2019
(unaudited) (audited)
EURm EURm
---------------------------------------------- ------------- ------------
As at 1 October 2019 0.12 -
Interest rate cap premium paid - 2.47
Fair value movement 0.07 (2.35)
---------------------------------------------- ------------- ------------
Non-current assets: interest rate derivatives 0.19 0.12
---------------------------------------------- ------------- ------------
The interest rate derivatives are marked to market by the
relevant counterparty banks on a quarterly basis in accordance with
IFRS 9. Any movement in the mark-to-market values of the
derivatives are taken to the Group profit or loss.
As at the period end date the total proportion of debt hedged
via interest rate derivatives equated to 84% (30 September 2019:
127%). The percentage for September 2019 was above 100% due to the
feature of the bank debt which allows flexible drawdown/repayment.
This allows the Company to manage its treasury in the context of
timing difference between an equity raise and an equity
deployment.
Fair value hierarchy
The fair value of the Group's interest rate derivatives is
recorded in the Group Statement of Financial Position and is
determined by forming an expectation that interest rates will
exceed strike rates and discounting these future cash flows at the
prevailing market rates as at the period end. This valuation
technique falls within Level 2 of the fair value hierarchy, as
defined by IFRS 13. The valuation was provided by the counterparty
to the derivatives. There have been no transfers between Level 1
and Level 2 during any of the periods, nor have there been any
transfers between Level 2 and Level 3 during any of the
periods.
14. Financial risk management
Financial instruments
The Group's principal financial assets and liabilities are those
that arise directly from its operations: trade and other
receivables, trade and other payables and cash held at bank. The
Group's other principal financial assets and liabilities are bank
borrowings and interest rate derivatives, the main purpose of which
is to finance the acquisition and development of the Group's
investment property portfolio and hedge against the risk of
interest rates rising. The book value of the Group's financial
instruments that are carried in the financial statements
approximates their fair value at the end of the period.
Risk management
The Group is exposed to market risk (including interest rate
risk), credit risk and liquidity risk. The Board of Directors
oversees the management of these risks. The Board of Directors
reviews and agrees policies for managing each of these risks that
are summarised below.
Market risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
financial instruments held by the Group that are affected by market
risk are principally the Group's cash balances and bank borrowings
along with interest rate derivatives entered into to mitigate
interest rate risk.
The Group monitors its interest rate exposure on a regular
basis. A sensitivity analysis performed to ascertain the impact on
the Group Cash Flow Statement and net assets which shows that a 50
basis point decrease/increase in interest rates would result in an
increase of EURnil or a decrease of EUR0.65 million to net assets,
based on the nominal borrowings at the period end.
The Group currently operates in seven countries. The current
distribution of total assets is as follows:
Total assets Belgium Germany Spain Italy Poland UK The Netherlands Total
--------------------------- -------- -------- ------- ------- ------- ------ ---------------- -------
31 March 2020 (unaudited) 92.55 290.76 162.44 147.32 119.09 12.49 52.24 876.89
--------------------------- -------- -------- ------- ------- ------- ------ ---------------- -------
30 September 2019
(audited) 91.50 273.65 163.03 146.64 63.47 2.34 - 740.63
--------------------------- -------- -------- ------- ------- ------- ------ ---------------- -------
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risks
from both its leasing activities and financing activities,
including deposits with banks and financial institutions.
Credit risk is mitigated by tenants being required to pay
rentals in advance under their lease obligations. The credit
quality of the tenant is assessed based on an extensive credit
rating scorecard at the time of entering into a lease agreement or
acquiring a let property. The Group holds collateral by way of bank
deposits totalling EUR1.17 million (see note 10).
Outstanding trade receivables are regularly monitored. The
maximum exposure to credit risk at the reporting date is the
carrying value of each class of financial asset less the collateral
held.
15. Share capital
The share capital relates to amounts subscribed for share
capital at its nominal value:
Ordinary Shares 31 March 31 March 30 September 30 September
2020 2020 2019 2019
Number EURm Number EURm
----------------------------------------------------------- ------------ --------- ------------- -------------
Issued and fully paid at 1 cent each
Balance at beginning of period - EUR0.01 Ordinary Shares 422,727,273 4.23 1 -
Shares issued in the period - - 422,727,272 4.23
----------------------------------------------------------- ------------ --------- ------------- -------------
Balance at end of period 422,727,273 4.23 422,727,273 4.23
----------------------------------------------------------- ------------ --------- ------------- -------------
The Group has one class of Ordinary Shares which carry no right
to fixed income.
The 1 cent shares listed on the Specialist Fund Segment of the
Main Market of the London Stock Exchange on 9 July 2018 were issued
for EUR1.13 (or GBP1.00). Following a Special Resolution of Tritax
EuroBox plc, an application was made to the High Court to cancel
the share premium, which was granted on 25 September 2018. This
resulted in the full balance being transferred into distributable
reserves.
On 29 May 2019, the Group increased its share capital by another
122,727,273 Ordinary Shares for EUR1.10 or GBP0.97 each. As a
result, the Group's issued share capital increased to 422,727,273
Ordinary Shares with voting rights.
