TIDMEBOX TIDMBOXE
RNS Number : 3795H
Tritax EuroBox PLC
03 December 2020
03 December 2020
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
Tritax EuroBox plc
(the "Company")
RESULTS FOR THE 12 MONTHSED 30 SEPTEMBER 2020
Tritax EuroBox plc (ticker: EBOX (Sterling) and BOXE (Euro)),
which invests in a high-quality portfolio of large, prime logistics
real estate assets strategically located across continental Europe,
is today reporting its results for the 12 months ended 30 September
2020.
Financial performance
30 September 30 September Increase/
2020 2019(1) (decrease)
Portfolio value EUR837.9m(5) EUR689.1m(2,5) 21.6%
IFRS NAV per share(3) EUR1.19 EUR1.13m 5.3%
EPRA Net Reinstatement Value
per share(3) EUR1.30 EUR1.21 7.4%
Dividend per share 4.40 cents 3.40 cents
Total Return(6) 11.3% 9.5% 1.8 pts
Profit before tax EUR53.58m EUR26.34m
Basic Earnings Per Share
("EPS")(4) 10.60 cents 6.25 cents
Adjusted EPS(4) 4.16 cents 3.25 cents
EPRA cost ratio 31.3% 34.5% (3.2) pts
Loan to value ("LTV") ratio 39.9% 33.3% 6.6 pts
Strategy and dividend policy: Evolving to deliver resilient,
sustainable value to our Shareholders
-- Acquisition strategy refined, to tilt towards a more value
add approach, with the aim of acquiring more assets earlier in
their development cycle or with opportunities to add value through
leasing and utilising vacant land
-- No change to the investment policy, with the Company
continuing to target large, modern buildings in the best logistics
locations in continental Europe, close to major population centres
and transport links
-- The Company is fully invested and hence is now well
positioned to adopt a more progressive and active capital
management programme
-- Updated dividend policy will deliver sustainable, covered and
growing dividends to shareholders with aiming to pay out 90-100% of
Adjusted EPS each year
Robert Orr, Chairman of Tritax EuroBox plc, commented:
"This was a good year for the business, during which we
delivered a robust financial performance and made further strategic
progress. We have worked closely with our tenants to support them
where necessary during the Covid-19 pandemic and have benefited
from the resilience of our business, based on high-quality assets
in prime locations, a robust balance sheet and a tenant base that
is financially strong.
"Our market is compelling, and the already positive structural
trends, such as the growth of e-commerce, have accelerated demand
for logistics space. We see exciting opportunities ahead of us and
the refinements we are making to our strategy and dividend policy
will support the delivery of secure and attractive dividends and
capital growth for shareholders. We have a significant pipeline of
growth opportunities and look forward to making further progress in
the year ahead."
Financial highlights: strong balance sheet and robust
performance
-- Dividends declared in respect of the year of 4.40 cents,
94.4% covered by Adjusted EPS. New dividend guidance with an
anticipated increase to 1.25 cents for the quarter ending 31
December 2020
-- Portfolio contracted annualised passing rent increased 16.7%
to EUR40.6 million as at 30 September 2020 (30 September 2019:
EUR34.8 million)
-- Portfolio independently valued at EUR839.3 million(5) at the
year end (30 September 2019: EUR691.7 million), reflecting a
like-for-like valuation uplift of 5.4%
-- Like for like income growth of 0.5%
-- Like for like market rental value growth for 12 months of 2.9%
-- Agreement with one tenant to defer EUR1.6 million of rent
until 2021, with all other rent due by 30 September 2020
received
-- Debt of EUR344.0 million at 30 September 2020, giving
headroom within facilities of EUR81.0 million, along with cash
balance of EUR24.4 million
-- LTV ratio of 39.9%(6) at 30 September 2020 (30 September
2019: 33.3%), well below our covenant limit and in line with the
Company's medium-term target of 45%
-- Credit facilities had a weighted average maturity of 3.8
years at 30 September 2020, with no facilities maturing before
2023
Operational highlights: a well-positioned, high-quality
portfolio
-- Acquired two prime logistics assets totalling nearly 124,000
sqm, for an aggregate cost of EUR103.6 million(7)
-- At the year end, the portfolio comprised:
o 12 assets in prime locations, with a large average size of
nearly 76,000 sqm
o A strong, well-diversified base of 21 tenant partners, 80%(8)
of whom are multi-billion Euro turnover businesses
-- 100% of assets are income producing(9) and 95% of rental
income is subject to an element of indexation each year
-- Weighted average unexpired lease term of 9.1 years at 30
September 2020 (30 September 2019: 11.0 years)
-- Awarded 2 Green Stars in the GRESB Assessment. Implemented 7
sustainability initiatives, including installation of LED lighting
and solar PV panels, implementation of biodiversity enhancement and
provision of community support across the portfolio
-- Continued value creation through active asset management during the year:
o Leased vacant space at Bochum, Germany 8,335 sqm
o Agreed the option to fund an approximately 88,000 sqm
extension to the property in Barcelona, Spain, enhancing income and
capital values
o Sold a 16,400 sqm plot of non-core development land at Bornem,
Belgium, for EUR2.3 million, 53% ahead of the latest valuation and
realising a profit of EUR0.8 million
-- Further asset management activity continues across the
portfolio, including development on zoned plots of unused land and
further leasing of unoccupied space
Post year end highlights
-- Acquired a 34,119 sqm logistics facility in Nivelles,
Belgium, for EUR31.2 million, resulting in full deployment of our
equity and debt
A Company presentation for analysts and investors will take
place via a live webcast and audio only dial in at 0900 (GMT) on
the day.
To view the live webcast, please register at:
https://www.investis-live.com/tritaxeurobox/5fb500ee248bc212006b9b13/whlw
The audio only dial in is available using the following
details:
Phone number: +44 (0) 203 868 4725
Participant access code: 537198
The presentation will also be accessible on-demand later in the
day from the Company website:
https://www.tritaxeurobox.co.uk/investors/ .
Notes
1 The comparator period is the 15 months from 1 July 2018 to 30
September 2019
2 Includes held for sale assets
3 Following the October 2019 update to EPRA's Best Practice
Recommendations Guidelines, the Company has adopted EPRA net
reinstatement value (NRV) as its primary measure of net asset value
and restated its September 2019 position in line with this change.
See note 25 of the Financial Statements for reconciliation.
4 See note 12 to the financial statements for reconciliation
5 Like-for-like increase of 5.4%
6 As per KPI definition
7 Excluding the capitalised acquisition costs
8 By rental income
9 Including licence fee income and rental guarantees
For further information please contact:
Tritax Group
Nick Preston
Mehdi Bourassi
Jo Blackshaw (Investor Relations) +44 (0) 20 8051 5070
Maitland/AMO (Media inquiries) +44 (0) 20 7379 5151
James Benjamin tritax-maitland@maitland.co.uk
The Company's LEI is: 213800HK59N7H979QU33.
NOTES:
Tritax EuroBox plc invests in and manages a well-diversified
portfolio of prime Continental European logistics real estate
assets that are delivering 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.
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.
Further information on Tritax EuroBox plc is available at
www.tritaxeurobox.co.uk
CHAIRMAN'S STATEMENT
Despite the obvious challenges that society has faced as a
whole, this was a positive year for us, as we made further
strategic progress and our resilient and responsible business model
with strong rent collection delivered a robust financial
performance. Since the end of the year, we have announced the full
deployment of our funds, achieving the portfolio construction
targets we set out at IPO.
While Covid-19 has had a dramatic impact on European economies
its impact on the Company has been modest. Our assets are key to
our strong and well-financed tenant partners' logistics and
distribution supply chains and we have worked closely with them to
offer support where appropriate.
Favourable market conditions
Covid-19 has impacted business sectors in different ways. It has
reinforced the attractions of our market, by accelerating long-term
trends and creating new drivers to secure logistics space.
E-commerce is a key driver of demand for logistics space and the
pandemic has pushed online shopping to new highs. Covid-19 has also
highlighted the need for robust and flexible supply chains,
encouraging companies to manufacture more in Europe and hold more
inventory close to end users.
These factors are increasing demand for large logistics assets
in prime locations but there is an acute shortage of available
space and a lack of suitable development sites. This is leading to
increasing occupational and investment demand, and rising rents.
With limited investment alternatives these assets are ever more
attractive to institutional investors, putting further downward
pressure on yields.
A secure and growing dividend
We aim to pay an attractive and growing dividend as a key part
of the Total Return we generate for Shareholders. Our earnings and
dividends are supported by the resilience of our income stream,
supported by a diversified tenant base operating in a range of
industries. In addition, the indexation built into the majority of
our leases ensures steady growth in rental income from our assets.
Total dividends for the year were 4.40 cents per share.
At IPO, we aimed to construct a high quality and resilient
portfolio that would support a dividend equivalent to 4.75% of the
IPO issue price, when fully geared and invested. Following
signature of the post-year end acquisition in Belgium and with the
anticipated practical completion of our current forward funded
developments, we have reached full deployment and expect to achieve
the initial dividend target on a pro forma basis, once the Mango
extension has completed.
We now require a dividend policy that will underpin the next
stage of our development. Going forward, we aim to pay out 90-100%
of our Adjusted EPS each year, with a minimum payout of 85%. This
will give us the flexibility to implement our refined strategy (see
below), while ensuring our Shareholders are rewarded with a
significant, secure and attractive dividend. We expect the dividend
to gradually increase and aim to distribute 1.25 cents per share
for the quarter ending 31 December 2020(1) .
A strategy for value creation
Our strategy to date has proved to be highly successful,
resulting in an excellent portfolio of assets in prime logistics
locations in six core European countries.
As our market evolves, we continue to refine our investment
focus so we can take advantage of the unprecedented conditions
described above and maximise the value we create for Shareholders.
In line with our four pillar investment approach established at
IPO, we have always looked favourably on assets with value creation
potential and although we will continue to acquire fully let
standing assets, we will increasingly tilt our activity towards
value-add opportunities. Our overall investment policy and
acquisition criteria will not change but we will aim to acquire
assets at an earlier point in the development cycle to enable us to
control more effectively the value-add opportunity. While the
dividend will remain a substantial driver of our Total Return, this
strategy will enable us to supplement that with increased capital
growth.
With the Company having now reached full deployment, it is now
in a position to adopt a more progressive and active capital
management programme. Options include recycling capital through
asset disposals, partnering with other investors, continued debt
management and, where supported by a clear rationale, raising new
equity.
Robust financial results and total returns
The Company is posting strong performance results with Total
Return of 11.3%, ahead of our long term objective of 9% per annum.
This is the result of growing income and increased valuation
underpinned by a strong portfolio of assets and tenants. This
enabled the Company to distribute a reliable and consistent
dividend throughout the year, despite the market turbulence around
Covid-19.
The Company took prudent financial measures at the start of
Covid-19 and we decided to suspend investment activity for a few
months during the summer in order to preserve cash and our
available Revolving Credit Facility ("RCF"). This resulted in a
delay in deploying the last remaining slice of equity, which has
now been done with the acquisition of the asset in Nivelles.
With the new acquisition and the portfolio now running at full
capacity, the Board expects the Adjusted Earnings to continue
growing during the next financial year, which should underpin
future performance.
Board and Governance
There was one change to the Board's composition during the year,
with Eva-Lotta Sjöstedt joining as a Non-Executive Director on 10
December 2019. The Board now comprises four independent
Non-Executive Directors, including me as Chairman. Eva-Lotta's
appointment has broadened the range of skills and experience on the
Board, enhancing our discussions and decisions.
The Board has continued to provide robust oversight of the
business during the year and in particular since the start of the
pandemic, and has been closely involved in discussions with the
Manager about the Company's response, as well as debating and
approving the changes to our strategy and dividend policy described
earlier.
Enhancing our sustainability
The world is rapidly changing and there are many external forces
that affect our business and our long-term ability to create value
for our Shareholders and for society as a whole.
We understand the scale of the challenge and a robust approach
to sustainability is a critical part of any long-term investment
management strategy. Managing the risks while seizing the
opportunities embedded within our portfolio, is central to the
delivery of market leading returns. Covid-19 has made this even
more important, by highlighting the non-financial risks we face
such as the importance of workers and wider social issues such as
health, safety and wellbeing.
During the year, the Board approved a new sustainability
strategy that has a long term vision to create a positive
environmental and socio-economic impact, aligned with the UN
Sustainable Development Goals (SDGs). This will help us to
future-proof our assets to meet the global challenges of climate
change and to ensure that we capitalise on the opportunity to
create sustainable value for all of our stakeholders. More
information can be found in the Manager's Report.
Share price
The Board is very conscious that the Company's shares have
traded at a discount to its net asset value. We believe that one of
the principal reasons for this is the low level of liquidity in our
stock. Now that we have fully invested all equity and debt, the
Company can implement the refined strategy to create meaningful
value for shareholders and enable the valuation gap to be
closed.
Outlook
We expect the Company to make further progress in the coming
year as we continue to benefit from the rental growth inherent in
our leases and as we receive a full year of income from this year's
acquisitions. We also expect further value creation through our
active asset management programme.
Looking further ahead, occupier demand is set to remain strong,
while the supply of new logistics space will be constrained for
some time to come, which is positive for market rental growth. Our
strategy and our ability to extract value embedded in the existing
portfolio will help us to take advantage of these conditions and to
deliver strong dividend and capital growth for Shareholders,
supporting our Total Return targets.
We have identified a pipeline of attractive investment
opportunities totalling well in excess of EUR1 billion and look
forward to expanding the portfolio to support the sustainable
growth in our income and capital value that we will deliver to our
Shareholders. Further investment will increase portfolio
diversification and economies of scale and provide access to an
investment grade credit rating which will open up new debt
financing opportunities.
In summary, we are positive about the outlook for the Company
and look forward to creating further value for all our
stakeholders.
Robert Orr, Chairman
2 December 2020
1. This is a target only and not a profit forecast. There can be
no assurances that the target will be met, and it should not be
taken as an indicator of the Company's expected or actual future
performance.
OUR MARKET
A compelling market
We operate in a market with strong fundamentals. While each
European country is different, there are common themes of rising
occupational demand, constrained supply, increasing rents and
improving lease terms. There is a growing body of evidence that the
Covid-19 pandemic is leading to an acceleration in many of these
trends, intensifying occupational demand and increasing investment
returns.
Structural changes are driving occupational demand
Logistics property occupiers are responding to profound
structural and operational changes in their markets. To ensure
these occupiers have sustainable business models, they must focus
on:
1. Meeting the needs and changing demands of modern consumers;
2. Optimising their supply chains to reduce costs; and
3. Ensuring they occupy sustainable assets that will be fit for purpose for years to come.
1. Meeting the needs and changing demands of modern consumers
The move to online shopping is one of the key drivers of
occupational demand for large logistics assets. Faced with the high
costs of occupying shops and rising online spending, retailers are
looking to consolidate their physical store operations and have a
combined in-store and online "omnichannel" presence.
Online sales are increasing rapidly in many European countries,
spurred by Covid-19. Many consumers, and particularly older ones,
tried e-commerce for the first time during lockdown, creating new
converts to online shopping. The Centre for Retail Research (CRR)
forecasts that Covid-19 has brought forward the higher level of
online sales that was previously expected in 2021. The CRR
forecasts that online share of total sales is expected to reach new
highs in the six main Western European countries, before moderating
to more normalised levels in 2021.
The pandemic is also causing retailers to reconsider not
reopening stores that were struggling pre-Covid-19, and encouraging
them to intensify their focus on an increasingly omnichannel
approach. Some of this redundant retail space may be repurposed to
support last mile delivery of online sales.
A sophisticated and modern supply chain is fundamental to the
success of the omnichannel model. Retailers are increasingly
reliant on very large, flexible, modern logistics properties,
enabling them to offer consumers access to their entire product
range and then quickly, flexibly and cheaply deliver those orders
and manage returns, while also having the ability to add capacity
as they grow.
2. Optimising supply chains to reduce costs
Even before Covid-19, many businesses were facing persistent
pressure on their supply chains, making the efficiencies and lower
costs offered by large flexible logistics buildings highly
appealing. The pandemic has only increased this pressure, with
companies facing reduced sales, increased costs and potentially
prolonged economic uncertainty.
As a result, occupiers are consolidating into fewer, larger and
more modern distribution assets. This provides them with economies
of scale and the opportunity to automate processes which would not
be possible in smaller, disparate properties, helping them to
improve their systems, reduce costs and have the flexibility to
meet growing demand. Larger units also tend to be taller, allowing
for mezzanine floors and more efficient automated racking and
storage systems. Automation also improves resilience against
Covid-19 and potential future pandemics, in part by reducing the
reliance on close human interaction.
The pandemic profoundly disrupted many supply chains,
particularly in the early stages, as the "just-in-time" supply
model failed to cope as suppliers were forced to shut down.
Companies therefore need to protect themselves from similar events
in future, or from potential disruption resulting from trade wars
or geopolitical tensions. Relocating manufacturing and assembly
closer to Europe from Asia will allow more flexibility and control
of shipping and distribution. Companies are also likely to hold
more inventory, to protect themselves from future shocks. National
governments are also pushing companies to hold more stock of key
goods such as food and medical supplies, to improve resilience.
3. Ensuring they occupy sustainable assets that will be fit for purpose for years to come
Sustainability is increasingly central to our tenants' corporate
strategies, reflecting the potential cost savings of energy
efficiency, being responsible corporate citizens and the need to
respond to growing consumer awareness of sustainability issues. By
occupying assets built with state-of-the-art design and materials,
and which incorporate low-carbon technologies and energy
efficiency, they can minimise their environmental footprint and
optimise their use of natural resources.
