Hibernia REIT plc (HBRN)
HALF YEARLY FINANCIAL REPORT
17-Nov-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No
596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
HALF YEARLY FINANCIAL REPORT
****************************
For the six months ended 30 September 2020
17 November 2020
Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces results for the six months
ended 30 September 2020 (the "period"). Highlights include:
Rent collection rates reflecting strong tenant base
? As at 16 November 2020, contracted rent received or on agreed payment terms was as follows:
· Commercial[1]: 99% for Q/E Dec-20; 99% for Q/E Sep-20; 99% for Q/E Jun-20
· Residential[2]: 98% for Nov-20; >99% for Oct-20; >99% for Sep-20
? 60% of our contracted rent roll is from technology companies or state entities
Further growth in distributable income
? Annual contracted rent of &euro66.5m at Sep-20, up 1% since Mar-20, and office WAULT of 6.2yrs, down 3%
· One pre-let of 24,000 sq. ft. adding &euro1.5m, or &euro0.5m net of lease expiries and adjustments on
let space
· One rent review and two lease variations agreed, adding incremental rent of &euro0.2m
· Since period end, one letting over 12,000 sq. ft. agreed, adding net rent of &euro0.2m
? Diluted IFRS loss per share of 5.0 cent from negative revaluation movements in the period (Sep-19: profit
of 3.7 cent)
? EPRA EPS5 of 3.3 cent, up 17.6% on last year due to leases signed in prior periods (Sep-19: 2.8 cent)
? Interim DPS of 2.0 cent declared, up 14.3% on prior year (Sep-19: 1.75 cent)
Modest decline in portfolio value, primarily coming in the first quarter of our financial year
? Portfolio value of &euro1,420.9m, down 3.8%[3] in the period (Mar-20: &euro1,465.2m)
· Valuation declined 3.2%3 in Q1 and 0.6%3 in Q2, primarily due to lower office net ERVs and higher office
yields
? Six-month Total Property Return[4] of -1.7% vs MSCI Ireland Property All Assets Index (excl. Hibernia) of
-1.6%
? Per RICS guidance, C&W has included a material uncertainty statement in its September 2020 valuations of
our commercial properties (residential properties not included)
? EPRA NTA per share5 of 171.9 cent, down 4.1% in the period (Mar-20: 179.2 cent)
Very robust balance sheet with no maturities until December 2023 giving substantial flexibility and
investment capacity
? Net debt of &euro265.3m, LTV5 of 18.7% (Mar-20: &euro241.4m, LTV 16.5%)
? Weighted average debt maturity of 3.8 years (Mar-20: 4.4 years)
? Cash and undrawn facilities of &euro130m, &euro103m net of committed expenditure (March 2020: &euro154m
and &euro136m)
? &euro25m share buyback programme launched in Aug-20
· At end of Sep-20, 8.1m shares had been acquired for &euro9.0m, an average price per share of &euro1.11
· Buyback programme completed on 16 Nov 2020: 23.1m shares repurchased at an average price per share of
&euro1.08
Committed office developments near completion; major pipeline schemes ready to start in near term
? Two office schemes on track to complete in early 2021, delivering 62,500 sq. ft. of Grade A office space
(38% pre-let)
? Major office developments fully planning approved and ready to start in next 12-26 months; all have low
break-evens
· Clanwilliam Court (final planning granted in the period) and Marine House can start in early 2022,
delivering >200,000 sq. ft. of new, Grade A office space, our second cluster after the recently completed
Windmill Quarter
· Harcourt Square can start in early 2023, delivering 337,000 sq. ft. of new, Grade A space in another
office cluster
Continuing focus on sustainability, one of our key strategic priorities
? Real-time energy consumption monitoring system installed and operating in our managed in-place offices
? Received third successive EPRA Gold Award for the quality of our ESG disclosures
? Submissions made to GRESB and, for the first time, CDP: results are expected shortly
· Considering the TCFD requirements and pathways for the Group to net zero carbon
Kevin Nowlan, Chief Executive Officer of Hibernia, said:
"Despite the challenging environment in the six months to September 2020 we have made significant progress
with our strategic priorities and our business performed well, delivering further growth in distributable
income and recording only a modest decline in portfolio value.
"Our leverage is amongst the lowest in the pan-European REIT universe, and this balance sheet strength gives
us substantial capacity and strategic flexibility for value-enhancing investment opportunities. We have
completed the &euro25m share buyback programme launched in August 2020, which has proved a highly accretive
use of capital.
"With the final grant of planning for our redevelopment of Clanwilliam Court, we now have planning
permission for the three main office projects in our development pipeline, all of which have low break-even
rents and all of which we can start in the next 12 - 26 months. These schemes will deliver 539,000 sq. ft.
of Grade A offices in the traditional core of Dublin at relatively low capital costs per buildable square
foot.
"Until there is a clear pathway for workers to return to their offices in meaningful numbers we expect
Dublin office vacancy rates to continue to rise and rents to remain under pressure. In our view the pandemic
is accelerating pre-existing changes in working patterns, such as more remote working, a greater focus on
collaborative spaces in offices, increased emphasis on employee wellness and office buildings'
sustainability credentials. This is something we had been factoring into our building designs already, as
can be seen in the Windmill Quarter. As the pandemic has continued we believe the importance of offices for
employee collaboration, creativity and culture has become increasingly apparent and we remain positive about
the long-term prospects for well-configured, prime offices in Dublin's city centre."
Contacts:
Hibernia REIT plc +353 (0)1 536 9100
Kevin Nowlan, Chief Executive Officer
Tom Edwards-Moss, Chief Financial Officer
Murray Consultants
Doug Keatinge: +353 86 037 4163, dkeatinge@murraygroup.ie
Andrew Smith: +353 83 076 5717, asmith@murraygroup.ie [1]
About Hibernia REIT plc
Hibernia REIT plc is an Irish Real Estate Investment Trust ("REIT"), listed on Euronext Dublin and the
London Stock Exchange. Hibernia owns and develops property and specialises in Dublin city centre offices.
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Disclaimer
This announcement contains forward-looking statements, which are subject to risks and uncertainties because
they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or
trends, and similar expressions concerning matters that are not historical facts. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors, which may cause the actual
results, performance or achievements of the Group or the industry in which it operates to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements speak only as at the date of this announcement. The Group will
not undertake any obligation to release publicly any revision or updates to these forward-looking statements
to reflect future events, circumstances, unanticipated events, new information or otherwise except as
required by law or by any appropriate regulatory authority.
Market review
General economy
The six months ended 30 September 2020 witnessed a decline in global economic output at a speed
unprecedented in peacetime due to the rapid spread of COVID-19 and the precautionary measures governments
imposed in response. Having started the year expecting global GDP growth of 3.3%, the IMF is now projecting
a 4.4% contraction in 2020, weaker again than the 3.0% contraction it was estimating in May 2020. A strong
recovery is still expected in 2021, with the IMF forecasting global GDP growth of 5.2%, leaving global GDP
approximately 6.5pp lower than in its pre-COVID projections of January 2020 but still 0.6pp ahead of 2019
GDP.
Ireland will also see a fall in output in 2020, although official expectations have improved recently. GDP
is now forecast to decline 2.5% in 2020 and grow 1.4% in 2021, compared to GDP forecasts in April 2020 of a
10.5% reduction in 2020 and a 5.8% increase in 2021 (source: Department of Finance "DoF"). According to
Goodbody, a GDP decline of 2.5% in 2020 would make Ireland one of the best-performing economies in the
developed world. This outperformance is largely due to the significant positive contribution to output from
the multinational sector. Modified Domestic Demand, which is often considered a more appropriate gauge of
the domestic economy as it strips out distortions caused by aircraft leasing and R&D from the multinational
sector, is expected to fall by 6.5% this year (-15.1% previously) and grow by 3.9% in 2021 (+7.8%
previously) (source: DoF).
However, the positive spill over from the multinational sector to the Irish labour market is relatively
modest and employment expectations have weakened, with the cumulative fall in employment now expected to be
8.0% vs a fall of 4.0% anticipated in April 2020 and the COVID-adjusted unemployment rate is expected to
average 10.7% in 2021 vs 9.7% previously (source: Goodbody, DoF). This illustrates the K-shaped trajectory
of the Irish economy at present, with domestic service sectors continuing to suffer due to the government
restrictions while the multinational sector, which is largely export focussed, performs well (source:
Goodbody). Ireland continues to offer significant support to the labour market through pandemic payments and
wage subsidy schemes: the standard measure of monthly unemployment was 7.3% in October 2020, while the
COVID-19 adjusted measure of unemployment was 20.2%, if all claimants of the Pandemic Unemployment Payment
("PUP") were classified as unemployed (source: CSO). Much of this emergency support is going to the
hospitality and retail sectors, with office-based employment less impacted thus far. Given the level of
government support and the enforced increase in personal savings caused by the restrictions, the economic
recovery, when it comes, is likely to be rapid.
In addition to COVID-19 the other key risk for the Irish economy in the near term is the terms under which
the UK and EU trade after the expiry of the Brexit transition period on 31 December 2020. The Central Bank
of Ireland ("CBI") estimates that a move to World Trade Organization rules could reduce the growth rate of
the Irish economy by 2pp in 2021, relative to a scenario where a free trade agreement is concluded.
Irish property market overview
As we noted on page 17 of our 2020 Annual Report, the structural changes that have occurred in Ireland's
property market since 2007 should give it much greater resilience. From 2001 to 2008, 100% of investment
spend on Irish property was from domestic investors, many of them developers, private individuals or
syndicates, and much of it was debt funded. By comparison, since 2013 ownership has shifted towards a more
diverse investor base. Many of these are institutional investors seeking long-term income, with Irish
investors only accounting for 20% of the &euro11.3bn invested in the past seven years (source: Knight
Frank), and debt is generally a smaller proportion of the funding mix.
As well as these structural changes, the Dublin office market itself entered the COVID-19 crisis with much
healthier fundamentals than it had prior to the Global Financial Crisis in 2008, due in part to the limited
speculative development funding available this cycle. While prime headline quoting rents in March 2020 and
2008 were both in excess of &euro60psf, the Dublin office vacancy rate in March 2020 was 6.5% versus 12.3%
in March 2008. And the unlet office space under construction totalled 3.0m sq. ft. (6.9% of existing stock)
in March 2020 versus 4.6m sq. ft. (14.9% of existing stock) in March 2008 (source: Knight Frank, Property
Market Analysis).
Irish property investment market
Investment volumes in the first nine months of 2020 totalled &euro1.8bn, down 40% on the same period last
year when volumes were &euro3.0bn, with overseas investors accounting for 74% of volumes (2019: 66%). After
a relatively strong first quarter of 2020 in which volumes were &euro0.7bn, they fell to &euro0.4bn in the
second quarter as the impact of COVID-19 was felt. In the third quarter there was a pick-up in activity with
volumes amounting to &euro0.7bn, though with new restrictions introduced in Ireland in October 2020 due to
the "second wave" of COVID-19 infections, transaction activity may be disrupted further. The residential and
office sectors have dominated, accounting for 82% of volumes in the nine-month period, up from 74% during
the same period in 2019 (source: Knight Frank). Activity in the multi-family residential sector remains
robust, particularly since the pandemic started, and the sector comprises 35% of overall volumes year to
date (a similar proportion to 2019). By comparison, from the onset of the COVID-19 pandemic in Ireland in
March 2020 until 30 September 2020, there were only three notable office transactions: Bishop's Square, 2
Burlington Road and 30-33 Molesworth Street, all of which are located in the CBD and were sold at yields
around 4% (see further details in the tables below). Since the end of September 2020 office investment
activity has picked up, with Baggot Plaza and Fitzwilliam 28, two more CBD offices, both transacting at
yields around 4%. The relative lack of transactional evidence in the office sector has created challenges in
assessing the market value of office assets. That said, CBRE reports that the continued low interest rate
environment, coupled with substantial unallocated capital positions, means that there is considerable
investor liquidity available to deploy into prime Irish property and there has been good underlying demand
for the office investment opportunities that have arisen in recent months.
Top 5 office investment transactions (9 months to September 2020)
Building Price Capital Buyer Buyer
value nationality
Bishop's &euro183m &euro1,003ps GLL German
Square, D2 f
The Treasury &euro115m &euro923psf Google American
Building, D2
2 Burlington &euro94m &euro1,090ps KGAL German
Road, D4 f
La Touche &euro84m &euro877psf AXA IM Real French & Irish
House, IFSC Assets and
BCP Capital
30-33 &euro60m &euro1,007ps KanAM German
Molesworth f
Street, D2
Top 5 total &euro536m
Source: Knight Frank.
Top 5 Private Rental Sector ("PRS") investment transactions (9 months to September 2020)
Building Price Price per unit Buyer Buyer
nationality
Cheevers Court &euro195m &euro530k per SW3 / DWS German
& Halliday unit
House, Dun
Laoghaire
The Prestige &euro145m &euro457k per SW3 / DWS German
Portfolio, unit
North Dublin
Clay Farm &euro75m &euro391k per Urbeo Irish
(Phase 1C), unit
Leopardstown
Johnstown Road, &euro45m &euro445k per Not Irish
D18 unit disclosed
Herberton, D8 &euro37m &euro358k per LRC Group UK
unit
Top 5 total &euro497m
Source: Knight Frank.
In the six months to 30 September 2020 the MSCI Ireland Property All Assets Index (the "Index") delivered a
total return of -1.6%, excluding Hibernia (September 2019: 3.0%). Over this period the "Other" sector (which
includes PRS) has been the top performer in the Index, with a total return of 2.9%, followed by the
Industrial sector at 2.6% (September 2019: 2.4% and 2.9%, respectively). Offices delivered a total return of
0.5% (September 2019: 3.5%), incorporating an income return of 2.1% and a capital return of -1.6%. Prime
office yields remained broadly constant at 4.0% as at 30 September 2020 (source: Knight Frank).
Dublin office occupational market
Following 3.3m sq. ft. of take-up in 2019, the strong momentum continued into 2020 with take-up of 0.8m sq.
ft. recorded in the first quarter, the second largest opening quarter ever (Q1 2019: 1.4m sq. ft.) (source:
Knight Frank). However, the second and third quarters of 2020 have been a challenging period for the
occupational market due to the COVID-19 restrictions and weak economic conditions, with sentiment not helped
when Google announced in September 2020 that it had terminated discussions to lease 200,000 sq. ft. in the
Sorting Office in the South Docks. In the six months to September 2020 take-up amounted to 0.3m sq. ft. (Q2:
<0.1m sq. ft.; Q3: >0.2m sq. ft.) compared to 0.7m sq. ft. for the same period last year. The total for the
first nine months of 2020 was 1.1m sq. ft. (2019: 2.1m sq. ft) with 53% of take-up in the city centre (2019:
52%) and 82% from the technology, media and telecommunications ("TMT") and pharma/medical sectors (2019:
47%), both of which have a high proportion of multinational companies (source: Knight Frank). While large
lettings (>100k sq. ft.) have become a regular feature of the Irish office market over recent years there
have been no individual lettings of greater than 50,000 sq. ft. since Q1 2020, an indication of the
hesitancy amongst occupiers to commit to significant new leases at present. Our active demand tracker, run
in conjunction with Cushman & Wakefield, saw a c. 30% fall in active demand between the end of February 2020
and the end of September 2020 to a figure of 2.3m sq. ft. (September 2019: 4.1m sq. ft.). CBRE reports that
there was approximately 0.4m sq. ft. reserved at the end of September 2020 though it is uncertain how much
will convert into leasing activity by the end of the calendar year. Indeed, despite recent positive news on
vaccine development we believe it is unlikely we will see a significant recovery in occupier demand until
there is a clear pathway for workers to return to offices in meaningful numbers.
Top 10 office lettings (9 months to September 2020)
Tenant Industry Building Area (sq. % of
ft.) total
take-up
Mastercard Finance 1&2 South 249k 22%
County Business
Park, D18
Slack Technology Fitzwilliam 28, 135k 12%
D2
Guidewire Technology Stemple 85k 8%
Exchange,
Blanchardstown,
D15
Google Technology Block I Central 75k 7%
Park, D18
Zalando Technology 2WML, D2 48k 4%
Microsoft Technology No. 3 Dublin 44k 4%
Landings, D1
Dropbox Technology One Park Place, 43k 4%
D2
OPW State 1 George's 42k 4%
Quay, D2
Salesforce Technology 78 Sir John 37k 3%
Rogerson's
Quay, D2
National Technology 3009 Lake 36k 3%
Broadband Drive,
Ireland Citywest, D24
Top 10 total 794k 71%
Source: Knight Frank.
The overall Dublin office vacancy rate (which includes "shadow" or "grey" space) increased to 8.9% at 30
September 2020 from 6.5% at 31 March 2020 (September 2019: 6.8%) and the Grade A vacancy rate in the city
centre, where all of Hibernia's office portfolio is located, was 9.1% at 30 September 2020, up from 5.9% at
31 March 2020 (September 2019: 6.0%) (source: Knight Frank). Of the 2.4pp increase in overall Dublin office
vacancy, 1.5pp related to 0.7m sq. ft. from un-let new buildings completing and 0.7pp related to 0.3m sq.
ft. of grey space coming back into the market as tenants offered surplus space for sub-leasing: the
remaining 0.2pp came from lease expiries. Most of the main Dublin agents have now marked down their headline
prime Dublin office rent assumptions by mid-single digit percentages from the pre-COVID levels above
&euro60psf and increased tenant incentives have been assumed in some cases, though the impact of this may
not have been fully recognised in property valuations in the market at 30 September 2020. Given the current
uncertainty and economic conditions we believe the risk remains to the downside for rental values in Dublin
at present.
Office development pipeline
The table below sets out our expectations for upcoming supply in Dublin's city centre and for the whole of
Dublin by calendar year. We currently expect 7.1m sq. ft. of gross new space to be delivered between 2020
and 2023 for the whole of Dublin (1.1m sq. ft. already completed), of which 76% will be in the city centre.
43% of office stock under construction in Dublin has been let or reserved (47% in the city centre), meaning
there is 3.0m sq. ft. under construction but not yet let (2.2m sq. ft. in the city centre) (source: Knight
Frank/Hibernia). Since we last reported in May 2020, the expected supply between 2020 and 2023 is down 0.3m
sq. ft. (5%) in the city centre and 0.5m sq. ft. (7%) for the whole of Dublin due to projects being delayed
and/or postponed.
