TIDMEBOX TIDMBOXE
RNS Number : 3244W
Tritax EuroBox PLC
10 December 2019
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
10 December 2019
Tritax EuroBox plc
(the "Group" or the "Company")
RESULTS FOR THE PERIOD FROM 1 JULY 2018 TO 30 SEPTEMBER 2019
Tritax EuroBox plc (tickers: EBOX (Sterling), BOXE (Euro)),
which invests in Continental European logistics real estate assets,
is today reporting its results for the Group for the period from 1
July 2018 to 30 September 2019.
Financial highlights
-- Basic net asset value ("NAV"): EUR477.3 million
-- EPRA NAV(1) : EUR484.2 million
-- Basic net asset value ("NAV") per share: EUR1.13
-- EPRA NAV(1) per share: EUR1.15
-- IFRS earnings per share ("EPS")(1) : 6.25 cents
-- Adjusted EPS(2) : 3.25 cents
-- EPRA EPS(2) : 2.96 cents
-- Dividends paid or declared for the period: 3.4 cents (85.3% covered by adjusted EPS)
o Remain on track to meet our dividend target once fully
invested and geared and expect then to be able to increase the
dividend progressively, supported by the regular indexation events
in the underlying lease agreements, and the capture of market
rental growth
-- Total return for the period: 3.4%
-- Total unsecured revolving credit facility of EUR425 million
with an average cost of debt of 2.2%
-- Loan to value ("LTV") ratio of 33.3% at 30 September 2019,
against the Company's medium-term target of 45% LTV(1)
-- The portfolio had a contracted annualised passing rent of
EUR34.8 million as at 30 September 2019
-- Gross equity proceeds raised in two tranches of EUR474.3
million (EUR339.3 million at the Company's significantly
oversubscribed IPO in July 2018 and EUR135.0 million raised on 29
May 2019 through a placing, with investment from both new investors
and existing Shareholders.)
Operational highlights
-- Acquired 10 prime Big Box logistics assets totalling 785,276
sqm of logistics space in five core Continental European
countries
-- 70% acquired off-market
-- The weighted average net initial purchase yield of the portfolio is 5.1%
-- Independent valuation of the asset acquired in the period of EUR691.7(4) million
-- Portfolio weighted average unexpired lease term(1) of 11 years
-- 100% cash producing(3)
-- 81% of tenants are multi-billion Euro businesses
-- 93% of leases are subject to an element of indexation
-- On 7 May 2019, the shares were listed on the Official List
and trading transferred to the premium segment of the Main
Market
-- The shares were included in the FTSE All-Share index on 24
June 2019 and anticipate inclusion in the FTSE EPRA NAREIT Index
Series at the end of the first quarter of 2020
Post balance sheet activity
-- Signed an agreement with Mango our tenant in Barcelona to
fund the extension of the property by 88,000 sqm at an attractive
yield on cost, which will enhance the income and capital value of
the asset
-- Today, the Board declared an interim dividend of 1 cent per
Ordinary Share in respect of the period from 1 July 2019 to 30
September 2019
-- Today, the Board announced the appointment of Eva-Lotta
Sjöstedt as a Non-Executive Director with immediate effect
Robert Orr, Chairman of Tritax EuroBox plc, commented:
"The outlook for our market remains compelling. The structural
change which is driving occupier demand for Big Boxes has only
recently started and hence has much further to run, while the
supply of appropriate new assets to meet this demand is likely to
remain constrained. This implies a continuation of the supportive
market conditions for our Company's strategy.
When acquiring, the Group will continue to target the largest
logistics assets, while maintaining our rigorous focus on quality,
location and capital discipline.
Overall, the Board remains confident in the future of the
business and I look forward to reporting on continued progress next
year."
Notes:
1. See Key Performance Indicators
2. Adjusted Earnings per Share attributable to Shareholders,
adjusted by other earnings not supported by cashflows. EPRA
Earnings per Share earnings from operational activities (which
excludes licence fees receivable on our forward-funded assets.) See
Note 12 to the accompanying financial information for
reconciliation of these measures to Basic EPS
3. Including licence fee income and rental guarantees
4. Including property held for sale and rent guarantees
FOR FURTHER INFORMATION, PLEASE CONTACT:
Tritax Group
Nick Preston
Mehdi Bourassi +44 (0) 20 7290 1616
Jefferies International Limited
Gary Gould
Stuart Klein +44 (0) 20 7029 8000
Kempen & Co N.V.
Dick Boer
Thomas ten Hoedt +31 (0) 20 348 8500
Akur Limited
Anthony Richardson
Tom Frost
Siobhan Sergeant +44 (0)20 7493 3631
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 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's Manager, Tritax Management LLP, has assembled a
full-service European logistics asset management capability
including specialist "on the ground" asset and property managers
with strong market standings in the Continental European logistics
sector. The appointed asset managers Logistics Capital Partners
("LCP") and Dietz AG ("Dietz") are logistics specialists and offer
the Company exposure to high quality asset management expertise and
access to their respective development pipelines, providing
acquisition opportunities across 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.tritaxeurobox.co.uk
1. Euro denominated returns, by reference to IPO issue price, on
a fully invested and geared basis. 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. Accordingly, investors
should not place any reliance on the targets in deciding whether or
not to invest in the Company and should not assume that the Company
will make any distributions at all and should decide themselves
whether or not the targets are reasonable or achievable.
A Company presentation for investors and analysts will be held
at 8.30am today at:
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Those wishing to attend the presentation or access the live
webcast and conference call are kindly asked to contact
Maitland/AMO at tritax-maitland@maitland.co.uk or by telephone on
+44 (0) 20 7379 5151.
The presentation will also be accessible on-demand
In addition, a recorded webcast of this meeting and the
presentation will also be available to download on-demand via the
Company website: www.tritaxeurobox.co.uk.
The Report and Accounts will also be made available on the
Company's website at www.tritaxeurobox.co.uk. In accordance with
Listing Rule 9.6.1, copies of these documents will be submitted to
the UK Listing Authority via the National Storage Mechanism and
will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM.
AT A GLANCE
Who we are and what we do
Tritax EuroBox floated on the London Stock Exchange in July
2018. We invest in and manage a well-diversified portfolio of
large, high-quality logistics real estate assets, known as Big
Boxes, across Continental Europe.
We focus on key logistics hubs, which are close to major
population centres in Europe's most-established logistics markets
and have good availability of labour. Our assets benefit from
strong transport links and are often near to Europe's major ports
and railheads, making them well positioned for regional, national
and global distribution occupiers. Their modern designs and
state-of-the-art construction helps them to meet both our tenant
partners' sustainability goals, and our ambition to invest in
assets which demonstrate minimal long term environmental impact. By
choosing areas of constrained supply, our investments provide the
best platform for rental growth, underpinning strong future
returns.
The Manager
Our Manager, Tritax Management LLP, has assembled a full-service
European investment management capability. This combines the
Manager's outstanding stock-picking and portfolio management
expertise with dedicated on-the-ground asset and property managers,
with strong market standings. This gives us a deep understanding of
individual market dynamics and the ability to implement our
strategy and effectively manage our assets.
CHAIRMAN'S STATEMENT
Ahead of our IPO in July 2018, we identified a clear opportunity
to establish a listed investment vehicle with a clear focus on the
big box subsector of the European logistics market, which we
believe represents a compelling investment proposition.
The Board has set a focussed strategy for the business to ensure
we rapidly scale up to capitalise on this opportunity. The business
model is scalable, and we have the financial and real estate
expertise to execute this strategy. We have delegated
responsibility of delivering this strategy to Tritax Management
LLP, a Manager that brings proven sector knowledge and expertise.
Together we believe we are uniquely placed to capitalise on it.
An expert and dedicated Manager
We are already benefitting significantly from the Manager's
capabilities and relationships which have enabled us to acquire and
manage an attractive portfolio of assets. Just as importantly, the
team is demonstrating an energy and passion for driving our
business forward and for seizing the opportunity that was
originally identified. The Manager's culture is firmly aligned with
our purpose and strategy and its "can do" ethos is a key
differentiator for us. Building our pan-European platform has been
a sizeable task and the team's dedication stands us in good stead
for the future. The Board engages closely with the Manager and we
look forward to continuing to work with the team to create further
value for our Shareholders.
Constructing an attractive portfolio
The effective platform the Manager has created and now operates
has allowed us to build rapidly a well-diversified portfolio of ten
assets, spread across key logistics locations in five core
Continental European countries. Europe is a large, fragmented and
disparate market and buying the right type of assets, in the most
sought- after locations, which combine to form a diversified, yet
cohesive and complementary portfolio is a critical skill. In an
increasingly competitive environment, the Manager's valuable
relationships, supplemented by the market intelligence and
pipelines of our specialist asset managers, have enabled us to buy
well, with 70% of the portfolio by value secured off-market.
We believe our portfolio is well placed to benefit from the
continuing structural change in the logistics market, which is
generating such strong occupational demand for Big Box assets. At
the same time, the financial strength of our tenant partners, their
geographic diversity and the average unexpired lease term of 11
years all combine to give us a robust and secure income stream,
underpinned by the quality of the properties. This should help to
safeguard our business from any economic headwinds.
At 30 September 2019, the portfolio was independently valued at
EUR691.7 million(1) . This valuation assumes the deduction of a
notional EUR14.3 million of Real Estate Transfer Tax ("RETT"),
which would be payable if the assets were sold outside a corporate
structure. European market practice is typically for assets to be
acquired via a corporate structure, in which case some or even all
of the RETT attributed to the portfolio would not be payable.
Adding value through asset management
Although the Group has only been operating for a short time, the
Manager has already demonstrated its asset management capabilities,
completing two value-enhancing lettings and restructuring a lease
on improved terms. In addition, there are attractive opportunities
in the short to medium term to add value by utilising unused or
adjacent land within the portfolio. These opportunities confirm the
Manager's ability to source assets for us with built-in value
creation potential.
Following the period end, we signed an agreement with our tenant
in Barcelona, Mango, to fund the extension of the property by
88,000 sqm. We have been able to secure this at an attractive yield
on cost, which will enhance the income and capital value of the
asset.
A solid capital base
The Company's IPO in July 2018 was significantly oversubscribed
and raised gross proceeds of EUR339.3 million or GBP300 million,
which we were able to invest quickly. On 29 May 2019, we raised a
further EUR135.0 million of gross proceeds through a placing, with
investment from both new investors and existing Shareholders. This
demonstration of support from Shareholders has enabled us to
achieve a great deal in a limited time and I want to thank
Shareholders for their continued support.
The Company has also been successful in obtaining attractive
debt financing. In October 2018, we agreed a EUR200 million
unsecured Revolving Credit Facility ("RCF") with HSBC Bank plc and
BNP Paribas, for an initial term of five years. We have since
expanded the facility with Bank of America Merrill Lynch ("BAML")
providing an additional EUR100 million commitment in December 2018.
Bank of China and Banco de Sabadell committed a further EUR125
million in aggregate, in September 2019. This gave us a total
facility at the period end of EUR425 million.
The RCF offers us an attractive cost of debt. Unusually for a
company as young as ours, it is unsecured. This demonstrates our
banking syndicate's understanding and support for our strategy and
the potential for further growth. It provides us with operational
flexibility and the scope for further expansion when the conditions
are right.
At 30 September 2019, we had drawn EUR235.5 million against the
RCF. This gave us an LTV ratio of 33.3%, against our medium-term
LTV target of 45% and the maximum permitted by our investment
policy of 50%.
Robust financial results
At the period end, the basic NAV attributable to owners of the
Company was EUR477.3 million or EUR1.13 per share. The EPRA NAV was
EUR484.2 million (EUR1.15 per share). IFRS earnings per share
("EPS") was 6.25 cents. The EPRA EPS was 2.96 cents. Adjusted EPS,
which adjusts for non-cash items in the income statement was 3.25
cents for the period. The Board considers Adjusted EPS to be the
most appropriate measure when considering dividend distributions.
However, all measures of EPS for the period reflect the dilutive
effect of the equity raise in May 2019 and the time taken to invest
the proceeds and become income producing.
On track for our dividend target
The dividend is a vital component of our total return target of
9.0% per annum. At IPO, we set an initial dividend target of 5.37
cents per annum (representing 4.75% of the issue price of equity at
the IPO)(2) , on a fully invested and geared basis. The Board has
declared four interim dividends in respect of the period ending 30
September 2019, totalling 3.40 cents per share. The total dividend
was 85.3% covered by Adjusted Earnings. We remain on track to meet
our dividend target once fully invested and geared and expect then
to be able to increase the dividend progressively, supported by the
regular indexation events in the underlying lease agreements, and
the capture of market rental growth. The total return for the
period was 3.4%.
Market listing and benchmark inclusion
At IPO, the Company's shares were admitted to the Specialist
Fund Segment of the London Stock Exchange's Main Market. On 7 May
2019, the shares were listed on the Official List and trading
transferred to the premium segment of the Main Market. This was an
important move, since it facilitates the Company's inclusion in key
stock market indices and broadens the range of potential
Shareholders. The shares were included in the FTSE All-Share index
on 24 June 2019 and we anticipate inclusion in the FTSE EPRA NAREIT
Global Real Estate Index Series at the end of the first quarter of
2020.
Strong corporate governance
Strong corporate governance and a Board culture that promotes
open, honest and robust debate have been fundamental to our success
during this first period of trading. We have a fully independent
Board, with a diverse range of skills and extensive European real
estate experience. We have met frequently with the Manager and I
believe that regular engagement and effective communication is key
to our constructive working relationship.
A compelling outlook
The outlook for our market remains compelling. The structural
change which is driving occupier demand for Big Boxes has only
recently started and hence has much further to run, while the
supply of appropriate new assets to meet this demand is likely to
remain constrained. This implies a continuation of the supportive
market conditions for our Company's strategy.
When acquiring, the Group will continue to target the largest
logistics assets, while maintaining our rigorous focus on quality,
location and capital discipline.
Overall, the Board remains confident in the future of the
business and I look forward to reporting on continued progress next
year.
Robert Orr, Chairman
9 December 2019
(1) Including property held for sale and rent guarantees.
(2) 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.