Sustainable assets are also more attractive investments,
offering lower obsolescence, lower running costs and greater
long-term appeal to occupiers and investors.
Asset location is key
The location of logistics assets is fundamental. In continental
Europe, prime logistics locations are typically close to densely
populated conurbations and have excellent transport links for wider
distribution, a suitable labour supply and sufficient power to
operate substantial automated systems.
In many European cities, large logistics units on the outskirts
also provide an effective solution for last-mile delivery across
the city, avoiding the need for smaller urban logistics closer to
the centre, and reducing the transport mileage and associated
environmental impacts.
Supply remains constrained
Given the characteristics described earlier, there are
comparatively few sites which can accommodate very large logistics
facilities. Municipalities are also often reluctant to zone for the
largest properties, instead preferring to consent for smaller unit
development. At the same time, the difficulty of acquiring suitable
new land for logistics means many developers are exhausting their
logistics land banks. The potential for increased manufacturing in
Europe, as noted above, could also increase competition for land
that could otherwise be used for logistics.
These factors, combined with a lack of speculative development
over the last decade, mean that occupiers looking for major new
logistics facilities have few choices. The consequence is that
logistics vacancies in continental Europe are at, or near, all-time
lows. Nine out of our twelve assets are located in markets where
vacancy rate are below 5%.
Strong take-up and few completions
Take-up across Europe has been consistently strong since 2016,
averaging 21 million sqm per annum. While the level of completions
has increased as occupiers seek logistics buildings with the
quality and standards to meet their operational needs, the supply
of new space has not kept up with the level of demand.
Rental growth is evident
Strong occupier demand and constrained supply, combined with
rising land prices, raw material and labour costs, mean there is
pressure for rents to increase.
Approximately only 10% of total operational costs are accounted
for by supply chain costs, and industry-standard metrics indicate
that only 0.75% of total operational costs are logistics real
estate occupancy (source: Savills). We therefore believe that
occupiers can absorb higher rental costs, as the economies and
efficiencies make higher rental levels sustainable in the longer
term.
Improving lease terms
Another important effect now evident in some European markets is
the potential to improve lease terms in favour of the property
owner.
Leases in Europe have typically been relatively short - on
average five years - and often contain occupier-friendly clauses,
such as restricted indexation provisions. However, the dynamics
described above mean that occupiers are increasingly keen to retain
long-term control of their properties, particularly given their
often substantial investment in fitting out and automation, and the
ever greater importance of an efficient supply chain in the wake of
Covid-19. They are therefore signing longer leases to secure their
occupation and amortise these costs over a longer period. Longer
leases also suit international companies who want to harmonise
their lease obligations across geographies. The trend to longer
leases is evidenced by our portfolio, which has a weighted average
unexpired lease term (WAULT) of 9.1 years at 30 September 2020.
We are also increasingly able to negotiate better indexation
clauses and more advantageous renewal options. These improvements
in lease terms help to improve the value of the assets.
Investment demand is robust
The dynamics of the occupational market and the difficulties
faced by other real estate sectors, in particular retail, have
further increased investment demand, especially since the start of
the pandemic. Competition is fierce for openly marketed
opportunities, so effective sourcing requires us to acquire
directly from sellers.
Strong investment demand has continued to compress yields, which
have been falling over the last decade and have hardened further
since our IPO. Even so, prime logistics assets continue to offer an
attractive yield premium over the risk-free European bond
yield.
OUR BUSINESS MODEL
Our business model supports the achievement of our purpose,
through our focus on the most modern, best located and most
sustainable logistics properties. These meet the needs of growing
and ambitious companies, both now and in the future, and help us to
create value for Shareholders, our tenant partners and our other
stakeholders.
What we do
We acquire, lease and manage large logistics assets across
strategic locations in core countries in continental Europe.
We aim 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.
How we create value
Source high-quality investments
The Manager uses its extensive logistics experience and network
of relationships to acquire properties for us which are not being
openly marketed, thereby reducing 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.
We are also able to expand our portfolio through extending and
building properties on our existing sites, enabling us to invest at
more advantageous rates than in the open market.
Buy and sell for value
Before acquiring 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 the potential upside in disposing of assets and
recycling capital into new opportunities.
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 enables us
to invest in brand new, environmentally friendly buildings leased
to institutional grade tenants on long leases, substantially
reducing any development risk.
The Manager can also acquire land for us which is zoned for
logistics use, either as an integral part of an existing
acquisition, or a discrete parcel of land. This allows 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 works with our tenant partners to maximise the
building's usefulness to their operations and to adapt the space as
their needs change. These initiatives can allow us the opportunity
to capture the rental growth which is prevalent across our markets.
Sustainability is at the heart of this approach, helping us to
future-proof our assets and ensure they generate long-term returns
for Shareholders, while protecting the environment and looking to
benefit local communities.
Our competitive advantage
The Manager and the Board together are responsible for devising,
implementing and evolving the Company's strategy. The Manager's
logistics sector specialism provides exceptional focus and
understanding of the dynamics of the sector to enable this. It
benefits from a deep pool of resource with many years of combined
experience in the European logistics real estate market, providing
shareholders with unrivalled execution capability. These skills
include sourcing and acquisition of assets; management, (in
conjunction with our retained asset managers) to unlock value from
assets; development; portfolio construction and management;
implementation of hold/sell strategies and disposal. Layered
throughout these disciplines is market leading in-house tax, legal
and accounting knowledge.
A key advantage is the relationship with development and asset
management partners Dietz and Logistics Capital Market (LCP) which
provides the Company with access to competitively priced, top
flight investment opportunities in the key European logistics
markets. As well as these relationships the Manager has a wide
contact base of other investors, developers and occupiers in the
market, also providing reliable attractive investment
opportunities.
In summary, the breadth and depth of the Manager's experience,
in all facets of the European real estate logistics market,
provides a focussed and motivated platform to deliver market
leading returns to shareholders.
The value we create
For our tenant partners
Our tenant partners benefit from large, modern, flexible,
sustainable and well-located logistics space, owned by a landlord
who is an expert in the sector and committed to understanding and
supporting their operations in the long term.
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.
Our approach to sustainability aims to transition our portfolio to
net zero carbon, while enhancing biodiversity on our sites.
For Shareholders
We look to pay a progressive, secure and sustainable dividend
and generate capital growth.
A large proportion of our Total Return is generated from the
rents which our tenants are contracted to pay to us under
multi-year lease contracts. As at 30 September 2020 the weighted
average length of these leases to expiry was 9.1 years, giving us
excellent predictability of income to underpin the returns we
deliver to investors. This income grows in two ways: As is usual in
European markets, rents we receive increase automatically each year
through a reference to a local inflation index. The second way is
through growing market rent levels, which we capture through our
asset management activities. As around two thirds of our rental
payments are made monthly in advance, with the remainder being paid
quarterly in advance, our predicted revenue converts quickly into
cash. This regular cashflow, coupled with the financial strength of
the tenants minimises the risk of bad debts. Assets we acquire
typically have an occupier in place. This, coupled with the strong
demand for our high-quality properties help 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.
This growth in income is directly converted into capital growth.
Additional capital growth can also be seen during the life of
ownership of our assets. This may come from yield compression
across the market, or through the benefits of our asset management
activities and our acquisition processes.
For lenders
Our lenders benefit from having interest serviced from regular
and stable cash flows, generated by financially strong tenants
occupying top quality real estate.
KEY PERFORMANCE INDICATORS
Set out below are the key performance indicators we use to track
our strategic progress.
KPI and definition Comments Performance
1. Dividend The dividend reflects our ability to 4.40 cents/share for
Dividends paid to Shareholders and deliver a growing income stream from the year ended 30 September
declared in relation to the period. our portfolio and 2020 (30 September
is a key element of our Total Return. 2019: 3.40 cents/share)
An attractive and progressive
dividend, with the intent
to pay out 90-100% of our Adjusted
Earnings each year, with a minimum
payout of 85% of Adjusted
Earnings.
----------------------------------------- -------------------------------
2. Total Return (TR) TR measures the ultimate outcome of 11.3% for the year
TR measures the change in the EPRA Net our strategy, which is to create value ended 30 September
Reinstatement Value (EPRA NRV) over the for our Shareholders 2020 (30 September
period plus through our portfolio and to deliver a 2019: 9.5%(1) )
dividends paid. 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 Value Basic Net Asset Value measures the net EUR 503.91m
Net asset value in IFRS GAAP value of the Company under IFRS. EUR1.19/share as at
30 September 2020 (
EUR477.27m/ EUR1.13/share
as at 30 September
2019)
----------------------------------------- -------------------------------
4. Adjusted earnings Adjusted EPS reflects our ability to EUR1 7.56m
Post-tax adjusted EPS attributable to generate earnings from our portfolio, 4.16 cents/share
Shareholders, adjusted for other which ultimately for the year ended
earnings not supported underpins our dividend payments. 30 September 2020 (
by cash flows. 30 September 2019 :
See note 12 of the Financial EUR10.79m/3.25 cents/share)
Statements.
----------------------------------------- -------------------------------
5. Loan to value ratio (LTV) The LTV measures the prudence of our 39.9% at 30 September
The proportion of our gross asset value financing strategy, balancing the 2020 ( 30 September
(including cash) that is funded by additional returns 2019: 33.3%)
borrowings and portfolio diversification 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 unexpired lease The WAULT is a key measure of the 9.1 years at 30 September
term (WAULT) quality of our portfolio. Long lease 2020 ( 30 September
The average unexpired lease term of the terms underpin the 2019: 11.0 years )
property portfolio weighted by annual security of our income stream. The
passing rents. Company seeks to maintain 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 helps indicate how 94.4% for the year
Dividends paid and proposed to sustainable a dividend is. It measures ended 30 September
Shareholders in relation to the the proportion 2020 ( 30 September
financial period. of dividends which is supported by 2019 : 85.3 % )
adjusted earnings.
----------------------------------------- -------------------------------
8. Interest cover It is a measure of a company's ability 4.63 times for the
The ratio of net property income to the to meet its interest payments. year ended 30 September
interest incurred in the period. 2020 ( 30 September
2019 : 6.0 times)
----------------------------------------- -------------------------------
9. Like-for-like rental growth This measures the company's ability to 0.5%/EUR0.18m for
Like-for-like rental growth compares grow its rental income over time. the year ended 30 September
the growth of the rental income of the Rental growth will 2020 (30 September
portfolio that not be linear during the hold period, 2019:1%/EUR0.3m)
has been consistently in operation and with different mechanism in each lease
not under development at year end. agreement. The
0.5% this year reflects the lower
inflation background.
----------------------------------------- -------------------------------
(1) Total Return for 30 September 2020 was 10.9% (30 September
2019: 3.4%) using the previous EPRA NAV at 122.72 cents and 114.54
cents respectively.
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association (EPRA). We provide
these measures to aid comparison with other European real estate
businesses. Following the October 2019 update to EPRA's Best
Practice Recommendations Guidelines, the Group has early adopted
these guidelines and has adopted EPRA NRV as its primary measure of
net asset value and restates its September 2019 position in line
with this change. A reconciliation of this change is provided
within the Notes to the EPRA and Other Key Performance Indicators
section.
Performance measures and definition Comments Performance
1. EPRA Net Reinstatement Value A key measure to highlight the EUR550.50m
(EPRA NRV) value of net assets on a long-term EUR1.30/share as at
Basic NAV adjusted for basis. The metric reflects 30 September 2020 (30
mark-to-market valuation of what would be needed to recreate September 2019:
derivatives, deferred tax and the current portfolio of the EUR511.05m/EUR1.21/share(1)
transaction company. )
costs (real estate transfer tax and
purchaser's costs).
-------------------------------------- --------------------------------------
2. EPRA Net Tangible Assets (EPRA Assumes that entities buy and sell EUR516.31m
NTA) assets, thereby crystallising EUR1.22/share as at
Basic NAV adjusted to remove the certain levels of unavoidable 30 September 2020 (30
fair values of financial deferred tax. September 2019:
instruments EUR481.74m/EUR1.14/share(1)
and deferred taxes. This excludes )
transaction costs.
-------------------------------------- --------------------------------------
3. EPRA Net Disposal Value (EPRA Represents the Shareholders' value EUR503.91m/
NDV) under a disposal scenario, where EUR1.19/share as at
Equivalent to IFRS NAV as this deferred tax, financial 30 September 2020 (30
includes the fair values of instruments and certain other September 2019:
financial instruments and deferred adjustments are calculated to the EUR477.27m/EUR1.13/share(1)
taxes. full extent of their liability, )
net of any resulting tax.
-------------------------------------- --------------------------------------
4. EPRA Earnings A key measure of the Group's EUR13.80m
Earnings from operational underlying results and an 3.26 cents/share for
activities. indication of the extent to which the year ended 30 September
current 2020 (30 September 2019:
dividend payments are supported by EUR9.81m/2.96 cents/share)
earnings.
-------------------------------------- --------------------------------------
5. EPRA Net Initial Yield (NIY) This measure should make it easier 4.4%
Annualised rental income based on for investors to judge for as at 30 September 2020
the cash rents passing at the themselves how the valuations (30 September 2019: 4.5%)
balance sheet date, less of portfolios compare.
non-recoverable
property operating expenses,
divided by the market value of the
property, increased with
(estimated)
purchasers' costs.
-------------------------------------- --------------------------------------
6. EPRA 'Topped-up' NIY This measure should make it easier 4.6%
This measure incorporates an for investors to judge for as at 30 September 2020
adjustment to the EPRA NIY in themselves how the valuations (30 September 2019: 4.8%)
respect of the expiration of of portfolios compare.
rent-free
periods (or other unexpired lease
incentives such as discounted rent
periods and step rents).
-------------------------------------- --------------------------------------
7. EPRA Vacancy Rate The vacancy relates to part of the 5.43%
Estimated Market Rental Value (ERV) two latest acquisitions in Breda for the year ended to
of vacant space divided by ERV of and Strykow. These buildings 30 September 2020 (30
the whole portfolio. were acquired partly vacant with September 2019: 1.2%)
rental guarantee covering the
vacant space.
-------------------------------------- --------------------------------------
8. EPRA Cost Ratio A key measure to enable meaningful 31.3%(2)
Administrative and operating costs measurement of the changes in a for the year ended to
(including and excluding costs of company's operating costs. 30 September 2020 (30
direct vacancy) divided We expect the EPRA cost ratio to September 2019: 34.5%
by gross rental income. continue to decrease over time, as (2) )
the portfolio grows and 31.0%(3)
the Company benefits from economies for the year ended to
of scale. 30 September 2020 (30
September 2019: 33.9%
(3) )
-------------------------------------- --------------------------------------
(1) EPRA NAV for 30 September 2020 was EUR518.78m/EUR1.23/share
(30 September 2019: EUR484.21m/EUR1.15/share). EPRA Triple Net
Asset Value (NNNAV) for 30 September 2020 was
EUR503.91m/EUR1.19/share (30 September 2019:
EUR477.27m/EUR1.13/share).
(2) Inclusive of vacant property costs
(3) Exclusive of vacant property costs
MANAGER'S REPORT
Further diversifying the portfolio through high-quality
acquisitions
During the year, we strengthened the Company's portfolio with
the addition of two investments, at an aggregate cost of EUR103.6
million. We continued to exercise strong capital discipline, with
these acquisitions having an average net initial yield of 5.4%.
After the year end, the Company made a further acquisition in
Belgium (see post year end activity below), resulting in full
deployment of its equity and debt.
At the year end, the Company had invested EUR773.8 million to
acquire a portfolio of 12 prime income-producing assets.
The assets acquired during the year were as follows:
-- Breda, Netherlands : acquired for EUR50.3 million, at a net
initial yield of 4.6%. The asset has a gross internal area of
c.46,200 sqm and was purpose built in November 2019 to the latest
logistics specifications, a rated BREEAM 'Very Good'. It is the
Company's first acquisition in the Netherlands and is in a key
location along the main east-west logistics corridor in Southern
Netherlands, with excellent road, rail and port connectivity, and a
robust labour market.
-- Strykow, Poland : acquired for EUR53.3 million, at a net
initial yield of 6.1%. The asset has a gross internal area of
c.77,660 sqm and comprises two recently developed prime logistics
properties and development land. It is in a core logistics location
in central Poland, close to the Group's asset let to Castorama.
The Breda and Strykow assets were classified as value-add,
reflecting the asset management opportunities they present through
leasing vacant space and developing unused land.
When we acquire properties with vacant space for the Company, we
aim to negotiate a rental guarantee to compensate for the lack of
income on this space. This guarantee may be either cash or
non-cash. Any rental guarantee is recognised within Adjusted
Earnings. Both acquisitions during the year benefit from a rental
guarantee.
A highly attractive portfolio
At the year end, the Company's portfolio was well diversified by
building size and tenant, with assets situated in the core European
countries of Belgium, Germany, Italy, the Netherlands, Poland and
Spain. The portfolio has several attractive characteristics, which
will help it to generate meaningful value for Shareholders and the
Company's tenant partners. Our assets are in prime locations across
core countries in continental Europe and are key to our tenant
partners' logistics and distribution supply chain needs.
Modern
The assets are modern, with 86% (by income) of the portfolio
having been built in the last four years. This helps to ensure that
the buildings meet the latest operational and sustainability needs
of occupiers.
Large
Significantly, the assets are large, with nearly 50% of the
portfolio (by income) being in excess of 100,000 sqm and an average
size of nearly 76,000 sqm. We believe this is the largest average
size in our sector and is an important advantage for the Company,
given that occupier demand for logistics space is concentrated on
these very large units and on the smaller "last mile" facilities,
with lower demand for mid-sized boxes.