Year Dublin city centre supply All Dublin supply
2020f 1.0m sq. ft. (23% 1.7m sq. ft. (29%
pre-let)* pre-let)*
2021f 2.1m sq. ft. (62% 2.2m sq. ft. (60%
pre-let) pre-let)
2022f 1.1m sq. ft. (46% 1.6m sq. ft. (48%
pre-let) pre-let)
2023f 1.2m sq. ft. (12% 1.6m sq. ft. (9%
pre-let) pre-let)
Total 2020-23 5.4m sq. ft. (47% 7.1m sq. ft. (43%
pre-let) pre-let)
Source: Knight Frank/Hibernia.
*Note: City centre office completions in 2020 YTD are 0.7m sq. ft. and in all Dublin they are 1.1m sq. ft.
The current economic uncertainty is likely to make securing project-specific debt funding for speculative
office development even more challenging than it has been in recent years and as a result, as we move into
2021, we may see more schemes being delayed or postponed, particularly those where construction has not yet
commenced.
Residential sector
Prior to COVID-19, increases in the number of new home completions in Ireland in 2020 and 2021 were
forecast. However, due to the various restrictions put in place in response to the pandemic, including a
shut-down of most construction sites for a period earlier in the year, expectations have reduced. 8,000
units were completed in the first half of 2020, which represented a decline of 9% on the same period last
year and 20,000 units are expected to be delivered in 2020, a fall of 8% on 2019 (source: Goodbody). This
will be the first year-on-year decline since 2012, putting Ireland even further behind the estimated natural
demographic demand for at least 34,000 units per annum (source: CBI). Data from the CSO show that Dublin
accounted for 30% of all Irish delivery in the first half of 2020, broadly in line with the 33% in the same
period last year. Similarly, when combined with the commuter counties around Dublin, the Greater Dublin Area
("GDA") accounted for 51% of Irish completions in the first half of 2020 (H1 2019: 55%) (source: CSO).
Within the GDA, houses accounted for 70% of completions and apartments for 30% in H1 2020 which compares to
79% houses and 21% apartments in the same period last year. While this represents an increase in the
proportion of apartments being built, it is still at odds with the aspirations of the Ireland 2040 plan for
compact urban growth. Furthermore, at 21% of total completions, apartment building in Ireland is running at
the lowest level of any EU member state, with the average being 59% (source: European Commission).
In June 2020 the new Irish Government (a three-party coalition) put forward its programme for government
which made a number of pledges that the state will play a more active role in the provision of housing in
Ireland alongside various supports for private home ownership. The Government aims to increase the total
social housing stock by 50,000 units over the next five years and it will focus on newly built homes
(source: DoF). While a significant demand/supply imbalance is likely to persist, the commitment to
increasing the supply of housing is welcome. Viability and affordability issues remain prevalent in the
private sector, particularly in Dublin, so it is likely that the ongoing delivery of apartments will depend
on continued demand from PRS investors. Goodbody estimates that 80% of the apartments delivered are being
purchased by PRS investors.
The latest housing data for Ireland suggest that residential prices are holding up but transaction volumes
remain significantly below the same period one year ago. Nationally, residential property prices have been
broadly flat for almost two years and so far this trend has not been disrupted by the pandemic. Dublin
continues to underperform, with prices down 1.5% year-on-year, relative to the very modest growth outside
the capital of 0.3% year-on-year (source: Goodbody). Knight Frank estimates that there continues to be
&euro3bn of capital looking to deploy into the residential sector in Ireland, with several new entrants
amongst the many European investors already focussing on investing in the Irish market at present. This is
likely to keep prime yields in the sector stable at 3.75-4%.
Business review
COVID-19 update and outlook
We have adapted our head office to provide a safe working environment for staff and any visitors in the
current circumstances. In accordance with public health guidance, our head office staff have been working
from home since mid-March 2020, with occasional visits to the office when necessary to perform their duties.
We have recently introduced an allowance to assist our staff with the purchase of office and IT equipment
that they may require to work from home in an ergonomically efficient and safe manner. While working from
home is less appealing for most of us than working in the office, with its benefits of daily professional
and social interaction that we previously took for granted, nonetheless the transition to remote working has
been smooth, assisted by our cloud-based IT systems. Maintaining our collaborative, team culture and
ensuring staff welfare has been a key priority of the last few months: along with regular video calls within
departments, we have a weekly all-hands video call to keep our staff up-to-date with the activities of all
our departments. In addition, we have held a number of virtual social events.
All our managed buildings have remained accessible by tenants as required. At the start of the crisis we
appointed one of our team to oversee our COVID-19 response and we have developed an individual plan for each
building. This has been discussed with tenants and covers access control, physical distancing measures,
additional cleaning, sanitising and signage. Most construction sites in Ireland, including 2 Cumberland
Place, were shut down from late March to mid-May 2020. Since then work on site has continued with
appropriate precautionary measures: this has caused some practical challenges for our contractors at 2
Cumberland Place but is not expected to materially affect the completion date of the project or costs (see
development section below for further details).
Looking at the Dublin office market as a whole, the crisis has caused many potential occupiers to postpone
or cancel their plans to take space in the near term and while recent news on vaccine development has been
positive, it is hard to envisage there being a significant recovery in demand until there is a clear pathway
for workers to return to their offices in meaningful numbers (please see the market update section above for
more details). It is difficult to discern trends amongst our existing office tenants regarding their
expectations on their longer-term workspace requirements at present and indeed it is likely that many of
them do not know at this stage. In our view, the COVID-19 pandemic is accelerating changes in working
patterns that were already happening, such as more remote working, a greater focus on collaborative
workspace within offices, increased importance placed on employee wellness and buildings' sustainability
credentials. This is something we had been factoring into our building designs already, as can be seen in
the Windmill Quarter. As the crisis continues we believe the importance of offices for employee
collaboration, creativity and team culture is becoming increasingly apparent and we continue to be positive
about the long-term prospects for well-configured, prime offices in Dublin's city centre. As such our
strategy remains to own and deliver high quality offices in Dublin's city centre.
In the Dublin residential rental market, tenant demand remains strong, other than at the top-end
(>&euro2,250 per month for a two-bed apartment) where interest has softened. As noted in the market update
above, demand for housing in Dublin outstrips supply and it is unlikely this will change any time soon given
demographics and supply challenges. Our focus within the residential sector continues to be on delivering
new supply in the medium term.
Progress against strategic priorities for FY21
We are making good progress with the strategic priorities outlined in the 2020 Annual Report, and we
summarise this in the table below.
Strategic priority Key targets Progress in six months
to September 2020
1) Grow rental income · Let remaining · In-place office
and, where possible, space in 2 vacancy of 7% (10%
WAULTs to drive Cumberland including
dividends per share Place Clanwilliam and
Marine)
· Get office
vacancy rate to · Contracted rental
5% or below income +1% to
&euro66.5m
· Agree two
outstanding · Net rental income
rent reviews recorded in the
and five rent period +12% to
reviews &euro32.0m
upcoming during
FY21 · Average rent
collection rates
· Minimise running at 99%
impact from
COVID-19 on
rental income
2) Complete 2 · Deliver 2 · 2 Cumberland still
Cumberland Place and Cumberland on budget but
work to optimise Place on budget completion now
development pipeline in late 2020 expected in Jan-21
to maximise due to COVID
risk-adjusted returns · Enhance and restrictions
for shareholders progress
(e.g. optimising pipeline · We obtained a
clusters, progressing schemes to final grant of
re-zonings) improve planning for 152,000
potential sq. ft.
returns redevelopment of
Clanwilliam Court
· Assess timing
of upcoming · We continue to
projects in assess our upcoming
light of market schemes in the
conditions current market
· Assess · We are assessing
existing in-place portfolio
in-place for future
portfolio for opportunities
future
value-add
opportunities
3) Continue to · Continue to · &euro3.8m deployed
recycle capital and seek to dispose in two acquisitions
make selective of assets which adjacent to existing
investments to do not meet our Hibernia assets
enhance Group returns expectations
for forward · &euro25m share
returns buyback programme
launched in Aug-20.
· Make At end Sep-20, 8.1m
acquisitions or shares purchased at
investments an average price of
where we see &euro1.11. The
opportunities programme completed
to enhance in Nov-20 at which
Group returns point 23.1m shares
in the medium had been acquired at
term an average price of
&euro1.08
4) Maintain balance · Maintain · At end Sep-20 cash
sheet flexibility to sufficient cash and undrawn
take advantage of and undrawn facilities were
investment facilities for &euro130m or
opportunities as they any investment &euro103m net of
arise opportunities committed
that arise expenditure
· Ensure level · The Group has
of indebtedness significant headroom
does not bring on all its financial
the Group close covenants (please
to breaching see Financial Review
any of the for further details)
financial
covenants in
its debt
facilities
5) Continue to · Reduce energy · New real-time
improve environmental consumption and energy monitoring
efficiency of the GHG emissions system installed and
portfolio per square operational: this is
metre on LFL expected to help
and absolute reduce consumption
basis
· On track for LEED
· Achieve LEED Platinum in 2
Platinum Cumberland Place
certification
at 2 Cumberland · Working on revised
Place Sustainability
Strategy
· Revise
Sustainability
Strategy
Disposals and acquisitions
Given the public health-related restrictions and associated market conditions, it was a quiet six-month
period for investment activity across the Irish property market. We made no disposals (H1 2020: none) and
invested &euro3.8m in two smaller acquisitions, both of which are adjacent to existing Hibernia assets and
are "bolt-on" in nature (H1 2020: &euro17.6m). We continue to review opportunities though we will be
disciplined in pursuing these, assessing them against investment in the material development opportunities
within our portfolio (see development section below for more details).
Portfolio overview
At 30 September 2020 the investment property portfolio consisted of 37 assets valued at &euro1,420.9m (March
2020: 36 assets valued at &euro1,465.2m) which can be categorised as follows:
Value as % of Equivalent Passing Contracted ERV
at port yield1 rent rent
foli
o
September
2020*
(all
assets)
1. Dublin CBD offices
Traditional &euro413m 29% 5.1%2 &euro22.3m &euro22.3m &euro23.1m
Core
IFSC &euro191m 13% 4.8% &euro8.3m &euro8.3m &euro11.0m
South Docks &euro540m3 38% 4.4% &euro26.1m &euro26.1m &euro27.5m
Total &euro1,145 81% 4.7%2 &euro56.7m &euro56.7m &euro61.7m
Dublin CBD m3
offices
2. Dublin &euro56m 4% - - &euro1.5m &euro3.6m
CBD office
development
s4
3. Dublin &euro164m6 12% 4.1%7 &euro6.3m7 &euro6.3m7 &euro6.8m7
residential
5
4. &euro56m 4% 3.2%8 &euro1.8m &euro2.0m &euro2.0m
Industrial/
land
Total &euro1,421 100% 4.6%2,7,8 &euro64.8m7 &euro66.5m7 &euro74.1m7
m3,6
Note: Per RICS and SCSI guidance, C&W have highlighted material uncertainty in their Sep-20 valuations due
to COVID-19. This applies to all assets other than our residential assets (Mar-20: all assets including
residential).
1) Yields on unsmoothed values and excluding the adjustment for 1WML owner-occupied space.
2) Harcourt Square, Clanwilliam Court and Marine House yields are calculated as the passing rent over the
total value (after costs) which includes residual land value. Excludes Iconic Offices in Clanwilliam
Court.
3) Excludes the value of space occupied by Hibernia in 1WML.
4) 2 Cumberland Place and 50 City Quay.
5) Includes 1WML residential element (Hanover Mills).
6) Valuation assuming 80% net-to-gross and purchaser costs as per C&W at Sep-20.
7) Residential income on net basis assuming Hibernia cost.
8) Current rental value assumed as ERV as these assets are valued using a combination of price per acre
and on an income basis.
Note: differences in summation of totals in above table are due to rounding.
The key statistics of our office portfolio, which comprised 81% of our overall investment property portfolio
by value at 30 September 2020 and 85% by contracted rent (March 2020: 82% and 88%, respectively), are set
out below. The WAULT to break/expiry of our completed developments (the majority of our office income) is
over 8.5 years. By comparison, our acquired office assets have a WAULT to break or expiry of just over three
years with those assets in our near term development pipeline (primarily Marine House, Clanwilliam Court and
Harcourt Square) having a WAULT of under two years: this is to facilitate future redevelopment activity.
Contracted ERV WAULT WAULT % % % of
rent to to of of rent
review break/e ren nex MTM2
1 xpiry t t at
upw ren next
ard t leas
s rev e
onl iew even
y cap t
&
col
lar
1. Acquired &euro25.5m &euro26.1m 2.0yrs 3.2yrs 16% - 84%
in-place (&euro47psf) (&euro48psf)
office
portfolio
&euro9.9m &euro9.9m
Development
pipeline 1.7yrs 1.7yrs - - 100%
assets (&euro42psf) (&euro42psf)
Investment &euro15.5m &euro16.1m
assets
2.1yrs 4.1yrs 26% - 74%
(&euro51psf) (&euro52psf)
2. &euro31.3m &euro31.1m 2.4yrs 8.6yrs - 29% 71%
Completed (&euro54psf) (&euro54psf)
office
development
s3
Whole &euro56.7m &euro57.1m 2.2yrs 6.1yrs 7% 16% 77%
in-place (&euro51psf) (&euro51psf)
office
portfolio
3. &euro1.5m &euro1.4m 5.0yrs 10.0yrs 0% 0% 100%
Committed
office-let6
(&euro61psf) (&euro59psf)
Total &euro58.2m &euro58.6m 2.3yrs 6.2yrs 7% 15% 78%
office
portfolio
(&euro51psf) &euro51psf)
4. Vacant - &euro4.5m4 - - - - -
in-place (&euro48psf)
office
5. - &euro2.2m - - - - -
Committed (&euro55psf)
office-unle
t5
Whole - &euro65.2m - - - - -
in-place (&euro51psf)
office
portfolio
(after
vacancy)
1) To earlier of review or expiry.
2) Mark-to-market.
3) 1 Cumberland Place, SOBO Works, 1&2DC, 1WML, 2WML, 1SJRQ.
4) Includes approx. &euro140k of retail in office buildings.
5) 2 Cumberland Place and 50 City Quay
6) In Apr-20 3M signed a pre-lease in 2 Cumberland Place
Since 31 March 2020 Group contracted rent has increased by &euro0.8m (+1%) to &euro66.5m, with the main
driver being the pre-let to 3M in 2 Cumberland Place, which outweighed the loss of income from the expiry of
some leases in Marine House. The vacancy rate of the in-place office portfolio, which was 7% by lettable
area in March 2020, remained 7% at 30 September 2020, excluding Marine House and Clanwilliam Court which we
expect to redevelop in the near term: including these two assets it rose to 10% at 30 September 2020. For
further details on the vacant space and the increase in contracted rent, please refer to the asset
management section below and for further details on our plans for Marine House and Clanwilliam Court please
see the development section below.
At 30 September 2020 our ten largest tenants, all of which are large, multinational companies or
government/state entities, accounted for 55% of our contracted portfolio rent of &euro66.5m. By sector,
technology and government/state entities accounted for 60% of contracted portfolio rent (please see the
selected portfolio information on pages 17 to 18). The composition of our tenant base, in particular the
amount of large, well-capitalised technology companies and government/state entities gives us comfort
regarding its resilience and as noted elsewhere in this document, our rent collection statistics have
remained strong during the COVID-19 crisis.
Portfolio performance
In the six months ended 30 September 2020 the portfolio value decreased &euro56.3m, or 3.8% on a
like-for-like basis (i.e. excluding acquisitions, disposals and capital expenditure). The majority
(&euro47.2m) of the valuation decline came in the quarter ended June 2020 (Q1 FY21) as the initial impact of
COVID-19 was reflected.
Value at Capex Acquis-itions Q1 Q2 Value at L-f-L change
March 1 Revaluatio Revaluatio September
2020* n n 2020*
(all (all
assets) assets)
Traditional &euro435m (&euro0.2m) - (&euro18m) (&euro4m) &euro413m (&euro21m) (4.9%)
core
IFSC &euro205m - - (&euro8m) (&euro6m) &euro191m (&euro14m) (6.6%)
South Docks &euro5552 &euro0.5m &euro3.4m (&euro13m) (&euro5m) &euro540m2 (&euro18m) (3.2%)
1. Total &euro1,19 &euro0.3m &euro3.4m (&euro38m) (&euro15m) &euro1,145 (&euro52m) (4.4%)
Dublin CBD 4m2 m2
offices
2. Dublin &euro51m &euro8.4m - (&euro3m) (&euro0m) &euro56m (&euro3m) (5.1%)
CBD office
development
s
3. Dublin &euro159m &euro0.1m &euro0.4m (&euro2m) &euro6m &euro164m &euro4m 2.6%
residential
4. &euro61m - - (&euro4m) (&euro1m) &euro56m (&euro5m) (8.4%)
Industrial/
land
Total &euro1,46 &euro8.8m &euro3.8m (&euro47m) (&euro10m) &euro1,421 (&euro56m) (3.8%)
5m2 m2
1) Including acquisition costs.
2) Excludes the value of space occupied by Hibernia in 1WML.
Note: At Sep-20, 50 City Quay was undergoing a substantial refurbishment and so it was moved from South
Docks to Dublin CBD Office Developments.
*Note: In the Mar-20 valuation C&W included a material uncertainty clause for all assets valued, in line
with RICS guidance. This is intended to indicate that less certainty and a higher degree of caution should
be ascribed to the valuations than would normally be the case due to the impact of COVID-19. In the Sep-20
valuation C&W removed the material uncertainty clause for assets within the "Dublin residential" group.
The valuation movements in the office portfolio in the six-month period were mainly driven by the following:
· Yields: While yields on our most prime offices / future offices (1SJRQ, Harcourt Square, Clanwilliam
Court and Marine House) remained unchanged, yields on all other offices in the portfolio moved out between
5bps and 20bps; and
· ERVs: While headline office ERVs remained unchanged in the period, an additional three months' rent free
(over an assumed 10-year term) was included in the net effective ERVs resulting in a c. 3% reduction in
net effective rents across the office portfolio.