OUR MARKET
Strong market fundamentals
The Group operates in a market with strong fundamentals. While
the market trends discussed overleaf are common across the
countries we are targeting, it must be remembered that the
Continental European real estate market is diverse and fragmented,
with different laws, planning environments and tax regimes in each
country. Successfully investing in and managing a Pan-European
portfolio of Big Box logistics assets therefore requires us to
understand and optimise the specific nuances of each country,
drawing on the Manager's skills and the on-the-ground expertise of
our specialist asset managers.
Driving occupational demand
Logistics property occupiers are facing profound structural and
operational change in their markets, to which they must respond to
ensure the sustainability of their business models. 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.
These trends have been prevalent in the US and UK for some time
and are now spreading rapidly across Continental Europe. Overall,
we estimate that the effects of these changes in Continental Europe
is between four and 10 years behind the UK.
Many of these trends were first identified and introduced to the
logistics market by retailers who have had to adapt their
businesses to the omnichannel retail model - acknowledging the
impact of the benefits of using automation to improve inventory
management and efficiency and the resulting cost savings.
Meeting the needs of modern consumers
Changes in the retail market and the move to online shopping are
among the most significant drivers of occupier demand for Big
Boxes. Faced with the high costs of occupying shops and rising
online retail spending, retailers are looking to reposition their
operations and have a dual in-store and online presence. These
retailers have to compete fiercely in both formats on price,
product range and speed of delivery. This is being implemented by
store closures, improved online presence and more efficient
distribution networks.
Retailers have realised that consolidation of their logistics
function into very large, well located, highly automated properties
is more efficient and reduces costs. Big Boxes are fundamental to
this consolidation, allowing traditional stores and online
consumers access to a retailer's entire product range and then
facilitating quick, flexible and cheap delivery and returns of
those orders. The logistics space requirements of this new business
model are substantial, as use of traditional retail space
contracts, and the take up of logistics space increases to better
serve both in-store and online consumers.
These changes are in their relative infancy in the European
market and, as a result, have much further to run.
Online sales are now increasing rapidly from a low base in many
Continental European countries, following the trend seen in the UK,
which began a similar growth trajectory over five years ago. It is
anticipated that this growth of online sales will continue and
follow and will mirror that seen in the UK.
As online retail becomes more established, consumer expectations
are also evolving. Consumers are increasingly demanding faster and
more flexible delivery methods, which are shaping supply chains and
creating a need for more efficient property types that enable
shorter throughput and delivery times.
Optimising supply chains
While e-commerce and the retail sector is a major driver of
demand for Big Boxes, it is not the only one. Occupiers in many
other sectors are also finding their margins under sustained
pressure, and they too are looking for opportunities to increase
efficiency and reduce costs and are learning from the experiences
of the retail sector. As a result, across the logistics industry,
there is a strategic move to fewer, larger and more modern
properties. This provides all occupiers with the efficiencies and
economies of scale and the opportunity to automate processes which
would not be possible in smaller properties. Larger units tend to
be higher, allowing for mezzanine floors and more efficient
automated racking and storage systems.
Occupying sustainable assets
Sustainability is increasingly central to occupiers' corporate
strategies. The pressure to be sustainable has the benefit of cost
savings that can be delivered through efficiency gains and also
companies' desire to be responsible corporate citizens. Companies
are responding to increasing consumer awareness of environmental
issues and their wish to buy from businesses which are actively
looking to minimise their environmental impact.
Modern Big Boxes, such as those we invest in, help our tenant
partners to meet their sustainability objectives. By occupying
assets built with state- of-the-art design and materials, and which
incorporate initiatives such as low-carbon technologies and energy
efficiency, they can minimise their environmental footprint and
optimise their use of natural resources. From an investment
perspective, these more environmentally friendly properties will
suffer lower obsolescence and also prove more attractive to
occupiers in the long term.
Supply remains constrained
Rising occupier demand for the best logistics assets facilities
and the relative lack of speculative development over the last
decade have created significant shortages of high-quality stock
available to rent. Currently, new supply is considerably lower than
the demand for logistics space across Europe, and we do not expect
this position to change in the foreseeable future for the following
reasons.
In Continental Europe, the prime logistics locations are
typically close to densely populated conurbations. There are
comparatively few sites in these locations which can accommodate
very large Big Box facilities, which have an available and
affordable labour supply, and which can also meet the requirements
for electrical power and proximity to appropriate transport links
and infrastructure needed to service these large properties. In
addition, our experience shows that local municipalities are often
reluctant to zone land for the development of the largest logistics
properties.
These restrictions of space, labour supply, sufficient power,
good transport links and local authority sensitivities together
constrict and control the supply of Big Box development land.
The difficulty of acquiring suitable new land for development
means that many developers are exhausting their land banks as they
pursue their development programmes with current occupier demand
remaining strong. Adding all these effects together, we expect to
see increasing land values which, combined with increasing
construction costs, will increase overall development costs, and
hence the value of these properties.
More generally, the amount of available land zoned for
industrial uses has decreased, particularly around major urban
centres, as developers have preferred to convert ageing industrial
properties to higher-value uses such as residential. This, combined
with the lack of speculative development over the last decade, is
providing occupiers with few choices. The consequence is that
logistics vacancies across continental Europe are at, or near,
all-time lows.
Rental growth is evident
Historically, rental growth has been limited, as the European
industrial and logistics development market has been able to create
supply through zoning more land to meet the demand for logistics
use, in particular as the demand from occupiers has been for small
and mid-sized properties where land plots have been more readily
available for development.
We believe that the situation in the future is likely to be
different, particularly when considering the very largest buildings
and the scale of sites they require. The supply of very large sites
in the right locations, where occupiers want to be, is extremely
limited and developers are having to pay ever-higher prices for
them. Construction costs are also rising, due to raw material and
labour cost inflation.
Until recently, higher input costs have not led to rental
growth, as falling investment yields meant developers could offset
rising costs by selling the finished property at a higher value.
However, as investment yields in the sector plateau, developers are
being forced to demand higher rents from occupiers to maintain
their profitability on projects. This effect is now being seen in
key logistics markets across Europe.
Logistics costs make up just 10% of typical supply chain
operational costs, with logistics real estate forming just 0.75% of
total costs. Of course, such industry standard metrics vary
according to different types of occupiers. However, it does
illustrate that rent comprises a small component of the overall
supply chain operational costs.
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 trend that is now evident across European
logistics markets is the improvement of lease terms in favour of
the property owner. In most European markets, it has been usual for
leases to contain a number of occupier-friendly clauses, such as
restricted indexation provisions, provision for certain expenditure
to be paid for by the landlord and options to renew on terms
favourable to the occupier. Leases have also been relatively short
with a typical length of around five years.
However, with the balance of the market dynamic shifting in
favour of the asset owner, occupiers are increasingly signing
longer leases. Occupying assets on long leases enables them to
retain control of strategically important assets and to amortise
their often-substantial investment in fitting out and automation
over a longer period. Longer leases also suit international
companies who are looking to harmonise their lease obligations
across different geographies. The trend towards longer leases is
evidenced by the Group's own portfolio, which contains a number of
leases in excess of ten years and had a weighted average unexpired
lease term at the period end of 11 years.
We are seeing that the terms that occupiers are prepared to sign
up to are more landlord friendly. Even in the relatively short time
the Company has been trading, we have been able to negotiate better
indexation clauses and more advantageous renewal options. This is a
key focus for the Company going forward as we seek to take
advantage of the strength of the occupier market and the scarcity
of options open to them. The impact of these improvements in lease
terms helps drive the value of the assets.
Investment demand is robust
The attractions of the market for investors mean that investment
demand is strong and looks set to remain so. Competition is
therefore fierce for openly marketed opportunities. Effectively
sourcing investment opportunities at favourable prices therefore
requires a different strategy to competing in the open market.
The Manager's broad network of pan-European relationships spans
occupiers, developers and other investors. The Manager has an
established reputation for providing security, reliability, honesty
and speed in transacting. Together, these attributes help the Group
to acquire suitable assets directly from sellers, without
properties being openly marketed. The evidence of this approach is
that seven of the ten assets acquired to date have been secured
off-market.
The Manager will continue to maintain and develop relationships,
particularly with top-quality European development companies, to
ensure a continuing robust pipeline of assets to support future
portfolio expansion. These long-term relationships are particularly
fruitful with developers who are keen to generate repeat business
with reliable counterparties.
WHAT THIS MEANS FOR US
Stock selection is key
Only the best assets in the best locations will meet the demands
of occupiers now and into the future. Our approach to stock
selection is described in our investment policy which governs our
acquisition strategy.
We focus on large, high-quality logistics assets which
typically:
-- are well located in established distribution hubs, within or
close to densely populated areas;
-- are in locations with limited supply, that are likely to
benefit from structural changes in occupational demand;
-- fulfil a key part of the occupiers' logistics and distribution supply chain;
-- are large and modern; and
-- benefit from index-linked leases.
When reviewing potential acquisitions, we also consider:
-- transport connectivity, the availability of labour and operational efficiencies;
-- the duration of the lease and potential for future rental growth;
-- the tenant's financial strength;
-- the tenant's commitment to the asset, in terms of the capital
expenditure committed to it and the role it plays in the tenant's
operations; and
-- the potential for asset management and value-adding
initiatives during and after the lease term.
Proactive asset management is vital for long-term value
We need to actively manage our assets, to ensure they remain fit
for the evolving business needs of our tenant partners, as
megatrends such as the rise in e-commerce continue.
Sustainability will underpin our success
In order to meet the requirements of today's occupiers, we need
to continue to acquire modern assets with the strongest
sustainability credentials and further enhance the sustainability
performance of existing assets, through our active asset
management.
OUR BUSINESS MODEL
THE ROLE OF THE BOARD
The Board has overall responsibility for setting and reviewing
our Investment Objectives and Policy. It also monitors our
investment and corporate activity, performance, business conduct
and strategy against our Investment Objectives and Policy. The
Board meets the Manager at Board meetings to challenge, debate and
discuss potential investment decisions and ensure ongoing
compliance with the Company's Investment Policy and Investment
Objectives. The Board also has a Management Engagement Committee,
which reviews the performance of the Manager and its principal
service providers.
THE ROLE OF THE MANAGER
The Board has delegated day-to-day decision-making
responsibility to the Manager in respect of portfolio strategy and
composition and risk management, in line with the Investment
Management Agreement. The Manager is our key source of competitive
advantage. Its extensive record in the logistics sector, deep
market knowledge and extensive networks of contacts enable us to
identify and transact assets, where appropriate forward fund
pre-let developments and proactively manage the portfolio to add
value.
OUR RESOURCES
We use the following resources to create value for Shareholders
and other stakeholders:
Financial capital
We are funded by Shareholders' equity, third party debt and
recycled funds
Physical assets
We have a portfolio of high-quality Big Box logistics assets
strategically throughout Continental Europe, let to financially
sound tenants
Our people
We have an experienced Board and a Manager with a high calibre
specialist team with a strong reputation which make us a partner of
choice for vendors, developers and occupiers
Valuable relationships
We build mutually beneficial and long-term relationships with
our occupiers and draw on the Manager's extensive contacts with key
influencers across the subsector
WHAT WE DO
We acquire, lease and manage Big Box logistics assets across
strategic locations in core countries in Continental Europe.
The Group aims to deliver consistent returns to Shareholders
over the medium to long term, through investing in properties that
deliver secure and rising rental income and capital growth.
Our sector focus and the fact that we typically hold investments
for the medium to long term, as well as avoiding taking speculative
development risk, distinguishes us from other competitors in our
market, who are often primarily developers or financial
institutions investing in a range of different asset classes and
looking for shorter-term gains.
Source high-quality investments
To source suitable assets, the Manager uses its extensive
logistics experience and established network of relationships. This
enables the Manager to acquire properties for us which are not
being openly marketed, thereby reducing the competition for such
assets. The Manager's expertise and reputation make us an
attractive partner for occupiers and for sellers looking to dispose
of their assets.
Buy and sell for value
Before making an offer to acquire an asset, the Manager
carefully assesses its fit with our investment criteria. Every
acquisition is considered alongside the existing portfolio, to
ensure good diversification, and avoid concentration of risk.
We intend to hold assets for the long term. However, we
regularly assess potential upside opportunities in disposing of
assets and recycling capital into new opportunities, and we have a
track record of doing this profitably. These disposals are
typically of mature assets where our estimates of forward-looking
returns are below target levels, assets where we believe the risk
profile has changed, or assets sold to special purchasers.
Develop on a risk-controlled basis
The Manager's relationships enable it to source and invest in
forward funded developments for us, which have been pre-let to a
specific tenant. Funding the construction of a property in this way
enables us to invest in brand new buildings leased to institutional
grade tenants on long leases, while substantially reducing any
development risk.
The Manager can also acquire land for us which is zoned for
logistics use, allowing us to capture a greater share of the
development profit. The Manager will only acquire such land,
already zoned for logistics use, from a developer who is
incentivised to secure planning and a pre-let with a financially
sound tenant, at which point the land will become a forward funded
pre-let development.
Proactively and responsibly manage assets
The Manager has assembled a full-service European logistics
asset management platform. As well as providing a local presence in
our target markets the platform enables the Manager to work with
our tenant partners to maximise the building's usefulness to their
operations and to adapt the space as their needs change.
HOW WE DELIVER RETURNS
A significant majority of our revenue is rental income which our
tenants are obliged to pay to us under multi-year lease contracts.
The weighted average length of these leases to expiry was 11 years
at 30 September 2019, giving us excellent predictability of income
generated by the current portfolio.
Rents typically increase each year through a relevant inflation
index, in some cases with a cap or collar on the increase. Rental
payments are usually received quarterly or monthly, converting our
revenue quickly into cash, and the financial strength of the
tenants minimises the risk of bad debts.
Assets we acquire typically have an occupier in place and strong
demand for our high-quality properties helps us to quickly let any
vacancy that arises. Lease renewals, new lettings and significant
asset management initiatives allow us to capture market rental
growth over and above the indexation inherent in the leases.
Our cost base enables us to convert a significant proportion of
our rental income into profit. A number of our costs are partially
or largely fixed, which will result in increasing profitability as
the portfolio expands.
We also generate capital growth as the value of our portfolio
increases. This may come from yield compression across the market,
rising income from our assets or the benefits of our asset
management activities.