Sustainable
89% of the portfolio by floor area is covered by Green Building
Certifications or Energy Performance Certificates (EPCs)
demonstrating their sustainability. The assets in the portfolio
have LED lighting in place, with other energy efficiency measures
to reduce the occupier operating costs; and support health and
wellbeing, through features such as gyms, cycle facilities,
recreation areas and increased daylighting, which supports
occupiers staff productivity and retention.
Income generating
The portfolio has been constructed to deliver secure, long-term
and growing income. Around 80% of the Company's 21 tenant partners
are multi-billion Euro businesses, including some of the world's
best-known companies. These businesses have strong balance sheets,
helping them to navigate difficult economic circumstances, and they
operate in a wide range of different industries.
The portfolio income is also secured on long leases. Nearly 90%
of income is secured for five years or more, resulting in a
weighted average unexpired lease term at the year end of 9.1 years,
well ahead of the Company's target minimum of five years. The
unexpired lease terms at the year end ranged up to 16.2 years.
Some 95% of the Company's rent includes an element of annual
indexation, with rental uplifts being either fixed or indexed to
local inflation, thus offering the regular compounding of income
that supports the Company's dividend growth policy.
We also look for opportunities to capture market rental growth,
which we expect to exceed indexation, through asset management
initiatives.
Our buildings are key operating assets for tenants' businesses
providing the goods and services that the underlying customers
continue to require. Consistently strong rent collection figures
from a high quality tenant base demonstrates that the logistics
sector remains resilient and structural tailwinds have been
accelerated by the impact of the Covid-19 pandemic.
Capturing embedded value
When sourcing acquisitions for the Company, we have always
looked favourably on assets that have embedded value creation
potential, for example through leasing activity or utilising unused
or adjacent land. We work proactively with the Company's tenant
partners to secure initiatives that drive rental income and capital
values, supporting the Company's delivery of secure long-term
income and an attractive total return.
Land sale
During the year, we completed the sale of a 16,400 sqm plot of
non-core development land at Bornem, Belgium. This plot sat outside
our core strategy, as it is better suited to smaller industrial
unit development rather than large-scale logistics development.
The sale receipt reflected a 53% net increase on the latest
valuation (gain of EUR0.83 million).
Leasing opportunities
In January 2020, the Company completed a lease on the vacant
unit of 8,335 sqm at its property in Bochum, Germany. The new lease
is for a five-year term from 1 February 2020, at a headline rent
which is some 7% higher than the previous rental guarantee and the
passing rent at the neighbouring units, now demonstrating both the
rental growth evident in this market and the reversionary potential
of the remainder of the building. The lease contains attractive
indexation provisions, with full annual indexation reflecting 100%
of the German Consumer Price Index. The lease also further
diversifies the Company's tenant base, adding Recht Logistik GmbH,
an established German logistics and transportation company based in
Nord Rhein Westphalia. The Bochum asset is now fully let.
As noted earlier, the Company has vacant space at both assets
acquired during the period in Breda and Strykow and sees further
value creation potential from leasing these units, which are
currently subject to rental guarantees. The assets at Bremen and
Hammersbach in Germany also offer opportunities for lease regears
in the medium term.
A key sustainability objective is to make use of lease
agreements to ensure that we are further collaboratively working
with our occupiers on sustainability goals, such as improving
energy efficiency. Since May 2020, the Company has put in place a
process to include green clauses in our leases to enable this
cooperation.
Expansion opportunities
In November 2019, the Company agreed an option to fund an 88,000
sqm extension to its global distribution centre at Lliçà d'Amunt,
Barcelona, let to Mango, one of the world's leading fashion
retailers. The capital commitment is estimated at EUR30.5 million
and will generate an attractive yield on cost. We expect
construction to start no sooner than Summer 2021, once all
necessary permissions have been obtained and in line with Mango's
strategic objectives and development programme.
On practical completion, which is targeted for Q4 2022, the
extension will be incorporated into the existing full repairing and
insuring lease that started in December 2016 on a 30-year term. The
unexpired lease term on completion of the extension will be
approximately 14 years to the first tenant break option in 2036,
with further break options in 2039 and 2042. The rent is subject to
annual upward-only indexation.
The extension forms part of accommodating the continued growth
of Mango's global e-commerce operations, which is expected to
further increase post Covid-19, combining the in-store and online
fulfilment functions, increasing this facility's gross internal
area to over 274,000 sqm, including mezzanine floors. As part of
the extension agreement, the Company and Mango will work together
to optimise and reduce energy consumption within the existing
building and the extension to improve the property's environmental
performance. The Company will commission an updated EPC on
completion of the extension, which will therefore demonstrate the
future-proofing of this high-specification asset, as well as
improving rental income and its capital value.
Development opportunities
Further asset management activity is expected across the
portfolio, including agreeing to start construction on a number of
zoned plots of unused land. These include the development land
acquired with the asset at Strykow, Poland, where there is the
potential to invest EUR15.0 million to fund the construction of a
building with a gross internal area of approximately 22,400 sqm.
The Company has entered into a conditional funding agreement with
the vendor to develop this land.
In Belgium, the assets at Bornem and Rumst have over 60,000 sqm
of zoned land with potential to develop approximately a further
28,000 sqm of warehouse space. The development plot at Bornem now
has a building permit in place and ground works have begun post
year end. In conjunction with LCP we are overseeing the development
of the site and simultaneously actively marketing the property.
In total, the development initiatives identified within the
portfolio could add up to EUR6.1 million of annual income over the
medium term.
Our sustainable approach
As outlined in the Chairman's statement, sustainability is
fundamental to the Company's ability to create long-term value for
Shareholders and other stakeholders and to manage risk while doing
so. During the year, we have defined and implemented a
sustainability strategy that supports the Company's overall
sustainability goal to create a positive environmental and
socio-economic impact by 2030. In support of this, the Company has
developed four key objectives. This strategy was approved by the
Board and is summarised below, along with targets for the next
three years.
Key Objectives 2020-23 targets
=============================================================
Own healthy and
sustainable buildings * Ensure all assets align with environmental, social
Ensure and demonstrate and governance (ESG) investment principles
the sustainability
of our assets
* Improve GRESB score to three Green Stars
* Implement green leases on all new leases
* Provide recommendation reports and sustainable
operations guides to tenants
========================== =============================================================
Energy and Carbon
Net zero carbon * Ensure all assets have LED lighting and Building
emissions Management Systems in place
* Install renewable energy generation projects
* Ensure assets have climate resilience measures
installed
========================== =============================================================
Nature and wellbeing
Enhance biodiversity * Implement biodiversity, climate and wellbeing
on the Company's measures on each asset
land
* Install electric vehicle charging and cycle
facilities
========================== =============================================================
Socio-economic
impact * Measure social value to demonstrate the impact of the
Create a positive Company's investment
socio-economic
impact through
our investment * Support local community causes, in conjunction with
tenants
* Support employment and skills initiatives for the
assets with the highest levels of deprivation
========================== =============================================================
The Company has developed this strategy by assessing its
portfolio and targeting those areas where the maximum impact will
be made on the most pressing issues. The strategy aligns with the
UN Sustainable Development Goals targeting the following specific
goals: Sustainable Cities and Communities, Climate Action, Life on
Land and Decent Work and Economic Growth. The Company will disclose
its results against the EPRA Sustainability Best Practice
Indicators (SBPR) in its ESG Disclosure Report, expected by early
2021.
Embedding and assessing sustainability throughout our
operations
We assess and embed sustainability processes throughout the life
cycle of our assets, from construction and acquisition, through the
ongoing management through to disposal.
We consider sustainability in accordance with our Investment
Policy and we carry out Sustainability Risk Assessments on
acquisition of assets. This provides us with valuable information
about the sustainability risks and opportunities a new asset will
present. We use this information to create Sustainability Action
Plans (SAPs) for each asset which set out plans to improve its
sustainability performance. These plans identify both asset
management and operational initiatives. We use these to engage our
tenant partners and collaborate on sustainability projects. The
SAPs are updated annually to identify any new risks and
opportunities.
This year, we have further enhanced the sustainability and ESG
components in our investment decision-making. We are also providing
ESG investment training for the Board and the Manager. Our newest
Non-Executive Director, Eva-Lotta Sjostedt, brings a wealth of ESG
experience to the Board, and has taken the position of
'Sustainability Champion' on the Board. Eva-Lotta conducts monthly
catch-up meetings with the Manager's Head of Sustainability to
ensure the Manager remains ESG focussed in all aspects of
operations.
Key sustainability highlights during the year
Investor ESG Rating: GRESB score 64/100 (up from 53 in 2019)
Carbon emissions: 3,890 Tonnes of C02e (Scopes 1, 2 and 3
business travel)
Renewable energy generated on site: 2,259 MWh megawatt hours
Green revenues from onsite solar PV generation for tenants:
EUR394,208
Wellbeing measures in place on portfolio: 9 assets with measures
in place
90% of our portfolio by floor area, representing ten out of the
twelve assets, benefit from Energy Performance Certificates or
Green Building Certification.
Examples of progress towards achieving our Big Goals
1. Healthy and sustainable buildings
Our objective is to ensure all assets are healthy and
sustainable. We target acquiring assets with Green Building
Certification wherever possible and ESG is embedded in all
investment and leasing activities.
-- 40% of our portfolio by floor area, representing five assets, is covered by Green Building Certification. Two of these, Rome, Italy and Breda, Netherlands are certified to BREEAM Very Good. The other three assets are located in Germany, in Peine, Wunstorf, and Bremen, and are certified to DGNB Gold.
-- 90% of our portfolio by floor area, representing ten out of
the twelve assets, benefit from Energy Performance Certificates or
Green Building Certification. These cover all assets apart from
those in Belgium where there is no EPC rating scheme in place. EPCs
in Europe vary depending on the country, most do not provide an EPC
grade. We are assessing options to rate the two Belgian assets.
During the year, among other assets, we acquired a building in
Breda in line with our ESG investment criteria. We have implemented
a standard process for embedding green leases into any lease
renewals or new lettings. We also joined the German Green Building
Council (DGNB), to support the sustainability activities at the
Company's five assets in Germany and to help engage with tenants,
local municipalities and developers.
2. Energy and carbon
Our objective is to achieve net zero carbon emissions in our
direct operations, including management of the buildings,
refurbishment and construction, and also to support our tenants in
achieving this in their operations in our buildings.
-- At the year end, six assets had rooftop solar PV installed.
These schemes generated 2,259 MWh of renewable energy during the
year.
-- Ten assets have LED lighting installed. During the year, LED
lighting installation progressed at Rumst and Bornem, which
increases coverage to twelve assets. We aim to work with the
Company's tenant partners to increase the coverage of LED lighting
and other energy efficiency measures, to support their operational
efficiency and carbon reduction plans.
-- The Company consumed 21,224 MWh of energy for the supply of
landlord procured electricity and gas. The Company's carbon
emissions totalled 3,890 tonnes of carbon (TCO2e) in the year. To
support our ambition for the Company's activities to be net zero
carbon, we are switching to renewable energy supplies in 2021. This
will bring the Company's indirect emissions (Scope 2) to net zero
carbon, and we are exploring ways to use renewable gas supplies to
bring our direct emissions (Scope 1) to net zero carbon.
-- We have calculated our Scope 3 business travel emissions,
which totalled 20 tonnes of carbon this year. We recognise that
this is likely to be much lower than in normal operating years due
to travel restrictions caused by Covid-19.
3. Nature and Wellbeing
Our objective is to enhance nature and wellbeing on our assets
for the benefit of our tenants and local communities. Covid-19 has
highlighted the importance of wellbeing and community
engagement.
-- As at the year end, nine of the Company's assets benefit from
the staff recreation and wellbeing facilities, meaning these assets
are well suited to supporting the wellbeing of employees.
-- Five assets in the portfolio currently have a range of nature
and biodiversity measures on site. We are working with our tenant
HAVI Logistics in Wunstorf, Germany, to install further measures,
including natural vermin control and beehives that will enhance the
local environment and contribute to the wellbeing of staff working
on site. We aim to increase this by working closely with our
tenants in the medium to long term.
4. Social Value
The Company aims to create social value in the communities where
its assets are located through its investment in European
logistics. The assets are well-located close to population centres
creating jobs, providing tax revenues and supporting the local
economy. These jobs often provide skills training, improving the
economic opportunities for the people employed.
-- The Company has created a portfolio-wide Community Investment
Fund that supports investments made into the local community by
tenants. This adds value beyond just the investment value of the
asset, enabling us to support local communities by working in
partnership with tenants. A recent example includes supporting
micro charities that help those most affected by the Covid-19
pandemic.
FINANCIAL REVIEW
Portfolio valuation
The portfolio was independently valued by JLL as at 30 September
2020, in accordance with the RICS Valuation - Global Standards. The
portfolio's total value at the year end (including rental
guarantees for new acquired properties) was EUR839.3 million (30
September 2019: EUR691.7 million). This reflected a like-for-like
valuation increase of 5.4% during the year, driven mainly by yield
compression, indexation on leases and asset management initiatives
such as the Mango extension.
In the Company's half year results, we stated that the valuer's
report as at 31 March 2020 noted material uncertainty relating to
property valuations as a result of Covid-19. The valuer's report as
at 30 September 2020 did not contain a material uncertainty clause,
reflecting greater understanding of Covid-19 and the reduced impact
on the logistics asset class.
Financial results
Comparative period
The comparative period for this set of results is the 15 months
from 1 July 2018 to 30 September 2019. This was the first period
for the Company after its IPO and the income the Company earned was
staggered over the period, as new assets were acquired. Given this,
it is not meaningful to draw comparisons between items in the
income statement. The commentary below therefore considers
financial performance in the twelve months to 30 September 2020 on
a standalone basis.
Rental income
Rental income for the year was EUR36.0 million (2019: EUR24.5
million). Under IFRS, rental income from each lease is smoothed
over the term of the lease. As a result, there was no impact on
reported revenue in the year from the deferral of EUR1.6 million of
rent to 2021 by a single tenant. However, we have deducted this
revenue from our calculation of Adjusted Earnings, to ensure the
Company does not distribute earnings that it has not yet received
in cash. This also means that Adjusted Earnings in the financial
year ending 30 September 2021 will include an additional EUR1.6
million, subject to receiving the cash.
Costs
The Company's operating and administrative costs were EUR10.7
million (2019: EUR8.5 million), which primarily comprised:
-- the Management Fee payable to the Manager of EUR4.1 million (2019: EUR3.3 million);
-- a fee for running an SGR structure in Italy, which ensures
the Italian property holding company is exempt from corporation and
income tax;
-- the Company's running costs, including accounting, tax and audit;
-- the Directors' fees; and
-- non-recoverable VAT of EUR0.68 million.
The EPRA cost ratio (inclusive of vacancy cost) was 31.3% (2019:
34.5%). We expect the EPRA cost ratio to continue to decrease over
time, as the portfolio grows and the Company benefits from
economies of scale.
Interest expense and commitment fees
Total costs of debt for the year were EUR7.7 million (2019:
EUR4.1 million), with interest cover of 4.6 times (2019: 6.0
times). The weighted average cost of debt was 2.3% (2019: 2.2%). As
the Company grows in size, we aim to become Investment Grade and to
further reduce our cost of debt. We believe this can be achieved as
we approach EUR1.2 billion GAV.
Gain on revaluation
The fair value gain on the revaluation of the Company's
investment properties was EUR38.6 million (2019: EUR17.9 million).
This performance reflects the strong position of the portfolio,
within a logistics subsector that has great tailwinds, both on the
investment and on the leasing side. The valuation increase is
mainly driven by yield compression, indexation on existing leases
and general ERV growth.
Profit before tax
Profit before tax for the year was EUR53.6 million (2019:
EUR26.3 million).
Taxation
The current income taxation charge for the year was 1.2% of the
Company's net property income (2019: 4.2%). The charge for the year
is low, due to conservative assumptions in the prior year and the
utilisation of tax losses.
The taxation charge is primarily incurred in the local
jurisdictions in which the Company invests. As an HMRC-approved
investment trust, the Company is exempt from UK corporation tax on
its chargeable gains. The Company is also exempt from UK
corporation tax on dividend income received, whether from UK or
non-UK companies, provided the dividends fall within one of the
exempt classes under the Corporation Tax Act 2009.
The corporation tax rate in future periods will depend primarily
on the jurisdictions where the Company acquires assets, given the
differing tax rates across continental Europe. The Company does not
use any structures designed to artificially reduce its tax
liabilities and looks to pay the appropriate level of tax where it
is due.
Earnings
Basic EPS for the year was 10.60 cents (2019: 6.25 cents). EPRA
EPS, which primarily excludes the valuation movement, was 3.26
cents (2019: 2.96 cents).
Given the Company's income focus, the Board has adopted Adjusted
EPS as a key performance indicator. This adjusts the income shown
in the Company Statement of Comprehensive Income to reflect the
underlying cash movements and/or earnings that do not go through
the IFRS Comprehensive Income, including rental guarantees or
licence fees and excluding the EUR1.6 million in rent deferred to
the next financial year.
Adjusted Earnings for the year were EUR17.6 million (2019:
EUR10.8 million), resulting in Adjusted EPS of 4.16 cents (2019:
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
Since the start of the year, the Company has declared the
following dividends:
Declared Amount per In respect of Paid/to be
share paid
14 February 2020 1.10 cents 1 October to 31 December 27 March 2020
2019
19 May 2020 1.10 cents 1 January to 31 March 15 June 2020
2020
4 August 2020 1.10 cents 1 April to 30 June 7 September
2020 2020
3 December 2020 1.10 cents 1 July to 30 September 8 January 2021
2020
The total dividend for the year was EUR18.6 million (2019:
EUR12.7 million), or 4.40 cents per share. The total dividend was
94.4% covered by Adjusted Earnings (2019: 85.3%). The Group is
structurally capable of distributing higher dividends, and would
have done so without the EUR1.6 million deferral to next financial
year. Going forward, the Group aims to gradually increase the
dividend, starting with the quarter ending 31 December 2020, where
the Group's expectation is to distribute 1.25 cents.