The largest individual valuation movements by value in the six-month period were:
· 1&2 Dockland Central, IFSC: 5.2% reduction in value as a result of a decrease in the assumed net
effective rent and an increase in the valuation yield of 15bps;
· 1 Cumberland Place, Traditional Core: 5.3% reduction in value due to a combination of the valuation
yield increasing by 15bps and the net effective ERV decreasing. The average headline ERV remained constant
at &euro53.75psf;
· Harcourt Square, Traditional Core: 6.7% reduction due to a reduction in the value of the current
contracted income as the unexpired term decreases, higher capital expenditure estimates for the
development due to assumed cost inflation and a 3% reduction in the estimated gross development value due
to a lower net effective ERV. The average headline ERV on the planned scheme remained constant at
&euro56.25psf;
· 1WML, South Docks: 3.4% reduction in value due to a combination of the valuation yield increasing by
5bps and the net effective ERV decreasing. The average headline ERV remained constant at &euro58.00psf;
· Forum, IFSC: 11.6% reduction in value due to a &euro2.50psf reduction in the headline ERV to
&euro47.00psf and an increase in the assumed capital expenditure required to upgrade the office
accommodation. The yield on the office was also increased by 10bps and on the car parking space by 20bps;
and
· Wyckham Point and Dundrum View, Residential: 3.3% increase in value as a result of a small increase in
contracted rent whilst valuation yields were reduced by 10bps over the period.
Developments and refurbishments
As previously announced, Gerard Doherty succeeded Mark Pollard as Director of Development following Mark's
retirement at the end of June 2020: Mark continues to work with us on a part-time basis. Capital expenditure
on developments in the period was &euro8m (September 2019: &euro9m) and related almost entirely to 2
Cumberland Place, our main active development. In August 2020 work started at 50 City Quay, a small
refurbishment project in the Windmill Quarter. Both active schemes are expected to be completed by early
2021 and will deliver a total of 62,500 sq. ft. of Grade A office space, 38% of which is pre-let. In the
period we also received a final grant of planning for the redevelopment of Clanwilliam Court. This means the
three major office schemes in our development pipeline now have full planning permission to deliver 539,000
sq. ft. of Grade A office space, starting in early 2022 (Marine House & Clanwilliam Court) and early 2023
(Harcourt Square).
Committed development schemes
Construction is nearing completion at 2 Cumberland Place, with delivery expected in January 2021. 24,000 sq.
ft. in the 58,000 sq. ft. building was pre-let to 3M Digital Science Community Ltd, a subsidiary of 3M
Company, in April 2020. The health protocols brought in since work on sites in Ireland was allowed to
restart in May 2020 have presented some logistical challenges for the contractors but no material delays or
cost overruns are expected and work has been able to continue since the re-introduction of the highest level
of COVID-19 restrictions in Ireland in October 2020. In August 2020 work commenced on the refurbishment of
50 City Quay. The 4,500 sq. ft. office building is situated in the Windmill Quarter, adjacent to 1SJRQ and
faces the River Liffey. The development work is expected to complete in January 2021.
Please see further details on the schemes below:
Total Full Est. Capex Est. total ERV1 Office ERV1 Expected
area purchase capex to cost (incl. practica
post price complet land) l
compl e completi
etion on
(sq. ("PC")
ft.) date
2 58k &euro0m3 &euro35m &euro8m &euro605psf4 &euro3.3m &euro56.53psf Q1 2021
Cumbe offic
rland e2
Place
, D2
1k
retai
l/caf
é
50 4.5k &euro3m &euro1m &euro1m &euro935psf &euro0.3m &euro55.00psf Q1 2021
City
Quay,
D2
Total 62.5k &euro3m3 &euro36m &euro9m &euro617psf &euro3.6m &euro56.42psf
commi offic
tted e2
1k
retai
l/caf
é
1) Per C&W headline office ERV at Sep-20.
2) In Apr-20, 24,000 sq. ft. (41%) was pre-let to 3M on a 10-year lease
3) The site forms part of Cumberland Place and at the time of acquisition of Cumberland House no value was
ascribed to it.
4) Office demise only.
Development pipeline
We have received a final grant of planning from An Bord Pleanála, the planning appeals board, for the
152,000 sq. ft. redevelopment of Clanwilliam Court after Dublin City Council's initial planning approval was
the subject of a third party appeal. This means we have planning permission now for the three main office
projects in our current development pipeline, Marine House, Clanwilliam Court and Harcourt Square. Together
these schemes can deliver 539,000 sq. ft. of Grade A office space in Dublin's Traditional Core, a net
increase of nearly 283,000 sq. ft. and a 25% increase in the size of our current in-place office portfolio.
We are also assessing the longer-term redevelopment potential of certain other assets within the portfolio.
We can start the redevelopment of Marine House and Clanwilliam Court from early 2022 when the existing
leases expire (i.e. in a little over 12 months' time) and we can start the redevelopment of Harcourt Square
from early 2023 (i.e. in a little over 24 months' time). All three schemes should be profitable under most
market conditions: based on the planning approvals we have in place, the valuations of the three properties
at 30 September 2020 (which include the present value of the income remaining on the leases) equate to
aggregate capital values of &euro303[5] per buildable sq. ft. and the estimated capital expenditure required
to deliver the schemes is &euro550 per buildable sq. ft., an all-in cost of &euro853 per buildable sq.
ft.[6].
We continue to hold 154.3 acres of land with potential for mixed-use development schemes in the longer term:
re-zoning will be necessary in all cases and consequently the timing of any future developments remains
uncertain at present.
Office Sector Current Area Full Comments
area post purchase
compl price1
etion
(sq. (sq.
ft.) ft.)
Marine House Office 41k 50k &euro30m
· Full
plannin
g
granted
for
refurbi
shment
and
extensi
on of
Marine
House
to
provide
50k sq.
ft. of
office
accommo
dation
(+22%
on
existin
g area)
· Lower
ground
floor
plannin
g
applica
tion
approve
d in
Aug-20
which
added
approx.
1.5k
sq. ft.
(includ
ed
within
50k sq.
ft.)
·
Ability
to
obtain
vacant
possess
ion in
2021
Clanwilliam Office 93k 141k &euro59m
Court offic
e ·
Redevel
opment
opportu
11k nity
ancil post
lary 2021
·
Potenti
al to
increas
e the
existin
g NIA
by 63%
and
create
an
office
cluster
similar
to
Windmil
l
Quarter
(with
Marine)
· Final
plannin
g grant
receive
d
Aug-20
Harcourt Office 122k 337k &euro77m
Square offic
e ·
Leased
to OPW
until
Dec-22
· Site
offers
potenti
al to
create
cluster
of
office
buildin
gs with
shared
facilit
ies or
a major
HQ
·
Plannin
g
granted
for
337k
sq. ft.
of
offices
(343k
incl.
recepti
on
areas),
+9%
over
previou
s
plannin
g and
+176%
over
existin
g area
One Office 22k 28k &euro20m
Earlsfort
Terrace ·
Current
plannin
g
permiss
ion for
two
extra
floors
(6k sq.
ft.),
expirin
g
Jul-21
·
Potenti
al for
redevel
opment
as part
of
wider
Earlsfo
rt
Centre
scheme
Total office &euro186m
& ancillary
278k 567k
Mixed-use Sector Current Area Full Comments
area post purchase
(sq. compl price1
ft.) etion
(sq.
ft.)
Newlands Logistics/ land 143.7 n/a &euro48m2
(Gateway) acres
·
Strateg
ic
transpo
rt
locatio
n
·
Potenti
al for
future
mixed-u
se
redevel
opment
subject
to
re-zoni
ng
Dublin Logistics 119k on n/a &euro11m
Industrial
Estate ·
Strateg
6.8 ic
acres transpo
rt
locatio
n
·
Potenti
al for
future
mixed-u
se
develop
ment
subject
to
re-zoni
ng
Malahide Logistics 66k n/a &euro8m
Road warehous
Industrial e & 17k ·
Park office Potenti
on 3.8 al for
acres future
mixed-u
se
develop
ment
subject
to
re-zoni
ng
Total &euro67m
mixed-use
154.3 n/a
acres
1) Including transaction costs and capex spent to date.
2) Initial consideration.
Asset management
Net capital expenditure on maintenance items amounted to &euro0.6m in the financial period or &euro0.4m net
of refunds (2019: &euro0.3m). Contracted rent increased by &euro0.8m (1%) to &euro66.5m (March 2020:
&euro65.7m) as a result of:
· A pre-let adding &euro1.5m;
· Rent reviews concluded and lease variations adding &euro0.2m;
· Acquisitions adding &euro0.1m; and
· Lease expiries, breaks, surrenders and adjustments reducing contracted rent by &euro1.0m.
Some other key statistics at 30 September 2020:
· The vacancy rate in the in-place office portfolio was 7% based on lettable area (March 2020: 7%) and
this available space had an ERV of &euro3.9m, excluding retail and parking (March 2020: &euro4.0m).
Including Marine House and Clanwilliam Court, where the leases are being allowed to expire to enable
redevelopment, the vacancy rate was 10%;
· Average rent across the in-place office portfolio was &euro51psf (March 2020: &euro50psf) and the ERV
was also &euro51psf (March 2020: &euro51psf);
· Five office rent reviews were active over 62,500 sq. ft. of office space, with a modest (&euro1m) uplift
in contracted rent expected (March 2020: two rent reviews active over 30,000 sq. ft. with a <&euro1m
uplift expected); and
· Please see page 16 in the Financial Review for rent collection statistics, which remain strong.
Summary of letting activity in the period
Offices:
· One pre-let on 24,000 sq. ft., adding gross rent of &euro1.5m per annum, or &euro0.5m per annum net of
expiries, breaks, surrenders and adjustments on let or licensed space. The term certain of the new lease
is 10 years.
Industrial:
· One rent review concluded over 22,000 sq. ft. and 12-month lease extensions signed over 155,000 sq. ft.,
increasing contracted rent by &euro0.2m per annum.
Residential:
· Letting activity and lease renewals on our 332 residential units added incremental annual rent of
&euro0.1m; and
· All let units are subject to the rental cap regulations.
Summary of letting activity since period end
Offices:
· One letting on 12,000 sq. ft., generating &euro0.6m per annum of incremental rent, or &euro0.2m net of
an existing lease to the same tenant in a different property with a short unexpired term which is being
cancelled. The period to expiry for the new lease is 10 years.
Key asset management transactions by property
· Central Quay, South Docks: In November 2020 we agreed to let 12,000 sq. ft. to Hines Real Estate Ireland
Limited ("Hines") on a long lease on terms in line with the June 2020 ERV. Hines currently occupies 8,000
sq. ft. in Clanwilliam Court and its lease there will be terminated. Hines is expected to take occupation
in early 2021 and the move will result in a net increase in Hibernia's contracted annual rent of
&euro0.2m. Separately, Invesco has served notice to exercise a break option on its lease on 11,000 sq. ft.
in the building with effect from November 2021 - this will result in a 12 month rental penalty;
· 2 Cumberland Place, Traditional Core: construction of the 58,000 sq. ft. office building is approaching
completion (see further details above). In April 2020 we agreed to lease 24,000 sq. ft. to 3M Digital
Science Community Ltd, a subsidiary of 3M Company, on a 10 year lease on terms ahead of the September 2019
ERV;
· Gateway, D22/24: In July we agreed lease extensions for two of the terminals to July 2021 and we have
agreed a rent review on another unit of the site, which is also let on short term rolling leases. In total
these agreements have increased our contracted rent by &euro0.2m per annum;
· Marine House, Traditional Core: Most of the leases in the 41,000 sq. ft. office building expired in June
2020. We have taken the decision to offer short term lease arrangements to align with the neighbouring
blocks in Clanwilliam Court, where leases mostly expire in late 2021 or early 2022. At present Marine
House is 46% occupied, generating rent of &euro0.6m per annum; and
· Flexible workspace arrangement: the flexible workspace arrangement with Iconic Offices in 21,000 sq. ft.
of Block 1, Clanwilliam Court continued to trade profitably, though occupancy has reduced since March
2020. 77% of workstations were occupied at 30 September 2020 (c. 90% of revenue from the arrangement) and
62% of the available co-working memberships were contracted at the same date.
Key in-place office properties with vacancy at period end
As noted above, the in-place office portfolio vacancy rate at 31 March 2020 was 7% and it remained at this
level at 30 September 2020, excluding Marine House and Clanwilliam Court, where leases are being run down to
facilitate their redevelopment in the near term. Including Marine House and Clanwilliam Court the office
vacancy rate at 30 September 2020 was 10%. The main office investment assets with vacancy are:
· Central Quay, South Docks: 25,500 sq. ft. of office accommodation was available to lease at 30 September
2020: since then we have leased 12,000 sq. ft. to Hines, which will move from 8,000 sq. ft. in Clanwilliam
Court in early 2021;
· The Forum, IFSC: all 47,000 sq. ft. of office accommodation and 50 car parking spaces are available to
lease; and
· Other: 11,000 sq. ft. of available space.
Future rent reviews, break options and lease expiries
The table below summarises upcoming rent reviews and lease expiries by financial year, as well as setting
out the ERVs for this space, as at 30 September 2020. As noted in the footnote below, only a relatively
small amount of income, &euro5.7m, is subject to break options over the next five years.
Current income ERV @ Sep-20
FY Expiries All other Rent review Expiries All other Rent review
for near lease for near lease
term expiries term expiries
developme developme
nt nt
Mar-21 &euro0.7m &euro0.1m &euro4.5m &euro0.7m &euro0.1m &euro5.5m
Mar-22 &euro3.2m &euro0.1m &euro11.6m &euro3.2m &euro0.1m &euro11.9m
Mar-23 &euro6.0m &euro0.7m &euro8.8m &euro6.0m &euro0.5m &euro8.3m
Mar-24 - &euro3.3m &euro3.5m - &euro3.3m &euro3.5m
Mar-25 - &euro2.8m &euro11.0m - &euro2.8m &euro10.8m
Total &euro9.9m &euro7.0m &euro39.4m1 &euro9.9m &euro6.8m &euro40.0m1
Note: The table above shows upcoming rent reviews and expiries: break options amount to an additional
&euro5.7m over the period to Mar-25.
1. &euro9.0m of this income is capped & collared at next review and a further &euro4.0m is subject to upward
only rent review provisions.
Sustainability
Improving our sustainability performance is a key strategic priority. In the three years to December 2019,
we achieved a reduction of over 25% in greenhouse gas emissions intensity from landlord-obtained utilities
in our managed offices on a like-for-like basis and a reduction of over 20% on an absolute basis. Neil
Menzies joined us as full-time Sustainability Manager in January 2020 and since then we have installed a
system to enable us to monitor the energy consumption of the managed areas of our office buildings in
real-time. We expect this will help us to reduce our greenhouse gas emissions intensity further. In the
period we received our third successive EPRA Gold Award for the quality of our sustainability performance
disclosures. We also submitted our GRESB 2020 Assessment and, for the first time, a climate change
questionnaire to CDP: we expect the results of both submissions shortly. Along with improving the operating
efficiency of our assets our major area of focus at present is on assessing pathways towards net zero carbon
emissions and considering the disclosure recommendations of the TCFD.
Financial review
As at 30 September 2020 31 March 2020 Movement
IFRS NAVPS 172.5c 179.8c (4.1)%
EPRA NTAPS1 171.9c 179.2c (4.1)%
Net debt1 &euro265.3m &euro241.4m 9.9%
Group LTV1 18.7% 16.5% 2.2pp
Six-month period 30 September 2020 30 September 2019 Movement
ended
(Loss) / profit (&euro34.2m) &euro25.5m (234.2)%
after tax
EPRA earnings1 &euro22.4m &euro19.3m 16.4%
Diluted IFRS EPS (5.0)c 3.7c (235.7)%
EPRA EPS1 3.3c 2.8c 17.6%
Interim DPS1 2.0c 1.75c 14.3%
1. An alternative performance measure ("APM"). The Group uses a number of such financial measures to
describe its performance, which are not defined under IFRS and which are therefore considered APMs. In
particular, measures defined by EPRA are an important way for investors to compare similar real estate
companies. For further information see Supplementary Information at the end of this report.
The key drivers of the 7.3 cent decrease in EPRA NTA per share since 31 March 2020, were:
· An 8.3 cent per share reduction due to revaluation losses on the property portfolio, including a 0.4
cent per share reduction from active developments: 6.9 cent of these revaluation losses came in the
quarter ended June 2020;
· A 3.3 cent per share increase from EPRA earnings;
· Payment of the FY20 final dividend, which reduced NTA by 3.0 cent per share; and
· Other items, primarily the share buy-back, which increased NTA by 0.7 cent per share;
EPRA earnings were &euro22.4m, up 16.4% compared with the first six months of the prior financial year due
to:
· A &euro3.4m increase (+12.0%) in net rental income to &euro32.0m (2019: &euro28.6m), primarily as a
result of having a full period of income from several leases which commenced in the prior financial year.
These included leases within our completed office developments (e.g. 1SJRQ, 2WML) and leases in our office
investment assets (e.g. South Dock House, Observatory). The increase as a result of these new leases was
partly offset by some lease expiries (e.g. Marine House); and
· A &euro0.3m increase (+3.1%) in overall costs (including finance expenses) to &euro10.8m (2019:
&euro10.5m) mainly due to increased finance costs as a result of the larger drawn debt position and a
modest increase in expected credit losses as a result of COVID-19.
The Group recorded an after tax loss of &euro34.2m in the period, a reduction of 234.2% over the same period
last year, due to revaluation losses on the investment property portfolio of &euro56.9m (2019: revaluation
gain of &euro6.3m).
Funding position
Group leverage target: our through-cycle target remains a loan to value ratio of 20-30%.
The Group's debt funding is fully unsecured and comprises a revolving credit facility ("RCF") and private
placement notes. The weighted average maturity of the Group's debt at 30 September 2020 was 3.8 years (March
2020: 4.4 years) and no debt is due before December 2023. Please see the table below for further details.
Instrument Quantum Maturity date Interest cost Security
Revolving &euro320m December 2023 2.0% over Unsecured
credit facility EURIBOR on
(five year) drawn funds
0.8% undrawn
comm't fee
(fixed)
Private &euro37.5m January 2026 2.36% coupon Unsecured
placement notes (fixed)
(seven year)
Private &euro37.5m January 2029 2.69% coupon Unsecured
placement notes (fixed)
(ten year)
Total &euro395m
At 30 September 2020, net debt was &euro265.3m (March 2020: &euro241.4m), equating to an LTV of 18.7% (March
2020: 16.5%). The main capital expenditure items increasing the net debt in the period were development
expenditure of &euro8.4m, gross acquisition expenditure of &euro3.8m and the share buyback of &euro9.0m (see
further details elsewhere in this report). Cash and undrawn facilities at 30 September 2020 amounted to
&euro130m or &euro103m, net of committed expenditure (March 2020: &euro154m and &euro136m, respectively).
Assuming full investment of the available facilities in property, the LTV, based on market values at 30
September 2020, would be c. 26%.