THE VALUE WE CREATE
For our tenant partners
Our tenant partners benefit from large, modern, flexible and
well- located logistics space, owned by a landlord who is an expert
in the sector and committed to supporting their operations in the
long term.
For lenders
Our lenders benefit from having interest serviced from regular
and stable cash flows, underpinned by financially strong
tenants.
For society
Our assets are integral to the communities where they are
located. They support employment in the local areas around our
assets and they generate tax revenues which support government
spending, both locally and nationally. Our assets also provide
efficient logistics space which supports modern lifestyles,
particularly in the online shopping market, allowing rapid delivery
and consumer choice from occupiers of these buildings.
For the environment
We take the environmental impact of our assets very seriously.
When building new properties, we will development partners to
ensure that the properties are as energy efficient and
environmentally friendly as possible. We also look to enter into
new leases with occupiers that aim to facilitate working together
with the occupier to reduce the environmental impact of their
occupation of the property.
For shareholders
We look to pay a progressive, secure and sustainable dividend
and generate capital growth in a low risk way.
OUR OBJECTIVES, STRATEGY AND KEY PERFORMANCE INDICATORS
Objectives
At IPO, we set two targets for the returns we aim to deliver to
Shareholders:
-- Dividends: we are targeting an initial 5.37 cents per annum,
reflecting 4.75% of the IPO issue price, on a fully invested and
geared basis, which is expected to increase progressively
thereafter.
-- Total return: we aim to achieve a total return of 9.0% per annum over the medium term.
Our strategy
Our strategy for achieving our target returns to investors is
set out below.
Investment strategy
Our investment strategy is informed by our Investment Policy,
which determines the type of assets we want to acquire. This is
overlaid by the strategic choices we make about the countries we
want to invest in, recognising that European logistics is not a
single market and that there is considerable variation between
countries and in the type and quality of logistics properties
available.
We look to diversify the portfolio by geography and tenant
partner, and to maintain a Weighted Average Unexpired Lease Term of
more than five years. A proportion of the portfolio may offer
exposure to urban distribution hubs, which help fulfil the final
mile part of the distribution chain.
Our investment philosophy
Our investment strategy also encompasses our four-pillar
investment philosophy. Our strategy is to build up a core of
Foundation assets to underpin the delivery of secure and attractive
dividends, while acquiring assets in the other pillars that help us
to capture greater capital and income growth for our
Shareholders.
The four pillars are:
-- Foundation assets: modern buildings in prime locations, let
on long leases to institutional-grade tenants. They provide our
core, low-risk rental income.
-- Value Add assets: let to strong tenant covenants and offering
opportunities to enhance returns through asset management.
-- Growth Covenant assets: fully let and well located but
undervalued due to the current financial strength of the occupier.
Asset value is expected to be driven by improvements in tenant
credit quality.
-- Strategic land: we can invest in land zoned for logistics
use, with the opportunity to deliver enhanced returns through
pre-let forward funded developments. We will not speculatively
develop buildings.
Our asset management strategy
The Manager develops a business plan for each asset we acquire.
This business plan identifies where we can expect to create value
through applying asset management techniques such as:
-- restructuring leases, for example to remove tenant break
clauses, extend lease terms, or amend rental levels or indexation
clauses;
-- funding key tenant fit out which enhances the building, such
as mezzanine floors, racking or energy efficiency initiatives, to
improve income levels or deliver more favourable lease terms;
-- funding an extension to the building to meet the tenant partners' business; or
-- growth plans, again to improve income levels and deliver more favourable lease terms.
Where we acquire Value Add assets, we look to turn them into
Foundation assets through asset management. We regularly monitor
and assess the delivery of each asset's business plan.
Our financing strategy
Our financing strategy is to fund acquisitions using our
unsecured revolving credit facility, then refinance when necessary
by raising further equity. This reduces the dilutive effects of
holding large cash balances, which arise when using an equity-first
approach.
We also look to buy assets in corporate structures which helps
to minimise transaction costs and therefore improve returns
generated by the asset.
We have a medium-term loan-to-value target of 45% and the
maximum permitted by our investment policy is 50%. We use interest
rate caps to hedge the cost of our variable rate debt. As the
business grows, we may look to secure additional sources of debt
financing, such as private placements or bond issues.
Our sustainability strategy
We recognise the critical importance to our tenant partners and
to our own long-term success of ensuring our assets provide
sustainability advantages, such as high levels of energy efficiency
and ensuring that the construction and occupation of our buildings
has a positive effect on the surrounding community and
environment.
KEY PERFORMANCE INDICATORS
KPI and definition Relevance to strategy Performance
1.Dividend The dividend reflects 3.40 CENTS/SHARE
Dividends paid to pour ability to deliver for the period to
shareholders and declared a growing income stream 30 September 2019
in relation to the from our portfolio
period. and is a key element
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 cent
per annum.
------------------------------- -----------------------------
2.Total return (TR) TR measures the ultimate 3.4%
TR measures the change outcome of our strategy, for the period to
in the EPRA net asset which is to create 30 September 2019
value over the period value for our shareholders
plus dividends paid. through our portfolio
and to deliver a secure
and growing income
stream. The Company's
medium-term TR target
set at IPO is 9% per
annum by reference
to the IPO issue price.
------------------------------- -----------------------------
3.Basic Net Asset Basic Net Asset Value EUR477.27m/
value measures the net value EUR1.13/SHARE
Net asset value in of the Company under as at 30 September
IFRS GAAP. IFRS. 2019
------------------------------- -----------------------------
4.Adjusted Earnings Adjusted EPS reflects EUR10.79m/
Post-tax adjusted our ability to generate 3.25 CENTS/SHARE
EPS attributable to earnings from our for the period to
shareholders, adjusted portfolio, which ultimately 30 September 2019
for other earnings underpins our dividend
not supported by cash payments.
flows.
------------------------------- -----------------------------
5.Loan to value ratio The LTV measures the 33.3%
(LTV) prudence of our financing at 30 September 2019
The proportion of strategy, balancing
our gross asset value the additional returns
(including cash) that and portfolio diversification
is funded by borrowings. that come with using
debt against the need
to successfully manage
risk. The Company
will maintain a conservative
level of aggregate
borrowings with a
medium term target
of 45% of gross asset
value and a maximum
limit of 50% (in each
case, calculated at
the time of borrowing).
------------------------------- -----------------------------
6.Weighted average The WAULT is a key 11.0 YEARS
unexpired lease term measure of the quality at 30 September 2019
(WAULT) of our portfolio.
The average unexpired Long lease terms underpin
lease term of the the security of our
property portfolio income stream. The
weighted by annual Company seeks to maintain
passing rents. a WAULT of greater
than five years across
the portfolio in accordance
with typical lease
lengths prevalent
in Continental Europe.
------------------------------- -----------------------------
7.Dividend cover The dividend cover 85.3%
Dividends paid and helps indicate how for the period to
proposed to shareholders sustainable a dividend 30 September 2019
in relation to the is. It measures the
financial period. proportion of dividends
which is supported
by Adjusted Earnings.
------------------------------- -----------------------------
8.Interest cover It is a measure of 6.0 TIMES
The ratio of net property a company's ability for the period to
income to the interests to meet its interest 30 September 2019
incurred in the period. payments.
------------------------------- -----------------------------
9.Like for like rental This measures the 1%/EUR0.3m
growth company's ability This is not applicable
Like for Like net to grow its rental being a first period
rental growth compares income over time. reporting. As an exception
the growth of the for this period, this
net rental income is comparing the annualised
of the portfolio that passing rent at the
has been consistently Balance Sheet date
in operation and not against the annualised
under development passing rent at acquisition
during the two full date.
preceding periods.
------------------------------- -----------------------------
EPRA PERFORMANCE MEASURES
KPI and definition Relevance to strategy Performance
1.EPRA NAV The EPRA NAV reflects EUR484.21m/
Basic NAV adjusted our ability to grow EUR1.15/SHARE
for mark-to-market the portfolio and at 30 September 2019
valuation of derivatives. to add value to it
throughout the lifecycle
of our assets.
---------------------------- ----------------------
2.EPRA Earnings A key measure of the EUR9.81m/
Earnings from operational Group's underlying 2.96 CENTS/SHARE
activities. results and an indication for the period to
of the extent to which 30 September 2019
current dividend payments
are supported by earnings.
---------------------------- ----------------------
3.EPRA Net Initial This measure should 4.5%
Yield (NIY) make it easier for at 30 September 2019
Annualised rental investors to judge
income based on the for themselves how
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 4.8%
NIY make it easier for at 30 September 2019
This measure incorporates investors to judge
an adjustment to the for themselves how
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).
---------------------------- ----------------------
5.EPRA Vacancy Rate A "pure" (%) measure 1.2%
Estimated Market Rental of investment property for the period to
Value (ERV) of vacant space that is vacant, 30 September 2019
space divided by ERV based on ERV.
of the whole portfolio.
Currently 100% of
the portfolio is income
producing whereby
the vacant space is
under rental guarantee
from vendors.
---------------------------- ----------------------
6.EPRA Cost Ratio A key measure to enable 34.5%
Administrative and meaningful measurement for the period to
operating costs (including of the changes in 30 September 2019
costs of direct vacancy) a company's operating
divided by gross rental costs.
income.
---------------------------- ----------------------
7.EPRA Triple net Makes adjustments EUR477.27m
Asset value (NNNAV) to EPRA NAV to provide EUR1.13/SHARE
EPRA NAV adjusted stakeholders with at 30 September 2019
to include the fair the most relevant
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.
---------------------------- ----------------------
MANAGER'S REPORT
This was a strong first period for the group. Following the
successful IPO in July 2018, we were able to deploy the net
proceeds rapidly on the Group's behalf, creating a cornerstone
portfolio of top-quality assets which will deliver long and secure
income and provide the potential for capital growth. This portfolio
underpins the Group's dividend and total return aspirations."
OUR PORTFOLIO CHARACTERISTICS
Big
49.4% of our assets are over 100,000 sqm. The average size of
our assets is 78,528 sqm(1)
Modern
84% of our portfolio has been built since 2016. The average age
of our assets is 2.9 years(2)
Highly specified
40% of our portfolio benefits from high levels of automation,
with the remaining 60% being high-quality, flexible distribution
space(1)
Well located
100% of our portfolio is located in key logistics locations,
within our target investment markets
Well diversified
16 different tenant partners occupy our assets, which are spread
across five countries
Pure logistics
100% of our portfolio are logistics assets - we do not invest in
other industrial real estate asset classes
Sustainable
53/100 was the score the Company achieved in the 2019 Global
Real Estate Sustainability Benchmark ('GRESB') Real Estate
Assessment
(1) Split by Investment Value
(2) Split by Gross Internal Area
ASSEMBLING A HIGH-QUALITY AND WELL-DIVERSIFIED PORTFOLIO
During the period, we demonstrated our ability to execute our
pan-European investment strategy on behalf of our Shareholders. The
Group acquired nine standing assets and one pre-let forward funded
developments.
In total, we successfully deployed EUR669.3 million of cash
(excluding acquisition costs) for the Group, in line with its
investment policy. Seven of the ten assets were acquired
off-market, utilising our direct relationships with developers and
vendors, a result of the strength of our relationship network.
Six of the assets are Foundation assets, which provide the
Group's core, low-risk income. The two Value Add assets and two
Growth Covenant assets provide enhanced opportunities for value
creation.
The Group has benefited from our expertise in structuring
transactions, in order to reduce costs, mitigate risk and preserve
long-term income. This requires a detailed understanding of
Europe's disparate legal and taxation regimes, as we look to
minimise leakage to rental income.
Having completed the first phase of investment, we are delighted
with the composition of the portfolio. We have developed strong
relationships with our tenants and have already uncovered a number
of significant opportunities to work with them to help deliver
their business objectives, and importantly also providing the
Company with the opportunity to add value to the portfolio.
DELIVERING SECURE INCOME
The income generated by the portfolio is well-diversified. In
total, the Group has 16 tenant partners, 81% of which are
multi-billion Euro companies, representing a diverse spread of
different businesses.
DELIVERING LONG INCOME
The Group benefits from a long income profile, with an average
unexpired lease term at the period end of 11 years, compared with
the target of at least five years.
The unexpired lease terms at the period end ranged from one year
to seventeen years. 96% of the portfolio income is secured for more
than five years, with 57% secured for more than ten years.
DELIVERING GROWING INCOME
All leases within the portfolio benefit from annual indexation
increases, either fixed or indexed to local inflation, offering the
regular annual compounding of income that supports the Group's
dividend growth policy.
We also look for opportunities to capture market rental growth,
which we expect to exceed indexation, through asset management
initiatives, providing further upside to the Group's income.
Capturing embedded value
Our sector expertise, specialist occupier knowledge and
proactive approach to asset management are all key to unlocking
further value and to protecting and enhancing the Group's income
streams.
When we review potential acquisitions for the Group, we use our
stock-picking intelligence to identify assets to which we can add
value in the near to medium term. Opportunities can also be found
through strong relationships with occupiers, which we build through
ongoing engagement.
As a result, there are opportunities to add value to assets
across all of the Group's portfolio, but particularly for those we
classify as Value Add assets. These assets are well-located, good-
quality buildings, which are typically let to financially sound
tenant partners and offer the potential for us to apply our asset
management expertise to enhance income and/or capital value. In
doing so, we seek to change these assets from Value Add to
Foundation assets.
An important feature of significant asset management
opportunities is that they offer the potential to capture market
rental growth now evidenced in many of the Group's markets. For
example, a tenant partner may agree to an increase in rent to
market rates, in return for the Group funding an extension to the
building in support of the tenant partner's strategic
ambitions.
The timing of the portfolio's lease expiries over the coming
years also facilitates the Group's ambition to capture and deliver
income growth. Our strategy is to balance long secure leases which
benefit from annual indexation, with shorter leases which provide
the opportunity to capture rising market rents. However, we have
carefully constructed the portfolio to ensure that there is no
particular concentration of lease expiries in a particular
year.
Our proactive approach delivers results
On acquisition, there were two vacant units at the Bochum site
and one at the Bornem property, all of which benefited from rental
guarantees from the vendors. We have let two of these units and are
close to securing the third. We have also negotiated a lease
re-gear at the Group's asset in Bornem.