Cash flow
The Company benefits from stable, growing and long-term cash
flows. Cash from operations in the period was a net inflow of
EUR31.6 million (2019: net outflow of EUR2.9 million).
Net assets
EPRA's updated Best Practice Recommendations Guidelines were
issued in October 2019. The Guidelines became effective for
financial years beginning on 1 January 2020 and while they are
therefore not applicable to the year under review, we have chosen
to adopt the changes early to ensure we report with the highest
level of transparency, and in line with best practice.
The Guidelines include three replacement net asset valuation
metrics, namely EPRA Net Reinstatement Value (NRV), EPRA Net
Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). We have
adopted EPRA NRV as our primary metric, as it includes RETT and
purchaser's costs. A reconciliation of all three metrics has been
provided in note 15 to the financial statements.
EPRA NRV per share at 30 September 2020 was EUR1.30 (30
September 2019: EUR1.21). The basic NAV per share at the year end
was EUR1.19 (30 September 2019: EUR1.13).
Debt financing
The Company has a EUR425 million Revolving Credit Facility (RCF)
provided by a group of five lenders - HSBC, BNP Paribas, Bank of
America Merrill Lynch, Bank of China and Banco de Sabadell. In
October 2020, three of the five lenders agreed to a one-year
extension of the facility. As a result, EUR100 million of debt
matures in 2023, EUR100 million in 2024, with the remaining EUR225
million now maturing in 2025. The facility is unsecured, providing
operational flexibility for the Company.
At the year end, the Company had drawn EUR344.0 million against
the RCF (30 September 2019: EUR235.5 million). This resulted in an
LTV ratio of 39.9% (30 September 2019: 33.3%). This compares with
the medium-term target of 45% and the maximum permitted by the
Company's investment policy of 50%.
The Company is in a robust financial position. At the year end,
it had financial headroom comprising EUR24.4 million of cash and
EUR81.0 million undrawn against the RCF. The Company also has
relatively limited future cash commitments. These comprise its
operating expenses, which are more than covered by rent receipts,
and a potential payment of EUR13.6 million in relation to the
development in Strykow, Poland, which is contingent on certain
pre-let conditions being met. No funding for the extension to the
Barcelona property is due before May 2021.
The Company's primary debt covenants relate to LTV, interest
cover and gearing. The definitions of LTV and interest cover in the
debt agreement differ from those we report elsewhere (cash is not
included). At the year end, using the debt agreement definitions,
the Company had:
-- an LTV of 41%, versus a maximum of 65%;
-- interest cover of 3.2 times, versus a minimum of 1.5 times; and
-- a gearing ratio of 68%, compared with a maximum of 150%.
The Company's hedging strategy includes using interest rate caps
to benefit from current low interest rates, while minimising the
effect of a significant rise in underlying interest rates. The
Company therefore holds three interest rate caps which hedge EUR300
million of its borrowing, resulting in 87% of drawn debt being
subject to an interest cap, with a total weighted average interest
cap of 0.67%.
Post year end activity
In October 2020, the Company extended part of its RCF (refer to
the Debt financing section).
On 2 December 2020, the Company announced the acquisition of its
13(th) asset, a newly built 35,460 sqm logistics facility
comprising two units. The asset is located in Nivelles, in the
attractive logistics market south of Brussels, Belgium. This
acquisition is expected to further grow our earnings in the next
financial year. This acquisition takes the Company's pro forma loan
to value ratio to 42%.
EPRA rating
We look to ensure that the Company maintains high-quality and
transparent communications with its Shareholders and other
stakeholders. We were therefore pleased that during the year, the
Company received a Gold rating from EPRA for the quality of its
reporting.
Related party transactions
Transactions with related parties in the period included the
Management Fee paid to the Manager, the Directors' fees. More
information can be found in note 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.
PRINCIPAL RISKS AND UNCERTAINTIES
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. The Manager has
established its own Risk Committee which ensures consistency and
transfer of best practice in reporting, monitoring and controlling
risk.
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 four years, most of which is subject to
interest rate derivative caps.
Principal risks and uncertainties
Further details of our principal risks and uncertainties are set
out below. They 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. The Board also continually reviews and
assesses emerging risks, and has a process in place to decide their
inclusion as Principal risks.
PRINCIPAL RISKS
The matrix below illustrates our assessment of the impact and
probability of the principal risks identified, the rationale for
which is contained within the commentary for each risk
category.
Covid-19 risks 6. Development activities Taxation risks
1. The Covid-19 pandemic are likely to involve 11. Maintenance of
could severely impact a higher degree of Investment Trust status.
the global economy risk than investment 12. Changes to local
and financial markets, in standing investments. tax legislation in
with consequences Operational risks countries in which
for the Company's 7. We rely on the the Company has investments.
commercial and financial continuance of the Political risks
situation. Manager. 13. The UK leaving
Property risks Financial risks the EU could have
2. Default of one 8. Our use of floating an ongoing negative
or more tenant partners. rate debt will expose effect on the performance
3. The performance the Group to underlying of the Company, due
and valuation of the interest rate movements. to political and/or
property portfolio. 9. A lack of debt economic uncertainty.
4. Our ability to funding at appropriate ESG risks
grow the portfolio rates may restrict 14. ESG risks and
may be affected by our ability to grow. inability to capitalise
the availability of 10. We must be able on the opportunities
suitable assets at to operate within could lead to loss
acceptable prices. our debt covenants. of competitive advantage,
5. Concentration of higher vacancies and
risk, in particular, higher operating costs
exposure to country for the Company and
risk. its tenants.
COVID-19 RISKS
1. The Covid-19 pandemic could severely impact the global economy
and financial market, with consequences for the Company's commercial
and financial situation
Probability Impact Mitigation
------------------------------- ---------------------------------
High Medium The global economy Health and safety guidelines
and financial markets have been issued by the
are currently being severely Manager, our asset managers
impacted by the Covid-19 and tenant partners to
pandemic. This is likely all employees, to ensure
to have an adverse effect they are in a safe working
on the magnitude and/or environment and that
likelihood of several they are aware of all
of the principal risks relevant symptoms of
and may have the following the virus. The Manager
consequences: - a potential conducted checks to confirm
impact on the short-term they were able to work
operations of the business from home remotely, to
due to staff working safeguard the undisrupted
remotely or potential continued operation of
absences because of the the business and training
virus. This includes has been undertaken by
the operation of the all employees to make
Company, the Manager, them aware of the potential
our asset managers and increased risk in cyber-crime.
tenant partners, whose The Company has sufficient
staff could be at a health liquid assets to endure
and safety risk. There the impact of Covid-19
is also an increased for the foreseeable future.
risk in cyber-crime due There were no unexpected
to remote working; - arrears from tenants
an overall reduction as at 30 September 2020
in revenue due to the and the Company is well
default of one or more within its banking covenant
of our tenant partners, limits. We expect property
which could affect our valuations to remain
ability to pay dividends stable, albeit with the
to Shareholders and/or uncertainty as to how
lead to a breach in our Covid-19 will impact
banking covenants; - investment volumes and
tenant partners requesting yields. The logistics
rent deferrals and therefore sector has been deemed
impacting the Company's "system critical" across
capacity to pay its target most European countries
dividend in the current and has few restrictions,
period; - an adverse which has allowed it
change in our property to be robust and withstand
valuations, which may the impact of the pandemic.
lead to a decrease in The material uncertainty
our Net Asset Value and clause is no longer applicable
affect our ability to to valuations in the
meet our target returns. logistics sector. The
The significant volatility long-term impact of Covid-19
in equity markets could is difficult to estimate
cause a decrease in the at this stage but remains
share price, potentially a focus for the Manager
causing a breach in banking and the Company.
covenants, which may
force us to sell assets
to repay loan commitments.
------------------------------- ---------------------------------
PROPERTY RISKS
2. One or more of the tenant partners may default
Probability Impact Mitigation
------------------------------------ -------------------------------------
Low to Medium Medium We select assets with
The default of one or strong property fundamentals
more of our tenant partners (location close to population
would reduce revenue centres, access to infrastructure
from the relevant asset(s). and energy supply), which
There may be a continuing should be attractive
reduction in revenues to other tenants if the
until we find a suitable current tenant partner
replacement tenant, which fails. In addition, while
may affect our ability we focus on tenant partners
to pay dividends to Shareholders with strong financial
and/or lead to a breach covenants, we also negotiate
in our banking covenants. 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.
------------------------------------ -------------------------------------
3. The valuation of the property portfolio may fluctuate
Probability Impact Mitigation
------------------------------------ -------------------------------------
Low to Medium Medium Property valuation As at 30 September 2020,
is inherently subjective our property portfolio
and uncertain, and the was 100% cash generating
appraised value of our from leases, and rental
properties may not accurately guarantees, with long
reflect the current or unexpired weighted average
future value of the Group's lease terms of 9.1 years
assets. In particular, and a strong tenant partner
the valuer has issued base. 95% of leases (by
the 31 March 2020 valuation income) include rent
based on a RICS material indexation (with different
uncertainty clause, due features in each country).
to the effect of Covid-19. Combined with the fact
In addition, our due that we focus on the
diligence may not identify best locations, where
all risks and liabilities land supply is tight,
in respect of a property and undertake significant
acquired, leading to, due diligence using the
among other things, an services of relevant
adverse change in the third parties, we believe
future valuation of that these factors reduce
asset. An adverse change the risk of significant
in our property valuation adverse property valuation
may lead to a decrease movements.
in our Net Asset Value
and affect our ability
to meet our target returns.
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.
------------------------------------ -------------------------------------
4. The growth of the portfolio may be affected by the availability
of suitable assets at acceptable prices
Probability Impact Mitigation
------------------------------------ -------------------------------------
Medium Medium Our business model is
The fundamentals of the based on undertaking
prime logistics locations predominantly off-market
in continental Europe transactions, sourced
mean that the availability through the Manager's
of land suitable for network of contacts across
large logistics properties Europe, and through our
is limited. In addition, partnership with local
the Big Box sector currently development companies.
attracts a lot of new The Manager has also
investors. This results developed strong relationships
in acquisition yields with a number of vendors
that are currently at and tenants in the industry.
record lows. Our reliability, experience
This may restrict our and speed of execution
ability to secure suitable gives us an edge over
logistics real estate many other potential
assets in targeted countries investors.
in continental Europe, In addition, the increase
in order to grow our in the capital value
portfolio while maintaining of our portfolio as a
our target returns. result of both the market
dynamics and our asset
management initiatives,
is expected to have a
positive impact on returns
for Shareholders.
------------------------------------ -------------------------------------
5. Concentration of risk, in particular, exposure to country
risk
Probability Impact Mitigation
------------------------------------ -------------------------------------
Low Low Our Investment Policy Our Investment Policy
does not include restrictions requires us to deliver
relating to the Group's a high-quality, diversified
exposure to individual portfolio of assets.
assets or tenant partners While we adopt a "bottom
and includes only limited up" approach in the selection
restrictions relating of real estate investments,
to our exposure to individual we also consider the
countries. Significant impact on the concentration
economic and/or political of risk within our portfolio,
changes affecting a country including the Group's
that the Group has invested exposure to any single
in, or the Eurozone, country (considering
generally, could have its economic and political
an adverse impact on stability) at the time
the income derived from of investment. Specifically,
investments within that the Investment Policy
country, and hence, on restricts our ability
the valuation of those to invest more than 20%
assets. This could lead of Gross Assets (in aggregate)
to weaker overall portfolio in Austria, Czech Republic,
performance, both in Portugal and Slovakia.
terms of revenue generation
and value.
------------------------------------ -------------------------------------
6. Development activities are likely to involve a higher degree
of risk than investment in standing investments
Probability Impact Mitigation
------------------------------------ -------------------------------------
Low Low Any forward funded None of our investments
developments are likely are a forward funded
to involve a higher degree development asset as
of risk than is associated at 30 September 2020,
with standing investments. although there are potential
This could include general commitments to forward
construction risks, delays fund projects in the
in the development or future. Any risk of investment
the development not being into forward funded projects
completed, cost overruns is minimal, as the developer
or developer/contractor takes on a significant
default. If any of the amount of construction
risks associated with risk and the risk of
our developments materialised, cost overruns. Funds
this could reduce the for forward funded developments
value of these assets remain with us and are
and our portfolio. only released to the
developer on a controlled
basis, subject to milestones
as assessed by our independent
project monitoring surveyors.
------------------------------------ -------------------------------------
OPERATIONAL RISK
7. Reliance on the continuance of the Manager
Probability Impact Mitigation
---------------------------------- ------------------------------
Low High We continue to rely Unless there is a default,
on the Manager's services either party may terminate
and its reputation in the Investment Management
the property market, Agreement by giving not
as well as the performance less than 24 months'
and reputation of the written notice, which
asset managers appointed may not be served before
by the Manager (currently 9 July 2021. The Management
LCP and Dietz). As a Engagement Committee
result, the Group's performance monitors and will regularly
will, to a large extent, review the Manager's
depend on the Manager's performance, including
abilities to source adequate the performance of the
assets, and to actively key third-party service
manage these assets, providers to the Group.
relying on the local In addition, the Board
knowledge of the asset meets regularly with
manager, where necessary. the Manager to ensure
Termination of the Investment it maintains a positive
Management Agreement working relationship.
would severely affect
our ability to manage
our operations and may
have a negative impact
on the Company's share
price.
---------------------------------- ------------------------------
FINANCIAL RISKS
8. Interest rates may fluctuate
Probability Impact Mitigation
------------------------------- ----------------------------------
Low to Medium Medium Interest on our The Company has entered
RCF is payable based into interest rate derivatives
on a margin over Euribor. to hedge our direct exposure
Any adverse movement to movements in Euribor.
in Euribor could affect These derivatives cap
our profitability and our exposure to the level
ability to pay dividends to which Euribor can
to Shareholders. rise and have terms coterminous
with the loans. We aim
to minimise the level
of unhedged debt whilst
also considering the
average level of draw
down on the RCF.
------------------------------- ----------------------------------
9. Debt funding at appropriate rates may not be available
Probability Impact Mitigation
------------------------------- ----------------------------------
Low Medium Without sufficient Last financial year,
debt funding, we may we secured long-term
be unable to pursue suitable unsecured debt with five
investment opportunities major financial institutions.
in line with our investment This demonstrates the
objectives. This may capacity of the Manager
impair our ability to to source adequate debt,
reach our targeted returns and the appetite from
and our ability to grow. lenders. As the Group
grows, we anticipate
that it will reach a
size that enables an
investment-grade debt
rating. This would facilitate
significant additional
debt opportunities.
------------------------------- ----------------------------------
10. Debt covenants may be breached
Probability Impact Mitigation
------------------------------- ----------------------------------
Low to Medium Medium If we were unable We continually monitor
to operate within our our debt covenant compliance
debt covenants, this and perform stress tests.
could lead to a default We have significant headroom
and our debt funding before there is a risk
being recalled. This of a breach and our covenants
may result in us selling have a soft breach feature,
assets to repay loan which enables the Manager
commitments. to act and remedy in
case of breach.
------------------------------- ----------------------------------
TAXATION RISKS
11. Maintenance of Investment Trust status
Probability Impact Mitigation
------------------------------- ---------------------------------
Low to Medium Medium If the Company The Board is ultimately
fails to maintain approval responsible for ensuring
as an Investment Trust, we adhere to the UK Investment
its income and gains Trust regime and we monitor
will be subject to UK strict adherence to the
corporation tax and it relevant regulations.
will be unable to designate We have also engaged
dividends as interest top-tier third-party
distributions. tax advisers to help
monitor our compliance
requirements.
------------------------------- ---------------------------------
12. Changes to local tax legislation in countries in which the
Company has investments
Probability Impact Mitigation
------------------------------- ---------------------------------
Medium Low A change in local The Board relies on top-tier
taxation status or tax third-party providers
legislation in any of to advise on any tax
the countries we invest changes in every country
in may lead to increased in which we invest. In
taxation of the Group addition, the Group has
and have a negative impact been structured on a
on the Company's profits conservative basis, with
and returns to Shareholders. reasonable internal debt
ratios, in line with
international transfer
pricing requirements.
------------------------------- ---------------------------------
POLITICAL RISKS
13. The UK leaving the EU could have an ongoing negative effect
on the performance of the Company, due to political and/or economic
uncertainty
Probability Impact Mitigation
-------------------------------- ---------------------------------
Low to Medium Low to Medium The UK Notwithstanding the potential
departed from the EU loss of AIFMD passporting
with effect from 31 January rights, we believe that
2020 and the current investors in key jurisdictions
transition phase will would continue to be
end on 31 December 2020. able to participate in
Economic volatility is equity fundraisings and
not a new risk for the we would seek legal advice
Company; however, until at the time with a view
the terms of any potential to facilitating this.
new deal between the The Company was established
UK and the EU become in 2018, after the UK
clearer, the exact outcome had voted to leave the
on the business remains EU. Since incorporation,
difficult to predict. therefore, the Company
Any new deal or the failure and its advisers have
of the UK to agree a been aware of the potential
new deal at all may have tax consequences associated
the following consequences: with the UK leaving the
- we expect to lose our EU and they have taken
AIFMD passporting rights, those risks into account
which will affect our when considering potential
ability to raise further investments. They have
equity from investors also structured investments
in certain EU member to minimise, so far as
states; - the Company possible, any additional
may no longer be able tax costs which may result
to benefit from EU taxation from the Company no longer
directives which may being able to benefit
increase the amount of from EU taxation directives.
tax payable by the Group In particular, the Company
on returns from underlying should be able to benefit
investments and reduce from double tax treaties
the amounts available which the UK has in place
to distribute to investors with the countries across
accordingly; - there Europe in which the Company
may be significant volatility invests. We saw limited
in equity markets, which to no impact on the Company's
could have an impact share price on the exit
on our share price; and date itself, but it remains
- the economy in Europe to be seen how the market
may be impacted or demand will react to the outcome
for European property of the trade deal negotiations
may decrease, hence leading and the end of the transition
to potentially lower phase on 31 December
valuations. 2020.