The Group has significant headroom on the financial covenants on its borrowings: the table below outlines
the principal financial covenants and the headroom above each as at 30 September 2020.
Key covenant Calculation Requirement At 30 Headroom to
Sep-20 covenant limit
Loan to Gross debt / <50% 19.9%1 Portfolio
value (portfolio value would
value + cash) have to fall
61% before
breach (March
2020: 65%)
Interest Underlying >1.5x 6.7x2 Underlying
cover ratio EBIT / total EBIT would
finance costs have to fall
78% before
breach (March
2020: 76%)
Net worth Net Asset >&euro400m &euro1,16 Net Asset
Value 7m Value would
have to fall
66% before
breach (March
2020: 68%)
1) Reported LTV is calculated as net debt/portfolio value, giving 18.7%.
2) Based on 12-month historic interest cover at 30 September 2020.
Interest rate hedging
Group hedging policy: to ensure the majority of the interest rate risk on drawn debt balances is fixed or
hedged.
At 30 September 2020 the Group had &euro75m of fixed coupon private placement notes (2019: &euro75m) and the
interest rate risk on the RCF drawings of &euro213m (2019: &euro167m) was mitigated by hedging instruments
covering &euro125m of notional exposure (2019: &euro225m) as set out below. This means 59% of the interest
rate risk on the RCF drawings was hedged (2019: 135%) and 69% of the Group's overall interest rate risk on
its debt was fixed or hedged (2019: 124%). The "over-hedged" position at 30 September 2019 was a short-term
effect that ceased in November 2019 and gave no additional financial risk to the Group.
Instrument Notional Strike Exercise Effective Termination
rate date date date
Cap &euro125m 0.75% n/a February December
2019 2021
Swaption &euro125m 0.75% December December December
2021 2021 2023
Capital management
In August 2020, given the prevailing share price, we announced a &euro25m share buyback programme to
complete the return to shareholders of the proceeds of the sale of 77 Sir John Rogerson's Quay which started
with the &euro25m share buyback programme undertaken in 2019. At 30 September 2020 8.1m shares had been
repurchased and cancelled for aggregate consideration of &euro9.0m, an average purchase price per share of
&euro1.11. On 16 November 2020 the &euro25m share buyback programme was completed, at which point 23.1m
shares had been repurchased and cancelled at an average purchase price per share of &euro1.08. The buyback
programme was accretive to EPRA NTAPS and EPRA EPS and the effects of this will be seen particularly in the
second half of the current financial year and beyond.
Rent collection
Our tenants are important stakeholders in our business and we have been working closely with them to offer
support, where needed, in the current circumstances.
Commercial tenants[7]
As can be seen from the table below, our commercial rent collection has remained strong in recent quarters.
At 16 November 2020, 95% of rent due for the quarter ending December 2020 had been received, or 98.5%
including monthly rent not yet due.
Commercial rent Quarter ending Quarter ended Quarter ended
Sep-20 (Q2 Jun-20 (Q1
FY21) FY21)
Dec-20 (Q3
FY21)
Rent received
Within seven days 90% 87% 89%
Within 14 days 90% 90.5% 89%
Within 30 days 93% 90.5% 90%
Within 60 days 95% 95% 93.5%
Rent received at 95% 99% 96%
16 November 2020
Rent on payment
plans
3.5% - -
Monthly rent not
yet due
Rent deferred - - 3%*
Rent on payment 3.5% - 3%
plans at 16
November 2020
Rent unpaid
Rent due 0.5% 0.5% 0.5%
Rent waived 1.0% 0.5% 0.5%
Rent unpaid at 16 1.5% 1% 1%
November 2020
*Due to be paid in full by July 2021
Residential tenants[8]
At close of business on 16 November 2020, 98% of the rent due for the month of November had been received
and the occupancy rate in our residential units was 96%. At the same point in September and October,
respectively, 97% and 99% of that month's contracted rent had been received and the occupancy rate was 95%
in both cases. We have now received over 99% of September rent and over 99% of October rent.
Dividend
Group dividend policy: to distribute 85-90% of rental profits via dividends each financial year, in
compliance with the requirement of the Irish REIT legislation to distribute at least 85%. The interim
dividend in a financial year will usually be 30-50% of the total ordinary dividends paid in respect of the
prior financial year.
The Board has declared an interim dividend of 2.0 cent per share, to be paid on 28 January 2021 to
shareholders on the register on 8 January 2021. The interim dividend has been increased 14.3% on prior year
(2019: 1.75 cent) following the continued growth in rental profits and represents 61% of EPRA EPS for the
period and 42% of the total dividends paid in respect of the prior financial year of 4.75 cent per share.
The whole dividend will be a Property Income Distribution in respect of the Group's property rental
business, as defined under the Irish REIT legislation.
Hibernia's Dividend Reinvestment Plan ("DRiP") is available to shareholders and allows them to instruct
Link, the Group's registrar, to reinvest the cash dividends paid by Hibernia in the purchase of existing
ordinary shares in the Company. The terms and conditions of the DRiP and information on how to apply are
available on the Group's website.
Selected portfolio information
1. Summary EPRA measures
EPRA performance Unit Six months Six months ended
measure ended 30 30 September 2019
September 2020
EPRA earnings &euro'000 22,439 19,284
EPRA EPS cent 3.3 2.8
Diluted EPRA EPS cent 3.3 2.8
EPRA cost ratio - % 21.3% 23.3%
including direct
vacancy costs
EPRA cost ratio - % 19.9% 22.1%
excluding direct
vacancy costs
EPRA performance Unit As at 30 As at 31 March
measure September 2020 2020
EPRA net initial % 4.5% 4.1%
yield ("NIY")
EPRA "topped-up" NIY % 4.5% 4.4%
IFRS NAV &euro'000 1,167,061 1,231,149
IFRS NAV per share cent 172.5 179.8
EPRA net cent 191.0 199.5
reinstatement value
("EPRA NRV")
EPRA net tangible cent 171.9 179.2
assets ("EPRA NTA")
EPRA net disposal cent 170.9 177.9
value ("EPRA NDV")
EPRA NAV per share cent 172.0 179.3
(old measure)
EPRA NNNAV per share cent 171.3 178.3
(old measure)
EPRA vacancy rate % 8.1% 6.9%
Adjusted EPRA % 7.5% 6.9%
vacancy rate
Note: These EPRA measures are APMs. EPRA has introduced new net asset value measures for reporting periods
starting after 1 January 2020. Please see Supplementary Information at the end of this report for further
details.
2. Top 10 tenants by contracted rent and % of contracted rent roll1
Top 10 tenants &eurom % Sector
1 HubSpot Ireland Limited 10.5 16% Technology
2 OPW 6.0 9% State entity
3 Twitter International 5.1 8% Technology
Company
4 Zalando 2.9 4% Technology
5 Autodesk Ireland 2.8 4% Technology
Operations
6 Informatica Ireland 2.1 3% Technology
EMEA
7 Riot Games 2.0 3% Technology
8 Travelport Digital 1.8 3% Technology
Limited
9 BNY Mellon Fund 1.6 2% Banking and capital
Services markets
10 Commission for 1.6 2% State entity
Communications
Regulation
Top 10 tenants 36.5 55%
Remaining tenants 30.0 45%
Whole portfolio 66.5 100%
1. Includes net residential rents and excludes income from joint arrangement with Iconic Offices in
Clanwilliam Court.
3. Contracted rent by tenant type
Sector &eurom %
Technology 29.9 45%
Government/state entity 9.9 15%
Banking and capital markets 7.4 11%
Professional services 3.8 6%
Media and telecommunications 2.3 3%
Insurance and reinsurance 1.7 3%
Serviced offices 0.5 1%
Other (incl. industrial) 4.7 7%
Residential 6.3 9%
Total 66.5 100%
4. In-place office contracted rent and WAULT progression
Sep-19 Movement Mar-20 Movement Sep-20
to Mar-20 to Sep-20
All office &euro54.3m 6% &euro57.7m 1% &euro58.2m
contracted
rent1
In-place &euro54.3m 6% &euro57.7m -2% &euro56.7m
office
contracted
rent1
In-place 6.9yrs -7% 6.4yrs -5% 6.1yrs
office
WAULT2
In-place 12% -5pp 7% - 7%4
office
vacancy3
1. Excl. arrangement with Iconic Offices at Block 1, Clanwilliam.
2. To earlier of break or expiry.
3. By net lettable office area. Office area only (i.e. excl. retail, basement, gym, Townhall etc.).
4. Excl vacancy in near term development properties - i.e. Marine and Clanwilliam. Including these the
vacancy rate would be 10%.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of risks and uncertainties which could have a significant impact on the Group's
performance and may cause actual results to differ materially from expected results. These risks are
reviewed and updated regularly and mitigated through a combination of internal controls, risk management and
insurance cover. The Group's risk management framework is described on pages 38 to 41 of the 2020 Annual
Report while the principal risks and uncertainties for the Group are set out on pages 42 to 50. These are
substantially unchanged since the publication of the 2020 Annual Report and the Group does not expect any
significant changes for the remaining six months of the financial year. These risks and uncertainties are
summarised, together with a short update where relevant, below.
COVID-19 pandemic: Multiple potential impacts across the business
A detailed discussion of the impact of the COVID-19 pandemic and our response to it can be found on page 15
of the 2020 Annual Report and an update is provided on page 6 of this Half Yearly Financial Report. The
Group's balance sheet remains robust (LTV at 30 September 2020: 18.7%) and its rental income has been
resilient to date: however while recent news on possible vaccines is promising, a high degree of uncertainty
still exists as to the duration of the COVID-19 pandemic and its ultimate effects and therefore this risk
remains a key focus of the Group.
Strategic risk: Inappropriate business strategy
We continue to monitor our strategy in light of economic trends, global developments and potential changes
in occupier behaviour post COVID-19. At present most of our tenants are primarily focused on the near-term
operational challenges COVID-19 has caused but when the pandemic subsides, they are likely to start
considering their longer-term occupational requirements. Our view, as expressed in this Half Yearly
Financial Report and in the 2020 Annual Report, is that the pandemic is accelerating pre-existing changes in
working patterns, such as more remote working, a greater focus on collaborative workspace within offices and
the increased importance being placed on employee wellness and buildings' sustainability credentials. We
also believe the crisis is emphasising the importance of offices for employee collaboration, creativity and
team culture and we continue to be positive about the long-term prospects for well-configured, prime offices
in Dublin's city centre and for residential rental properties. As such, we consider strategic risks to be in
line with those at 31 March 2020 and do not expect an increase in the second half of the financial year.
Climate change risk: Failure to respond appropriately and sufficiently to climate change
These risks are unchanged and are expected to remain so for the rest of the financial year. As expected, the
Government announced an increase in carbon taxes in Budget 2021 in October 2020. Improving the Group's
sustainability performance is one of our key strategic priorities: we have installed a real time energy
consumption monitoring system across our managed in-place office portfolio to help reduce our greenhouse gas
intensity. We recently received an EPRA Gold Award for the quality of our sustainability disclosures in 2020
(the third successive year) and expect to receive the results of our GRESB submission shortly. We made our
first submission to the CDP benchmark in August 2020. We are also continuing to assess pathways towards net
zero carbon emissions and considering the disclosure recommendations of the TCFD.
Market risks: Weakening economy / Negative impacts from political actions and/or trends nationally and
internationally
These risks remain broadly unchanged. COVID-19 has caused a slowdown in economic activity around the world
unprecedented in peacetime and the pace and timing of any recovery is unclear, both in Ireland and
internationally. Until there is a clear pathway for workers to return to their offices in meaningful
numbers, which is likely to coincide with a broader economic recovery, we do not expect to see a significant
recovery in the Dublin office market. The outcome of the negotiations between the UK and EU regarding a
trade deal when the transitional arrangements expire remains uncertain and could cause economic damage to
Ireland in the short term, even if the UK's exit from the EU may be beneficial for the Dublin office market
in the longer term. To date government and central bank actions in most countries, including Ireland, have
focused on providing stimuli to counteract the economic shock caused by the public health measures
introduced. At some point authorities may start raising tax rates to support the increased public spending
the crisis has necessitated. In addition, international tax reforms in future could impact Ireland's
attractiveness as a destination for foreign direct investment.
Investment risk: Inappropriate concentration on assets, locations, tenants or tenant sectors
These risks are unchanged. The Group's portfolio, all of which is located in Dublin, was worth &euro1.4
billion at 30 September 2020 (March 2020: &euro1.5 billion), with 85% comprising city centre offices, 12%
residential units and the remaining 3% industrial properties and land (March 2020: 85% offices, 11%
residential units, 4% industrial properties and land). The largest asset represents 11% of the portfolio by
value (March 2020: 11%). The Group's top 10 tenants account for 53% of gross contracted rent (March 2020:
54%), the technology sector and state entities account for 60% of gross contracted rent and the single
largest tenant is HubSpot, which accounts for 15% of gross contracted rent (March 2020: 57% and 16%,
respectively).
Development risks: Poor or mistimed execution of development projects / Contractor or sub-contractor default
These risks also remain unchanged. At 30 September 2020 we had two committed schemes, totalling 62,500 sq.
ft. of offices of which 24,000 sq. ft. is pre-let. (March 2020: One committed scheme totalling 59,000 sq.
ft., none let). The remaining committed capital expenditure on these schemes amounts to &euro9m and both are
due to complete before the end of the current financial year. The Group's development pipeline is flexible
and plans for individual properties can be changed to reflect prevailing economic circumstances.
Regulatory, tax and political risk: Management of tax and changes to tax status or environment
These risks remain largely unchanged and there were no material changes to property taxes or the REIT regime
announced as part of Budget 2021 in October 2020. Compliance with the REIT legislation is monitored by the
Board on a quarterly basis and there have been no breaches in the period.
Operations risks: Disruption from external event / Cyber-attack or threat / Loss or shortage of staff to
execute our business plan or failure to motivate staff / Reputational damage
No significant incidents have occurred since the start of the period and no material change in these risks
is expected for the rest of the financial year. The Group's head office has been specially adapted to
provide a safe working environment but staff continue to work at home where possible. Maintaining our
collaborative and team culture, IT security and staff welfare have been key foci. The Group is maintaining a
heightened focus on cyber security given increased remote working due to COVID-19. See page 6 for an update
in relation to the impacts and implications of COVID-19 for Hibernia's business.
Asset management risk: Poor asset management
This risk remains stable and there are no significant changes expected for the remainder of the financial
year. We continue to engage with tenants and ensure health and safety measures are in place to deal with the
risk of COVID-19 in the workplace. Achieving high environmental and wellness standards is a priority and we
believe it is becoming increasingly important in attracting tenants and investors. Rent collection
statistics remain strong (see page 16 for more detail) but we are maintaining a "tenant credit risk"
register to identify any potential issues early.
Finance risk: Inappropriate capital structure or lack of funds for investment
The Group's financial leverage remains modest: at 30 September 2020 the LTV was 18.7% (March 2020: 16.5%)
and the Group had available cash and undrawn facilities totalling &euro130m, or &euro103m net of committed
expenditure (March 2020: &euro154m or &euro136m, respectively). The Group has no debt maturities falling due
until December 2023 and has sufficient headroom on all its financial covenants to enable it to weather
significant falls in asset values and a prolonged economic downturn.
Directors' Responsibilities Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with IAS 34
Interim Financial Reporting as issued by the IASB and adopted by the EU; the Transparency (Directive
2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.
Each of the Directors, whose names appear on page 56 of this Half Yearly Financial Report, confirms that, to
the best of his/her knowledge, the condensed consolidated financial statements in the Half Yearly Financial
Report have been prepared in accordance with International Accounting Standard 34 Interim Financial
Reporting as adopted by the European Union ("EU"), give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and the half yearly management report herein contains a
fair review of the information required by Disclosure and Transparency Rules of the Central Bank of Ireland,
namely:
· Regulation 8(2) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007, being an
indication of important events that have occurred during the period from 1 April 2020 to 30 September 2020
and their impact on the Half Yearly Financial Report, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· Regulation 8(3) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007 being:
· A fair review of related party transactions that have taken place during the period from 1 April 2020
to 30 September 2020 and that have materially affected the financial position or performance during the
period; and
· any changes in the related parties' transactions described in the 2020 Annual Report that could have a
material impact on the financial position or performance of the enterprise in the first six months of
the financial year.
Signed on behalf of the Board
Kevin Nowlan Thomas Edwards-Moss
Chief Executive Officer Chief Financial Officer
16 November 2020
INDEPENT REVIEW REPORT TO HIBERNIA REIT PLC
We have been engaged by the company to review the interim financial information included in the Half Yearly
Financial Report for the six months ended 30 September 2020 which comprises the condensed consolidated
statement of financial position as at 30 September 2020 and the related condensed consolidated income
statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of
changes in equity, condensed consolidated statement of cash flows, and the related notes for the six-month
period then ended ("interim financial information"). We have read the other information contained in the
Half Yearly Financial Report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial information.
This report is made solely to the company in accordance with International Standard on Review Engagements
2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE
2410") issued by the International Auditing and Assurance Standards Board. Our work has been undertaken so
that we might state to the company those matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this review report, or for the
conclusions we have formed.
Director's responsibilities
The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The
Directors are responsible for preparing the Half Yearly Financial Report which includes the interim
financial information, in accordance with International Accounting Standard 34 as adopted by the European
Union, the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market
Conduct) Rules 2019.
As disclosed in note 2, the annual financial statements of the company are prepared in accordance with IFRSs
as adopted by the European Union. The interim financial information included in this Half Year Financial
Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial
Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the interim financial information in the
Half Yearly Financial Report based on our review.
Scope of review
We conducted our review in accordance with ISRE 2410. A review of interim financial information consists of
making inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial
information in the Half Yearly Financial Report for the six months ended 30 September 2020 is not prepared,
in all material respects, in accordance with International Accounting Standard 34 as adopted by the European
Union, the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market
Conduct) Rules 2019.