The successful execution of these initiatives so soon after
acquisition demonstrates our asset management capabilities. These
draw on a combination of our in-house expertise and the
pan-European asset and property management platform we have put in
place for the Group. Such prompt lettings and re-gears are also
evidence of our ability to buy the right assets in the right
locations.
At Bochum in Germany we secured the letting of the first vacant
unit to Gruber Logistics, an established transportation and
logistics service provider in Germany. The five-year lease began on
1 April 2019, with the initial rent in line with the rental
guarantee provided by Dietz AG at acquisition. Rent is subject to
annual uplifts reflecting 100% of the German Consumer Price Index,
with a hurdle of 2%.
One of the two units at our Bornem property in Belgium had been
vacant for more than 18 months before the Group acquired it.
Through our understanding of the local market, we were able to
identify the reasons why it had not let, and we let the unit ahead
of the timescale expected at acquisition. The new tenant partner,
Belgische Distributiedienst NV ("BD NV"), is part of the BD myShopi
NV group, which acts as guarantor to the lease. The nine-year lease
from 1 July 2019 has an initial annual headline rent in line with
the expected rental value and 30% above the level of income cover
secured at acquisition. The new rent will compound annually at 100%
of the Belgian Health Index.
The second building at Bornem, a single warehouse, is let to two
occupiers with interconnected business activities. On acquisition,
the principal tenant Alcon- Couvreur NV occupied the majority of
the property on a lease expiring on 31 August 2027, with a break
option in August 2022. The second tenant, Pharma Distri Centre, a
third-party logistics supplier to Alcon, occupied the remainder of
the property on a lease expiring on 31 January 2020.
In September 2019, we negotiated a lease re-gear, whereby Alcon
Laboratories Belgium took occupation of the entire premises and
their 2022 break option was removed, delivering a combined WAULT to
expiry of 7.2 years. Swiss based Alcon Pharma Ltd is the guarantor
to the new lease.
The successful implementation of the business plan we developed
as part of the acquisition process has resulted in a longer income
profile and enhances the value of this well-located asset.
Expansion and land sale opportunities
Looking forward, there are a number of further opportunities to
add value across the portfolio. Part of the value of Big Boxes for
occupiers is their inherent flexibility - they are agile assets
that can be adapted in response to evolving requirements.
The Group's tenant partners have fast- moving businesses and we
are aware of their need to expand their logistics operations in
response to growing demand. We have, therefore. sought to acquire
assets for the Group that can accommodate extensions to existing
properties. This helps future proof the Group's assets and assists
tenant partner retention for the longer term.
Following the period end, we have signed an agreement with
Mango, our tenant partner in Barcelona, to fund the extension of
the property by 88,000 sqm. We have been able to agree this at an
attractive yield on cost, which will enhance the income and the
capital value of the asset overall.
Five assets out of the Group's portfolio of ten assets have
adjacent expansion land. There are several plots adjacent to the
properties in Bornem and Rumst, which together could accommodate
28,000 sqm of logistics space.
Following the period end, we exchanged conditional contracts to
sell a 16,400 sqm plot of non-core development land at Bornem,
Belgium. This plot of land sits outside of our core strategy as it
is better suited to smaller industrial unit development which sits.
Once completed the sale receipt will reflect a 60% increase on
latest valuation.
The Group's assets in Barcelona, Rome and Wunstorf also have
identified plots of expansion land. We are appraising these
projects, with the expectation of delivering value enhancing
opportunities in the short to medium term.
Looking forward
Our portfolio is in great shape. It achieves the objectives we
set out at IPO and also provides a strong base for future
performance for shareholders. We have achieved a lot over the last
18-month period, with our internal team and platform of advisers
settling in well and working effectively together.
The market trends that we identified before IPO remain
favourable, with occupiers continuing to expand, particularly
targeting the largest format logistics properties. Coupled with
ever tightening supply, we are seeing rental values increase in
most key logistics markets.
Looking forward, with the benefit of the portfolio we have
established and the team we have built up, we are looking to
continue the growth of the Company. Our relationships and
reputation in the investment market allow us to continue to access
interesting investment opportunities that meet our investment
objectives. With a strong pipeline of new opportunities, along with
our established and performing portfolio we are confident about the
future growth of the Company.
FINANCIAL REVIEW
The Group benefitted from the support of Shareholders through a
further equity raise in May 2019. The Group was also able to
obtain, and subsequently increase, an unsecured credit facility to
provide debt to sit alongside equity raised. The support shown by
both our Shareholders and our syndicate of lending banks reinforces
the attractions of the sector and their confidence in our ability
to implement the Group's strategy to facilitate its growth.
Valuation
The portfolio was independently valued by JLL as at 30 September
2019, in accordance with the RICS Valuation - Global Standards
2017.
The portfolio's total value at the period end was EUR691.7
million(1) , including forward funded development commitments of
EUR27.5 million of which EUR6 million of which remained to be
incurred at the period-end. This valuation is calculated after an
assumed EUR14.3 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.
Equity financing
On IPO on 4 July 2018, the Company issued 300 million ordinary
shares at a price of EUR1.1311 (or GBP1.00) per share, through a
placing, offer for subscription and intermediaries offer. This
raised gross proceeds of EUR339.3 million (or GBP300 million). The
issue was significantly oversubscribed.
Having deployed the IPO proceeds and debt financing, on 24 May
2019, the Company raised a further EUR135 million of gross proceeds
(approximately GBP119.1 million) through the placing of 122,727,273
ordinary shares at a price of EUR1.10 (or GBP0.97) per share.
Debt financing
The Group maintains a prudent level of debt and looks to achieve
a low cost of borrowing, while maintaining operational flexibility.
The medium-term target is an LTV ratio of 45%, with a maximum of
50%, in each case calculated at the time of borrowing.
In October 2018, the Company agreed a EUR200 million revolving
credit facility ("RCF") with HSBC Bank plc and BNP Paribas. The RCF
had an opening margin of 1.55% over the higher of zero or Euribor.
This increases up to 2.2%, depending on the LTV ratio. The RCF has
an initial maturity of five years, which can be extended for a
further two years with lender support. Importantly, the facility is
unsecured, providing operational flexibility for the Group.
Subsequently in December 2018, the Company announced that Bank
of America Merrill Lynch had agreed to provide a further EUR100
million commitment alongside HSBC and BNP Paribas, increasing the
unsecured RCF to EUR300 million.
Following the May 2019 equity raise, the Company agreed a
further increase in the RCF and added two institutions to its
lending syndicate. This increased the facility by EUR125 million to
EUR425 million, with the additional commitment provided by Bank of
China and Banco de Sabadell.
At 30 September 2019, EUR235.5 million had been drawn against
the RCF. This resulted in an LTV ratio of 33.3% at that date.
The Group's hedging strategy for its variable-rate debt 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 Group therefore holds derivative
instruments, which hedge EUR300 million of its borrowing
commitments. The derivative instruments comprise two interest rate
caps running coterminous with the debt facilities, with a total
weighted average cap of 0.67%.
Since financial period-end, four out of five lenders approved a
one-year extension of the RCF. This results in EUR325 million debt
maturing in 2024 and EUR100 million maturing in 2023.
1. Including property held for sale and rent guarantees.
Financial results
Rental income for the period was EUR24.5 million. The Group's
operating and administrative costs were EUR8.5 million, which
primarily comprised:
-- the Management Fee payable to the Manager of EUR3.3 million;
-- a fee for running an SGR structure in Italy, which ensures
the Italian property holding company is exempt from corporation
tax;
-- the Administration fee; and
-- the Directors' fees.
The EPRA cost ratio was 34.5%. This is a key measure of the
Group's operational performance, as rigorous cost control supports
profitability and the ability to pay dividends. As a start-up, the
Company incurred fixed and exceptional costs during its first
financial period while income was staggered over the period as new
assets were acquired. We expect the EPRA cost ratio to decrease
over time as the size of the portfolio increases and the Group
benefits from economies of scale.
Total interest expense for the period were EUR4.1 million
resulting in a comfortable interest cover ratio of 6.0 times. The
profit before tax for the period was EUR26.3 million, with Adjusted
Earnings for the period of EUR10.8 million(2) .
The current taxation charge for the period was 4.2% of the
Group's net property income. This taxation 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 Group acquires assets, given the differing
tax rates across Continental Europe. The Group 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 6.25 cents.
The EPRA EPS, which excludes the valuation movement, was 2.96 cents
for the period.
Given the Group's income focus, the Board has adopted adjusted
EPS as a key performance indicator. This adjusts the income shown
in the Group Statement of Comprehensive Income to reflect the
underlying cash movements. Adjusted EPS for the period was 3.25
cents. More information about the calculation of basic, EPRA and
adjusted EPS can be found in note 12 to the financial
statements.
Dividends
The interim dividends declared and paid in respect of the
financial period are set out below:
Declared Amount per In respect of Date paid/to
share be paid
------------ ------------- ----------------------- -------------------
7 March 2019 0.4 cents 1 July to 31 December 29 March 2019
2018
------------ ------------- ----------------------- -------------------
9 May 2019 1.0 cent 1 January to 31 March 12 June 2019
2019
------------ ------------- ----------------------- -------------------
8 August 1.0 cent 1 April to 30 June 9 September
2019 2019 2019
------------ ------------- ----------------------- -------------------
10 December 1.0 cent 1 July to 30 September 15 January 2020
2019 2019
The total dividend in respect of the period was, therefore,
EUR12.7 million. The total dividend was 85.3% covered by Adjusted
Earnings of EUR10.7 million.
Cash Flow
The Group benefits from stable, growing and long-term cash flows
generated from rental income from the tenants. The cash from
operations was negative EUR2.9 million. The artificially negative
figure is driven by unrecovered VAT paid (EUR12 million) on the
acquisition of the Group's Italian asset. We expect the full amount
to be recovered in 2020. Excluding the Italian VAT element, the
Group generated EUR9.1 million from its operations over the period.
We expect the figure to increase significantly in the next
financial year as the Group's properties will be cash generating
for the full financial year.
Net assets
The EPRA NAV per share at 30 September 2019 was EUR1.15, after
adjusting for the deferred tax and fair value adjustments
recognised against our interest rate derivatives. The basic NAV per
share was EUR1.13 at that date.
Related-party transactions
Transactions with related parties in the period included the
Management Fee paid to the Manager, the Directors' fees and agency
fees paid to SG Commercial. More information can be found in note
26 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 has ambitious growth plans for the short to medium
term. The financial structure of the Group has been designed to
benefit from economies of scale and we aim to help the Group to
achieve critical scale during 2020. We believe there is a healthy
pipeline of suitable investment opportunities and the team is fully
committed to sourcing new real estate assets that fit the Company's
investment strategy.
We expect that the Company will qualify for inclusion in the
FTSE EPRA NAREIT Global Real Estate Index series in early 2020.
This should allow the Group to access a broader investor base,
seeking exposure to the listed European real estate sector, as well
as increasing the liquidity in its shares.
From a debt perspective, the Group will aim to obtain a credit
rating in the short to medium term. Should the Group achieve an
Investment Grade rating, the cost of debt would automatically
reduce by 25 to 30 bps (dependant on LTV) under the current terms
of the RCF. It should also open new borrowing possibilities,
including access to the bond markets.
Above all, the Group will seek to increase the level of
quarterly dividend payments gradually, with the aim to achieve the
returns objectives set at IPO. Specifically, the Group will aim to
deliver a fully covered dividend during the next financial
year.
Tritax Management LLP
9 December 2019
Notes
(1) Including property held for sale and rent guarantees.
(2) See Note 12.
PRINCIPAL RISKS
The Board has overall responsibility for risk management and
internal controls, with the Audit Committee reviewing the
effectiveness of the risk management process on our behalf.
We aim to operate in a low-risk environment, focusing on the
Continental European logistics real estate sector to deliver an
attractive capital return and secure income for Shareholders. The
Board recognises that effective risk management is key to the
Group's success. Risk management ensures a defined approach to
decision making that decreases uncertainty surrounding anticipated
outcomes, balanced against the objective of creating value for
Shareholders.
Approach to managing risk
Our risk management process is designed to identify, evaluate
and mitigate (rather than eliminate) the significant risks we face.
The process can, therefore, only provide reasonable, and not
absolute, assurance. As an investment company, we outsource key
services to the Manager, the Administrator and other service
providers, and rely on their systems and controls.
At least three times a year, the Board undertakes a formal risk
review, with the assistance of the Audit Committee, to assess the
effectiveness of our risk management and internal control systems.
During these reviews, the Board has not identified or been advised
of any failings or weaknesses which it has determined to be
material.
Risk appetite
We have a specific Investment Policy, which we adhere to and for
which the Board has overall responsibility.
Our risk appetite is low and, in particular, we do not undertake
any speculative development. We have high-quality tenant partners,
with a portfolio of modern buildings and one of the longest
unexpired lease terms in the sector, coupled with an average term
to maturity on our debt of 4 years most of which is subject to
interest rate derivative caps.
Principal risks and uncertainties
Our principal risks and uncertainties have the potential to
affect our business materially, either favourably or unfavourably.
Some risks are currently unknown, while others that we currently
regard as immaterial, and have therefore not included here, may
turn out to be material in the future.
PRINCIPAL RISKS
PROPERTY RISKS
1 Default of one or more tenant partners
Probability Impact Mitigation
----------------------------------- -------------------------------------
Low Medium We select assets with strong
The default of one or property fundamentals (location
more of our tenant partners close to population centres,
would reduce revenue access to infrastructure
from the relevant asset(s). and energy supply), which
There may be a continuing should be attractive to
reduction in revenues other tenants if the current
until we find a suitable tenant partner fails. In
replacement tenant, which addition, while we focus
may affect our ability on tenant partners with
to pay dividends to Shareholders. strong financial covenants,
we also negotiate various
guarantees or deposits,
to enable us to cover income
while looking for a new
tenant.
While there is no restriction
on the Group's exposure
to any one tenant partner,
our Investment Policy requires
us to deliver a high-quality,
diversified portfolio.