-------------------------------- ---------------------------------
ESG RISKS
14. ESG risks and inability to capitalise on the opportunities could lead to loss of competitive
advantage, higher vacancies and higher operating costs for the Company and its tenants
Probability Impact Mitigation
-------------------------------------------------- --------------------------------------------------
High Medium The Company's sustainability strategy
addresses all the key risks for the Company in
The World Economic Forum (WEF) listed ESG its operations.
risks as 4 out of 5 of its top risks in 2020. It provides guidance to the Board and Manager
to reduce ESG risks to create value for all
There are several ESG risks potentially its stakeholders, including investing in more
impacting the Company. ESG focussed assets, delivering lower
Climate change and biodiversity loss are the operating
principle environmental risks affecting the costs for tenants and more secure returns for
Company's investors.
long term ability to operate in its markets;
the ability for our tenants to source and We ensure the assets we invest in are well
retain located for labour supply and the Company is
the right labour skills and mitigating modern developing
slavery in our supply chains, are the key initiatives to support local employment
social opportunities.
risks; and the ability to be transparent and
agile in managing the evolving governance The Board of Directors and the Manager have
risks, undertaken ESG training to ensure they have
such as diversity and human capital the
management. right awareness and skills to manage ESG risks
and opportunities.
-------------------------------------------------- --------------------------------------------------
GOING CONCERN AND VIABILITY STATEMENT
The Group's cash balance as at 30 September 2020 was EUR24.4
million. It also had undrawn amounts under its debt facilities of a
further EUR81.0 million. Of the Group's total facilities, EUR100
million matures in 2023, EUR100 million in 2024 and EUR225 million
in 2025(1) .
The Group currently has substantial headroom against its
borrowing covenants, with an LTV of 41% as at 30 September 2020
against a borrowing covenant limit of 65%. The Group's borrowings
are unsecured, providing it with a deeper pool of liquidity and
with more flexibility over its arrangements. The signature of the
latest acquisition of Nivelles will lead to a lower undrawn amount
of approximately EUR50 million with a new borrowing LTV of 43%.
The Group also benefits from a secure income stream from leases
with long average unexpired terms, which are not overly reliant on
any one tenant. This diversification mitigates the risk of tenant
default. As a result, the Directors believe that the Group is well
placed to manage its current and future financial commitments and
other business risks.
Having reviewed the Group's cash flow forecasts, which show that
liabilities can be met as they fall due, the Directors believe that
there are currently no material uncertainties in relation to the
Group's ability to continue for a period of at least 12 months from
the date of approval of the financial statements. The Board is,
therefore, of the opinion that the going concern basis adopted in
preparing the Annual Report is appropriate.
Assessment of viability
The period over which the Directors consider it feasible and
appropriate to report on the Group's viability is the three-year
period to December 2023. There was no change to the period over
which the Directors assess viability.
The assumptions underpinning these forecast cash flows and
covenant compliance forecasts were sensitised, to explore the
Group's resilience to the potential impact of its significant
risks, or a combination of those risks. The principal risks
summarise those matters that could have a significant impact on the
Group's ability to remain in operation and meet its current
obligations.
While the principal risks assessed by the Directors could affect
the Group's business model, the Directors do not consider that they
have a reasonable likelihood of impacting the Group's viability
over the three-year period to December 2023.
The sensitivities performed were designed to be severe but
plausible and to take full account of the availability of
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks to the forecast cash
flows. In the modelling, the Group also considered the likely
future capital expenditures, including the Nivelles acquisition as
well as the extensions on our Spanish and Polish assets. The key
risks considered, separately and in combination, include:
1. an increase in Euribor;
2. a decrease in the value of the portfolio; and
3. Three key tenants default and are not replaced.
Viability Statement
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency or liquidity.
Having considered the forecast cash flows and covenant
compliance, and the impact of the sensitivities in combination, the
Directors confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the three-year period of their
assessment to December 2023.
(1) As at October 2020
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2020
Period
from 1
Year ended July 2018
30 September to 30 September
2020 2019
Note EURm EURm
Rental income 6 36.00 24.49
------- ---------------- -------------------
Service charge income 6 6.42 3.32
------- ---------------- -------------------
Other income 6 0.46 0.37
------- ---------------- -------------------
Gross property income 6 42.88 28.18
------- ---------------- -------------------
Direct property costs 7 (7.40) (3.70)
------- ---------------- -------------------
Net property income 35.48 24.48
------- ---------------- -------------------
Fair value gain on investment properties 14 38.57 17.85
------- ---------------- -------------------
Gain on disposal of investment property 0.83 -
------- ---------------- -------------------
Administrative and other expenses 8 (10.73) (8.45)
------- ---------------- -------------------
Operating profit 64.15 33.88
------- ---------------- -------------------
Net finance expense 10 (10.57) (5.03)
------- ---------------- -------------------
Effect of foreign exchange differences 0.03 (0.16)
------- ---------------- -------------------
Changes in fair value of interest rate
derivatives 20 (0.03) (2.35)
------- ---------------- -------------------
Profit before taxation 53.58 26.34
------- ---------------- -------------------
Taxation 11 (8.79) (5.62)
------- ---------------- -------------------
Profit for the year 44.79 20.72
------- ---------------- -------------------
Total comprehensive income for the year
attributable to the Shareholders 44.79 20.72
------- ---------------- -------------------
Earnings Per Share (EPS) (expressed in
cents per share)
------- ---------------- -------------------
EPS - basic and diluted 12 10.60 6.25
------- ---------------- -------------------
GROUP STATEMENT OF FINANCIAL POSITION
As at 30 September 2020
30 September 30 September
2020 2019
Note EURm EURm
---------------
Non-current assets
------- --------------- ---------------
Investment properties 14 837.90 687.58
------- --------------- ---------------
Derivative financial instruments 20 0.09 0.12
------- --------------- ---------------
Trade and other receivables 15 1.17 1.17
------- --------------- ---------------
Deferred tax assets 11 1.15 0.59
------- --------------- ---------------
Total non-current assets 840.31 689.46
------- --------------- ---------------
Current assets
------- --------------- ---------------
Assets held-for-sale 14 - 1.52
------- --------------- ---------------
Trade and other receivables 15 14.72 31.75
------- --------------- ---------------
Cash and cash equivalents 16 24.44 17.90
------- --------------- ---------------
Total current assets 39.16 51.17
------- --------------- ---------------
Total assets 879.47 740.63
------- --------------- ---------------
Current liabilities
------- --------------- ---------------
Trade and other payables 17 (9.29) (16.72)
------- --------------- ---------------
Income tax liability (0.34) (1.06)
------- --------------- ---------------
Total current liabilities (9.63) (17.78)
------- --------------- ---------------
Non-current liabilities
------- --------------- ---------------
Trade and other payables 17 (1.46) -
------- --------------- ---------------
Loans and borrowings 18 (340.63) (231.95)
------- --------------- ---------------
Deferred tax liabilities 11 (13.64) (5.18)
------- --------------- ---------------
Other liabilities 19 (8.89) (7.28)
------- --------------- ---------------
Tenant deposit 23 (1.31) (1.17)
------- --------------- ---------------
Total non-current liabilities (365.93) (245.58)
------- --------------- ---------------
Total liabilities (375.56) (263.36)
------- --------------- ---------------
Net assets 503.91 477.27
------- --------------- ---------------
Equity
------- --------------- ---------------
Share capital 24 4.23 4.23
------- --------------- ---------------
Share premium reserve 131.24 131.21
------- --------------- ---------------
Retained earnings 368.44 341.83
------- --------------- ---------------
Total equity 503.91 477.27
------- --------------- ---------------
Net Asset Value (NAV) per share (expressed
in Euro per share)
------- --------------- ---------------
Basic NAV 25 1.19 1.13
------- --------------- ---------------
EPRA NRV (formerly EPRA NAV)(1) 25 1.30 1.21
------- --------------- ---------------
1 Note the prior period has been recomputed in line with the
latest EPRA guidance over Net Asset Value measures.
The financial statements were approved by the Board of Directors
on 2 December 2020 and signed on its behalf by:
Robert Orr
Chairman
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2020
Retained
Share capital Share premium earnings Total
Note EURm EURm EURm EURm
At 1 October 2019 4.23 131.21 341.83 477.27
------- ---------------- ---------------- ------------ ----------
Net profit for the year - - 44.79 44.79
------- ---------------- ---------------- ------------ ----------
Total comprehensive income - - 44.79 44.79
------- ---------------- ---------------- ------------ ----------
Contributions and distributions:
------- ---------------- ---------------- ------------ ----------
Associated share issue
costs - 0.03 - 0.03
------- ---------------- ---------------- ------------ ----------
Dividends paid 13 - - (18.18) (18.18)
------- ---------------- ---------------- ------------ ----------
Total contributions and
distributions - 0.03 (18.18) (18.15)
------- ---------------- ---------------- ------------ ----------
At 30 September 2020 4.23 131.24 368.44 503.91
------- ---------------- ---------------- ------------ ----------
Retained
Share capital Share premium 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 24 - (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
------- ---------------- ---------------- ------------ ---------
GROUP CASH FLOW STATEMENT
For the year ended 30 September 2020
Period
from
For the 1 July
year ended 2018 to
30 September 30 September
2020 2019
Note EURm EURm
Cash flows from operating activities
------- ---------------- ----------------
Profit for the year/period 44.79 20.72
------- ---------------- ----------------
Gain on disposal of investment property (0.83) -
------- ---------------- ----------------
Changes in fair value of investment properties (38.57) (17.85)
------- ---------------- ----------------
Changes in fair value of interest rate
derivatives 0.03 2.35
------- ---------------- ----------------
Tax expense 8.79 5.62
------- ---------------- ----------------
Net finance expense 10.57 5.03
------- ---------------- ----------------
Accretion of tenant lease incentive 6 (3.56) (3.65)
------- ---------------- ----------------
Amortisation of tenant lease incentives
and lease commissions 6 0.04 0.02
------- ---------------- ----------------
Decrease/(increase) in trade and other
receivables 18.70 (32.50)
------- ---------------- ----------------
(Decrease)/increase in trade and other
payables (6.48) 17.37
-------------------------------------------------- ------- ---------------- ----------------
Cash generated from/(used in) operations 33.48 (2.89)
------- ---------------- ----------------
Tax paid (1.20) (0.53)
-------------------------------------------------- ------- ---------------- ----------------
Net cash flow generated from/(used in)
operating activities 32.28 (3.42)
------- ---------------- ----------------
Investing activities
------- ---------------- ----------------
Purchase of investment properties (102.41) (645.57)
------- ---------------- ----------------
Disposal of assets held-for-sale 2.33 -
-------------------------------------------------- ------- ---------------- ----------------
Improvements to investment properties
and development expenditure (7.65) (14.76)
-------------------------------------------------- ------- ---------------- ----------------
Net cash flow used in investing activities (107.73) (660.33)
------- ---------------- ----------------
Financing activities
------- ---------------- ----------------
Proceeds from issue of Ordinary Share
capital - 474.33
------- ---------------- ----------------
Cost of share issues - (9.35)
------- ---------------- ----------------
Loans received 18 121.00 321.00
------- ---------------- ----------------
Loans repaid 18 (12.50) (85.50)
------- ---------------- ----------------
Loan arrangement fees paid 18 (0.74) (4.03)
------- ---------------- ----------------
Loan interest paid (7.61) (4.01)
------- ---------------- ----------------
Interest rate cap premium paid 20 - (2.47)
------- ---------------- ----------------
Dividends paid to equity holders 13 (18.18) (8.43)
------- ---------------- ----------------
Net cash flow generated from financing
activities 81.97 681.54
------- ---------------- ----------------
Net movement in cash and cash equivalents
for the year/period 6.52 17.79
------- ---------------- ----------------
Cash and cash equivalents at start of
the year/period 17.90 -
------- ---------------- ----------------
Unrealised foreign exchange gains 0.02 0.11
------- ---------------- ----------------
Cash and cash equivalents at end of the
year/period 24.44 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 registered address of the
Company is disclosed in the Company Information.
The financial information presented here does not constitute the
company's statutory accounts for the periods ended 30 September
2020 or 2019 but is derived from those accounts. Statutory accounts
for period ended 30 September 2019 have been delivered to the
registrar of companies, and those for the year ended 30 September
2020 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.
Accounting policies
2. Basis of preparation
The Group has chosen to adopt EPRA (European Public Real Estate
Association - www.epra.com/finance/financial-reporting/guidelines)
best practice guidelines for calculating key metrics such as net
reinstatement value (NRV) and earnings per share. The Group has
elected to early adopt the three new EPRA NAV measures as
introduced in October 2019. These are disclosed in notes 12 and
25.
2.1. Going concern
The Directors have prepared cash flow forecasts for the Group
for a period of at least 12 months from the date of approval of the
consolidated financial statements. These forecasts include the
Directors' assessment of the impact of Covid-19 on the Group, and
plausible downside scenarios.
The Group's property portfolio is let to 21 tenants across over
12 properties in 6 European countries. The Group's largest tenant
represents 19% of contracted rent at 30 September 2020 and the top
5 tenants together represent 60% of contracted rent.
As at the date of approval of the consolidated financial
statements, the Group has not experienced a significant increase in
rent arrears compared to the equivalent period last year. As a
result of Covid-19, a number of the Group's tenants have requested
deferral or a re-profiling of rent payments. Such requests have
been considered on a case by case basis and based on the merits of
such request and the circumstances of the tenant. However, as at
the date of approval of the financial statements, the Group has not
experienced a significant increase in rent arrears compared to the
equivalent period last year.
The Directors have considered the risk that further tenants
either request deferrals or become insolvent and hence no rent is
paid. The Directors have assessed each tenant's risk based on
experience, knowledge of the tenant and discussions to date on rent
deferrals. Following this assessment the Directors have modelled a
severe but plausible downside scenario, where 33% of rental income
is unpaid for a 12 months' duration, which forecasts that the Group
will continue to have sufficient cash resources to meet its
liabilities as they fall due, and will continue to meet its debt
covenants, which are set out in further detail below.
The Group has an unsecured revolving credit facility, which does
not require any repayment until 2023. The loan includes financial
covenants for loan-to-value ("LTV"), interest cover ratio ("ICR")
and gearing. These covenants have been complied with throughout the
year and up to the date of approval of the financial
statements.
The LTV covenant is measured quarterly based on the property
valuation as used in the consolidated financial statements. Based
on the most recent valuation the Group retained headroom against a
covenant limit, reporting 41% against the limit of 65%.
The gearing covenant is measured quarterly based on consolidated
total net borrowings to consolidated shareholders' funds. Based on
the most recent reporting the Group retained headroom against the
covenant limit, reporting 68% against the limit of 150%.
The ICR covenant is measured as the ratio of the Group's
consolidated earnings before income and tax, subject to certain
adjustments, to consolidated net finance costs in respect of any
measurement period, by reference to accounting income. Based on the
most recent reporting the Group retained headroom against the
covenant limit, reporting 318% against the limit of 150%.
As a result of the above and considering the Nivelles
acquisition, the Directors forecast that covenant compliance will
continue for at least the next 12 months.
Consequently, the directors are confident that the Group and the
Company will have sufficient funds to continue to meet their
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
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 year, 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 and prior periods 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 2020.
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 year 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.
All intercompany transactions and balances between Group
companies are eliminated on consolidation. These consolidated
financial statements include the financial statements of the
Company and the subsidiary companies as listed in note 4 of the
Company accounts.
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. Rent guarantees and top ups paid by a vendor to the Group
to compensate the Group for vacant space or rent free periods are
treated as part of the cost of the property acquired and offset the
initial purchase consideration. Such receipts are included in the
Group's Adjusted EPS in note 12. 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 is 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 year-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 year 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.
Extensions of bank borrowings under accordion options in the
original facility agreement are treated as changes in estimated
cash flows under the original financial liability.
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 break clauses are assumed to be exercised unless it is
reasonably certain at inception of the lease that the break will
not be exercised. 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 property 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
year. 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 year.
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 year 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 year.
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
5.1. Standards in issue and effective from 1 October 2019
The following new accounting amendments have been applied in
preparing these consolidated financial statements:
IFRS 16: Leases
The Directors have assessed the impact on the financial
statements of this standard. As the Group does not hold any
material operating or leasehold agreements as lessee, the impact of
IFRS 16 is immaterial.
Amendment to IFRS 16 regarding Covid-19-related rent concessions
was issued in May 2020, for annual reporting periods beginning on
or after 1 June 2020 (earlier application is permitted). It permits
lessees, as a practical expedient, not to assess whether particular
rent concessions occurring as a direct consequence of the Covid-19
pandemic are lease modifications and instead to account for those
rent concessions as if they are not lease modifications. The
amendment does not affect lessors. The impact of this amendment is
considered immaterial as the Group does not hold any material
operating or leasehold agreements as lessee.