Christian MacManus
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
Date: 16 November 2020
Condensed consolidated income statement
For the six months ended 30 September 2020
Six months Six Financial year
ended months ended
ended
30 31 March 2020
September 30
2020 September
unaudited 2019
unaudited audited
Notes &euro'000 &euro'000 &euro'000
Revenue 5 36,672 33,717 67,930
Rental income 5 33,263 29,749 61,812
Property operating 5 (1,243) (1,171) (3,227)
expenses
Net rental and 5 32,020 28,578 58,585
related income
Operating expenses
Administrative (5,671) (5,700) (13,246)
expenses
Expected credit (213) (53) (147)
losses on financial
assets
Total operating (5,884) (5,753) (13,393)
expenses
Operating profit 26,136 22,825 45,192
before gains and
losses
(Losses)/gains on 9 (56,891) 6,288 22,856
investment property
Other gains/(losses) 15 (28) 10
Operating (30,740) 29,085 68,058
(loss)/profit
Finance income - 3 3
Finance expense (3,712) (3,589) (7,198)
(Loss)/profit before (34,452) 25,499 60,863
income tax
Income tax credit 208 26 180
(Loss)/profit for (34,244) 25,525 61,043
the period
attributable to
owners of the Parent
EPRA earnings for 7 22,439 19,284 38,093
the period
Earnings per share
Basic earnings per 7 (5.0)c 3.7c 8.9c
share
Diluted earnings per 7 (5.0)c 3.7c 8.8c
share
EPRA earnings per 7 3.3c 2.8c 5.5c
share
Diluted EPRA 7 3.3c 2.8c 5.5c
earnings per share
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2020
Six months Six months Financial year
ended ended ended
30 September 30 31 March 2020
2020 September
unaudited 2019
unaudited
audited
&euro'000 &euro'000 &euro'000
(Loss)/profit for (34,244) 25,525 61,043
the period
attributable to
owners of the Parent
Other comprehensive
income, net of
income tax
Items that will not
be reclassified
subsequently to
profit or loss:
(Loss)/gain on (307) 627 1,658
revaluation of land
and buildings
Items that may be
reclassified
subsequently to
profit or loss:
Net fair value 47 (59) 54
gain/(loss) on
hedging instruments
entered into for
cashflow hedges
Total other (260) 568 1,712
comprehensive income
Total comprehensive (34,504) 26,093 62,755
income for the
period attributable
to owners of the
Parent
Condensed consolidated statement of financial position
As at 30 September 2020
30 September 2020 31 March 2020
audited
unaudited
Notes &euro'000 &euro'000
Assets
Non-current assets
Investment property 9 1,420,886 1,465,183
Property, plant and 8,107 8,631
equipment
Other assets 534 534
Other financial 3 34
assets
Trade and other 10 9,874 10,215
receivables
Total non-current 1,439,404 1,484,597
assets
Current assets
Trade and other 10 6,107 3,751
receivables
Cash and cash 29,341 28,454
equivalents
Total current assets 35,448 32,205
Total assets 1,474,852 1,516,802
Equity and
liabilities
Capital and reserves
Share capital 11 67,668 68,466
Share premium 11 580,444 630,276
Capital redemption 11 2,568 1,757
fund
Other reserves 4,801 5,379
Retained earnings 12 511,580 525,271
Total equity 1,167,061 1,231,149
Non-current
liabilities
Financial liabilities 13 285,624 259,691
Deferred tax 187 395
liabilities
Total non-current 285,811 260,086
liabilities
Current liabilities
Financial liabilities 13 491 517
Trade and other 18,780 21,873
payables
Contract liabilities 2,709 3,177
Total current 21,980 25,567
liabilities
Total equity and 1,474,852 1,516,802
liabilities
IFRS NAV per share 8 172.5c 179.8c
Diluted IFRS NAV per 8 171.9c 179.2c
share
EPRA NTA per share 8 171.9c 179.2c
Condensed consolidated statement of cash flows
For the six months ended 30 September 2020
Six months Six months Financial year
ended ended ended
30 30 September 31 March 2020
September 2019
2020 unaudited
unaudited
audited
Notes &euro'000 &euro'000 &euro'000
Cash flows from
operating
activities
Rents received 31,390 31,585 64,735
from tenants
Other property 2,881 3,999 6,560
income
Property expenses (4,550) (4,484) (8,918)
paid
Cash paid to and (4,389) (4,072) (6,024)
on behalf of
employees
Other (1,910) (1,153) (5,607)
administrative
expenses paid
Interest received - 3 3
Other income 19 12 10
Income tax 1 69 81
Net cash from 23,442 25,959 50,840
operating
activities
Cash flows from
investing
activities
Purchase of 14 (4,621) (17,094) (22,675)
investment
property
Cash expenditure 14 (10,492) (11,569) (25,266)
on investment
property
Cash received - 34,639 34,503
from sale of
investment
property
Purchase of (53) (130) (2,016)
property, plant
and equipment
Net cash flow (15,166) 5,846 (15,454)
(absorbed)/
generated by
investing
activities
Cash flow from
financing
activities
Dividends paid 12 (20,544) (13,885) (25,866)
Cash expended on (8,978) (18,979) (25,036)
share buy-back
Borrowings drawn 25,600 37,200 57,945
Borrowings repaid - (29,968) (29,968)
Finance expenses (3,453) (3,203) (6,369)
paid
Share issue costs (14) (15) (10)
Net cash (7,389) (28,850) (29,304)
(outflow) from
financing
activities
Net increase in 887 2,955 6,082
cash and cash
equivalents
Cash and cash 28,454 22,372 22,372
equivalents start
of period
Increase in cash 887 2,955 6,082
and cash
equivalents
Net cash and cash 29,341 25,327 28,454
equivalents at
end of period
The condensed consolidated statement of cashflows including comparative information has been presented here
using the direct approach under IFRS 7 Statement of cashflows. Previously the indirect approach has been
presented. Further details on this change can be found in note 2.a.
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2020
Share Share Capital Property Cashflow Share-based Retained Total
capital premium redemption revaluatio hedge payment earnings
fund n reserve reserve reserve
&euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000
Balance at 69,759 624,483 - 1,889 (288) 7,556 515,140 1,218
1 April ,539)
2019
Profit for - - - - - - 25,525 25,52
the period 5)
Other - - - 627 (59) - - 568)
comprehensi
ve income
for the
period
Total 69,759 624,483 - 2,516 (347) 7,556 540,665 1,244
comprehensi ,632)
ve income
for the
period
Issue of 464 5,793 - - - (6,257) (10) (10)
share
capital
Own shares (1,327) - 1,327 - - - (18,979) (18,9
acquired 79)
and
cancelled
in the
period
Dividends - - - - - - (13,885) (13,8
paid 85)
Share-based - - - - - (131) - (131)
payments
Balance at 68,896 630,276 1,327 2,516 (347) 1,168 507,791 1,211
30 ,627
September
2019
(unaudited)
Profit for - - - - - - 35,518 35,51
the period 8)
Other - - - 1,031 113 - - 1,144
comprehensi )
ve income
for the
period
Total 68,896 630,276 1,327 3,547 (234) 1,168 543,309 1,248
comprehensi ,289)
ve income
for the
period
Own shares (430) - 430 - - - (6,057) (6,05
acquired 7)
and
cancelled
in the
period
Dividends - - - - - - (11,981) (11,9
paid 81)
Share-based - - - - - 898 - 898)
payments
Balance at 68,466 630,276 1,757 3,547 (234) 2,066 525,271 1,231
31 March ,149)
2020
(audited)
Loss for - - - - - - (34,244) (34,2
the period 44)
Other - - - (307) 47 - - (260)
comprehensi
ve income
for the
period
Total 68,466 630,276 1,757 3,240 (187) 2,066 491,027 1,196
comprehensi ,645)
ve income
for the
period
Capital (50,000) 50,000 -
reorganisat
ion
Issue of 13 168 - - - (181) (14) (14)
share
capital
Own shares (811) - 811 - - - (8,978) (8,97
acquired 8)
and
cancelled
in the
period
Dividends - - - - - - (20,544) (20,5
paid 44)
Share-based - - - - - (137) 89 (48)
payments
Balance at 67,668 580,444 2,568 3,240 (187) 1,748 511,580 1,167
30 ,061
September
2020
(unaudited)
Notes to the condensed consolidated financial statements
Section 1 - General
*******************
The accounting conventions and accounting policies employed in the preparation of these condensed
consolidated financial statements are consistent with those employed in the preparation of the most recent
annual consolidated financial statements in respect of the year ended 31 March 2020 as described in the 2020
Annual Report and referenced in this document as appropriate except as noted below.
1. General Information
Hibernia REIT plc (the "Company"), registered number 531267, together with its subsidiaries and associated
undertakings (the "Group"), is engaged in property investment and development (primarily office) in the
Dublin market with a view to maximising its shareholders' returns.
The Company is a public limited company and is incorporated and domiciled in Ireland. The address of the
Company's registered office is 1WML, Windmill Lane, Dublin, D02 F206, Ireland.
The ordinary shares of the Company are listed on the primary listing segment of the Official List of
Euronext Dublin (formerly the Irish Stock Exchange) (the "Irish Official List") and the premium listing
segment of the Official List of the UK Listing Authority (the "UK Official List" and, together with the
Irish Official List, the "Official Lists") and are traded on the regulated markets for listed securities of
Euronext Dublin and the London Stock Exchange plc.
2. Basis of preparation
2.a Statement of compliance and basis of preparation
The consolidated annual financial statements of the Hibernia REIT plc have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the EU, which comprise standards and
interpretations approved by the International Accounting Standards Board ("IASB"). IFRS as adopted by the EU
differ in certain respects from IFRS as issued by the IASB. These condensed consolidated financial
statements have been prepared in accordance with International Accounting Standard 34 Interim Financial
Reporting as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007, and the Central
Bank (Investment Market Conduct) Rules 2019.
The interim figures for the six months ended 30 September 2020 are unaudited but have been reviewed by the
independent auditor, Deloitte Ireland LLP , whose report is set out on page 21 of this Half Yearly Financial
Report. The summary financial statements for the year ended 31 March 2020 that are presented in the
condensed consolidated financial statements represent an abbreviated version of the full financial
statements for that year on which the independent auditor, Deloitte Ireland LLP, issued an unqualified audit
report. The half yearly financial statements herein are non-statutory financial statements for the purposes
of the Companies Act 2014.
The Group has decided to adopt the direct approach in preparing the consolidated statement of cashflows in
its next Annual Report in place of the indirect approach which has been used until now. The condensed
consolidated cashflow statement in these condensed consolidated financial statements is therefore presented
on this basis. The comparatives have also been presented in line with this approach. The Group has chosen to
make this accounting policy change in order to provide more relevant and reliable information for readers of
the financial statements. The main impact of this form of presentation is to present the Group's operating
cashflows in a clearer and more useful way, with no need for reconciliation to arrive at the major operating
cashflows, such as cash received from rental income. No other amendments to presentation are included as
this change does not impact net asset values, profitability or any other financial disclosures.
Apart from the change in presentation above, the Group has made no other amendments to its accounting
policies nor has the Group early adopted any forthcoming IASB standards (note 3).
The consolidated financial statements of the Group for the year ended 31 March 2020 ("the 2020 Annual
Report") are available upon request from the Company Secretary or from www.hiberniareit.com. The financial
statements for the financial year ended 31 March 2020 have been filed in the Companies Registration Office.
These condensed consolidated financial statements were approved for issue by the Board of Directors on 16
November 2020.
2.b Alternative performance measures
The Group uses alternative performance measures to present certain aspects of its performance. These are
explained and, where appropriate, reconciled to equivalent IFRS measures. The main alternative performance
measures used are those issued by the European Public Real Estate Association ("EPRA"), which is the
representative body of the listed European real estate industry. EPRA issues guidelines and benchmarks for
reporting both financial and sustainability measures. These are important in assisting investors in
comparing and measuring the performance of real estate companies across Europe on a consistent basis as well
as being key performance indicators for the Group.
2.c Functional and presentation currency
These condensed consolidated financial statements are presented in euro, which is the Company's functional
currency and the Group's presentation currency.
2.d Basis of consolidation
The condensed consolidated financial statements incorporate the condensed consolidated financial statements
of the Company and entities controlled by the Company (its subsidiaries). The accounting policies of all
consolidated entities are consistent with the Group's accounting policies. All intragroup assets and
liabilities, equity, income, expenses and cashflows relating to transactions between members of the Group
are eliminated in full on consolidation.
2.e Assessment of going concern
These condensed consolidated financial statements have been prepared on a going concern basis. The Company's
shares are trading at a significant discount to the net asset value per share reported in these condensed
consolidated financial statements: at 30 September 2020 the closing share price discount to both the IFRS
NAV per share and the EPRA NTA per share was 42%. As at close of business on 16 November 2020, being the
last day before the publication of this Half Yearly Financial Report, the share price discount to both was
27%. The Group's main assets are its investment properties, which comprise 96% of total assets or 122% of
net asset value. These are independently valued at every quarter end and are measured at fair value. More
information on the valuation of the Group's investment properties can be found in notes 2.f and 9 to these
condensed consolidated financial statements. The Group's property, plant and equipment is mainly its head
office in 1WML which is also carried at fair value and independently valued at each quarter end. The balance
of assets are assessed for impairment under a simplified expected credit loss model. The Group carries no
intangible assets or goodwill. As outlined below, the Group has sufficient headroom in its debt covenants to
ensure that financing remains in place. It is therefore the opinion of the Directors that no impairment on
the net asset value of the Group is indicated, despite the discount to NAV/NTA at which its shares currently
trade.
The Board assesses the viability of the Group over a three-year period at each of its quarterly Board
meetings. It is satisfied that a forward-looking assessment of the Group for this period is sufficient to
enable a reasonable assessment of viability, and also in order to opine on the appropriateness of the going
concern basis of preparation of these condensed consolidated financial statements. This assessment considers
the Group's current position and the principal and emerging risks that it faces. The most significant of
these at the date of preparing these financial statements is the Novel Coronavirus ("COVID-19") pandemic,
the full impact of which it is not yet possible to quantify fully or accurately. This has been the subject
of intensive assessment by the Board since 31 March 2020 and it is likely it will continue to be so for some
time to come. Key factors considered in light of the likely effects of this pandemic are:
* Health and safety of staff, tenants, suppliers and the community
* Remote working and social distancing measures may continue to disrupt business operations
* Investment market activity and property values may decline
* Occupational market activity and rental values may decline
* Debt funding may become harder to source/more expensive
* Tenants may not be able to pay their rent
* Dividends may need to be cut
* Occupier and investor behaviour and expectation may change permanently as a result
An analysis of revenue and a disaggregation of income is outlined in notes 5 and 6. Due to the nature of
rent receipts, a significant portion of revenue is collected in advance of its due date and 90% of
commercial rent for the quarter ending 31 December 2020 had been collected within 7 days of the gale date
rising to 95% within 60 days of the gale date. 98% of the residential rent due for the month of November
2020 had been collected by 16 November 2020. Information on the Group's financial assets and approach to
credit risk is contained in Section IV and notes 21 and note 30.d. of the consolidated financial statements
in the 2020 Annual Report, with updated information in note 15 of this Half Yearly Financial Report.
The Group had a cash balance as at 30 September 2020 of &euro29m (March 2020: &euro28m), is generating
positive operating cash flows and, as discussed in note 13, has in place debt facilities with average
maturity of 3.8 years, no debt maturities until December 2023 and an undrawn balance of &euro107m at 30
September 2020 (March 2020: &euro133m). Its capital commitments as at 30 September 2020 were &euro27m (March
2020: &euro18m) and it is maintaining a minimum cash balance of &euro15m for liquidity purposes. As at 30
September 2020, leverage remains low (LTV 18.7%; March 2020: 16.5%) and this means the Group can withstand a
61% decline in its portfolio value and a 78% decline in earnings before interest and tax without breaching
its debt covenants. There are no reasons to expect that the Group will not be able to meet its liabilities
as they fall due for the foreseeable future.
Therefore, the Directors have concluded that the going concern assumption remains appropriate.
2.f Significant judgements
Not all of the Group's accounting policies require the Directors to make difficult, subjective or complex
judgements. Any judgements made are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
The following are the significant judgements used in preparing these consolidated financial statements:
Valuation of investment property
The valuation of the Group's property portfolio is a key element of the Group's net asset value as well as
impacting executive and employee variable remuneration. The Directors have appointed an independent valuer
(Cushman & Wakefield, the "Valuer") to perform the valuations and report to them on its opinion as to the
fair value of these properties. However, the nature of the valuation process is inherently subjective and
values are derived using comparable market transactions and the Valuer's assessment of market sentiment. The
valuations therefore represent a significant judgement.
The Group's investment properties are held at fair value and were valued at 30 September 2020 by the Valuer.
Investment property is valued in accordance with guidance in the appropriate sections of the Valuation
Technical and Performance Standards ("VPS") and the Valuation Practice Guidance Applications ("VPGA")
contained within the Royal Institution of Chartered Surveyors ("RICS") Valuation - Global Standards November
2019 (the "Red Book"). Valuations are compliant with the International Valuation Standards ("IVS"). Fair
value under IFRS 13 is 'the price that would be received to sell an asset, or paid to transfer a liability,
in an orderly transaction between market participants at the measurement date'. The Red Book confirms that
the references in IFRS 13 to market participants and a sale make it clear that for most practical purposes
fair value is consistent with market value. Further information on the valuations and the sensitivities is
given in note 9.
The COVID-19 pandemic has impacted financial markets and the global economic environment and as at 30
September 2020, the Valuer has stated that it continues to place less weight than usual on market evidence
for comparison purposes, to inform opinions of value. The current response to COVID-19 means that there is
an unprecedented set of circumstances on which to base a judgement. The Valuer has therefore reported on the
basis of a material uncertainty with respect to all assets except for the private rental sector assets
(residential sector) as per VPS 3 and VPGA 10 of the RICS Red Book Global. This material uncertainty clause
was in place at 31 March 2020 for all assets. This is not intended by the Valuer to suggest that its
valuations cannot be relied on but to indicate that less certainty - and a higher degree of caution - should
be ascribed to the valuations than would normally be the case.
Property valuations are complex and involve data which is not publicly available, and a degree of judgement.
The valuations are based upon the key assumptions of estimated rental values and market-based yields. In
light of the material valuation uncertainty because of COVID-19, the Board has paid particular attention to
the valuations and especially to properties within the portfolio where the impact may be greatest.
The Directors have reviewed the valuation process undertaken, the meaning of the material uncertainty the
Valuer has expressed, changes in market conditions including COVID-19, recent transactions in the market,
valuation movements on individual buildings and the Valuer's expectations in relation to future rental
growth and yield movement. With the continued uncertainty in relation to the impact of COVID-19, the
Directors have also considered the extent to which this was impacting the property investment and
occupational markets in relation to both liquidity and activity. As a result of these reviews, the Directors
concluded that the valuations are suitable for inclusion in the Group's condensed consolidated financial
statements, unadjusted save for the amendment for income spreading as discussed in 2.g.