----------------------------------- -------------------------------------
2 The performance and valuation of the property portfolio
Probability Impact Mitigation
----------------------------------- -------------------------------------
Low Medium As at 30 September 2019,
Property valuation is our property portfolio was
inherently subjective 100% cash generating from
and uncertain and the leases, license fees and
appraised value of our rental guarantees, with
properties may not accurately long unexpired weighted
reflect the current or average lease terms of 11
future value of the Group's years and a strong tenant
assets. In addition, partner base.
our due diligence may
not identify all risks 93% of leases (by income)
and liabilities in respect include rent indexation
of a property acquired, (with different features
leading to, among other in each country). Combined
things, an adverse change with the fact that we focus
in the future valuation on the best locations, where
of that asset. land supply is tight, and
undertake significant due
An adverse change in diligence using the services
our property valuation of relevant third parties,
may lead to a decrease we believe these factors
in our Net Asset Value reduce the risk of significant
and affect our ability adverse property valuation
to meet our target returns. movements.
In an extreme scenario,
it could also lead to
a breach of our banking
covenants, which may
force us to sell assets
to repay loan commitments.
----------------------------------- -------------------------------------
3 Our ability to grow the portfolio may be affected by the
availability of suitable assets at acceptable prices
Probability Impact Mitigation
----------------------------------- -------------------------------------
Medium Medium Our business model is based
The fundamentals of the on undertaking predominantly
prime logistics locations off-market transactions,
in Continental Europe sourced through the Manager's
mean that the availability network of contacts across
of land suitable for Europe, and through our
large logistics properties partnership with local development
is limited. In addition, companies. The Manager has
the Big Box sector currently also developed strong relationships
attracts a lot of new with a number of vendors
investors. This results and tenants in the industry.
in acquisition yields Our reliability, experience
that are currently at and speed of execution gives
record lows. us an edge over many other
potential investors.
This may restrict our
ability to secure suitable In addition, the increase
logistics real estate in the capital value of
assets in targeted countries our portfolio as a result
in Continental Europe, of both the market dynamics
in order to grow our and our asset management
portfolio while maintaining initiatives, is expected
our target returns. to have a positive impact
on returns for Shareholders.
----------------------------------- -------------------------------------
4 Concentration of risk, in particular, exposure to country
risk
Probability Impact Mitigation
----------------------------------- -------------------------------------
Low Low Our Investment Policy requires
Our Investment Policy us to deliver a high-quality,
does not include restrictions diversified portfolio of
relating to the Group's assets. While we adopt a
exposure to individual "bottom up" approach in
assets or tenant partners the selection of real estate
and includes only limited investments, we also consider
restrictions relating the impact on the concentration
to our exposure to individual of risk within our portfolio,
countries. Significant including the Group's exposure
economic and/or political to any single country (considering
changes affecting a country its economic and political
the Group has invested stability) at the time of
in, or the Eurozone, investment. Specifically,
generally, could have the Investment Policy restricts
an adverse impact on our ability to invest more
the income derived from than 20% of Gross Assets
investments within said (in aggregate) in Austria,
country and, hence, on Czech Republic, Portugal
the valuation of those and Slovakia.
assets. This could lead
to weaker overall portfolio
performance, both in
terms of revenue generation
and value.
----------------------------------- -------------------------------------
5 Development activities are likely to involve a higher degree
of risk than investment in standing investments
Probability Impact Mitigation
----------------------------------- -------------------------------------
Low Low Only one of our investments
Any forward funded developments is a forward funded development
are likely to involve asset, totalling with c.
a higher degree of risk 16,000 sqm under construction
than is associated with as at 30 September 2019.
standing investments. This asset is pre-let to
This could include general a sound tenant covenant.
construction risks, delays Any risk of investment into
in the development or forward funded projects
the development not being is minimal, as the developer
completed, cost overruns takes on a significant amount
or developer/contractor of construction risk and
default. If any of the the risk of cost overruns.
risks associated with Funds for forward funded
our developments materialised, developments remain with
this could reduce the us and are only released
value of these assets to the developer on a controlled
and our portfolio. basis, subject to milestones
as assessed by our independent
project monitoring surveyors.
----------------------------------- -------------------------------------
OPERATIONAL RISKS
6 We rely on the continuance of the Manager
Probability Impact Mitigation
--------------------------------- ------------------------------------
Low High Unless there is a default,
We continue to rely on either party may terminate
the Manager's services the Investment Management
and its reputation in Agreement by giving not
the property market, less than 24 months' written
as well as the performance notice, which may not be
and reputation of the served before 9 July 2021.
asset managers appointed
by the Manager (currently The Management Engagement
LCP and Dietz). As a Committee monitors and will
result, the Group's performance regularly review the Manager's
will, to a large extent, performance, including the
depend on the Manager's performance of the key third-party
abilities to source adequate service providers to the
assets, and to actively Group. In addition, the
manage these assets, Board meets regularly with
relying on the local the Manager to ensure it
knowledge of the asset maintains a positive working
manager, where necessary. relationship.
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
7 Our use of floating rate debt will expose the Group to underlying
interest rate movements
Probability Impact Mitigation
--------------------------------- -----------------------------------
Low to medium Medium The Company has entered
Interest on our revolving into interest rate derivatives
credit ("RCF") facility to hedge our direct exposure
is payable based on a to movements in Euribor.
margin over Euribor. These derivatives cap our
Any adverse movement exposure to the level to
in Euribor could affect which Euribor can rise and
our profitability and have terms coterminous with
ability to pay dividends the loans. We aim to minimise
to Shareholders. the level of unhedged debt
whilst also considering
the average level of draw
down on the RCF.
--------------------------------- -----------------------------------
8 A lack of debt funding at appropriate rates may restrict
our ability to grow
Probability Impact Mitigation
--------------------------------- -----------------------------------
Low Medium During the year, we secured
Without sufficient debt long-term unsecured debt
funding, we may be unable with five major financial
to pursue suitable investment institutions. This demonstrates
opportunities in line the capacity of the Manager
with our investment objectives. to source adequate debt,
This may impair our ability and the appetite from lenders.
to reach our targeted As the Group grows, we anticipate
returns and our ability that it will reach a size
to grow. that enables an investment-grade
debt rating. This would
facilitate significant additional
debt opportunities.
--------------------------------- -----------------------------------
9 We must be able to operate within our debt covenants
Probability Impact Mitigation
--------------------------------- -----------------------------------
Low to medium Medium We continually monitor our
If we were unable to debt covenant compliance
operate within our debt and perform stress tests.
covenants, this could We have significant headroom
lead to a default and before there is a risk of
our debt funding being a breach and our covenants
recalled. This may result have a soft breach feature,
in us selling assets which enables the Manager
to repay loan commitments. to act and remedy in case
of breach.
--------------------------------- -----------------------------------
TAXATION RISKS
10 Maintenance of Investment Trust status
Probability Impact Mitigation
------------------------------ -----------------------------------
Low to medium Medium The Board is ultimately
If the Company fails responsible for ensuring
to maintain approval we adhere to the UK Investment
as an Investment Trust, Trust regime and we monitor
its income and gains strict adherence to the
will be subject to UK relevant regulations. We
corporation tax and it have also engaged top-tier
will be unable to designate third-party tax advisers
dividends as interest to help monitor our compliance
distributions. requirements.
------------------------------ -----------------------------------
11 Changes to local tax legislation in countries in which
the Company has investments
Probability Impact Mitigation
------------------------------ -----------------------------------
Medium Low The Board relies on top-tier
A change in local taxation third-party providers to
status or tax legislation advise of any tax changes
in any of the countries in every country in which
we invest in may lead we invest.
to increased taxation
of the Group and have In addition, the Group has
a negative impact on been structured on a conservative
the Company's profits basis, with reasonable internal
and returns to Shareholders. debt ratios, in line with
international transfer pricing
requirements.
------------------------------ -----------------------------------
POLITICAL RISKS
12 The vote to leave the EU could result in political and/or
economic uncertainty that could have a negative effect on
the performance of the Company
Probability Impact Mitigation
------------------------------ ------------------------------------
Low to medium Low to medium Notwithstanding the potential
The UK has been granted loss of AIFMD passporting
an extension of Article rights, we believe that
50 TEU up until 31 January investors in key jurisdictions
2020, with flexibility would continue to be able
for the UK to leave the to participate in equity
EU before this deadline fundraisings and we would
if a withdrawal agreement seek legal advice at the
is approved by Parliament. time with a view to facilitating
this.
Failure of the UK to
agree a withdrawal agreement The Company was established
resulting in a "no-deal in 2018 after the UK had
Brexit" may have the voted to leave the EU. Since
following consequences: incorporation, therefore,
- We may lose our AIFMD the Company and its advisers
passporting rights, which have been aware of the potential
would affect our ability tax consequences associated
to raise further equity with the UK leaving the
from investors in certain EU and they have taken those
EU member states risks into account in when
- The Company may no considering potential investments.
longer be able to benefit They have also structured
from EU taxation directives investments to minimise,
which may increase the so far as possible, any
amount of tax payable additional tax costs which
by the Group on returns may result from the Company
from underlying investments no longer being able to
and reduce the amounts benefit from EU taxation
available to distribute directives. In particular,
to investors accordingly the Company should be able
- There may be significant to benefit from double tax
volatility in equity treaties which the UK has
markets, which could in place with the countries
have an impact on our across Europe in which the
share price Company invests.
The economy in Europe
may be impacted or demand
for European property
may decrease, hence leading
to potentially lower
valuations.
------------------------------ ------------------------------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 July 2018 to 30 September 2019
Period from 1 July 2018 to 30 Period from 17 May 2018 to 30 June
September 2019 2018
Note EURm EURm
Rental income 6 24.49 -
---- ------------------------------------ ------------------------------------
Service charge income 6 3.32 -
---- ------------------------------------ ------------------------------------
Other income 6 0.37
---- ------------------------------------ ------------------------------------
Gross property income 6 28.18 -
---- ------------------------------------ ------------------------------------
Direct property costs 7 (3.70) -
---- ------------------------------------ ------------------------------------
Net property income 24.48 -
---- ------------------------------------ ------------------------------------
Fair value gain on investment
properties 14 17.85 -
---- ------------------------------------ ------------------------------------
Administrative and other expenses 8 (8.45) -
---- ------------------------------------ ------------------------------------
Operating profit 33.88 -
---- ------------------------------------ ------------------------------------
Finance expense 10 (5.03) -
---- ------------------------------------ ------------------------------------
Effect of foreign exchange
differences (0.16) -
---- ------------------------------------ ------------------------------------
Changes in fair value of interest
rate derivatives 20 (2.35) -
---- ------------------------------------ ------------------------------------
Profit before taxation 26.34 -
---- ------------------------------------ ------------------------------------
Taxation 11 (5.62) -
---- ------------------------------------ ------------------------------------
Profit for the period 20.72 -
---- ------------------------------------ ------------------------------------
Total comprehensive income for the
period attributable to the
Shareholders 20.72 -
---- ------------------------------------ ------------------------------------
Earnings Per Share (EPS) (expressed
in cents per share)
---- ------------------------------------ ------------------------------------
EPS - basic and diluted 12 6.25 -
---- ------------------------------------ ------------------------------------
GROUP STATEMENT OF FINANCIAL POSITION
As at 30 September 2019
30 June
30 September 2019 2018
Note EURm EURm
Non-current assets
---- ----------------- -------
Investment properties 14 687.58 -
---- ----------------- -------
Derivative financial instruments 20 0.12 -
---- ----------------- -------
Trade and other receivables 15 1.17 -
---- ----------------- -------
Deferred tax assets 11 0.59 -
---- ----------------- -------
Total non-current assets 689.46 -
---- ----------------- -------
Current assets
---- ----------------- -------
Assets held-for-sale 14 1.52 -
---- ----------------- -------
Trade and other receivables 15 31.75 0.06
---- ----------------- -------
Cash and cash equivalents 16 17.90 -
---- ----------------- -------
Total current assets 51.17 0.06
---- ----------------- -------
Total assets 740.63 0.06
---- ----------------- -------
Current liabilities
---- ----------------- -------
Trade and other payables 17 (16.72) -
---- ----------------- -------
Income tax liability (1.06) -
---- ----------------- -------
Total current liabilities (17.78) -
---- ----------------- -------
Non-current liabilities
---- ----------------- -------
Loans and borrowings 18 (231.95) -
---- ----------------- -------
Deferred tax liabilities 11 (5.18) -
---- ----------------- -------
Other liabilities 19 (7.28) -
---- ----------------- -------
Tenant deposit 23 (1.17) -
---- ----------------- -------
Total non-current liabilities (245.58) -
---- ----------------- -------
Total liabilities (263.36) -
---- ----------------- -------
Net assets 477.27 0.06
---- ----------------- -------
Equity
---- ----------------- -------
Share capital 24 4.23 0.06
---- ----------------- -------
Share premium reserve 131.21 -
---- ----------------- -------
Retained earnings 341.83 -
---- ----------------- -------
Total equity 477.27 0.06
---- ----------------- -------
Net Asset Value (NAV) per share (expressed in Euro per share)
---- ----------------- -------
Basic NAV 25 1.13 -
---- ----------------- -------
EPRA NAV 25 1.15 -
---- ----------------- -------
GROUP STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Retained earnings Total
Note EURm EURm EURm EURm
At incorporation - - - -
---- ------------- ------------- ----------------- -----
Net result for the period - - - -
---- ------------- ------------- ----------------- -----
Total comprehensive income - - - -
---- ------------- ------------- ----------------- -----
Contributions and distributions:
---- ------------- ------------- ----------------- -----
New preference shares subscribed 24 0.06 - - 0.06
---- ------------- ------------- ----------------- -----
At 30 June 2018 0.06 - - 0.06
---- ------------- ------------- ----------------- -----
Share capital Share premium Retained earnings Total
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 24 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 24 (0.06) - - (0.06)
---- ------------- ------------- ----------------- ------
Dividends paid 13 - - (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
---- ------------- ------------- ----------------- ------
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.