IFRIC 23: Uncertainty over income tax treatments
The Directors have considered the impact on the financial
statements of this standard. There is no material impact to the
Group as a result of the recognition and measurement requirements
of IFRIC 23.
5.2. New standards issued but not yet effective
-- Amendments to IFRS 3 "Business Combinations", definition of a business
-- Amendments to IAS 1 "Presentation of Financial Statements"
and IAS 8 "Accounting Policies, Changes in Accounting Estimates and
Errors", definition of material
-- Revised Conceptual Framework for Financial Reporting
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
They are not expected to impact the Group significantly as they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
There are other new standards and amendments to standards and
interpretations which have been issued that are effective in future
accounting periods, and which the Group has decided not to adopt
early. None of these are expected to have a material impact on the
condensed consolidated financial statements of the Group.
6. Gross property income
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Rental income 32.48 20.86
---------------- ----------------
Spreading of tenant incentives 3.56 3.65
---------------- ----------------
Amortisation of capital contribution and lease
commission (0.04) (0.02)
---------------- ----------------
Gross rental income 36.00 24.49
---------------- ----------------
Service charges recoverable 6.42 3.32
---------------- ----------------
Other income 0.46 0.37
---------------- ----------------
Gross property income 42.88 28.18
---------------- ----------------
The Group derives property income from the following
countries:
Gross property
income (EURm) Belgium Germany Spain Italy Poland The Netherlands Total
--------
30 September 2020 6.07 13.84 8.14 7.07 6.72 1.04 42.88
---------- ---------- -------- -------- --------- ------------------ --------
30 September 2019 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:
Between Between Between Between
Less than 1 and 2 and 3 and 4 and More than
1 year 2 years 3 years 4 years 5 years 5 years Total
EURm EURm EURm EURm EURm EURm EURm
-----------
30 September 2020 37.73 36.91 36.99 34.36 31.29 186.91 364.19
------------ ----------- ----------- ----------- ----------- ------------ ---------
30 September 2019 33.42 34.34 34.45 34.51 33.66 215.59 385.97
------------ ----------- ----------- ----------- ----------- ------------ ---------
The Group's investment properties are leased mainly to single
tenants, some of which have rental securities attached (bank or
parent guarantees, cash deposit), under the terms of a commercial
property lease. The majority have rent indexation that are linked
to either RPI/CPI or fixed uplifts.
There are three tenants representing more than 10% of rental
income during the year (EUR7.82 million, EUR6.19 million and
EUR4.04 million) (2019: four tenants). As at 30 September 2020,
three tenants represented more than 10% of passing rent (2019:
three tenants).
7. Direct property costs
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Service charge expense 6.51 3.37
---------------- ----------------
Other expenses 0.89 0.33
---------------- ----------------
Total property expenses 7.40 3.70
---------------- ----------------
8. Administrative and other expenses
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Investment management fees(1) 6.02 4.64
---------------- ----------------
Directors' remuneration (note 9) 0.23 0.23
---------------- ----------------
Auditor's fees
---------------- ----------------
Fees payable for the audit of the Company's accounts 0.35 0.22
--------------------------------------------------------- ---------------- ----------------
Fees payable for the review of the Company's
interim accounts 0.04 0.14
--------------------------------------------------------- ---------------- ----------------
Fees payable for the audit of the Company's subsidiaries 0.10 0.16
--------------------------------------------------------- ---------------- ----------------
Total Auditor's fee 0.49 0.52
---------------- ----------------
Corporate administration fees 0.97 0.97
---------------- ----------------
Regulatory fees 0.09 0.10
---------------- ----------------
Legal and professional fees 2.29 1.63
---------------- ----------------
Marketing and promotional fees 0.49 0.23
---------------- ----------------
Other administrative costs 0.15 0.13
---------------- ----------------
Total administrative and other expenses 10.73 8.45
---------------- ----------------
(1) Investment management fees include fees payable to Tritax
Management LLP for EUR4.1 million (30 September 2019: EUR3.3
million (see note 26).
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 into the cost of
the respective assets.
9. Directors' remuneration
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Directors' fees 0.20 0.21
---------------- ----------------
Employer's National Insurance 0.03 0.02
---------------- ----------------
Total Directors' remuneration 0.23 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 current and prior periods 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
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Interest payable on loans and bank borrowings 5.82 3.07
---------------- ----------------
Commitment fees payable on bank borrowings 1.84 1.02
---------------- ----------------
Loss on remeasurement of put option (note 19) 1.88 0.30
---------------- ----------------
Bank fees 0.11 0.15
---------------- ----------------
One-off cost of extinguishment of bank loans - 0.01
---------------- ----------------
Amortisation of loan arrangement fees 0.92 0.48
---------------- ----------------
Total finance expense 10.57 5.03
---------------- ----------------
The total interest payable on financial liabilities carried at
amortised cost comprises interest and commitment fees payable on
bank borrowings of EUR7.66 million (30 September 2019: EUR4.09
million) of which nil was capitalised in both periods and
amortisation of loan arrangement fees of EUR0.92 million (30
September 2019: EUR0.48 million) of which EUR0.74 million (30
September 2019: EUR4.03 million) was capitalised into the loan in
the year (see note 18).
11. Taxation
a) Tax charge in the Group Statement of Comprehensive Income
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Current taxation:
---------------- ----------------
UK taxation - -
---------------- ----------------
Overseas taxation-current year 0.68 1.03
---------------- ----------------
Overseas taxation-prior year adjustment (0.27) -
---------------- ----------------
Deferred taxation:
---------------- ----------------
UK taxation - -
---------------- ----------------
Overseas taxation 8.38 4.59
---------------- ----------------
Total tax charge 8.79 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 year in
accordance with its status as an Investment Trust Company
("ITC").
b) Factors affecting the tax charge for the year/period
The tax assessed for the year/period is lower than the standard
rate of corporation tax in the UK. The differences are explained
below:
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Profit before taxation 53.58 26.34
---------------- ----------------
Theoretical tax at UK corporation tax rate of
19% (30 September 2019: 19%) 10.18 5.00
---------------- ----------------
Losses where no deferred taxes have been recognised 0.56 0.21
---------------- ----------------
Impact of different tax rates on foreign jurisdictions (0.22) 0.41
---------------------------------------------------------- ---------------- ----------------
Expenses not deductible for tax purposes 0.09 -
---------------- ----------------
Impact of UK interest distributions from the
Investment Trust (1.55) -
---------------- ----------------
Prior year adjustment to current tax (0.27) -
---------------- ----------------
Total 8.79 5.62
---------------- ----------------
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Deferred tax assets:
---------------- ----------------
Differences between tax and property revaluation 0.09 0.42
---------------- ----------------
Tax losses carried forward 0.82 -
---------------- ----------------
Other 0.24 0.17
---------------- ----------------
Total 1.15 0.59
---------------- ----------------
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Deferred tax liabilities:
---------------- ----------------
Differences between tax and property revaluation 13.57 4.99
---------------- ----------------
Other 0.07 0.19
---------------- ----------------
Total 13.64 5.18
---------------- ----------------
All movements in deferred tax assets and liabilities have been
recognised in profit and loss other than EUR0.52 million of tax
losses acquired as part of a property acquisition.
12. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Group by the weighted average number of Ordinary Shares in issue
during the year. As at 30 September 2020 and 2019, there are no
dilutive or potentially dilutive equity arrangement in
existence.
The calculation of EPS is based on the following:
Weighted
Net profit average
attributable number
to Ordinary of Ordinary Earnings
Shareholders Shares(1) per share
For the year ended 30 September 2020 EURm '000 Cent
Basic EPS 44.79 422,727 10.60
---------------- --------------- -------------
Adjustments to remove:
---------------- --------------- -------------
Deferred tax charge (note 11) 8.38
---------------- --------------- -------------
Changes in fair value of investment properties
(note 14) (38.57)
---------------- --------------- -------------
Changes in fair value of interest rate
derivatives (note 20) 0.03
---------------- --------------- -------------
Gain on disposal of investment property (0.83)
---------------- --------------- -------------
EPRA EPS 13.80 422,727 3.26
---------------- --------------- -------------
Adjustments to include/(exclude):
---------------- --------------- -------------
Licence fee receivable on forward funded
developments 0.50
---------------- --------------- -------------
Rental income recognised in respect of
fixed uplifts (1.92)
---------------- --------------- -------------
Rental income deferred(3) (1.60)
---------------- --------------- -------------
Amortisation of loan arrangement fees 0.92
---------------- --------------- -------------
Unrealised foreign exchange currency loss 0.02
---------------- --------------- -------------
Loss on remeasurement of put option (note
10) 1.88
---------------- --------------- -------------
Rental guarantee receipts excluded from
property income-settled via cash(2) 2.24
---------------- --------------- -------------
Rental guarantee receipts excluded from
property income-settled via contracted
liability settlement(2) 1.72
---------------- --------------- -------------
Adjusted EPS 17.56 422,727 4.16
---------------- --------------- -------------
Weighted
Net profit average
attributable number
to Ordinary of Ordinary Earnings
Shareholders Shares(1) per share
For the period ended 30 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 9.81 331,599 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 (note
10) 0.30
---------------- --------------- -------------
Rental guarantee receipts excluded from
property income-settled via cash(2) 2.85
---------------- --------------- -------------
Adjusted EPS 10.79 331,599 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.
3 Covid-19 rent deferral that is expected to be received during
next financial year.
Adjusted Earnings is a performance measure used by the Board to
assess the level of the Group's dividend payments. The metric
mainly adjusts EPRA earnings for:
i. Exclusion of non-cash items credited or charged to the Group
Statement of Comprehensive Income, such as fixed rental uplift
adjustments and amortisation of loan arrangement fees;
ii. Inclusion of licence fees which relates to cash received
from developers during development periods, in order to access the
land; and
iii. Inclusion of rental guarantee adjustments relate to
acquired assets with properties which have had an income guarantee
attached to them as part of the acquisition of the asset. The
rental guarantee is released (through a cash movement or contracted
liability settlement) as adjusted earnings over the period of the
lease which it is intended to cover or lease break - however, this
release does not go through rental income in the Group Statement of
Comprehensive Income, and as such an adjustment is made to
recognise the receipt.
13. Dividends paid
Period
from
1 July
Year ended 2018 to
30 September 30 September
2020 2019
EURm EURm
Final dividend in respect of period ended 30
September 2019
at 1.0 cent per Ordinary Share (30 June 2018:
nil) 4.23 -
---------------- ----------------
First interim dividend in respect of year ended
30 September 2020
at 1.10 cent per Ordinary Share (30 September
2019: 0.4 cent) 4.65 1.20
---------------- ----------------
Second interim dividend in respect of year ended
30 September 2020 at 1.10 cent per Ordinary Share
(30 September 2019: 1.0 cent) 4.65 3.00
---------------- ----------------
Third interim dividend in respect of year ended
30 September 2020 at 1.10 cent per Ordinary
Share (30 September 2019: 1.0 cent) 4.65 4.23
---------------- ----------------
Total dividends paid 18.18 8.43
---------------- ----------------
Total dividends paid for the year/period 3.30 cent 2.40 cent
---------------- ----------------
Total dividends unpaid but declared for the year/period 1.10 cent 1.00 cent
---------------- ----------------
Total dividends declared for the year/period 4.40 cent 3.40 cent
---------------- ----------------
On 3 December 2020, the Directors of the Company declared a
fourth interim dividend in respect of the period from 1 July 2020
to 30 September 2020 of 1.10 cent per Ordinary Share, which will be
payable on or around 8 January 2021 to Shareholders on the register
on 11 December 2020.
Out of EUR18.60 million (30 September 2019: EUR12.66 million)
dividends declared for the year, EUR5.70 million (30 September
2019: 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 outbreak of the Novel Coronavirus (Covid-19), declared by
the World Health Organization as a "Global Pandemic" in March 2020
has impacted global financial markets and global economy. It is
difficult to predict the impact Covid-19 might have on the real
estate market in the future, therefore, we will continue to monitor
the performance of the portfolio closely through ongoing
discussions with the Company's external valuers and pay a
particular regard to comparable market evidence over the coming
months. Despite the onset of Covid-19 in Q1 2020, the demand from
the investment market for logistics assets has remained robust. The
Company's external valuers decided that the valuations as at 30
September 2020 should not include a material uncertainty clause as
had been included in the Group's 31 March 2020 Interim results.
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 year amounts to
EUR67,600 (period ended 30 September 2019: EUR130,400). 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 acquisitions during the current and prior period have been
treated as asset purchases rather than business combinations (see
note 3.1).
During the year, the following investment properties were
acquired:
Location Date acquired
Breda, the Netherlands 23 December 2019
-------------------
Strykow Lodz, Poland 3 February 2020
-------------------
Investment Investment Investment
properties properties properties
completed under construction Total
EURm EURm EURm
At 1 October 2019 665.75 21.83 687.58
-------------- ---------------------- --------------
Acquisition of properties(4) 105.86 - 105.86
-------------- ---------------------- --------------
Improvements to investment properties 1.43 - 1.43
-------------- ---------------------- --------------
Development expenditure - 6.22 6.22
-------------- ---------------------- --------------
Transfer from investment properties under
construction to completed 28.05 (28.05) -
-------------- ---------------------- --------------
License fees and rental guarantees received (3.90) - (3.90)
-------------- ---------------------- --------------
Fixed rental uplift and tenant lease incentives(1) 2.57 - 2.57
-------------- ---------------------- --------------
Amortisation of rental uplift and tenant
lease incentives(1) (0.43) - (0.43)
-------------- ---------------------- --------------
Change in fair value during the year(3) 38.57 - 38.57
-------------- ---------------------- --------------
As at 30 September 2020 837.90 - 837.90
-------------- ---------------------- --------------
Investment Investment Investment
properties properties properties
completed under construction 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 received (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 of 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 amount as at 30 September 2020 was
EUR6.23 million (30 September 2019: EUR3.87 million). 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 carrying value of assets held-for-sale at the Balance
Sheet date was EURnil (2019: EUR1.52 million).
3 Included in the fair value change in the year was unrealised
gains of EUR53.93 million (30 September 2019 : EUR45.53 million)
and unrealised losses of EUR15.36 million (30 September 2019 :
EUR27.68 million).
4 Included acquisition costs of EUR2.27 million.
30 September 30 September
2020 2019
EURm EURm
Investment properties in Balance Sheet 837.90 687.58
--------------- ---------------
Assets held-for-sale - 1.52
--------------- ---------------
Rental guarantee held in separate receivable 1.41 2.57
--------------- ---------------
Total external valuation of investment properties 839.31 691.67
--------------- ---------------
As at 30 September 2020, the Group had the following potential
capital commitments in relation to its forward funded pre--let
development assets (30 September 2019: EUR5.99 million):
-- Strykow of EUR13.5 million subject to pre-let conditions being met
-- Mango extension EUR30.5 million subject to permit
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."
MV 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 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 at 30
September 2020 (range: EUR32.10--EUR84.97 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: 4.57%* or range:
3.91%-6.25%). Net initial yield is dependent on the tenant, lease
length and the other variables listed above for ERV.
Net initial yield and ERV are not necessarily independent
variables. It is possible a change in one assumption may result in
an offsetting change to the other but equally the change in both
assumptions may increase the impact on valuation.
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% +0.25%
net initial net initial
yield yield -5% in +5% in
EURm EURm ERV EURm ERV EURm
(Decrease)/increase in the fair
value of investment properties
as at 30 September 2020 48.56 (43.41) (20.03) 20.03
----------------------------------- --------------- --------------- ------------ ------------
(Decrease)/increase in the fair
value of investment properties
as at 30 September 2019** 37.79 (34.20) (10.51) 13.15
----------------------------------- --------------- --------------- ------------ ------------
* Including rental guarantee
** 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.
15. Trade and other receivables
30 September 30 September
2020 2019
Non-current trade and other receivables EURm EURm
Cash in public institutions 1.17 1.17
--------------- ---------------
The cash in public institutions is a deposit of EUR1.17 million
given by the tenant for the property in Barcelona, Spain.
30 September 30 September
2020 2019
Current trade and other receivables EURm EURm
Trade receivables 2.52 1.97
--------------- ---------------
Prepayments, accrued income and other receivables 5.92 7.39
--------------- ---------------
Escrow cash 0.39 6.79
--------------- ---------------
VAT receivable* 5.89 15.60
--------------- ---------------
14.72 31.75
--------------- ---------------
* VAT receivable relates mainly to VAT reclaim due on the
purchase of the property in Italy EUR4 million (30 September 2019:
EUR12 million).
The following table sets out the ageing of trade receivables as
at 30 September 2020:
30 September 30 September
2020 2019
Past due but not impaired EURm EURm
<30 days 1.69 1.35
--------------- ---------------
30-60 days 0.18 0.37
--------------- ---------------
60-90 days - 0.18
--------------- ---------------
90 days+ 0.65 0.07
--------------- ---------------
Total 2.52 1.97
--------------- ---------------
Past due and impaired - -
--------------- ---------------
Total 2.52 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 September 30 September
2020 2019
EURm EURm
Cash and cash equivalents to agree with cash
flow 24.44 17.90
--------------- ---------------
All cash held under the Italian subsidiaries fund are subject to
local dividend distribution rules which mean that dividends can
only be paid twice a year. The amount of cash held in Italy as at
30 September 2020 was: EUR2.92 million (30 September 2019: EUR2.16
million).