Valuation basis of investment property
The valuation approach for each property, while generally similar, differs based on the physical and
investment and/or development attributes of the property. A judgement must be made to decide on the
valuation premise appropriate for each asset to give its 'highest and best use'. This judgement impacts on
the valuation technique that is appropriate for the measurement, considering the availability of data with
which to develop inputs that represent the assumptions that market participants would use when pricing the
property. All valuations are at Level 3 in the fair value hierarchy.
'Highest and best use'
All investment properties in the Group's portfolio are valued in accordance with their current use, which is
also the highest and best use except for:
* Harcourt Square, Marine House and Clanwilliam Court Blocks 1, 2 and 5 where, in accordance with IFRS
13:27, the valuations take into account the redevelopment potential upon expiry of the current leases which
reflects their highest and best use. It is the Directors' intention to pursue the redevelopment of these
properties when the leases have expired. At 30 September 2020 full planning was in place for all three
schemes. These are valued on an investment basis until the end of the leases and on a residual basis
thereafter.
* Newlands (Gateway) which is currently partly rented on short-term leases, has been valued on a price per
acre basis as early stage plans are in place to redevelop this property in future and this approach reflects
the highest and best use of this property.
* Properties in Malahide Road Industrial Park and Dublin Industrial Estate which are currently partly rented
on mostly short-term leases, have been valued on a basis that includes recognition of their potential as
development sites.
* 2 Cumberland Place and 50 City Quay are nearing practical completion and progress has been made in
relation to pre-letting parts of 2 Cumberland Place. The valuation methodology is an investment valuation
with outstanding capital expenditure recognised within the valuation.
2.g Analysis of sources of estimation uncertainty
Valuation of investment property
Although valuations are based on the Directors' best knowledge of the amount, event or actions, actual
results may differ from those estimates. The Group's investment properties are held at fair value and were
valued at 30 September 2020 by the Valuer on the basis discussed in 2.f above. Further information on the
valuations and the sensitivities around the inputs used is given in note 9.
The Board conducts a detailed review of each property valuation to ensure that appropriate assumptions have
been applied. The most significant estimates affecting the valuation included yields and estimated rental
values ("ERVs"). For development projects, other assumptions including costs to complete and risk premium
assumptions are also factored into the valuation. As discussed in 2.f, the Valuer has expressed a material
uncertainty due to the impacts of COVID-19 in relation to commercial property. In accordance with the
Group's policy on revenue recognition from leases, the valuation provided by C&W has been adjusted only by
the fair value of the income accruals ensuing from the recognition of lease incentives and the deferral of
lease costs. The total reduction in the Valuer's investment property valuation in respect of these
adjustments was &euro9.1m (March 2020: &euro8.1m).
There were no other significant judgements or key estimates that might have a material impact on the
condensed consolidated financial statements as at 30 September 2020.
3. Application of new and revised International Financial Reporting Standards ("IFRS")
Changes in accounting standards
As set out below, a limited number of changes to IFRS became effective for periods commencing on or after 1
January 2020. Although these changes do not amend the disclosure requirements of IAS 34, they may impact the
underlying accounting applied during the period.
Having assessed the amendments below, none had, nor is expected to have, a material impact on the Group's
accounting.
New IFRS or Amendment IASB mandatory EU endorsed
to IFRS effective date mandatory effective
(periods commencing date (periods
on or after) commencing on or
after)
Amendments to 1 January 2020 1 January 2020
references to the
conceptual framework
in IFRS standards
Amendments to IAS 1 1 January 2020 1 January 2020
and IAS 8: Definition
of material
Amendments to IFRS 9, 1 January 2020 1 January 2020
IAS 39 and IFRS 7:
Interest rate
benchmark reform
Amendments to IFRS 3: 1 January 2020 1 January 2020
Definition of a
business
Amendment to IFRS 16: 1 June 2020 1 June 2020
COVID-19 related rent
concessions
Amendment to IAS 1: 1 January 2023 TBC
Classification of
liabilities as
current or
non-current
Amendments to IAS 16: 1 January 2022 TBC
property, plant and
equipment - proceeds
before intended use
Annual improvements 1 January 2022 TBC
cycle 2018-2020
Amendments to IFRS 3: 1 January 2022 TBC
Reference to the
conceptual framework
Amendments to IAS 37: 1 January 2022 TBC
Onerous contracts -
cost of fulfilling a
contract
IFRS 17: Insurance 1 January 20231 TBC
contracts
Amendments to IFRS 17 1 January 2023 TBC
1) In June 2020, the IASB issued Amendments to IFRS 17
which defer the effective date of IFRS 17 until 1 January
2023. In addition the IASB issued Extension of the
Temporary Exemption from Applying IFRS 9 (Amendments to
IFRS 4) which changes the fixed expiry date for the
temporary exemption in IFRS 4 Insurance Contracts from
applying IFRS 9 Financial Instruments, so that entities
would be required to apply IFRS 9 for annual periods
beginning on or after 1 January 2023.
Section 2 - Performance
***********************
This section includes notes relating to the performance of the Group for the period, including segmental
reporting, earnings per share and net assets per share as well as specific elements of the condensed
consolidated statement of income.
4. Operating segments
4.a Basis for segmentation
The Group is organised into six business segments, against which the Group reports its segmental
information. These segments mainly represent the different investment property classes. The Group has
divided its business in this manner as the various asset segments differ in their character and risk/return
profiles depending on market conditions and reflect the strategic objectives that the Group has targeted.
There were no amendments to the segments used during the period and a full description together with further
information can be found on pages 137 to 139 of the 2020 Annual Report.
4.b Information about reportable segments
The Group's key measure of underlying performance of a segment is total income after revaluation gains and
losses, which comprises revenue (rental and service charge income), property outgoings, revaluation of
investment properties and other gains and losses. Total income after revaluation gains and losses includes
rental income, which is used as the basis to report key measures such as EPRA Net Initial Yield ("NIY") and
EPRA "topped-up" NIY. These alternative performance measures ("APMs") (detailed on page 188 of the 2020
Annual Report and in the supplementary section on pages 51 to 56 of this Half Yearly Financial Report)
measure the cash passing rent returns on market value of investment properties before and after an
adjustment for the expiry of a rent-free period or other lease incentives, respectively.
An overview of the reportable segments is set out below:
For the six months ended 30 September 2020 (unaudited)
Office Office Residential Industrial/land Other Central Consolidated
assets developmen assets assets assets assets position
t assets and
costs
&euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000
Total revenue 32,197 - 3,596 879 - - 36,672
Rental income 28,788 - 3,596 879 - - 33,263
Property (615) - (592) (36) - - (1,243)
operating
expenses
Net rental and 28,173 - 3,004 843 - - 32,020
related income
Operating
expenses
Administrative - - - - - (5,416) (5,416)
expenses
Net impairment (210) - - (3) - - (213)
losses on
financial and
contract
assets
Depreciation - - - - - (255) (255)
Total (210) - - (3) - (5,671) (5,884)
operating
expenses
Operating 27,963 - 3,004 840 - (5,671) 26,136
profit/(loss)
before gains
and losses
Gains and (53,119) (2,796) 4,122 (5,098) - - (56,891)
(losses) on
investment
property
Other gains - - - - 15 - 15
Operating (25,156) (2,796) 7,126 (4,258) 15 (5,671) (30,740)
profit/(loss)
Finance (1,370) - - - - (2,342) (3,712)
expense
Profit/(loss) (26,526) (2,796) 7,126 (4,258) 15 (8,013) (34,452)
before income
tax
Income tax - - - 208 - - 208
Profit/(loss) (26,526) (2,796) 7,126 (4,050) 15 (8,013) (34,244)
for the period
attributable
to owners of
the parent
Total segment 1,159,412 56,134 165,161 55,702 534 37,909 1,474,852
assets
Investment 1,145,019 56,106 164,059 55,702 - - 1,420,886
property
For the six months ended 30 September 2019 (unaudited)
Office Office Residential Industrial/land Other Central Group
assets developme assets assets assets assets consolida
nt assets and costs ted
position
&euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000
Total revenue 29,515 - 3,547 655 - - 33,717
Rental income 25,547 - 3,547 655 - - 29,749
Property (580) - (583) (8) - - (1,171)
operating
expenses
Net rental and 24,967 - 2,964 647 - - 28,578
related income
Operating
expenses
Administration - - - - - (5,611) (5,611)
expenses
Depreciation - - - - - (142) (142)
Total - - - - - (5,753) (5,753)
operating
expenses
Operating 24,967 - 2,964 647 - (5,753) 22,825
profit/(loss)
before gains
and losses
Gains and 6,172 943 766 (1,593) - - 6,288
(losses) on
investment
property
Other gains - - - - - (28 ) (28)
Operating 31,139 943 3,730 (946) - (5,781) 29,085
profit/(loss)
Finance income - - - - - 3 3
Finance (1,157) - - - - (2,432) (3,589)
expense
Profit/(loss) 29,982 943 3,730 (946) - (8,210) 25,499
before income
tax
Income tax - - - - - 26 26
Profit for the 29,982 943 3,730 (946) - (8,184) 25,525
period
attributable
to owners of
the parent
Total segment 1,205,929 21,899 155,487 60,349 534 33,343 1,477,541
assets
Investment 1,186,620 21,899 154,869 60,349 - - 1,423,737
property
4.c Geographic information
All of the Group's assets, revenue and costs are based in the Greater Dublin Area, mainly in central Dublin.
4.d Major customers
The Group uses information on its top 10 tenants to monitor its major customers. This is presented below
based on gross contracted rents (including variable rents based on profit sharing arrangements) as at the
period end. This is concentrated on office tenants as the next major segment, residential, consists mainly
of small private tenants and therefore contains no major concentration of credit risk.
The Group's top 10 tenants as at 30 September 2020 are as follows, expressed as a percentage of Group gross
contracted rent:
As at 30 September 2020 (unaudited)
Tenant ? Business Sector? Contracted Rent % ?
(&eurom)?
HubSpot Ireland Technology 10.5 15.4
Limited
OPW State entity 6.0? 8.8
Twitter International Technology 5.1? 7.4
Company ?
Zalando Ireland Technology 2.9 4.2
Limited
Autodesk? Ireland Technology 2.8? 4.1
Operations Limited
Informatica Ireland Technology 2.1? 3.1?
EMEA ?
Riot Games Technology 2.0 2.9
Travelport Digital Technology 1.8? 2.7
Limited ?
BNY Mellon Fund Banking & capital 1.6 2.3
Services? markets?
The Commission for State entity 1.6 2.3
Communications
Regulation
Top 10 tenants ? ? 36.4 53.2
Remaining tenants ? ? 32.1 46.8
Whole portfolio? ? 68.51 100.0?
1. Includes residential rents gross and variable rents from the Iconic arrangement
As at 31 March 2020 (audited)
Tenant ? Business Sector? Contracted Rent % ?
(&eurom)?
HubSpot Ireland Technology 10.5 15.5
Limited
OPW State entity 6.0? 8.9
Twitter International Technology 5.1? 7.5
Company ?
Zalando Technology 2.9 4.2
Autodesk? Ireland Technology 2.8? 4.2
Operations Limited
Informatica Ireland Technology 2.1? 3.1?
EMEA ?
Riot Games Technology 2.0 2.9
Electricity Supply State entity 1.9? 2.8?
Board
Travelport Digital Technology 1.8? 2.7
Limited ?
BNY Mellon Fund Banking & capital 1.6 2.4?
Services? markets?
Top 10 tenants ? ? 36.7 54.2
Remaining tenants ? ? 31.1 45.8
Whole portfolio? ? 67.81 100.0?
1. Includes residential rents gross and variable rents from the Iconic arrangement
5. Revenue and net rental and related income
Accounting policy
See note 5 of the 2020 Annual Report.
Revenue can be analysed as follows:
Six months Six months Financial year
ended ended ended
30 September 30 September 31 March 2020
2020 2019
unaudited unaudited
audited
&euro'000 &euro'000 &euro'000
Gross rental 32,555 27,954 59,937
income
Rental incentives 708 1,795 1,875
Rental income 33,263 29,749 61,812
Revenue from 3,409 3,968 6,118
contracts with
customers1
Total revenue 36,672 33,717 67,930
1. Revenue from contracts with customers is service charge income
Net rental and related income
Six months Six months Financial year
ended ended ended
30 September 30 September 31 March 2020
2020 2019
unaudited unaudited
audited
&euro'000 &euro'000 &euro'000
Total revenue 36,672 33,717 67,930
Cost of goods and (3,242) (3,929) (6,183)
services1
Property expenses (1,410) (1,210) (3,162)
Net rental and 32,020 28,578 58,585
related income
1. Costs of goods and services are service charge expenses.
Further information on the sources and characteristics of revenue and rental income is provided in note 6.
Included in property expenses is an amount of &euro0.4m (Sep 2019: &euro0.4m) relating to void costs on
office properties, i.e. costs relating to office properties which were available to let but were not
income-generating during the financial period.
Property operating expenses
Six months Six months Financial year
ended ended ended 31 March 2020
30 September 30 September audited
2020 2019
unaudited unaudited
&euro'000 &euro'000 &euro'000
Service charge 3,409 3,968 6,118
income
Service charge (3,242) (3,929) (6,183)
expenses
Property expenses (1,410) (1,210) (3,162)
Property operating (1,243) (1,171) (3,227)
expenses
6. Disaggregation of revenue and rental income
A full description of the basis of the disaggregation of the Group's income can be found in note 6 of the
2020 Annual Report.
Total revenue by duration of lease contract (based on next break date or expiry)
Service charge income is included within the one year or less segment as these arrangements, while provided
for under the lease contracts, are negotiated on an annual basis.
Six months ended 30 September 2020 (unaudited)
Lease contracts: One year or Between one Greater Total
less and five than five &euro'000
&euro'000 years years
&euro'000 &euro'000
Office assets 5,360 10,719 16,117 32,196
Office - - - -
development
assets
Residential 3,457 139 - 3,596
assets
Industrial/land 619 48 213 880
assets
Total segmented 9,436 10,906 16,330 36,672
revenue
Six months ended 30 September 2019 (unaudited)
Lease contracts: One year or Between one Greater Total
less and five than five &euro'000
&euro'000 years years
&euro'000 &euro'000
Office assets 5,532 9,618 14,365 29,515
Office - - - -
development
assets
Residential 3,333 214 - 3,547
assets
Industrial/land 328 112 215 655
assets
Total segmented 9,193 9,944 14,580 33,717
revenue
Rental income by tenant industry sector1
Six months Six months Financial year
ended ended ended
30 September 30 September 31 March 2020
2020 unaudited 2019 unaudited
audited
&euro'000 % &euro'000 % &euro'000 %
Technology 14,815 44.6 11,263 37.9 25,121 40.7
State entity 5,027 15.1 5,177 17.4 10,241 16.6
Banking & 3,696 11.1 3,665 12.3 7,253 11.7
capital
markets
Residential 3,596 10.8 3,547 11.9 7,197 11.6
Professional 2,125 6.4 2,370 8.0 4,235 6.9
services
Other2 1,399 4.2 1,199 4.0 2,545 4.1
Media & 1,097 3.3 1,052 3.5 2,044 3.3
telecommunic
ations
Co-working 673 2.0 709 2.4 1,424 2.3
Insurance & 835 2.5 767 2.6 1,752 2.8
reinsurance
Rental 33,263 100 29,749 100 61,812 100
income
1. Tenant industry sectors have been reviewed. The main change is to split the previous "TMT" into
Technology and Media and Telecommunications. Other reclassifications in prior periods reflect current sector
analysis for more relevant comparison.
2. Other includes: Industrial (mainly logistics), parking, retail and other small businesses.
7. Earnings per share
There are no convertible instruments, options or warrants on ordinary shares in issue as at 30 September
2020 other than those arrangements relating to share-based payments. The Company has established a reserve
of &euro1.7m (September 2019: &euro1.2m, March 2020: &euro2.1m) which is mainly for the issue of ordinary
shares relating to the Group's bonus schemes. It is estimated that a maximum of approximately 2.2m ordinary
shares (September 2019: 1.3m; March 2020: 2.4m shares) may be issued under the share-based performance award
schemes, 1.3m of which are provided for at 30 September 2020 and a further 0.9m of which may be recognised
over the next three years, depending on performance and various service conditions. The dilutive effect of
these shares is disclosed below.
The calculations are as follows:
Weighted Six Six months ended Financial
average months year ended
number of ended 30
shares September
2020 30 September 2019
unaudited 31 March
2020
unaudited
audited
Notes '000 '000 '000
Issued 684,657 697,589 697,589
share
capital
at
beginning
of the
period
Shares (8,106) (13,270) (17,573)
cancelled
during
the
period
Shares 125 4,641 4,641
issued
during
the
period
Shares in 11 676,676 688,960 684,657
issue at
the
period
end
Weighted 683,737 692,330 688,759
average
number of
shares
Number of 2,168 1,325 2,375
shares to
be issued
under
share-bas
ed
schemes
Diluted 685,905 693,655 691,134
number of
shares
Six Six Financial
mont mont year ended
hs hs 31 March
ende ende 2020
d 30 d
Sept
embe
r audited
2020 30
unau Sept
dite embe
d r
2019
unau
dite
d
'000 '000 '000
Number of shares due to issue under 1,30 837 1,490
share-based schemes recognised at period 6
end
Number of shares due to issue under 862 488 885
share-based schemes not recognised at
period end1
Number of shares to be issued under 2,16 1,32 2,375
share-based schemes 8 5
1. Included here are all amounts from share-based payments which are granted but which have not been
recognised at the period end but will be recognised over the next two to three years
Six months Six months Financial year
ended ended ended
30 September 30 31 March 2020
2020 September
2019
unaudited
audited
unaudited
&euro'000 &euro'000 &euro'000
(Loss)/profit for (34,244) 25,525 61,043
the period
attributable to the
owners of the
Parent
'000 '000 '000
Weighted average 683,737 692,330 688,759
number of ordinary
shares (basic)
Weighted average 685,905 693,655 691,134
number of ordinary
shares (diluted)
Basic earnings per (5.0)c 3.7c 8.9c
share
Diluted earnings (5.0)c 3.7c 8.8c
per share
EPRA earnings and EPRA earnings per share, alternative performance measures, are presented below as they
illustrate for investors the extent to which dividends are supported by recurring income and are key
performance indicators for the Group.