GROUP CASH FLOW STATEMENT
For the period from 1 July 2018 to 30 September 2019
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
Note EURm EURm
Cash flows from operating activities
---- --------------------------------- -----------------------
Profit for the period 20.72 -
---- --------------------------------- -----------------------
Changes in fair value of investment properties (17.85) -
---- --------------------------------- -----------------------
Changes in fair value of interest rate derivatives 2.35 -
---- --------------------------------- -----------------------
Tax expense 5.62 -
---- --------------------------------- -----------------------
Finance expense 5.03 -
---- --------------------------------- -----------------------
Accretion of tenant lease incentive 6 (3.65) -
---- --------------------------------- -----------------------
Amortisation of tenant lease incentives and lease
commissions 6 0.02 -
---- --------------------------------- -----------------------
Increase in trade and other receivables (32.50) -
---- --------------------------------- -----------------------
Increase in trade and other payables 17.37 -
---------------------------------------------------- ---- --------------------------------- -----------------------
Cash generated from operations (2.89) -
---- --------------------------------- -----------------------
Tax paid (0.53) -
---------------------------------------------------- ---- --------------------------------- -----------------------
Net cash flow used in operating activities (3.42) -
---- --------------------------------- -----------------------
Investing activities
---- --------------------------------- -----------------------
Purchase of investment properties (645.57) -
---- --------------------------------- -----------------------
Improvements to investment properties and
development expenditure (14.76) -
---------------------------------------------------- ---- --------------------------------- -----------------------
Net cash flow used in investing activities (660.33) -
---- --------------------------------- -----------------------
Financing activities
---- --------------------------------- -----------------------
Proceeds from issue of Ordinary Share capital 474.33 -
---- --------------------------------- -----------------------
Cost of share issues (9.35) -
---- --------------------------------- -----------------------
Loans received 18 235.50 -
---- --------------------------------- -----------------------
Loan arrangement fees paid 18 (4.03) -
---- --------------------------------- -----------------------
Loan interest paid (4.01) -
---- --------------------------------- -----------------------
Interest rate cap premium paid 20 (2.47) -
---- --------------------------------- -----------------------
Dividends paid to equity holders 13 (8.43) -
---- --------------------------------- -----------------------
Net cash flow generated from financing activities 681.54 -
---- --------------------------------- -----------------------
Net movement in cash and cash equivalents for the
period 17.79 -
---- --------------------------------- -----------------------
Cash and cash equivalents at start of the period - -
---- --------------------------------- -----------------------
Unrealised foreign exchange gains 0.11 -
---- --------------------------------- -----------------------
Cash and cash equivalents at end of the period 17.90 -
---- --------------------------------- -----------------------
NOTES TO THE CONSOLIDATED ACCOUNTS
1. Corporate information
The Company is a public limited company incorporated and
domiciled in England and Wales. The Company was established on 17
May 2018. Prior to the listing of the Company on the London Stock
Exchange, the Company filed unaudited dormant company financial
statements as of and for the period to 30 June 2018. The Company's
ordinary shares were listed on the Official List of the UK Listing
Authority and admitted to trading on the Main Market of the London
Stock Exchange on 9 July 2018. The registered address of the
Company is disclosed in the Company Information.
Accounting policies
2. Basis of preparation
2.1. RNS basis of preparation
The financial information set out below does not constitute the
company's statutory accounts for the periods ended 30 September
2019 or 30 June 2018 but is derived from those accounts. Statutory
accounts for the period ended 30 June 2018 have been delivered to
the registrar of companies, and those for the periods ended 30
September 2019 will be delivered in due course. The auditor has
reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
The statutory accounts for the period ended 30 September 2019
are the Company's first under International Financial Reporting
Standards as adopted by the EU. The financial statements for the
period ended 30 June 2018 were dormant company accounts and were
unaudited. There were no adjustments on transition to IFRS.
2.2 Foreign currency translation
The presentation currency of the Company is Euro. Each entity in
the Group determines its own functional currency and items included
in the financial statements of each entity are measured using that
functional currency. All entities in the Group have Euro as the
functional currency.
Non-monetary assets and liabilities carried at fair value that
are denominated in foreign currencies are translated at the rates
prevailing on the date that the fair value was determined. Gains
and losses arising on exchange are included in the profit or loss
for the period, except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair value
are recognised directly to equity, and any exchange component of
that gain and loss is also recognised directly to equity.
3. 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.
3.1. 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.
3.2. 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 14.
4. Summary of significant accounting policies
4.1. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company up
to 30 September 2019.
Control is achieved when the Company is exposed, or has rights,
to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. For acquisitions not considered business combinations,
the cost of acquisition is allocated to the assets and liabilities
acquired based upon their relative fair values, and no goodwill or
deferred tax is recognised. Any non-controlling interests are
stated at the minority's proportion of the fair values of the
assets and liabilities recognised.
For each of the subsidiaries within the Group with
non-controlling interests (see note 4 of the Company financial
statements), the Group has issued put options to the
non-controlling interest. The Group has adopted the anticipated
acquisition method under which the underlying interests of the
non-controlling interest are presented in the Group Statement of
Financial Position and the Group Statement of Comprehensive Income
as if they are already acquired by the Group.
The day-to-day operations of Fondo Minerva Eurobox Italy, are
managed by Savills IM, ("Savills") in accordance with the
requirements of the Italian REIF regime. The Company has the power
to replace Savills with another operator and therefore considers
the investment to be a subsidiary under IFRS 10.
The results of subsidiaries where control is acquired or
disposed of during the period are included in the Group profit or
loss from the effective date of acquisition or up to the effective
date of disposal, as appropriate. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring the
accounting policies used in line with those of the Group.
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.
4.2. Investment property and investment property under
construction
Investment property comprises completed property that is owned
or held under a lease to earn rentals or for capital appreciation,
or both, and property under development where the Group intends to
retain ownership on completion.
Investment property is recognised when the risks and rewards of
ownership have been transferred and is measured initially at cost
including transaction costs. The cost of investment property
includes potential payments under put options granted to
non-controlling interests of subsidiaries which own investment
property. Transaction costs include transfer taxes, professional
fees for legal and other services and other costs incurred in order
to bring the property to the condition necessary for it to be
capable of operating. Subsequent to initial recognition, investment
property is stated at fair value. Gains or losses arising from
changes in the fair values are included in the Group profit or
loss.
Investment properties under construction are financed by the
Group where the Group enters into contracts for the development of
a pre--let property under a funding agreement. All such contracts
specify a fixed amount of consideration. The Group does not expose
itself to any speculative development risk as the proposed building
is pre--let to a tenant under an agreement for lease and the Group
enters into a fixed price development agreement with the developer.
Investment properties under construction are initially recognised
at cost (including any associated costs), which reflect the Group's
investment in the assets. Subsequently, the assets are remeasured
to fair value at each reporting date. The fair value of investment
properties under construction is estimated as the fair value of the
completed asset less any costs still payable in order to complete,
which include an appropriate developer's margin.
Additions to properties include costs of a capital nature only.
Expenditure is classified as capital when it results in
identifiable future economic benefits, which are expected to accrue
to the Group. All other property expenditure is expensed in the
Group profit or loss as incurred.
The corresponding entry upon recognising lease incentives or
fixed/minimum rental uplifts is made to investment property. For
further details please see Accounting Policy note 4.8.1.
Investment properties cease to be recognised when they have been
disposed of or withdrawn permanently from use and no future
economic benefit is expected from disposal. The difference between
the net disposal proceeds and the carrying amount of the asset is
recognised in the Group profit or loss in the year of retirement or
disposal.
4.3. Assets held-for-sale
A non-current asset or disposal group to be classified as held
for sale if it is highly probable that its carrying amount will be
recovered principally through a sale transaction instead of through
continuing use. Such assets, or disposal groups are generally
measured at the lower of the carrying amount and fair value less
costs to sell and once classified as held-for-sale, the asset is no
longer amortised or depreciated. Investment property that is
classified as held for sale is held at fair value.
4.4. Financial instruments
Fair value hierarchy
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
reassessing categorisation at the end of each reporting period.
4.4.1. Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group's accounting policy for each category
is as follows:
Derivative financial instruments
Derivative financial instruments refer to interest rate caps
purchased for hedging purposes which are initially recognised at
fair value plus costs of acquisition and are subsequently measured
at fair value, being the estimated amount that the Group would
receive or pay to terminate the agreement at the period end date,
taking into account current interest rate expectations of the
Company and its counterparties. The Group does not apply hedge
accounting and hence the gain or loss at each fair value
remeasurement date is recognised in the profit or loss.
Amortised cost
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
Consolidated Statement of Financial Position.
These assets arise principally from the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows
which are solely payments of principal and interest. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue and are
subsequently carried at amortised cost being the effective interest
rate method, less provision for impairment.
Impairment provisions for current and non--current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non--payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss disclosed in the
Group profit or loss. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less.
4.4.2. Financial liabilities
The Group classifies its financial liabilities as amortised
cost.
The Group's accounting policy for each type of financial
liability is as follows:
Bank borrowings
Bank borrowings are initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensure that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the Group Statement of Financial Position. For the
purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payment while the liability is
outstanding.
Other non-derivative financial liabilities
Non-derivative financial liabilities are recognised initially at
the date that the Group becomes a party to the contractual
provisions of the instrument and are measured initially at fair
value less initial direct costs and subsequently measured at
amortised cost. The Group derecognises a financial liability when
its contractual obligations are discharged, cancelled or
expire.
4.5. 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.
4.6. Forward funded pre--let investments
The Group enters into forward funding development agreements for
pre--let investments. The Group will enter into a forward funding
agreement with a developer and simultaneously enter into an
agreement for lease with a prospective tenant willing to occupy the
building once complete.
During the period between initial investment in a forward funded
agreement and the rent commencement date under the lease, the Group
usually receives licence fee income. Usually this is payable by the
developer to the Group throughout this period and typically
reflects the approximate level of rental income that is expected to
be payable under the lease, as and when practical completion is
reached. IAS 40.20 states that investment property should be
recognised initially at cost, being the consideration paid to
acquire the asset, therefore such licence fees are deducted from
the cost of the investment and are shown as a receivable.
4.7. Dividends payable to Shareholders
Equity dividends are recognised when they become legally
payable. Interim equity dividends are recognised when paid. Final
equity dividends are recognised when approved by the Shareholders
at an Annual General Meeting.
4.8. Property income
4.8.1. Rental income
Rental income arising from operating leases on investment
property is accounted for on a straight--line basis over the lease
term and is included in gross rental income in the Group profit or
loss. The lease term is the non--cancellable period of the lease.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight--line basis over the term of the lease.
Included in the straight-line basis are the effects of future fixed
or minimum uplifts. Any contingent rental uplifts are excluded
until the amounts are known. Initial direct costs incurred in
negotiating and arranging an operating lease are recognised as an
expense over the lease term on the same basis as the lease income.
Rental income is invoiced, either monthly or quarterly in advance
and, for all rental income that relates to a future period, this is
deferred and appears within current liabilities on the Group
Statement of Financial Position.
Amounts received from tenants to terminate leases or to
compensate for dilapidations are recognised in the Group profit or
loss when the right to receive them arises.
When the Group enters into a forward funded transaction, the
future tenant signs an agreement for lease. No rental income is
recognised under the agreement for lease; once practical completion
has taken place and the formal lease is signed, rental income
commences to be recognised in the Group profit or loss.
4.8.2. Service charges and other income
Income arising from expenses recharged to tenants is recognised
in the period in which the compensation becomes receivable. Service
charge and insurance premiums and other such receipts are included
in the gross rental income gross of the related costs, as the
Directors consider that the Group acts as principal in this
respect.
4.9. Finance income
Finance income is recognised as interest accrues on cash
balances held by the Group. Interest charged to a tenant on overdue
rental income is also recognised within finance income.
4.10. Finance costs
Finance costs consist of interest and other costs that the Group
incurs in connection with bank and other borrowings, and the
holding of deposits in Euro bank accounts. All interest costs are
expensed to the Group profit or loss in the period in which they
occur on an effective interest basis and all loan issue costs paid
are offset against amounts drawn on the facilities and are
amortised over the term of the facilities.
The Group has elected not to capitalise interest on investment
properties under development.
4.11. Taxation
The Company is approved by HMRC as an investment trust under
sections 1158 of the Corporation Tax Act 2010.
In respect of each accounting period for which the Company
continues to be approved by HMRC as an investment trust the Company
will be exempt from UK taxation on its capital gains. The Company
is, however, liable to UK corporation tax on its income.
The Company should in practice be exempt from UK corporation tax
on dividend income received, provided that such dividends (whether
from UK or non-UK companies) fall within one of the "exempt
classes" in Part 9A of the CTA 2009. The Company is also able to
elect to take advantage of modified UK tax treatment in respect of
its "qualifying interest income" for an accounting period referred
to as the "streaming" regime. Under regulations made pursuant to
the Finance Act 2009, the Company may designate as an "interest
distribution" all or part of the amount it distributes to
shareholders as dividends, to the extent that it has "qualifying
interest income" for the accounting period. If the Company
designates any dividend it pays in this manner, it is able to
deduct such interest distributions from its income in calculating
its taxable profit for the relevant accounting period.
The Company's status as an approved investment trust does not
impact the taxation of its subsidiaries or the Group's liability to
tax in the other countries in which the Group operates.
Current tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from "profit before tax" as reported
in the Consolidated Statement of Comprehensive Income because of
items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The Group's
current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Where corporation tax arises in subsidiaries, these amounts are
charged to the Consolidated Statement of Comprehensive Income. The
current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the date of the balance
sheet in the countries where the Group operates.
Deferred tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition (other than in a business combination)
of assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities and assets are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
The carrying values of the Group's investment properties are
assumed to be realised by sale at the end of use. The capital gains
tax rate applied is that which would apply on a direct sale of the
property recorded in the Consolidated Balance Sheet regardless of
whether the Group would structure the sale via the disposal of the
subsidiary holding the asset, to which a different tax rate may
apply. The deferred tax is then calculated based on the respective
temporary differences and tax consequences arising from recovery
through sale.
5. Standards in issue and effective from 1 January 2019
IFRS 16: Leases
The Directors are currently assessing the impact on the
financial statements of this standard; however, at present they do
not anticipate that the adoption of this will have a material
impact on the Group's financial statements as the Group does not
hold any material operating leases as lessee.