30
31 March 2020 30 September 2019 September 2019
Preference Shares 31 March 2020 Number EURm Number EURm
----------------------------- ---------------------- -------------- ---------------------------- ---------------
Issued and fully paid at EUR1
each
Balance at beginning of
period -
EUR1.00 Preference Shares - - 57,100 0.06
Shares issued in the period - - - -
Shares cancelled in the
period - - (57,100) (0.06)
----------------------------- --------------------- --------------- ---------------------------- ---------------
Balance at end of period - - - -
----------------------------- --------------------- --------------- ---------------------------- ---------------
On 26 September 2018, the Group cancelled 57,100 redeemable
preference shares with a nominal value of EUR57,100. The preference
shares did not carry any rights to a dividend.
16. Net asset value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the
Group Statement of Financial Position attributable to ordinary
equity holders of the Parent by the number of Ordinary Shares
outstanding at the end of the period. As there are dilutive
instruments outstanding basic NAV per share is shown below:
31 March 2020 30 September
(unaudited) 2019 (audited)
EURm EURm
--------------------------------------------
Net assets per Group Statement of Financial
Position 490.88 477.27
Adjustments to calculate EPRA NAV:
Changes in fair value of interest rate
derivatives 2.28 2.35
Deferred tax adjustment 9.81 4.59
-------------------------------------------- ------------- ---------------
EPRA NAV 502.97 484.21
Ordinary Shares:
Issued share capital (number) 422,727,273 422,727,273
NAV per share (expressed in Euro per share)
Basic NAV per share 1.16 1.13
EPRA NAV per share 1.19 1.15
-------------------------------------------- ------------- ---------------
17. Transactions with related parties
For the period ended 31 March 2020, all Directors and the
Members of the Manager are considered key management personnel. The
terms and conditions of the Investment Management Agreement are
described in the Management Engagement Committee Report. The fee
payable to the Manager for the period to 31 March 2020 was EUR2.07
million (period ended 31 December 2018: EUR0.90 million).
The total amount outstanding at the period end relating to the
Investment Management Agreement was EUR0.97 million (30 September
2019: EUR1.06 million).
The total amounts paid to Directors for their services for the
period to 31 March 2020 was EUR0.1 million (31 December 2019:
EUR0.1 million).
The six Members of the Manager, namely Mark Shaw, Colin Godfrey,
James Dunlop, Henry Franklin, Petrina Austin and Bjorn Hobart, are
also Members of SG Commercial LLP. No fees were payable to SG
Commercial in the period ended 31 March 2020 (period ended 31
December 2018: EUR0.59 million) in respect of agency services. The
agency fees payable to SG Commercial LLP represents 0% (31 December
2018: 19%) of the agency fees payable by the Group during the
period. There were no fees outstanding as at 31 March 2020 and 30
September 2019.
During the period the Directors received the following
dividends: Robert Orr: EUR420, Keith Mansfield: EUR4,990, Taco De
Groot: EUR525 and Eva-Lotta Sjostedt: EURnil. None of the Directors
received any dividends in the period from 1 July 2018 to 31
December 2018. Nick Preston, the Fund Manager received EUR1,410
during the period (none in the period from 1 July 2018 to 31
December 2018).
During the period the six Members of the Manager received the
following dividends: Colin Godfrey: EUR2,835, Mark Shaw: EUR2,835,
James Dunlop: EUR2,835, Henry Franklin: EUR1,901, Petrina EUR452
and Bjorn EUR452. None of these Members received any dividends in
the period from 1 July 2018 to 31 December 2018.
On 5 February 2020 the Manager has acquired in the market
116,416 Ordinary Shares at 90.2 pence per share on behalf of
certain member of staff of the Manager.
18. Subsequent events
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
19. Accounting for non-controlling interest ("NCI")
The total comprehensive loss attributable to the NCI of EUR0.06
million and the NCI in acquisition of subsidiaries of EUR1.69
million as stated in the Condensed Consolidated Statement of
Changes in Equity for the period 31 December 2018 have since been
derecognised. Prior to 31 December 2018 these non-controlling
shareholders of certain Group's subsidiary were granted put options
that convey to those shareholders the right to sell their shares in
that subsidiary to the Group for an exercise price. In such case,
written put options meet the definition of a financial liability,
and are therefore recognised as such. The put option liability was
recognised in the Consolidated Statement of Financial Position as
of 30 September 2019 and 31 March 2020. The Group has adopted an
accounting policy of the anticipated-acquisition method whereby the
purchase of the put option is effectively assumed to have been
exercised and hence the NCI is not recognised. The NCI of EUR1.63
million as stated in the Condensed Statement of Financial Position
at 31 December 2018 has therefore been subsequently derecognised
and an other liability of EUR1.63 million in respect of the put
option has been recognised (see note 12). As a result, the Group's
total equity has reduced by EUR1.63 million but the equity due to
shareholders of the Company is unchanged. There has been no other
impact on the Group's total comprehensive income for the
comparative period attributable to the Shareholders, Earnings Per
Share (Basic, Adjusted and EPRA), and on the Group's NAV per share.
The comparative information in Condensed Group Statement of
Comprehensive Income and Condensed Consolidated Statement of
Changes in Equity for the period 31 December 2018 was not adjusted
as the impact is not significant.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EKLBFBELEBBD
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