Six months Six months Financial
ended ended year ended 31
March 2020
30 September 30
2020 September
2019
EPRA earnings Note &euro'000 &euro'000 &euro'000
(Loss)/profit for (34,244) 25,525) 61,043)
the period
Less:
Losses and (gains) 9 56,891 (6,288) (22,856)
on investment
property
Profit or loss on - - -
disposals of other
assets
Deferred tax in (208) - (152)
respect of EPRA
adjustments
Changes in fair -) 47) 58)
value of financial
instruments and
associated close-out
costs
EPRA earnings 22,439) 19,284) 38,093)
EPRA earnings per '000 '000 '000
share and diluted
EPRA earnings per
share
Weighted average 683,737 692,330 688,759
number of ordinary
shares (basic)
Weighted average 685,905 693,655 691,134
number of ordinary
shares (diluted)
EPRA earnings per 3.3 2.8 5.5
share (cent)
Diluted EPRA 3.3 2.8 5.5
earnings per share
(cent)
8. NAV per share, EPRA NTA per share and Total Accounting Return ("TAR")
The IFRS NAV is calculated as the value of the Group's assets less the value of its liabilities based on
IFRS measures.
As at 30 September As at 31 March 2020
2020 unaudited audited
&euro'000 &euro'000
IFRS net assets at 1,167,061 1,231,149
end of period
(&euro'000)
Ordinary shares in 676,676 684,657
issue ('000)
IFRS NAV per share 172.5c 179.8c
'000 '000
Ordinary shares in 676,676 684,657
issue
Number of shares to 2,168 2,375
be issued under
share-based schemes
(see note 7)
Diluted number of 678,844 687,032
shares
Diluted IFRS NAV per 171.9c 179.2c
share
EPRA NAV measures (which are APMs) are calculated in accordance with the European Public Real Estate
Association ("EPRA") Best Practice Recommendations: October 2019 and are set out on pages 54 to 56 of this
Half Yearly Financial Report.
Total accounting return ("TAR")
Total Accounting Return, a key performance indicator and alternative performance measure, is calculated as
the increase in EPRA Net Tangible Assets ("NTA") per share for the period over the previous period-end EPRA
NTA per share and adding back dividends per share paid during the period, expressed as a percentage of
opening EPRA NTA per share. Please note under the EPRA Best Practice Guidelines October 2019 NTA has
replaced NAV as the key asset value measure. For further details please see pages 54 and 56 of this Half
Yearly Financial Report.
EPRA NTA
Six months ended Financial year ended
30 September 2020 31 March 2020
unaudited
audited
&euro'000 &euro'001
IFRS NAV 1,167,061 1,231,149
Include:
Revaluation of other - -
non-current
investments
Diluted NAV at fair 1,167,061 1,231,149
value
Exclude:
Fair value of 187 234
financial instruments
NTA 1,167,248 1,231,383
Diluted number of 678,844 687,032
shares at period end
NTA per share at 171.9c 179.2c
period end
TAR
As at 30 September As at 31 March
2020 2020 audited
unaudited
Opening EPRA NTA per share 179.2c 173.2c
Closing EPRA NTA per share 171.9c 179.2c
(Decrease)/increase in EPRA (7.3)c 6.0c
NTA per share
Dividends per share paid in 3.0c 3.8c
period
Total return per share (4.3)c 9.8c
Total accounting return (2.4)% 5.7%
("TAR")
Section 3 -Tangible assets
**************************
This section contains information on the Group's investment properties and other tangible assets. All
investment properties are fully owned by the Group. The Group's investment properties are carried at fair
value and its other tangible assets at depreciated cost except for land and buildings which are adjusted to
fair value.
9. Investment property
Accounting policy
See note 16 of the 2020 Annual Report.
In accordance with the Group's policy on revenue recognition from leases, the valuation provided by C&W has
been adjusted only by the fair value of the income accruals ensuing from the recognition of lease incentives
and the deferral of lease costs. The total reduction in the Valuer's investment property valuation in
respect of these adjustments was &euro9.1m (March 2020: &euro8.1m).
At 30 September 2020 (unaudited)
Fair value Office Office Residential Industrial/land Total
category assets developmen assets assets
Level 3 t
&euro'000 assets
Level 3
Level 3 Level 3 &euro'000
&euro'000 &euro'000
Level 3
&euro'000
Carrying 1,196 47,999 159,459 60,80 1,465,183
value at 1 ,925 0
April 2020
Additions:
Property 3,424 - 375 - 3,799
purchases
Development 289 8,403 103 - 8,795
and
refurbishmen
t
expenditure
Transferred (2,50 2,500 - - -
between 0)
segments1
Revaluations (53,1 (2,796) 4,122 (5,09 (56,891)
included in 19) 8)
income
statement
Carrying 1,145 56,106 164,059 55,70 1,420,886
value at 30 ,019 22
September
2020
1. 50 City Quay is undergoing redevelopment and has been recognised as a development property from 30
September 2020.
2. On 9 November 2018 the Group agreed to acquire 92.5 acres adjacent to its holdings in Newlands Cross from
the Irish Rugby Football Union (the "IRFU") for initial consideration of &euro27m. If rezoning is achieved
before November 2028 the IRFU will be due additional consideration equating to 44% of the value of
Hibernia's total land interests of 143.7 acres in the Newlands site at re-zoning, less the initial
consideration.
At 31 March 2020 (audited)
Fair value Office Office Residential Industrial/land Total
category assets developme assets assets
Level 3 nt
&euro'000 assets
Level 3
Level 3 Level 3 &euro'000
&euro'000 &euro'000
Level 3
&euro'000
Carrying 1,173,140 16,199 153,079 53,000 1,395,418
value at 1
April 2019
Additions:
Property 8,741 - 694 13,385 22,8201
purchases
Development 9,0972 13,557 825 157 23,636
and
refurbishmen
t
expenditure
Revaluations 5,494 18,243 4,861 (5,742) 22,856
included in
income
statement
Transferred 6,210 - - - 6,210
from
property,
plant and
equipment3
Transferred (5,757) - - - (5,757)
to property,
plant and
equipment3
Carrying 1,196,925 47,999 159,459 60,8004 1,465,183
value at 31
March 2020
1. A VAT refund of &euro0.5m was accounted for during the financial year arising as a result of the grant of
VAT inclusive leases within a redeveloped property in 2DC, following its refurbishment. Gross acquisitions
in the financial year therefore &euro23.3m.
2. This includes capital expenditure on 1WML, 1SJRQ and 2WML after their transfer to the office segment.
3. The Group moved to a new head office in 1WML in late 2019. The space previously occupied by the Group in
South Dock House was leased to a tenant during the financial year and was transferred to investment property
at fair value on the date on which it changed in use.
4. On 9 November 2018 the Group agreed to acquire 92.5 acres adjacent to its holdings in Newlands Cross from
the Irish Rugby Football Union (the "IRFU") for initial consideration of &euro27m. If rezoning is achieved
before November 2028 the IRFU will be due additional consideration equating to 44% of the value of
Hibernia's total land interests of 143.7 acres in the Newlands site at re-zoning, less the initial
consideration.
There were no transfers between fair value levels during the period. Approximately &euro129k of financing
costs were capitalised at an effective interest rate of 2.1% in relation to the Group's developments and
major refurbishments (March 2020: &euro141k). No other operating expenses were capitalised during the
period.
Valuations as at 30 September 2020
The valuations used to determine fair value for the investment properties in the condensed consolidated
financial statements are determined by the Group's Valuer and are in accordance with the provisions of IFRS
13. C&W has agreed to the use of its valuations for this purpose. As discussed in notes 2.f and 2.g,
property valuations are inherently subjective as they are made on the basis of assumptions made by the
Valuer and therefore are classified as Level 3. At the 30 September 2020 the Valuer has reported on the
basis of a material uncertainty for commercial assets as per VPS 3 and VPGA 10 of the RICS Red Book Global.
No material uncertainty attaches to residential assets. At 31 March 2020 the material uncertainty extended
to all assets. This is not intended by the Valuer to suggest that its valuations cannot be relied on but to
indicate that less certainty - and a higher degree of caution - should be ascribed to the valuations than
would normally be the case.
Valuations are completed on the Group's investment property portfolio on at least a half-yearly basis and,
in accordance with the appropriate sections of the Professional Standards, the Valuation Technical and
Performance Standards ("VPS") and the Valuation Practice Applications ("VPGA") contained within the RICS
Valuation - Global Standards 2019 ("the Red Book"). It follows that the valuations are compliant with the
International Valuation Standards. Fair value under IFRS 13 is "the price that would be received to sell an
asset, or paid to transfer a liability, in an orderly transaction between market participants at the
measurement date". The Red Book confirms that the references in IFRS 13 to market participants and a sale
make it clear that for most practical purposes fair value is consistent with market value.
The method that is applied for fair value measurements categorised within Level 3 of the fair value
hierarchy is the yield methodology using market rental values capitalised with a market capitalisation rate
or yield or other applicable valuation technique. Using this approach for the Group's investment properties,
values of investment properties are arrived at by discounting forecasted net cash flows at market derived
capitalisation rates. This approach includes future estimated costs associated with refurbishment or
development, together with the impact of rental incentives allowed to tenants. Thus development properties
are assessed using a residual method in which the completed development property is valued using income and
yield assumptions and deductions are made for the estimated costs to complete, including finance costs and
developers' profit, to arrive at the current valuation estimate. In effect, this values the development as a
proportion of the completed property.
In the period ended 30 September 2020, for most properties the highest and best use is the current use
except as discussed in note 2.f. In these instances, the Group may need to achieve vacant possession before
redevelopment or refurbishment may take place and the valuation of the property takes account of any
remaining occupancy period on existing leases. The table below summarises the approach for each investment
property segment.
Valuation methodology
The following table illustrates the fair value methods applied to each segment:
Description of Fair value Narrative Changes in the
investment of the description of fair value
property asset investment techniques used technique
class property during the
&euro'm at period
the period
end
Office assets 1,145 Yield No change in
methodology valuation
using market technique.
rental values
capitalised with
a market
capitalisation
rate.
Exceptions to
this:
· Harcourt
Square is
valued on an
investment
basis until
the end of the
current lease
(December
2022) and on a
residual basis
thereafter
· Marine House
and
Clanwilliam
Court Blocks
1, 2 and 5 are
valued on an
investment
basis until
the end of the
current leases
(which expire
over the
period 2020,
2021 and early
2022) and on a
residual basis
thereafter
Office development 56 Residual method, No change in
assets i.e. Gross valuation
Development technique.
Value less Total
Development Cost
less Profit
equals Fair
Value
· Gross
Development
Value ("GDV"):
the fair value
of the
completed
proposed
development
(arrived at by
capitalising
the market
rent or
Estimated
Rental Value
("ERV") with
an appropriate
yield,
allowances for
purchasers'
costs,
assumptions
for voids
and/or rental
free periods).
The
appropriate
yield is based
on the
Valuer's
opinion of the
most likely
tenant
covenant
achievable for
the property
and the most
likely lease
terms
· Total
Development
Cost ("TDC"):
this includes,
but is not
limited to,
construction
costs, land
acquisition
costs,
professional
fees, levies,
marketing
costs and
finance costs
· Developer's
profit which
is measured as
a percentage
of the total
development
costs
(including the
site value).
It also takes
account of
letting risk
For developments
close to
completion the
yield
methodology is
usually applied.
Residential assets 164 Yield No change in
methodology valuation
using rental technique.
values
capitalised with
a market
capitalisation
rate.
Alternatively,
the comparable
sales method of
valuation is
used to value
some residential
assets.
Industrial/ 56 Yield No change in
methodology valuation
using market technique.
rental values
land assets capitalised with
a market
capitalisation
rate. The
Newlands site,
including the
Gateway
industrial park
is valued as an
early stage
development site
on a price per
acre basis.
Properties in
Dublin
Industrial
Estate and
Malahide Road
Industrial
Estate are
valued using
market rental
values
capitalised with
a market
capitalisation
rate. The values
are benchmarked
to capital
values per sq.
ft. to take
account of their
current
condition and
development
potential.
Reconciliation of the independent Valuer's valuation report amount to the carrying value of investment
property in the consolidated statement of financial position:
As at 30 As at 31 March 2020
September
2020
audited
unaudited
&euro'000 &euro'000
Valuation per 1,436,735 1,480,360
Valuer's
report
Owner occupied (6,713) (7,089)
Income (9,136) (8,088)
recognition
adjustment1
Investment 1,420,886 1,465,183
property
balance at end
of period
1. Income recognition adjustment: this relates to the difference in valuation that arises as a result of
property valuations using a cash flow based approach while income recognition for accounting purposes
spreads the costs of tenant incentives and lease set up over the lease term.
EPRA capital expenditure
The following table analyses capital expenditure ("CapEx") according to EPRA guidelines.
1) Acquisitions: amounts spent for the purchase of investment properties including purchase costs
capitalised
2) Development: amounts spent on investment properties under construction and related project costs
capitalised, including internal costs allocated
3) "In-place" Investment properties: amounts spent on the completed operational portfolio including:
a. Incremental lettable area: amounts spent to add additional lettable space to 'in-place' investment
property
b. No incremental lettable space: amounts spent to enhance the property without increasing lettable areas
c. Tenant incentives: any amounts spent on the investment property as incentive for tenants
4) Capitalised interest: capitalised finance costs which are added to the carrying value of investment
properties
The Group has no joint ventures; all of its properties are located in the Dublin area. Expenditure is
therefore analysed into portfolio property type only.
As at 30 September 2020 (unaudited)
Office Office Residential Industrial/land Total
assets developme assets assets
&euro'000 nt &euro'000 &euro'000
assets
&euro'000 &euro'000
Acquisitions 3,424 - 375 - 3,799
Development1 289 8,274 103 - 8,666
Of which:
Development properties 39 8,274 - - 8,313
'In-place' investment
properties
Incremental lettable space - - - - -
No incremental lettable 165 - 103 - 268
space
Tenant incentives - - - - -
Expenditure on properties 85 - - - 85
due for
re-development/refurbishment
Other material non-allocated - - - - -
types of expenditure
3,713 8,274 478 - 12,465
Capitalised interest2 - 129 - - 129
Total CapEx 3,713 8,403 478 - 12,594
Conversion from accrual to 1,635 (100) 984 2,519
cash basis
Total CapEx on cash basis 5,348 8,303 1,462 - 15,113
1. Capital expenditure relating to development or major refurbishment of 2 Cumberland Place, 50 City Quay
and some remaining CapEx on 1SJRQ.
2. Financing expenses capitalised on developments and refurbishments.
As at 31 March 2020 (audited)
Office Office Residential Industrial/land Total
assets developmen assets
&euro'000 t &euro'000
assets
&euro'000 Assets &euro'000
&euro'000
Acquisitions 8,741 - 694 13,385 22,8201
Development2 9,097 13,416 825 157 23,495
Of which:
Development properties 7,787 13,416 - - 21,203
'In-place' investment
properties
Incremental lettable space - - - - -
No incremental lettable (446)3 - 825 - 379
space
Tenant incentives - - - - -
Expenditure on properties 1,756 - - 157 1,913
due for
re-development/refurbishment
Other material non-allocated - - - - -
types of expenditure
17,838 13,416 1,519 13,542 46,315
Capitalised interest4 - 141 - - 141
Total CapEx 17,838 13,557 1,519 13,542 46,456
Conversion from accrual to (173) 2,001 (220) (123) 1,485
cash basis
Total CapEx on cash basis 17,665 15,558 1,299 13,419 47,941
1. A VAT refund of &euro0.5m was accounted for during the financial year arising as a result of the grant of
VAT inclusive leases within a redeveloped property in 2DC, following its refurbishment. Gross acquisitions
in the financial year therefore &euro23.3m.
2. Capital expenditure relating to development or major refurbishment of 1SJRQ, 1&2WML, and 2 Cumberland
Place.
3. Dilapidation payments were received from vacating tenants and have been netted with capital expenditure.
4. Financing expenses capitalised on developments and refurbishments.
Key unobservable inputs used in the valuation of the Group's investment property
30 September 2020 (unaudited)
Market Estimated rental value Equivalent
value yield
Low High
&euro'000 Low High
Office 1,145,019 &euro25.00psf &euro62.50psf 3.99% 7.06%
Office 56,106 &euro35.00psf &euro62.00psf 4.47% 5.62%
development
Residential1 164,059 &euro22,800pa &euro32,400pa 3.60% 5.29%
Industrial/land 55,702 &euro5.00psf &euro9.00psf 6.36% 8.59%
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after
deducting operating expenses. The market standard deduction is 20% of gross rental income. Based on the
Valuer's estimation of market rent with no deduction for operating expenses
31 March 2020 (audited)
Market Estimated rental value Equivalent
value yield
&euro'000 Low High Low High
Office 1,196,925 &euro25.00psf &euro62.50psf 3.99% 6.65%
Office 47,999 &euro30.00psf &euro62.00psf 4.42% 4.42%
development
Residential1 159,459 &euro25,200pa &euro32,400pa 3.70% 5.06%
Industrial/land 60,800 &euro5.00psf &euro9.00psf 7.65% 7.94%
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after
deducting operating expenses. The market standard deduction is 20% of gross rental income. Based on the
Value's estimation of market rent with no deduction for operating expenses.
Sensitivity data
The sensitivity tables below illustrate the impact of movements in key unobservable inputs on the fair value
of investment properties. These are net ERV, equivalent yields and development construction costs (residual
appraisals). To calculate these impacts only the movement in one unobservable input is changed as if there
is no impact on the other. In reality there may be some impact on yields from an ERV shift and vice versa.
However, this gives an assessment of the maximum impact of shifts in each variable. The tables illustrate
the impacts from a 5% or 10% ERV and a 25bp or 50bp shift in equivalent yield on the valuations as included
in the consolidated financial statements at 30 September 2020 and 31 March 2020.