6. Gross property income
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Rental income 20.86 -
--------------------------------- -----------------------
Spreading of tenant incentives 3.65 -
--------------------------------- -----------------------
Amortisation of capital contribution and lease commission (0.02) -
--------------------------------- -----------------------
Gross rental income 24.49 -
--------------------------------- -----------------------
Service charges recoverable 3.32 -
--------------------------------- -----------------------
Other income 0.37 -
--------------------------------- -----------------------
Gross property income 28.18 -
--------------------------------- -----------------------
The Group derives property income from the following
countries:
Belgium Germany Spain Italy Poland Total
Gross property income 5.10 5.87 9.00 6.67 1.54 28.18
------- ------- ----- ----- ------ -----
The future minimum lease payments under non--cancellable
operating leases receivable by the Group are as follows:
Less than More than
1 year 2-5 years 5 years Total
EURm EURm EURm EURm
30 September 2019 33.42 136.96 215.59 385.97
--------- --------- --------- ------
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 four tenants representing more than 10% of rental
income during the period (EUR8.38 million, EUR5.93 million, EUR3.31
million and EUR3.01 million). As at 30 September 2019, three
tenants represented more than 10% of passing rent.
7. Direct property costs
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Service charge expense 3.37 -
--------------------------------- -----------------------
Other expenses 0.33 -
--------------------------------- -----------------------
Total property expenses 3.70 -
--------------------------------- -----------------------
8. Administrative and other expenses
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Investment management fees (note 26) 4.64 -
--------------------------------- -----------------------
Directors' remuneration (note 9) 0.23 -
--------------------------------- -----------------------
Auditor's fees
--------------------------------- -----------------------
Fees payable for the audit of the Company's accounts 0.22 -
--------------------------------- -----------------------
Fees payable for the review of the Company's interim
accounts 0.14 -
--------------------------------- -----------------------
Fees payable for the audit of the Company's subsidiaries 0.16 -
--------------------------------- -----------------------
Total Auditor's fee 0.52 -
--------------------------------- -----------------------
Corporate administration fees 0.97 -
--------------------------------- -----------------------
Regulatory fees 0.10 -
--------------------------------- -----------------------
Legal and professional fees 1.63 -
--------------------------------- -----------------------
Marketing and promotional fees 0.23 -
--------------------------------- -----------------------
Other administrative costs 0.13 -
--------------------------------- -----------------------
Total administrative and other expenses 8.45 -
--------------------------------- -----------------------
Fees relating to the share issuances have been treated as share
issue expenses and offset against share premium. The transaction
costs related to the loan and borrowings have been treated as part
of the arrangement fees for issuing the debt. The fees in relation
to the acquisition of assets have been capitalised in to the cost
of the respective assets.
9. Directors' remuneration
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Directors' fees 0.21 -
--------------------------------- -----------------------
Employer's National Insurance 0.02 -
--------------------------------- -----------------------
Total Directors' remuneration 0.23 -
--------------------------------- -----------------------
A summary of the Directors' emoluments, including the
disclosures required by the Companies Act 2006, is set out in the
Directors' Remuneration Report.
Personnel
During the period under review the Company did not have any
personnel, besides the Directors of the Company. Furthermore, the
Company does not have the intention to engage other personnel in
future.
10. Finance expense
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Interest payable on loans and bank borrowings 3.07 -
--------------------------------- -----------------------
Commitment fees payable on bank borrowings 1.02 -
--------------------------------- -----------------------
Loss on remeasurement of put option 0.30 -
--------------------------------- -----------------------
Bank fees 0.15 -
--------------------------------- -----------------------
One-off cost of extinguishment of bank loans 0.01 -
--------------------------------- -----------------------
Amortisation of loan arrangement fees 0.48 -
--------------------------------- -----------------------
Total finance expense 5.03 -
--------------------------------- -----------------------
The total interest payable on financial liabilities carried at
amortised cost comprises interest and commitment fees payable on
bank borrowings of EUR4.09 million of which nil was capitalised in
the period and amortisation of loan arrangement fees of EUR0.48
million of which EUR4.03 million was capitalised into the loan in
the period (see note 18).
11. Taxation
a) Tax charge in the Group Statement of Comprehensive Income
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Current taxation:
--------------------------------- -----------------------
UK taxation - -
--------------------------------- -----------------------
Overseas taxation 1.03 -
--------------------------------- -----------------------
Deferred taxation:
--------------------------------- -----------------------
UK taxation - -
--------------------------------- -----------------------
Overseas taxation 4.59 -
--------------------------------- -----------------------
Total tax charge 5.62 -
--------------------------------- -----------------------
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").
b) Factors affecting the tax charge for the period
The tax assessed for the period is lower than the standard rate
of corporation tax in the UK. The differences are explained
below:
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Profit before taxation 26.34 -
--------------------------------- -----------------------
Theoretical tax at UK corporation tax rate of 19% (30 June
2018: 19%) 5.00 -
--------------------------------- -----------------------
Losses where no deferred taxes have been recognised 0.21 -
--------------------------------- -----------------------
Impact of different tax rates on foreign jurisdictions 0.41 -
---------------------------------------------------------- --------------------------------- -----------------------
Total 5.62 -
--------------------------------- -----------------------
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Deferred tax assets:
--------------------------------- -----------------------
Differences between tax and property revaluation 0.59 -
--------------------------------- -----------------------
Total 0.59 -
--------------------------------- -----------------------
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
Deferred tax liabilities:
--------------------------------- -----------------------
Differences between tax and property revaluation 5.18 -
--------------------------------- -----------------------
Total 5.18 -
--------------------------------- -----------------------
12. 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 30 September 2019 there are no
dilutive or potentially dilutive equity arrangement in
existence.
The calculation of EPS is based on the following:
Net profit attributable to Weighted average number of
For the period ended 30 Ordinary Shareholders Ordinary Shares(1) Earnings per share
September 2019 EURm '000 Cent
Basic EPS 20.72 331,599 6.25
------------------------------- ------------------------------- ------------------
Adjustments to remove:
------------------------------- ------------------------------- ------------------
Deferred tax charge (note 11) 4.59
------------------------------- ------------------------------- ------------------
Changes in fair value of
investment properties (note 14) (17.85)
------------------------------- ------------------------------- ------------------
Changes in fair value of
interest rate derivatives (note
20) 2.35
------------------------------- ------------------------------- ------------------
EPRA EPS 9.81 2.96
------------------------------- ------------------------------- ------------------
Adjustments to
include/(exclude):
------------------------------- ------------------------------- ------------------
Licence fee receivable on
forward funded developments 0.87
------------------------------- ------------------------------- ------------------
Rental income recognised in
respect of fixed uplifts (3.63)
------------------------------- ------------------------------- ------------------
Amortisation of loan arrangement
fees 0.48
------------------------------- ------------------------------- ------------------
Unrealised foreign exchange
currency loss 0.11
------------------------------- ------------------------------- ------------------
Loss on remeasurement of put
option 0.30
------------------------------- ------------------------------- ------------------
Rental guarantee receipts
excluded from property
income(2) 2.85
------------------------------- ------------------------------- ------------------
Adjusted EPS 10.79 3.25
------------------------------- ------------------------------- ------------------
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.
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 as distributable income over the
period of the lease which it is intended to cover - 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.
13. Dividends paid
Period from
Period from 17 May 2018 to 30 June
1 July 2018 to 30 September 2019 2018
EURm EURm
First interim dividend in respect of period ended 30
September 2019
at 0.4 cent per Ordinary Share (30 June 2018: nil) 1.20 -
--------------------------------- -----------------------
Second interim dividend in respect of period ended
30 September 2019 at 1.0 cent per Ordinary Share (30 June
2018: nil) 3.00 -
--------------------------------- -----------------------
Third interim dividend in respect of period ended
30 September 2019 at 1.0 cent per Ordinary Share (30 June
2018: nil) 4.23 -
--------------------------------- -----------------------
Total dividends paid 8.43 -
--------------------------------- -----------------------
Total dividends paid for the year 2.40 cent Nil cent
--------------------------------- -----------------------
Total dividends unpaid but declared for the year 1.00 cent Nil cent
--------------------------------- -----------------------
Total dividends declared for the year 3.40 cent Nil cent
--------------------------------- -----------------------
On 9 December 2019, the Directors of the Company declared a
fourth interim dividend in respect of the period from 1 July 2019
to 30 September 2019 of 1.00 cent per Ordinary Share, which will be
payable on or around 15 January 2020 to Shareholders on the
register on 20 December 2019.
Out of EUR12.66 million dividends declared for the year, EUR1.70
million is designated as interest distribution.
14. 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.
Total valuation fee incurred by the Group in the period ended 30
September 2019 amounts to EUR130,400 (period ended 30 June 2018:
nil). The fee is not contingent on the valuation of the
properties.
Other than Tritax EuroBox plc, the external valuer provides
valuation and research - related services to the Tritax Group, as
well as to other funds Tritax Group manages. The Directors ensure
full independence of the valuer.
All corporate acquisitions during the period have been treated
as asset purchases rather than business combinations (see note
3.1).
During the period, the following investment properties were
acquired:
Location Date acquired
Barcelona, Spain 25 September 2018
-----------------
Rome, Italy(--) 16 October 2018
-----------------
Rumst and Bornem, Belgium 25 October 2018
-----------------
Peine, Germany 4 December 2018
-----------------
Bochum, Germany 7 November 2018
-----------------
Wunstorf, Germany*(--) 12 February 2019
-----------------
Lodz, Poland(--) 12 April 2019
-----------------
Hammersbach, Germany 13 June 2019
-----------------
Bremen, Germany 24 September 2019
-----------------
* Currently under construction.
(--) Acquired based on asset deal.
Investment properties Investment properties under
completed construction Investment properties Total
EURm EURm EURm
At incorporation - - -
---------------------------- ---------------------------- ---------------------------
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 period(3) 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. The difference between this and cash
receipts change 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 was unrealised
gains of EUR45.53 million and unrealised losses of EUR27.68
million.
30 June
30 September 2019 2018
EURm EURm
Investment properties in Balance Sheet 687.58 -
----------------- -------
Assets held-for-sale 1.52 -
----------------- -------
Rental guarantee held in separate receivable 2.57 -
----------------- -------
Total external valuation of investment properties 691.67 -
----------------- -------
As at 30 September 2019, the Group had capital commitments of
EUR5.99 million in relation to its forward funded pre--let
development assets. All commitments fall due within one year from
the date of this report. 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.
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.
As of the date of this Annual Report, the only investments of
the Group that have been identified consist of the current
portfolio as specified in the management report. While the Group is
negotiating to acquire further properties, there is no guarantee
that these properties will form part of the portfolio of the
Group.
With respect to new investments, management will be targeting
specific investment categories based on the Group's investment
objective and restrictions. Because such investments may be made
over a substantial period of time, the Group faces the risk of
interest rate fluctuations in case of leveraging these investments
and adverse changes in the real estate markets.
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."
Market Value as defined in the RICS Valuation Standards is the
equivalent of fair value under IFRS.
The following descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values are as follows:
Valuation techniques
Investment properties completed: income approach
The income method (or income approach) quantifies the net
present value of future benefits associated with the ownership of
the equity interest or asset by totalling the current tenancy of
the property, followed by the demand market rent on lease expiry,
capitalised at an appropriate yield.
Investment properties under construction: residual approach
The residual approach for properties under construction takes
the expected valuation of the finished property using the income
approach and deducts forecast costs to complete the development and
an allowance for developer's profit.
Unobservable input: estimated rental value ("ERV")
The rent per square metre at which space could be let in the
market conditions prevailing at the date of valuation (range:
EUR32.10--EUR71.12 per square metre, per annum).
ERV is dependent upon a number of variables in relation to the
Group's property. These include: size, building specification and
location.
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: 4.77% or range:
4.26%-5.78%).
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 by
nature.
As a result the following sensitivity analysis has been prepared
for investment properties:
+0.25% net initial yield -0.25% net initial yield
-5% in ERV EURm +5% in ERV EURm EURm EURm
(Decrease)/increase in the fair
value of investment properties
as at 30 September 2019* (10.51) 13.15 (34.20) 37.79
--------------- --------------- ------------------------ ------------------------
* The sensitivity analysis has been prepared excluding
investment properties under construction.
The JLL valuation includes deductions for transaction costs that
would be incurred by a hypothetical purchaser at the valuation
date. These costs include Real Estate Transfer Tax (RETT)
equivalent to stamp duty except for properties in Italy and
Belgium. In the former, this is due to Italy being an Investment
Management Company (SGR) and in the latter, the local valuation
practice is to exclude such costs given the prevalence of corporate
rather than asset transactions in these markets. Under the
assumption that all assets in the portfolio are disposed under a
"corporate sale" scenario, the fair valuation of the assets would
be adjusted by the saving of the RETT and would result in a
valuation of EUR705.96 million (EUR14.29 million increase).
15. Trade and other receivables
30 June
30 September 2019 2018
Non-current trade and other receivables EURm EURm
Cash in public institutions 1.17 -
----------------- -------
The cash in public institutions is a deposit of EUR1.17 million
given by the tenant for the property in Barcelona, Spain.
30 June
30 September 2019 2018
Current trade and other receivables EURm EURm
Trade receivables 1.97 -
----------------- -------
Prepayments, accrued income and other receivables 7.39 -
----------------- -------
Escrow cash 6.79 -
----------------- -------
VAT receivable* 15.60 -
----------------- -------
31.75 -
----------------- -------
* VAT receivable relates mainly to VAT reclaim due on the
purchase of the property in Italy (EUR12 million).
The following table sets out the ageing of trade receivables as
at 30 September 2019:
30 June
30 September 2019 2018
Past due but not impaired EURm EURm
<30 days 1.35 -
----------------- -------
30-60 days 0.37 -
----------------- -------
60-90 days 0.18 -
----------------- -------
90 days+ 0.07 -
----------------- -------
Total 1.97
----------------- -------
Past due and impaired - -
----------------- -------
Total 1.97
----------------- -------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables. To measure expected credit losses
on a collective basis, trade receivables are grouped based on
similar credit risk and ageing.
The expected loss rates are based on the Group's historical
credit losses experienced over the period prior to the period end.
The historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the
Group's customers. Both the expected credit loss provision and the
incurred loss provision in the current and prior period are
immaterial.
No reasonably possible changes in the assumptions underpinning
the expected credit loss provision would give rise to a material
expected credit loss.