17. Trade and other payables
30 September 30 September
2020 2019
Non-current trade and other payables EURm EURm
Other payables 1.46 -
--------------- ---------------
30 September 30 September
2020 2019
Current trade and other payables EURm EURm
Trade and other payables 3.57 6.47
--------------- ---------------
Bank loan interest payable 0.40 0.24
--------------- ---------------
Deferred income 0.54 0.34
--------------- ---------------
Accruals 4.44 9.00
--------------- ---------------
VAT liability 0.34 0.67
--------------- ---------------
9.29 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
The Group has a long-term, Revolving Credit Facility ("RCF") of
EUR425 million (see table below). 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 weighted
average term to maturity of the Group's debt as at the year-end is
3.8 years (30 September 2019: 4.0 years). EUR325 million of the RCF
has been extended to October 2024 during the year.
Facility Maturity
EURm date
19 October
HSBC UK Bank 100.0 2023
----------- -------------
100.0 19 October
BNP Paribas(1) 2024
----------- -------------
100.0 19 October
Bank of China(1) 2024
----------- -------------
100.0 19 October
Bank of America 2024
----------- -------------
19 October
Banco de Sabadell(1) 25.0 2024
----------- -------------
Total RCF 425.0
----------- -------------
1 Extended to 19 October 2025 in October 2020
As at 30 September 2020, all of the Group's debt facility
commitments are floating rate. The LTV across all drawn debt was
41% 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 year
covered by the financial statements.
Any associated fees in arranging the loan and borrowings that
are unamortised as at the year end are offset against amounts drawn
on the facilities as shown in the table below:
30 September 30 September
2020 2019
EURm EURm
Bank borrowings at the beginning of the year/period 231.95 -
--------------- ---------------
Bank borrowings drawn in the year/period 121.00 321.00
--------------- ---------------
Bank borrowings repaid in the year/period (12.50) (85.50)
--------------- ---------------
Loan issue costs paid (0.74) (4.03)
--------------- ---------------
Non-cash amortisation of loan issue costs 0.92 0.48
--------------- ---------------
Non-current liabilities: loan and borrowings 340.63 231.95
--------------- ---------------
30 September 2020
Total debt
Drawn Undrawn available
EURm EURm EURm
--------- ---------- -------------
Repayable between one and two years - - -
--------- ---------- -------------
Repayable between two and three years - - -
--------- ---------- -------------
Repayable between three and four years 80.94 19.06 100.00
--------- ---------- -------------
Repayable between four and five years 263.06 61.94 325.00
--------- ---------- -------------
Repayable in over five years - - -
--------- ---------- -------------
344.00 81.00 425.00
--------- ---------- -------------
30 September 2019
Total debt
Drawn Undrawn available
EURm EURm EURm
--------- ---------- -------------
Repayable between one and two years - - -
--------- ---------- -------------
Repayable between two and three years - - -
--------- ---------- -------------
Repayable between three and four years - - -
--------- ---------- -------------
Repayable between four and five years 235.50 189.50 425.00
--------- ---------- -------------
Repayable in over five years - - -
--------- ---------- -------------
235.50 189.50 425.00
--------- ---------- -------------
19. Other liabilities
30 September 30 September
2020 2019
EURm EURm
Balance at the beginning of the year 7.28 -
--------------- ---------------
Addition 0.02 7.03
--------------- ---------------
Repayments (0.29) (0.05)
--------------- ---------------
Loss on measurement of put option 1.88 0.30
--------------- ---------------
Balance at the end of the year 8.89 7.28
--------------- ---------------
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.
The options are exercisable as follows:
Ownership Date of maturity
Companies % of option
Tritax EuroBox (Bochum) Propco GmbH 94.9 5 April 2029
------------ -------------------
Tritax EuroBox (Peine) Propco GmbH 94.9 28 March 2029
------------ -------------------
Dietz Logistik 33. Grundbesitz GmbH 89.9 12 November
2029
------------ -------------------
Tritax Eurobox (Bremen I) Propco GmbH 89.9 22 February
2030
------------ -------------------
Tritax Eurobox (Bremen II) Propco GmbH 89.9 22 February
2030
------------ -------------------
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. The caps
expire in October 2023.
As at the current and prior period ends, 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 year-end was 0.67% (30 September 2019:
0.67%). The total premium payable in the year towards securing the
interest rate caps was EURnil (30 September 2019: EUR2.47
million).
30 September 30 September
2020 2019
EURm EURm
Interest rate derivatives valuation brought forward 0.12 -
--------------- ---------------
Interest rate cap premium paid - 2.47
--------------- ---------------
Fair value movement (0.03) (2.35)
--------------- ---------------
Non-current assets: interest rate derivatives
carried forward 0.09 0.12
--------------- ---------------
The interest rate derivatives are marked to market based on the
valuation 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 year--end date the total proportion of debt hedged via
interest rate derivatives equated to 87% (30 September
2019:127%).
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 year 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 year.
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 EUR0.07 million to net assets,
based on the nominal borrowings at the year-end.
The Group currently operates in seven countries. The current
distribution of total assets is as follows:
Total assets Belgium Germany Spain Italy Poland UK The Netherlands Total
-------
30 September 2020 93.01 303.63 169.12 141.52 117.39 4.37 50.43 879.47
---------- ---------- --------- --------- --------- ------- ------------------ ---------
30 September 2019 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), and in certain case holds
bank guarantee letters.
Covid-19 increased the tenant credit risk of the Group, with
some tenants asking for rent deferrals with a view to help their
financial position. However, as at 30 September 2020, all deferrals
have been repaid as agreed with one single deferral outstanding
agreed to be received during 2021 for EUR1.6 million.
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:
Carrying Total Less than Between More than
amount cash flows 3 months 3-12 months 1-2 years 2-5 years 5 years
EURm EURm EURm EURm EURm EURm EURm
30 September
2020
----------- -------------- ------------ -------------- ------------ ------------- ------------
Loans and
borrowings 340.63 374.69 1.70 5.11 6.81 361.07 -
----------- -------------- ------------ -------------- ------------ ------------- ------------
Trade and
other
payables* 9.87 9.87 8.41 - 1.46 - -
----------- -------------- ------------ -------------- ------------ ------------- ------------
Non-current
liabilities 8.89 8.89 - - - - 8.89
----------- -------------- ------------ -------------- ------------ ------------- ------------
Tenant
deposit 1.31 1.31 - - - - 1.31
----------- -------------- ------------ -------------- ------------ ------------- ------------
360.70 394.76 10.11 5.11 8.27 361.07 10.20
----------- -------------- ------------ -------------- ------------ ------------- ------------
Carrying Total Less than Between More than
amount cash flows 3 months 3-12 months 1-2 years 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 2020 the Group has a cash balance of GBP 0.41
million and PLN 5.54 million, equivalent to EUR0.45 million and
EUR1.22 million respectively (30 September 2019:GBP 0.54 million
and PLN 6.49 million, equivalent to EUR0.61 million and EUR1.48
million respectively).
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 usually 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
year end was 39.9% (30 September 2019: 33.3%).
23. Tenant deposit
30 September 30 September
2020 2019
Non-current liabilities EURm EURm
Balance at the beginning of the year 1.17 1.17
--------------- ---------------
Additions in the year 0.14 -
--------------- ---------------
Balance at the end of the year 1.31 1.17
--------------- ---------------
The main 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 September 30 September 30 September 30 September
2020 2020 2019 2019
Number EURm Number EURm
Issued and fully paid at 1 cent
each
--------------- --------------- --------------- ---------------
Balance at beginning of year/period
-
EUR0.01 Ordinary Shares 422,727,273 4.23 1 -
--------------- --------------- --------------- ---------------
Shares issued in the year/period - - 422,727,272 4.23
--------------- --------------- --------------- ---------------
Balance at end of year/period 422,727,273 4.23 422,727,273 4.23
--------------- --------------- --------------- ---------------
The Group has one class of Ordinary Shares which carry no right
to fixed income.
The 1 cent shares listed on the Specialist Fund Segment of the
Main Market of the London Stock Exchange on 9 July 2018 were issued
for EUR1.13 (or GBP1.00). Following a Special Resolution of Tritax
EuroBox plc, an application was made to the High Court to cancel
the share premium, which was granted on 25 September 2018. This
resulted in the full balance being transferred into distributable
reserves.
On 7 May 2019, the Group's Ordinary Shares were listed on the
premium segment of the Main Market of the London Stock Exchange
from the Specialist Fund Segment.
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 September 30 September 30 September 30 September
2020 2020 2019 2019
Number EURm Number EURm
Issued and fully paid at EUR1
each
---------------- ---------------- --------------- ---------------
Balance at beginning of year/period
-
EUR1.00 Preference Shares - - 57,100 0.06
---------------- ---------------- --------------- ---------------
Shares cancelled in the year/period - - (57,100) (0.06)
---------------- ---------------- --------------- ---------------
Balance at end of year/period - - - -
---------------- ---------------- --------------- ---------------
On 26 September 2018, the Group cancelled 57,100 redeemable
preference shares with a nominal value of EUR57,100. The preference
shares did not carry any rights to a dividend.
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 year. As there are no dilutive
instruments outstanding, basic NAV per share is shown below:
30 September 30 September
2020 2019
EURm EURm
Net assets per Group Statement of Financial
Position 503.91 477.27
--------------- ---------------
Ordinary Shares:
--------------- ---------------
Issued share capital (number) 422,727,273 422,727,273
--------------- ---------------
NAV per share (expressed in Euro per share)
--------------- ---------------
Basic NAV per share 1.19 1.13
--------------- ---------------
In October 2019, EPRA introduced three new measures of net asset
value: EPRA Net Reinvestment Value (NRV), EPRA Net Tangible Assets
(NTA) and EPRA Net Disposal Value (NDV). These are applicable for
accounting periods starting on or after 1 January 2020, but the
Group has elected to early adopt these new measures for the year
ended 30 September 2020. The Group considers EPRA NRV to be the
most relevant EPRA NAV measure for the Group, replacing our
previously reported EPRA NAV and EPRA NAV per share metrics. We are
now reporting EPRA NRV as our primary NAV measure alongside Basic
NAV. The prior year comparative figures have also been recomputed
in line with the new EPRA methodology. Also refer to Notes to the
EPRA and Other Key Performance Indicators section for the bridge
between the new and the previous set of EPRA NAVs metrics.
30 September 2020 30 September 2019
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
EURm EURm EURm EURm EURm EURm
----------- ----------- ----------- ----------- ----------- -----------
NAV attributable
to shareholders 503.91 503.91 503.91 477.27 477.27 477.27
----------- ----------- ----------- ----------- ----------- -----------
Mark-to-market adjustments
of derivatives (0.09) (0.09) - (0.12) (0.12) -
----------- ----------- ----------- ----------- ----------- -----------
Deferred tax adjustment 12.49 12.49 - 4.59 4.59 -
----------- ----------- ----------- ----------- ----------- -----------
Transaction costs(1) 34.19 - - 29.31 - -
----------- ----------- ----------- ----------- ----------- -----------
NAV 550.50 516.31 503.91 511.05 481.74 477.27
----------- ----------- ----------- ----------- ----------- -----------
NAV per share in
Euro 1.30 1.22 1.19 1.21 1.14 1.13
----------- ----------- ----------- ----------- ----------- -----------
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of
transaction costs (RETT and purchaser's costs). Transaction costs
are added back when calculating EPRA NRV .
26. Transactions with related parties
For the year ended 30 September 2020, 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 year ended 30 September 2020 was
EUR4.13 million (2019: EUR3.28 million).
The total amount outstanding at the year end relating to the
Investment Management Agreement was EUR1.10 million (2019: EUR1.06
million).
Details of amounts paid to Directors for their services can be
found within the Directors' Remuneration Report. No fees were paid
to SG Commercial LLP ("SG Commercial") for the year to 30 September
2020 (2019: EUR0.67 million) in respect of agency services for the
year; this represents a total of 0% (2019: 14.70%) of agency fees
paid by the Group during the year. There were no fees outstanding
as at the year end and 30 September 2019. The six Members of the
Manager, namely Mark Shaw, Colin Godfrey, James Dunlop, Henry
Franklin, Petrina Austin and Bjorn Hobart, are also Members of SG
Commercial.
During the year, the Directors received the following dividends:
Robert Orr: EUR860 (2019:EUR480), Keith Mansfield: EUR12,470 (2019:
EUR4,560), Taco De Groot: EUR1,075 (2019: EUR600) and Eva-Lotta
Sjostedt: EUR127 (2019: EURnil).
During the year the six Members of the Manager received the
following dividends: Colin Godfrey: EUR6,142 (2019: EUR3,011), Mark
Shaw: EUR6,148 (2019: EUR3,011), James Dunlop: EUR6,142 (2019:
EUR3,011), Henry Franklin: EUR4,137 (2019: EUR2,008), Petrina
Austin: EUR981 (2019: EUR480) and Bjorn Hobart: EUR981 (2019:
EUR480). Nick Preston, the Fund Manager received EUR3,156 during
the year (2019: EUR1,306).
On 5 February 2020 the Manager has acquired in the market
116,416 Ordinary Shares at 90.2 pence per share on behalf of
certain members of staff of the Manager. On 17 June 2020 the
Manager also acquired in the market 99,129 Ordinary Shares at 92.4
pence per share on behalf of certain members of staff of the
Manager.
On 1 October 2020, there were three new Members of the Manager,
namely Nick Preston, Frankie Whitehead and James Watson. They are
also Members of SG Commercial.
27. Leases
As lessor
Details of the Group's leases from tenants of its investment
property are found in note 6.
As lessee
The Group holds one investment property, with a carrying amount
of EUR133.5 million, on a lease which ends in 87.5 years. A
peppercorn rent is paid and hence the associated lease liability
and right-of-use asset are immaterial.
28. Subsequent events
In October 2020, the loans from BNP Paribas, Bank of China and
Banco de Sabadell for a total of EUR225 million have been extended
for another year to October 2025 (see note 18).
On 2 December 2020, the Group announced that it signed the
acquisition of a building located in Nivelles, Belgium for a total
purchase price of EUR31.2 million. The transaction is expected to
close in December 2020.
Company Balance Sheet
Company Registration Number 11367705
Note At 30 September 2020 At 30 September 2019
EURm EURm
------------------------------------- ------- ----------------------- -----------------------
Non-current assets
Derivative financial instruments 0.09 0.12
Trade and other receivables 5 466.52 447.92
Investment in subsidiaries 4 316.32 240.84
------------------------------------- ------- ----------------------- -----------------------
Total non-current assets 782.93 688.88
Current assets
Trade and other receivables 5 4.38 2.83
Cash held at bank 6 3.52 2.05
------------------------------------- ------- ----------------------- -----------------------
Total current assets 7.90 4.88
------------------------------------- ------- ----------------------- -----------------------
Total assets 790.83 693.76
------------------------------------- ------- ----------------------- -----------------------
Current liabilities
Trade and other payables 7 (2.22) (6.36)
Income tax liability - -
------------------------------------- ------- ----------------------- -----------------------
Total current liabilities (2.22) (6.36)
------------------------------------- ------- ----------------------- -----------------------
Non-current liabilities
Loans and borrowings 8 (340.63) (231.95)
------------------------------------- ------- ----------------------- -----------------------
Total non-current liabilities (340.63) (231.95)
------------------------------------- ------- ----------------------- -----------------------
Total liabilities (342.85) (238.31)
------------------------------------- ------- ----------------------- -----------------------
Total net assets 447.98 455.45
------------------------------------- ------- ----------------------- -----------------------
Equity
Share capital 9 4.23 4.23
Share premium reserve 131.24 131.21
Retained earnings 312.51 320.01
------------------------------------- ------- ----------------------- -----------------------
Total equity 447.98 455.45
------------------------------------- ------- ----------------------- -----------------------
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in the financial statements. The profit
attributable to the Parent Company for the year ended 30 September
2020 amounted to EUR10.68 million (2019: a loss of EUR1.10
million).
The financial statements were approved by the Board of Directors
on 2 December 2020 and signed on its behalf by:
Robert Orr
Director
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2020
Share premium Retained earnings
Share capital Total
-----------------------------------
Note EURm EURm EURm EURm
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
At 1 October 2019 4.23 131.21 320.01 455.45
Net profit for the year - - 10.68 10.68
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
Total comprehensive income - - 10.68 10.68
Contributions and distributions:
Associated share issue costs - 0.03 - 0.03
Dividends paid 3 - - (18.18) (18.18)
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
At 30 September 2020 4.23 131.24 312.51 447.98
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
Share Retained
Share capital premium earnings Total
Note EURm EURm EURm EURm
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
At 1 July 2018 0.06 - - 0.06
Net loss for the period - - (1.10) (1.10)
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
Total comprehensive loss - - (1.10) (1.10)
Contributions and distributions:
New share capital subscribed 9 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 9 (0.06) - - (0.06)
Dividends paid 3 - - (8.43) (8.43)
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
Total contributions and
distributions 4.17 131.21 321.11 456.49
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
At 30 September 2019 4.23 131.21 320.01 455.45
----------------------------------- ------- -------------------- ---------------- -------------------- ----------
Notes to the Company Accounts
1. Accounting policies
Disclosure exemptions adopted
In preparing the financial statements the Company has taken
advantage of all applicable disclosure exemptions conferred by FRS
101. Therefore the financial statements do not include:
- certain comparative information as otherwise required by EU
endorsed IFRS;
- certain disclosures regarding the Company's capital;
- a statement of cash flows and related notes;
- the effect of future accounting standards not yet adopted;
- the disclosure of the remuneration of key management
personnel; and
- disclosure of related party transactions with other wholly
owned members of the Tritax Eurobox plc Group.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the Company's consolidated financial statements. The
financial statements do not include certain disclosures in respect
of:
- financial instruments; and
- fair value measurement other than certain disclosures required
as a result of recording financial instruments at fair value.