16. Cash and cash equivalents
30 June
30 September 2019 2018
EURm EURm
Cash and cash equivalents to agree with cash flow 17.90 -
----------------- -------
17. Trade and other payables
30 June
30 September 2019 2018
EURm EURm
Trade and other payables 6.47 -
----------------- -------
Bank loan interest payable 0.24 -
----------------- -------
Deferred income 0.34 -
----------------- -------
Accruals 9.00 -
----------------- -------
VAT liability 0.67 -
----------------- -------
16.72 -
----------------- -------
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
18. Loans and borrowings
In October 2018, the Group agreed a long-term, Revolving Credit
Facility ("RCF") of EUR200 million with HSBC Bank PLC and BNP
Paribas. The facility is for five years, with an option to extend
for a further two years and is unsecured. The loan has a margin of
1.55% to 2.2% above the higher of zero or Euribor, depending on the
drawn level and the prevailing LTV (loan-to-value) ratio. The RCF
was extended in December 2018, August 2019 and September 2019
respectively, to include EUR100 million of accordion funding from
BAML, EUR25 million of accordion funding from Banco de Sabadell and
EUR100 million of accordion funding from Bank of China
respectively, taking the total facility to EUR425 million.
Following the financing activity as noted above, the weighted
average term to maturity of the Group's debt as at the period-end
is 4.0 years.
As at 30 September 2019, all of the Group's debt facility
commitments are floating term. The LTV across all drawn debt was
33% 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.
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 June
30 September 2019 2018
EURm EURm
Bank borrowings drawn: due in more than one year 235.50 -
----------------- -------
Loan issue costs paid (4.03) -
----------------- -------
Non-cash amortisation of loan issue costs 0.48 -
----------------- -------
Non-current liabilities: loan and borrowings 231.95 -
----------------- -------
Maturity of loans and borrowings
30 September 2019 30 June 2018
Drawn Undrawn Total debt available Total debt available
EURm EURm EURm EURm
------ ------- -------------------- --------------------
Repayable between one and two years - - - -
------ ------- -------------------- --------------------
Repayable between two and five years 235.50 189.50 425.00 -
------ ------- -------------------- --------------------
Repayable in over five years - - - -
------ ------- -------------------- --------------------
235.50 189.50 425.00 -
------ ------- -------------------- --------------------
19. 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 in those
subsidiaries. As part of the purchase agreements, the Group issued
put options to the minority shareholders. The options are
exercisable 10 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.
20. 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 (see note 18).
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
EUR2.47 million.
30 June
30 September 2019 2018
EURm EURm
Interest rate cap premium paid 2.47 -
----------------- -------
Fair value movement (2.35) -
----------------- -------
Non-current assets: interest rate derivatives 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 127%. The percentage is
above 100% at the end of the period 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.
21. 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 EUR0.41 million to net assets,
based on the nominal borrowings at the period-end.
The Group currently operates in six countries. The current
distribution of total assets is as follows:
Belgium Germany Spain Italy Poland UK Total
Total assets 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 15).
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.
Credit risk related to cash deposits
One of the credit risks of the Group arises with the banks and
financial institutions. The Board of Directors believes that the
credit risk on short--term deposits and current account cash
balances is limited because the counterparties are banks, who are
committed lenders to the Group, with high credit ratings assigned
by international credit--rating agencies.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and, going forward, the finance charges, principal
repayments on its borrowings and its commitments under forward
funded development arrangements (see note 14). It is the risk that
the Group will encounter difficulty in meeting its financial
obligations as they fall due, as the majority of the Group's assets
are property investments and are therefore not readily realisable.
The Group's objective is to ensure it has sufficient available
funds for its operations and to fund its capital expenditure. This
is achieved by continuous monitoring of forecast and actual cash
flows by management ensuring it has appropriate levels of cash and
available drawings to meet liabilities as they fall due.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted payments,
including interest charges:
Less than More than
Carrying amount Total cash flows 3 months 3-12 months 1-2 years Between 2-5 years 5 years
EURm EURm EURm EURm EURm EURm EURm
30 September 2019
--------------- ---------------- --------- ----------- --------- ----------------- ---------
Loans and
borrowings 231.95 256.23 1.30 3.89 5.18 245.86 -
--------------- ---------------- --------- ----------- --------- ----------------- ---------
Trade and other
payables* 15.71 15.71 15.71 - - - -
--------------- ---------------- --------- ----------- --------- ----------------- ---------
Non-current
liabilities 7.28 7.28 - - - - 7.28
--------------- ---------------- --------- ----------- --------- ----------------- ---------
Tenant deposit 1.17 1.17 - - - - 1.17
--------------- ---------------- --------- ----------- --------- ----------------- ---------
256.11 280.39 17.01 3.89 5.18 245.86 8.45
--------------- ---------------- --------- ----------- --------- ----------------- ---------
* Excludes VAT and deferred income as these are not financial
liabilities.
Foreign currency risk
The Group is Euro denominated. The Group operates
internationally, mainly in the Euro zone. The Group keeps some cash
in foreign currency to finance its working capital.
As at 30 September 2019 the Group has a cash balance of GBP 0.54
million and PLN 6.49 million, equivalent to EUR0.61 million and
EUR1.48 million respectively, at the Balance Sheet date.
Development risk
Development risk is the exposure that Group takes in projects
where building is not yet completed. Construction risk is mitigated
by the Group by entering into fixed price contracts with the
developers. Letting risk is alleviated by entering into pre-let
agreements with tenants or rental guarantees with the developers or
vendors.
Taxation risk
Tax laws in these countries may change in the future,
representing an increase in tax risk to the Company.
22. Capital management
The primary objective of the Group's capital management is to
ensure that it remains a going concern.
The Board, with the assistance of the Investment Manager,
monitors and reviews the Group's capital so as to promote the
long--term success of the business, facilitate expansion and to
maintain sustainable returns for Shareholders. The Group considers
proceeds from share issuances, bank borrowings and retained
earnings as capital. The Group's policy on borrowings is as set out
below:
The level of borrowing will be on a prudent basis for the asset
class, and will seek to achieve a low cost of funds.
The Directors intend that the Group will maintain a conservative
level of aggregate borrowings with a medium--term target of 45% of
the Group's gross assets (with a limit of 50%).
The Group has complied with all covenants on its borrowings up
to the date of this report. The targets mentioned above sit
comfortably within the Group's covenant levels, which include loan
to value ("LTV") and interest cover ratio. The Group LTV at the
period end was 33.3%.
23. Tenant deposit
30 June
30 September 2019 2018
Non-current liabilities EURm EURm
Tenant deposit 1.17 -
----------------- -------
This balance relates to a cash deposit given by the tenant for
the property in Barcelona, Spain.
24. Share capital
The share capital relates to amounts subscribed for share
capital at its nominal value:
30 June 30 June
30 September 2019 30 September 2019 2018 2018
Number EURm Number EURm
Issued and fully paid at 1 cent each
----------------- ----------------- ------- -------
Balance at beginning of period -
EUR0.01 Ordinary Shares 1 - - -
----------------- ----------------- ------- -------
Shares issued in the period 422,727,272 4.23 1 -
----------------- ----------------- ------- -------
Balance at end of period 422,727,273 4.23 1 -
----------------- ----------------- ------- -------
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 June 30 June
30 September 2019 30 September 2019 2018 2018
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 - - 57,100 0.06
----------------- ----------------- ------- -------
Shares cancelled in the period (57,100) (0.06) - -
----------------- ----------------- ------- -------
Balance at end of period - - 57,100 0.06
----------------- ----------------- ------- -------
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.
The Group has one class of Ordinary Shares which carry no right
to fixed income.
25. 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:
30 September 2019
EURm
Net assets per Group Statement of Financial Position 477.27
-----------------
EPRA NAV (see Additional Information) 484.21
-----------------
Ordinary Shares:
-----------------
Issued share capital (number) 422,727,273
-----------------
NAV per share (expressed in Euro per share)
-----------------
Basic NAV per share 1.13
-----------------
EPRA NAV per share 1.15
-----------------
EPRA NAV is calculated as net assets per the Consolidated
Statement of Financial Position excluding cumulative fair value
adjustments for debt-related derivatives and deferred tax
adjustment.
No comparative is disclosed as the Group did not hold any
investment properties in the prior period.
26. Transactions with related parties
For the period ended 30 September 2019, all Directors and the
Partners 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 30 September 2019 was
EUR3.28 million (2018: EURnil).
The total amount outstanding at the period-end relating to the
Investment Management Agreement was EUR1.06 million.
Details of amounts paid to Directors for their services can be
found within the Directors' Remuneration Report. Throughout the
period SG Commercial LLP ("SG Commercial") has provided general
property agency services to the Group. SG Commercial has been paid
fees totalling EUR0.67 million in respect of agency services for
the period; this represents a total of 14.70% of agency fees paid
by the Group during the period. None was outstanding as at the
period end. Of the four controlling Members of the Manager, namely
Mark Shaw, Colin Godfrey, James Dunlop and Henry Franklin, all
except Henry Franklin are also the controlling Members of SG
Commercial. While there are currently no existing contractual
arrangements between the Group and SG Commercial, the Group may
choose to appoint SG Commercial in the future from time to time on
either a sole or joint agency basis. Any such appointments have
been and will continue to be made on normal market--based
contractual terms. In the event that any such appointment is
proposed by the Manager, the Board has and shall continue to be
consulted and asked for its approval.
During the period the Directors received the following
dividends: Robert Orr: EUR480, Keith Mansfield: EUR4,560 and Taco
De Groot: EUR600.
During the period the four controlling Members of the Manager
received the following dividends: Colin Godfrey: EUR3,011, Mark
Shaw: EUR3,011, James Dunlop: EUR3,011 and Henry Franklin:
EUR2,008. None of the Directors received any dividends in the
period from 17 May 2018 to 30 June 2018.
27. Subsequent events
Since financial year-end, four out of five lenders approved a
one-year extension of the RCF. This results in EUR325 million debt
maturing in 2024 and EUR100 million maturing in 2023.
On 27 November 2019, the Group announced that it would finance
the construction of the extension to its global distribution centre
in Barcelona, Spain, for an estimated capital commitment of EUR30.5
million.
NOTES TO THE EPRA AND OTHER KEY PERFORMANCE INDICATORS
(UNAUDITED)
1. EPRA earnings per share
Period ended 30 September 2019
EURm
Total comprehensive income (attributable to Shareholders) 20.72
------------------------------
Adjustments to remove:
------------------------------
Changes in fair value of investment properties (17.85)
------------------------------
Deferred tax adjustment 4.59
------------------------------
Changes in fair value of interest rate derivatives 2.35
------------------------------
Profits to calculate EPRA Earnings per share 9.81
------------------------------
Weighted average number of Ordinary Shares 331,599,364
-----------
EPRA earnings per share - basic and diluted 2.96 cents
-----------
2. EPRA NAV per share
Period ended 30 September 2019
EURm
Net assets at end of period 477.27
------------------------------
Adjustments to calculate EPRA NAV:
------------------------------
Changes in fair value of interest rate derivatives - 2019 2.35
------------------------------
Deferred tax adjustment 4.59
------------------------------
EPRA net assets 484.21
------------------------------
Shares in issue at 30 September 2019 422,727,273
------------------------------
Dilutive shares in issue -
------------------------------
422,727,273
------------------------------
Dilutive EPRA NAV per share EUR1.15
------------------------------
3. EPRA NNNAV
Period ended 30 September 2019
EURm
EPRA net assets 484.21
------------------------------
Include:
------------------------------
Fair value of financial instruments (2.35)
------------------------------
Deferred tax adjustment (4.59)
------------------------------
EPRA NNNAV 477.27
------------------------------
Shares in issue at 30 September 2019 422,727,273
------------------------------
Dilutive shares in issue -
------------------------------
422,727,273
------------------------------
EPRA NNNAV per share EUR1.13
------------------------------
No comparative is disclosed as the Group did not hold any
investment properties in the prior period.
4. EPRA net initial yield (NIY) and EPRA "topped up" NIY
Period ended 30 September 2019
EURm
Investment property 687.58
------------------------------
Less: development properties (21.83)
------------------------------
Completed property portfolio 665.75
------------------------------
Allowance for estimated purchasers' costs 29.31
------------------------------
Gross up completed property portfolio valuation (B) 695.06
------------------------------
Annualised cash passing rental income 31.58
------------------------------
Less: contracted rental income in respect of development properties -
------------------------------
Property outgoings (0.30)
------------------------------
Annualised net rents (A) 31.28
------------------------------
Contractual increases for fixed uplifts 1.84
------------------------------
Topped up annualised net rents (C) 33.12
------------------------------
EPRA Net Initial Yield (A/B) 4.50%
------------------------------
EPRA Topped Up Net Initial Yield (C/B) 4.77%
------------------------------
5. EPRA vacancy rate
Period ended 30 September 2019
EURm
Annualised estimated rental value of vacant premises 0.41
------------------------------
Portfolio estimated rental value(1) 33.43
------------------------------
EPRA vacancy rate 1.22%
------------------------------
1 Excludes land held for development.
6. EPRA cost ratio
Period ended 30 September 2019
EURm
Property operating costs 0.33
------------------------------
Administration expenses 8.45
------------------------------
Net service charge costs 0.05
------------------------------
Other operating income (0.37)
------------------------------
Total costs including vacant property costs (A) 8.46
------------------------------
Vacant property costs (0.16)
------------------------------
Total costs excluding vacant property costs (B) 8.30
------------------------------
Gross rental income - per IFRS (C) 24.49
------------------------------
Total EPRA cost ratio (including vacant property costs) (A/C) 34.54%
------------------------------
Total EPRA cost ratio (excluding vacant property costs) (B/C) 33.89%
------------------------------
7. Total return
Period ended 30 September 2019
cents
Opening EPRA NAV 113.11
------------------------------
Closing EPRA NAV 114.54
------------------------------
Growth in EPRA NAV 1.43
------------------------------
Dividends Paid 2.40
------------------------------
Total growth in EPRA NAV plus dividends paid 3.83
------------------------------
Total return 3.39%
------------------------------
No comparative is disclosed as the Group did not hold any
investment properties in the prior period.
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
FR CKKDNABDKKBD
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December 10, 2019 02:01 ET (07:01 GMT)
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