Principal accounting policies
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the periods presented, unless otherwise
stated. No newly applicable accounting standards for the current
year had any material impact on the Company.
Currency
The Company financial statements are presented in Euro which is
also the Company's functional currency.
Dividends payable for 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.
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:
Fair value through profit or loss
This category comprises in-the-money derivatives and
out-of-money derivatives where the time value offsets the negative
intrinsic value. They are carried in the statement of financial
position at fair value with changes in fair value recognised in the
Group profit or loss in the finance income or expense line. Other
than derivative financial instruments which are not designated as
hedging instruments, the Group does not have any assets held for
trading nor does it voluntarily classify any financial assets as
being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and
services to customers such as 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 and
contractual cash flows 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 being recognised
within cost of sales 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.
Impairment provisions for receivables from related parties and
loans to related parties are recognised based on a forward-looking
expected credit loss model. The methodology used to determine the
amount of provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset, 12-month expected credit losses along with
gross interest income are recognised. For those for which credit
risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are
recognised.
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.
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.
Investment in subsidiaries
The investment in subsidiary companies is included in the
Company's Balance Sheet at cost less provision for impairment.
Financial liabilities
The Company classifies its financial liabilities as amortised
cost.
The Company'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 year to
repayment is at a constant rate on the balance of the liability
carried in the Company Balance Sheet. 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 Company 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 Company derecognises a financial liability when
its contractual obligations are discharged, cancelled or
expire.
Significant accounting judgements, estimates and assumptions
The preparation of the Company'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. There were no significant accounting
judgements, estimates or assumptions in preparing the financial
statements.
2.Taxation
30 September 30 September 2019
2020 EURm
EURm
------------------- --------------- --------------------
UK corporate tax - -
------------------- --------------- --------------------
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 year .
The UK corporation tax rate for the financial year is 19%.
Accordingly, this rate has been applied in the measurement of the
Company's tax liability at 30 September 2020.
3.Dividends paid
Please refer to note 13 of the Group accounts.
4.Investment in subsidiaries
30 September 30 September 2019
2020 EURm
EURm
---------------------------------------------- --------------- --------------------
At the beginning of the year/period 240.84 -
Increase in investments via share purchase 76.69 240.84
Impairment in the year (1.21) -
---------------------------------------------- --------------- --------------------
At the end of the year/period 316.32 240.84
---------------------------------------------- --------------- --------------------
The Company has the following subsidiary undertakings as at 30
September 2020:
Principal activity Country of incorporation Ownership %
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Spain) Holdco, S.L. Investment Holding Company Spain 100%*
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox Barcelona SLU Property Investment Spain 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Eurobox Italy Holdco Limited Investment Holding Company Jersey 100%*
---------------------------------------- ------------------------------ ---------------------------- --------------
Fondo Minerva Eurobox Italy** Property Investment Italy 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Belgium) Holdco NV Investment Holding Company Belgium 100%*
---------------------------------------- ------------------------------ ---------------------------- --------------
Panton Kortenberg Vastgoed NV Property Investment Belgium 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Rumst Logistics NV Property Investment Belgium 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Rumst Logistics II NV Property Investment Belgium 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Rumst Logistics III NV Property Investment Belgium 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Pakobo NV Property Investment Belgium 100%
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax EuroBox (Wunstorf) Holdco Property Investment United Kingdom 100%*
Limited
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax EuroBox (Bochum) Propco GmbH Property Investment Germany 94.9%*
(previously known as Dietz Logistik
25. Grundbesitz GmbH)
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax EuroBox (Peine) Propco GmbH Property Investment Germany 94.9%*
(previously known as Dietz Logistik
38. Grundbesitz GmbH)
---------------------------------------- ------------------------------ ---------------------------- --------------
Dietz Logistik 33. Grundbesitz GmbH Property Investment Germany 89.9%*
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Bremen I) Propco GmbH Property Investment Germany 89.9%*
(previously known as CLI Real Estate
I GmbH)
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Bremen II) Propco Property Investment Germany 89.9%*
GmbH (previously known as Dietz
Logistik 47. Grundbesitz
GmbH)
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Poland) Propco sp. z Property Investment Poland 100%*
o.o (previously known as Nestral sp.
z o.o.)
---------------------------------------- ------------------------------ ---------------------------- --------------
Central Logistics Investment sp. z Property Investment Poland 100%*
o.o
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Netherlands) Propco Property Investment United Kingdom 100%*
Limited
---------------------------------------- ------------------------------ ---------------------------- --------------
Tritax Eurobox (Breda) PropCo B.V. Property Investment The Netherlands 100%*
---------------------------------------- ------------------------------ ---------------------------- --------------
* These are direct subsidiaries of the Company.
** 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 registered addresses for the subsidiaries across the Group
are consistent based on their country of incorporation and are as
follows:
Spain entities: Avenida de Felipe II, 17, 1 C, 28009, Madrid,
Spain Jersey entities: 13-14 Esplanade, St Helier, Jersey, JE1
1EE
Italy entities: Savills Investment Management SGR S.p.A., Fondo
Minerva, Via San Paolo 7, 20121 Milano, Italy
Belgium entities: Louizalaan 331-333, 1050 Brussels, Belgium
German entities: Darmstädter Straße 246, 64625 Bensheim, Germany
and Westendstraße 28, 60325 Frankfurt am Main
Poland entities: Warsaw, ul. Pi kna 18, 05-077 Warsaw,
Poland
The Netherlands entities: Hoogoorddreef 15, 1101BA Amsterdam,
the Netherlands
United Kingdom entities: 6 Duke Street St James's, London, SW1Y
6BN, United Kingdom
5.Trade and other receivables
30 September 30 September 2019
2020 EURm
EURm
------------------------------------------- --------------- --------------------
Amounts receivable from Group companies 470.14 450.60
Other receivables 0.76 0.15
------------------------------------------- --------------- --------------------
470.90 450.75
------------------------------------------- --------------- --------------------
All amounts receivable from Group companies are documented under
term loans with maturity exceeding three years, with an option to
extend for a further five years. All borrowings are unsecured and
are charged at 4% (with the exception of Poland at 2.69%). Interest
is generally payable quarterly and, therefore, is classified as
current assets.
30 September 30 September 2019
2020 EURm
EURm
------------------------------ --------------- --------------------
Current assets 4.38 2.83
Non-current assets 466.52 447.92
------------------------------ --------------- --------------------
470.90 450.75
------------------------------ --------------- --------------------
6.Cash held at bank
30 September 30 September 2019
2020 EURm
EURm
------------------------------ --------------- --------------------
Cash held at bank 3.52 2.05
------------------------------ --------------- --------------------
7.Trade and other payables
30 September 30 September 2019
2020 EURm
EURm
------------------------------ --------------- --------------------
Trade and other payables 2.13 2.98
Accruals 0.09 3.38
------------------------------ --------------- --------------------
2.22 6.36
------------------------------ --------------- --------------------
8.Loans and borrowings
All external borrowings of the Group are held by the Company.
Please refer to note 18 of the Group accounts for further
details.
9. Share capital
Please refer to note 24 of the Group accounts.
10. Related party transactions
The Company has taken advantage of the exemption not to disclose
transactions with other wholly owned members of the Group as the
Company's own financial statements are presented together with its
consolidated financial statements.
Below are the amounts received by the companies which are not
wholly owned:
30 September 2020 30 September 2019
Income received from Group companies EURm EURm
----------------------------------------------------------------------- -------------------- ---------------------
Tritax EuroBox (Bochum) Propco GmbH 1.22 0.88
Tritax EuroBox (Peine) Propco GmbH 3.49 2.08
Dietz Logistik 33. Grundbesitz GmbH 1.83 0.37
Tritax Eurobox (Bremen I) Propco GmbH (previously known as CLI Real 0.64 -
Estate I GmbH)
Tritax Eurobox (Bremen II) Propco GmbH (previously known as Dietz 0.69 -
Logistik 47. Grundbesitz
GmbH)
----------------------------------------------------------------------- -------------------- ---------------------
7.87 3.33
----------------------------------------------------------------------- -------------------- ---------------------
Below are the amounts owed by the companies which are not wholly
owned:
----------------------------------------------------------------------- -------------------- ---------------------
Less than More than one year
Amount owed from/(to) Group companies as at 30 September 2020 one year EURm
EURm
----------------------------------------------------------------------- -------------------- ---------------------
Tritax EuroBox (Bochum) Propco GmbH 0.04 24.42
Tritax EuroBox (Peine) Propco GmbH - 67.74
Dietz Logistik 33. Grundbesitz GmbH - 31.10
Tritax Eurobox (Bremen I) Propco GmbH (previously known as CLI Real
Estate I GmbH) - 13.16
Tritax Eurobox (Bremen II) Propco GmbH (previously known as Dietz
Logistik 47. Grundbesitz
GmbH) - 14.86
----------------------------------------------------------------------- -------------------- ---------------------
0.04 151.28
----------------------------------------------------------------------- -------------------- ---------------------
Less than More than one year
Amount owed from Group companies as at 30 September 2019 one year EURm
EURm
--------------------------------------------------------------------------------- ------------ ---------------------
Tritax EuroBox (Bochum) Propco GmbH - 24.46
Tritax EuroBox (Peine) Propco GmbH - 67.75
Dietz Logistik 33. Grundbesitz GmbH 0.38 31.10
Tritax Eurobox (Bremen I) Propco GmbH (previously known as CLI Real Estate I
GmbH) - 28.02
Tritax Eurobox (Bremen II) Propco GmbH (previously known as Dietz Logistik 47. - -
Grundbesitz
GmbH)
--------------------------------------------------------------------------------- ------------ ---------------------
0.38 151.33
--------------------------------------------------------------------------------- ------------ ---------------------
For all other related party transactions please refer to note 26
of the Group accounts.
11.Directors' remuneration
Please refer to note 9 of the Group accounts.
12.Subsequent events
Please refer to note 28 of the Group accounts.
NOTES TO THE EPRA AND OTHER KEY PERFORMANCE INDICATORS
(UNAUDITED)
1. EPRA earnings per share
Year ended Period
30 September ended 30
2020 September
EURm 2019
EURm
Total comprehensive income (attributable to Shareholders) 44.79 20.72
---------------- --------------
Adjustments to remove:
---------------- --------------
Changes in fair value of investment properties (38.57) (17.85)
---------------- --------------
Deferred tax adjustment 8.38 4.59
---------------- --------------
Changes in fair value of interest rate derivatives 0.03 2.35
------------------------------------------------------------- ---------------- --------------
Gain on disposal of investment property (0.83) -
------------------------------------------------------------- ---------------- --------------
Profits to calculate EPRA Earnings per share 13.80 9.81
------------------------------------------------------------- ---------------- --------------
Weighted average number of Ordinary Shares 422,727,273 331,599,364
---------------- --------------
EPRA earnings per share - basic and diluted 3.26 cents 2.96 cents
---------------- --------------
2. EPRA NAV measures
In October 2019, EPRA issued new best practice recommendations
(BPR) for financial guidelines on its definitions of NAV measures:
EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV)
and EPRA net disposal value (NDV). The Group has adopted these new
guidelines and applies them in the 2020 Annual Report. The group
considered EPRA net reinvestment value (NRV) to be the most
relevant NAV measure for the Group, replacing our previously
reported EPRA NAV and EPRA NAV per share metrics. We are now
reporting EPRA NRV as our primary NAV measure alongside Basic NAV.
EPRA NRV 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, and
including transaction costs (Real Estate Transfer Tax and
purchaser's costs).
30 September 2020 Current measures Previously reported measures
-------------------------------------- -------------------------------------------- ---------------------------------
EPRA NRV EPRA NTA EPRA NDV EPRA NAV EPRA NNNAV
EURm EURm EURm EURm EURm
-------------------------------------- ------ ----------- ----------- ----------- --------------- ----------------
NAV attributable to shareholders 503.91 503.91 503.91 503.91 503.91
Mark-to-market adjustments of derivatives (0.09) (0.09) - 2.38 -
Deferred tax adjustment 12.49 12.49 - 12.49 -
Transaction costs(1) 34.19 - - - -
NAV 550.50 516.31 503.91 518.78 503.91
---------------------------------------------- ----------- ----------- ----------- --------------- ----------------
NAV per share in Euro 1.30 1.22 1.19 1.23 1.19
---------------------------------------------- ----------- ----------- ----------- --------------- ----------------
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of
transaction costs (RETT and purchaser's costs). Transaction costs
are added back when calculating EPRA NRV .
30 September 2019 Current measures Previously reported measures
-------------------------------------- -------------------------------------------- ---------------------------------
EPRA NRV EPRA NTA EPRA NDV EPRA NAV EPRA NNNAV
EURm EURm EURm EURm EURm
-------------------------------------- ------ ----------- ----------- ----------- --------------- ----------------
NAV attributable to shareholders 477.27 477.27 477.27 477.27 477.27
Mark-to-market adjustments of derivatives (0.12) (0.12) - 2.35 -
Deferred tax adjustment 4.59 4.59 - 4.59 -
Transaction costs(1) 29.31 - - - -
NAV 511.05 481.74 477.27 484.21 477.27
---------------------------------------------- ----------- ----------- ----------- --------------- ----------------
NAV per share in Euro 1.21 1.14 1.13 1.15 1.13
---------------------------------------------- ----------- ----------- ----------- --------------- ----------------
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of
transaction costs (RETT and purchaser's costs). Transaction costs
are added back when calculating EPRA NRV .
3. EPRA net initial yield (NIY) and EPRA "topped up" NIY
Year ended Period
30 September ended 30
2020 September
EURm 2019
EURm
Investment property 837.90 687.58
---------------- -------------
Less: development properties - (21.83)
--------------------------------------------------- ---------------- -------------
Completed property portfolio 837.90 665.75
---------------- -------------
Allowance for estimated purchasers' costs 34.19 29.31
--------------------------------------------------- ---------------- -------------
Gross up completed property portfolio valuation
(B) 872.09 695.06
--------------------------------------------------- ---------------- -------------
Annualised cash passing rental income 39.24 31.58
---------------- -------------
Less: contracted rental income in respect of -
development properties -
---------------- -------------
Property outgoings (0.98) (0.30)
--------------------------------------------------- ---------------- -------------
Annualised net rents (A) 38.26 31.28
---------------- -------------
Contractual increases for fixed uplifts 1.41 1.84
--------------------------------------------------- ---------------- -------------
Topped up annualised net rents (C) 39.67 33.12
--------------------------------------------------- ---------------- -------------
EPRA Net Initial Yield (A/B) 4.39% 4.50%
---------------- -------------
EPRA Topped Up Net Initial Yield (C/B) 4.55% 4.77%
--------------------------------------------------- ---------------- -------------
4. EPRA vacancy rate
Year ended Period ended
30 September 30 September
2020 2019
EURm EURm
Annualised estimated rental value of vacant
premises 2.21 0.41
---------------- ----------------
Portfolio estimated rental value(1) 40.65 33.43
----------------------------------------------- ---------------- ----------------
EPRA vacancy rate 5.43% 1.22%
----------------------------------------------- ---------------- ----------------
1 Excludes land held for development.
5. EPRA cost ratio
Year ended Period ended
30 September 30 September
2020 2019
EURm EURm
Property operating costs 0.89 0.33
---------------- ----------------
Administration expenses 10.73 8.45
---------------- ----------------
Net service charge costs 0.09 0.05
---------------- ----------------
Other operating income (0.46) (0.37)
---------------------------------------------------- ---------------- ----------------
Total costs including vacant property costs
(A) 11.25 8.46
---------------- ----------------
Vacant property costs (0.09) (0.16)
---------------------------------------------------- ---------------- ----------------
Total costs excluding vacant property costs
(B) 11.16 8.30
---------------- ----------------
Gross rental income - per IFRS (C) 36.00 24.49
---------------------------------------------------- ---------------- ----------------
Total EPRA cost ratio (including vacant property
costs) (A/C) 31.25% 34.54%
---------------------------------------------------- ---------------- ----------------
Total EPRA cost ratio (excluding vacant property
costs) (B/C) 31.00% 33.89%
---------------------------------------------------- ---------------- ----------------
There were no overheads nor operating expenses capitalised in
the year in line with IFRS (2019: EURnil).
6. Capital expenditure
30 September 30 September
2020 2019
EURm EURm
Acquisition(1) 105.86 654.22
--------------- ---------------
Development(1) 6.22 16.28
--------------- ---------------
Investment properties(1) :
--------------- ---------------
Incremental lettable space 1.43 0.72
--------------- ---------------
Tenant incentives(2) 2.14 3.99
--------------- ---------------
Other material non-allocated types of expenditure(3) (3.90) (3.96)
--------------- ---------------
Total 111.75 671.25
--------------- ---------------
(1) See note 14.
(2) Fixed rental uplift and tenant lease incentives after
adjusting for amortisation on rental uplift and tenant lease
incentives.
(3) License fees and rental guarantees.
The Group has no interest in joint ventures.
7. Total Return
Year ended Period ended
30 September 30 September
2020 2019
cents cents
Opening EPRA NRV 120.89 113.11
---------------- ----------------
Closing EPRA NRV(1) 130.23 120.89
---------------- ----------------
Growth in EPRA NRV 9.34 7.78
---------------- ----------------
Dividends Paid 4.30 2.40
---------------- ----------------
Total growth in EPRA NRV plus dividends paid 13.64 10.18
---------------- ----------------
Total Return(1) 11.28% 9.00%
---------------- ----------------
1 Total Return for 30 September 2020 was 10.90% (30 September
2019: 3.39%) using the previous EPRA NAV at 122.72 cents and 114.54
cents respectively.
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