ERV and equivalent yields
30 September 2020 (unaudited)
Impact on market Impact on market Impact on market Impact on market
value of a value of a value of a value of a 50bp
change in the
equivalent yield
5% change in the 10% change in 25bp change in
the the equivalent
yield
estimated rental
value estimated rental
value
Sensitivities Increase Decrease Increase Decrease Increase Decrease Increase Decrease
&euro'm &euro'm &euro'm &euro'm &euro'm &euro'm &euro'm &euro'm
Office 51.5 (51.5) 103.1 (103.1) (72.3) 81.1 (136.6) 170.4
Office 2.6 (2.6) 5.2 (5.2) (3.4) 4.0 (6.6) 8.4
development
Residential 8.1 (8.1) 16.1 (16.1) (10.3) 11.7 (19.4) 25.4
Industrial/land 0.6 (0.6) 1.1 (1.1) (0.5) 0.3 (1.0) 0.8
Total 62.8 (62.8) 125.5 (125.5) (86.5) 97.1 (163.6) 205.0
31 March 2020 (audited)
Impact on market Impact on market Impact on market Impact on market
value of a 5% value of a 10% value of a 25bp value of a 50bp
change in the change in the change in the change in the
estimated rental estimated rental equivalent yield equivalent yield
value value
Sensitivities Increase Decrease Increase Decrease Increase Decrease Increase Decrease
&euro'm &euro'm &euro'm &euro'm &euro'm &euro'm &euro'm &euro'm
Office 58.6 (58.6) 116.9 (116.9) (83.4) 93.2 (158.3) 198.7
Office 2.8 (2.8) 5.7 (5.7) (3.8) 4.3 (7.3) 9.2
development
Residential 8.0 (8.0) 15.8 (15.8) (9.9) 11.2 (18.6) 24.1
Industrial/land 0.3 (0.3) 0.6 (0.6) (0.3) 0.3 (0.5) 0.6
Total 69.7 (69.7) 139.0 (139.0) (97.4) 109.0 (184.7) 232.6
Development construction costs
A 5% decrease or increase in construction costs would result in a decrease or increase in the total value of
the portfolio of &euro10m as at 30 September 2020 (March 2020: &euro10m). Development construction costs are
an unobservable input to residual appraisals which are used in valuing those properties that are pipeline
development assets.
10. Trade and other receivables
As at 30 As at 31 March
September 2020 2020 audited
unaudited
&euro'000 &euro'000
Non-current
Property income 9,471 9,590
receivables
Recoverable 427 661
capital
expenditure
Expected credit (24) (36)
loss allowance
Balance at end of 9,874 10,215
period -
non-current
Current
Property income 4,222 1,955
receivables
Recoverable 455 460
capital
expenditure
Expected credit (286) (61)
loss allowance
4,391 2,354
Receivable from 136 136
investment
property sales
Deposits paid on 822 -
investment
property
Prepayments 458 985
Income tax refund 2 2
due
VAT refundable 298 274
Balance at end of 6,107 3,751
period- current
Balance at end of 15,981 13,966
period- total
Of which are 2,999 1,591
classified as
financial assets
The non-current balance is mainly non-financial in nature; &euro0.4m (March 2020: &euro0.7m) relates to
amounts receivable from tenants in relation to capital expenditure funded initially by the Group to be
recovered over the relevant lease term, with the balance consisting of accrued income and expenditure
amounts relating to the lease incentives and deferred lease costs. These amounts, as they are receivable
over the term of the lease, have a financing element. The Group has chosen to apply the simplified expected
credit loss model to these. The Group introduced an internal rating system for tenants during the COVID-19
pandemic in order to ensure proactive management of amounts due. The Group has a diverse range of tenants,
many of which are large multinational companies, and our rent collection statistics have remained strong
(note 2.e, page 16). The current balance of trade and other receivables has a low concentration of credit
risk, and for the most part consists of prepayments or income accruals for rents due from reviews and other
agreed amendments to lease terms which were not invoiced at the period end (note 15.d). The expected credit
loss allowance is calculated according to the provision matrix and totals &euro310k (March 2020: &euro97k).
No credit losses were realised in the period (March 2020: &euro50k).
Section 4 - Financing including equity and working capital
**********************************************************
This part focuses on the financing of the Group's activities, including the equity capital, bank borrowings
and working capital. It also covers financial risk management.
The Group's accounting policies with respect to these items can be found in Section IV of the 2020 Annual
Report.
11. Issued share capital and share premium
Accounting policy
See note 22 of the 2020 Annual Report.
At 30 September 2020 (unaudited)
No. Share capital Share premium Capital Total
of redemption Company
shar fund Capital
es
in
issu
e
'000 &euro'000 &euro'000 &euro'000 &euro'000
Balance 684, 68,466 630,276 1,757 700,499
at 657
beginnin
g of
period
Shares (8,1 (811) - 811 -
cancelle 06)
d during
the
period
(see
below)
Capital - - (50,000) - (50,000)
reorgani
sation
(note
12)
Shares 125 13 168 - 181
issued
during
the
period
(see
below)
Balance 676, 67,668 580,444 2,568 650,680
at end 676
of
period
At 31 March 2020 (audited)
No. of Share capital Share Capital Total
shares premium redemption Company
in issue fund capital
'000 &euro'000 &euro'000 &euro'000 &euro'000
Balance 697,589 69,759 624,483 - 694,242
at
beginning
of period
Shares (17,573) (1,757) - 1,757 -
cancelled
during
the
period
(see
below)
Shares 4,641 464 5,793 - 6,257
issued
during
the
period
(see
below)
Balance 684,657 68,466 630,276 1,757 700,499
at end of
period
Shares issued during the period are as follows:
0.1m ordinary shares with a nominal value of &euro0.10 were issued on 23 April 2020 in settlement of
share-based payments relating to remuneration (see further details below).
Shares cancelled during the period - share buyback programme:
On 7 August 2020, the Company commenced a &euro25m share buyback programme which completed on 16 November
2020. This &euro25m share buyback is accretive to net asset value per share and earnings per share and
completed the return to shareholders of the proceeds from the sale of 77 Sir John Rogerson's Quay started
with the &euro25m share buyback programme undertaken in the 2020 financial year. As at 30 September 2020
8.1m shares had been repurchased and cancelled under this buyback programme for aggregate consideration of
&euro9.0m (an average purchase price of &euro1.11 per share). It completed on 16 November 2020: in total
23.1m shares were acquired and cancelled at an average price of &euro1.08 per share.
Share-based payments
The Group's remuneration scheme includes awards which are made in shares or nil-cost share options and which
are payable to employees only after fulfilling service and/or performance conditions. Amounts provided for
at 30 September 2020 were 1.3m shares and a maximum of a further 0.9m shares remain to be accrued as at the
period end. Amounts due at 31 March 2020 were 1.5m shares and a further 0.9m shares remain to be accrued as
at the period end (note 7).
On 29 July 2020 conditional awards of the Company's ordinary shares of &euro0.10 cent each ("LTIP Shares")
under the LTIP were granted to Executive Directors and other key management personnel totalling 2,437,608
shares. These vest after three years subject to performance and service conditions.
Details on the Group's remuneration scheme can be found in the Remuneration Committee Report on pages 98 to
116 of the 2020 Annual Report or on the Group's website.
Share capital
Ordinary shares of &euro0.10 each:
Six months ended Financial year ended
30 September 2020 31 March 2020
unaudited
audited
'000
'000
Authorised 1,000,000 1,000,000
Allotted, called up and 676,676 684,657
fully paid
In issue at end of 676,676 684,657
period
12. Retained earnings and dividends
As at 30 September As at 31 March 2020
2020 unaudited audited
&euro'000 &euro'000
Balance at beginning of 525,271 515,140
the period
(Loss)/profit for the (34,244) 61,043
period
Share issuance and (14) (10)
buyback costs
Capital reorganisation 50,000 -
Share buy-back (8,978) (25,036)
Share-based payments 89 -
released
Dividends paid (20,544) (25,866)
Balance at end of 511,580 525,271
period
On 9 April 2020 &euro50m in share premium was converted to distributable reserves as a result of a capital
reorganisation which commenced during the financial year ended 31 March 2020.
Share-based payments released relates to share-based payment awards which have been partially or fully
settled in cash, e.g. payment of taxes on behalf of employees which are assessed at the date on which the
award vests and therefore differ from the amount provided using the grant date share price. The difference
between the award amount and the settlement amount is moved to retained earnings when the awards are settled
as the provision was made through personnel costs.
.
Distributable reserves - Company only
As at 30 September As at 31 March
2020 unaudited 2020
&euro'000 audited
&euro'000
Retained earnings at 444,029 436,014
start of period
Deduct cumulative (408,513) (388,406)
unrealised gains1
Distributable profits at 35,516 47,608
start of period
(Loss)/profit for the (26,432) 58,927
period
Adjust for unrealised 48,788 (20,107)
losses/(gains) in period
Dividends paid (20,544) (25,866)
Share buy- back (8,978) (25,036)
Capital reorganisation 50,000 -
Other 69 (10)
Distributable profits at 78,419 35,516
end of period
Add back cumulative 359,725 408,513
unrealised gains1
Retained earnings at end 438,144 444,029
of period
1. Unrealised inter-company profits arising on the transfer of investment properties to subsidiaries have
been eliminated for the purposes of the above calculation.
Six months ended Six months ended
30 September 2020 30 September 2019
unaudited unaudited
&euro'000 &euro'000
Interim dividend declared 13,233 11,989
for the period ended 30
September 2020 of 2.0 cent
per share (September 2019:
1.75 cent per share)
Final dividend paid for the 20,544 13,885
financial year ended 31
March 2020 of 3.0 cent per
share (March 2019: 2.0 cent
per share)
In August 2020 a dividend of 3.0 cent per share (&euro20.5m) was paid to the holders of fully paid ordinary
shares. An interim dividend for the period of 2.0 cent per share (c. &euro13.2m) has been declared and will
be paid on 28 January 2021. The Directors confirm that the Company continues to comply with the distribution
obligations contained within the Irish REIT legislation.
13. Financial liabilities
Accounting policy
See note 25 of the 2020 Annual Report.
13.a Borrowings
As at 30 September As at 31 March
2020 unaudited 2020
&euro'000
audited
&euro'000
Non-current
Unsecured bank 211,014 185,109
borrowings
Unsecured private 74,610 74,582
placement notes
Total non-current 285,624 259,691
borrowings
Current
Unsecured bank 128 159
borrowings
Unsecured private 363 358
placement notes
Total current 491 517
borrowings
Total borrowings 286,115 260,208
The maturity of non-current borrowings is as follows:
The maturity of As at 30 September As at 31 March
non-current 2020 unaudited 2020
borrowings is as &euro'000
follows:
audited
&euro'000
Less than one year 491 517
Between one and two - -
years
Between two and five 211,014 185,109
years
Over five years 74,610 74,582
Total 286,115 260,208
Movements in borrowings during the period:
As at 30 September As at 31 March 2020
2020 unaudited
&euro'000
audited
&euro'000
Balance at beginning 260,208 231,555
of period
Bank finance drawn 25,600 57,945
Bank finance repaid - (29,968)
Interest payable 307 676
Balance at end of 286,115 260,208
period
The Group has a stated policy of not incurring debt above 40% of the market value of its property assets and
has a through-cycle leverage target of 20-30% loan to value ("LTV"). Under the Irish REIT rules the LTV
ratio must remain under 50%.
The Group has an unsecured RCF of &euro320m provided by Bank of Ireland, Wells Fargo, Barclays Bank Ireland
and Allied Irish Banks. This facility, which expires in December 2023, is denominated in euro and is subject
to a margin of 2.0% over three-month EURIBOR. The Group has entered into derivative instruments so that the
majority of its (&euro125m) EURIBOR exposure is capped at 0.75% in accordance with the Group's hedging
policy (note 15.d.ii)
The Group also has &euro75m of private placement notes with an average maturity of 6.8 years at 30 September
2020 (March 2020: 7.3 years) which were placed with a single institutional investor. Coupons of 2.525% are
fixed so long as the Group's credit rating remains investment grade.
Where debt is drawn to finance material refurbishments and developments that take a substantial period of
time to take into use, the interest cost of this debt is capitalised. Approximately &euro129k of financing
costs were capitalised at an effective interest rate of 2.05% in relation to the Group's developments and
major refurbishments during the period (March 2020: &euro141k).
All costs related to financing arrangements are amortised using the effective interest rate. The Directors
confirm that all covenants have been complied with and are kept under review. There is significant headroom
on the financial covenants (note 2.e).
13.b Net debt reconciliation and LTV
Net debt and LTV are key financing metrics used by the Group and are also APMs. Net debt is the redemption
value of borrowings as adjusted by cash available for use. LTV or "loan to value" is the ratio of net debt
to investment property value at the measurement date.
As at 30 September As at 31 March 2020
2020 unaudited
&euro'000
audited
&euro'000
Cash and cash 29,341 28,454
equivalents
Cash reserved1 (6,684) (7,457)
Gross debt - fixed (75,000) (75,000)
interest rates
Gross debt - variable (212,990) (187,390)
interest rate
Net debt at period end (265,333) (241,393)
Investment property at 1,420,886 1,465,183
period end
Loan to value ratio 18.7% 16.5%
1. Cash is reduced by the amounts held in relation to rent deposits, sinking funds and similar arrangements
as these balances are not viewed as available funds for the purposes of the above calculation.
Reconciliation of opening to closing net debt:
Assets Liabilities Total
Cash Unsecured Private
and borrowings placemen
cash t notes
equiva
lents
&euro' &euro'000 &euro'00 &euro
000 0 '000
Net debt at as 17,322 (159,413) (75,000) (217,
at 1 April ) 091)
2019
Borrowings - (57,945) - (57,9
repaid 45)
Borrowings - 29,968) - 29,96
drawn 8)
Movement in cash and cash 6,082) - - 6,082
equivalents )
Movement in (2,407 - - (2,40
cash reserved ) 7)
1
Net debt as at 20,997 (187,390) (75,000) (241,
31 March 2020 ) 393)
(audited)
Borrowings - (25,600) - (25,6
drawn 00)
Movement in cash and cash 887) - - 887)
equivalents
Movement in 773) - - 773)
cash reserved
1
Net debt as at 22,657 (212,990) (75,000) (265,
30 September ) 333)
2020
(unaudited)
1. Cash is reduced by the amounts held in relation to rent deposits, sinking funds and similar arrangements
as these balances are not viewed as available funds for the purposes of the above calculation.
14. Cash flow information
Purchase of investment property
30 September 31 March 2020
2020 audited
unaudited
Notes &euro'000 &euro'000
Investment property 9 3,799 22,820)
purchases
Increase/(decrease) in 822 (145))
deposits on investment
properties
Purchase of investment 4,621 22,675)
property
Cash expenditure on investment property
30 September 31 March 2020
2020 audited
unaudited
Notes &euro'000 &euro'000
Development and refurbishment 9 8,795 23,636)
expenditure
Decrease/(increase) in 1,697 1,630)
investment property
expenditure payable
Capital expenditure on 10,492 25,266)
investment property
15. Financial instruments and risk management
15.a Financial risk management objectives and policy
The Group takes calculated risks to realise its strategic goals and this exposes the Group to a variety of
financial risks. These include, but are not limited to, market risk (including interest and price risk),
liquidity risk and credit risk. These financial risks are managed in an overall risk framework by the Board,
in particular by the Chief Financial Officer, and monitored and reported on by the Risk and Compliance
Officer. The Group monitors market conditions with a view to minimising the volatility of the funding costs
of the Group. The Group uses derivative financial instruments such as interest rate caps and swaptions to
manage some of the financial risks associated with the underlying business activities of the Group.
15.b Financial assets and financial liabilities
The following table shows the Group's financial assets and liabilities and the methods used to calculate
fair value.
Asset/Liability Carrying Level Fair value Assumptions
value calculation
technique
Trade and other Amortised 3 Discounted Most trade
receivables cost cash flow receivables
are very
short-term,
the majority
less than
one month,
and
therefore
face value
approximated
fair value
on a
discounted
basis.
Borrowings Amortised 3 Discounted The fair
cost cash flow value of
financial
liabilities
held at
amortised
cost have
been
calculated
by
discounting
the expected
cash flows
at
prevailing
interest
rates.
Derivative Fair value 2 Calculated The fair
financial fair value value of
instruments price derivative
financial
instruments
is
calculated
using
pricing
based on
observable
inputs from
financial
markets.
Trade and other Amortised 3 Discounted All trade
payables cost cash flow and other
payables
that could
be
classified
as financial
instruments
are very
short-term,
the majority
less than
one month,
and
therefore
face value
approximated
fair value
on a
discounted
basis
Contract Amortised 3 Discounted All contract
liabilities cost cash flow liabilities
classified
as financial
instruments
are very
short-term,
the majority
less than
one month,
and
therefore
face value
approximated
fair value
on a
discounted
basis
The carrying value of non-interest-bearing financial assets and financial liabilities approximates to their
fair values, largely due to their short-term maturities.
15.c Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly.
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the
recorded fair value are not based on observable market data.
The following tables present the classification of financial assets and liabilities within the fair value
hierarchy and the changes in fair values measurements at Level 3 estimated for the purposes of making the
above disclosure.
As at 30 September 2020 (unaudited)
Level Total Of which Measured Measured Total Fair
are at fair at financial value
assessed value amortised instrumen financial
as cost ts instrumen
financial ts
instrumen
ts
&euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000
Trade and 3 15,981 2,999) - 22) 2,999 2,999) 2,999)
other
receivables
Derivatives 2 3) 3) 3 - 3) 3)
at fair
value
Borrowings 3 (286,115) (286,115) - (286,115) (286,115) (290,569)
Trade and 3 (18,780) (1,404) - (1,404) (1,404) (1,404)
other
payables
Contract 3 (2,709) (2,709) - (2,709) (2,709) (2,709)
liabilities
(291,620) (287,226) 3 (287,229) (287,226) (291,680)
As at 31 March 2020 (audited)
Level Total Of which Measured Measured Total Fair
are at fair at financial value
assessed value amortised instrumen financial
as cost ts instrumen
financial ts
instrumen
ts
&euro'000 &euro'000 &euro'000 &euro'000 &euro'000 &euro'000
Trade and 3 13,966 1,591 - 1,591 1,591 1,591
other
receivables
Derivatives 2 34 34 34 - 34 34
at fair
value
Borrowings 3 (260,208) (260,208) - (260,208) (260,208) (266,559)
Trade and 3 (21,873) (2,240) - (2,240) (2,240) (2,240)
other
payables
Contract 3 (3,177) (3,177) - (3,177) (3,177) (3,177)
liabilities
(271,258) (264,000) 34 (264,034) (264,000) (270,351)
Movements of Level 3 fair values
This reconciliation includes investment property, loans and other financial assets which are included in
trade payables, trade receivables and contract liabilities. Measurement of these assets is described in note
0 (Investment property) and in the table at the start of this note.
As at 30 September As at 31 March 2020
2020
audited
unaudited
&euro'000
&euro'000
Balance at beginning 1,465,183 1,395,418
of period
Purchases, sales,
issues and settlement
Purchases1 12,594 46,456
Transfer to/from - 453
property, plant and
equipment
Fair value movement (56,891) 22,856
Balance at end of 1,420,886 1,465,183
period
1. Includes development, refurbishment and maintenance expenditure.
15.d Financial risk management
This note explains the Group's exposure to financial risks and how these risks could affect the Group's
future financial performance.
Risk Exposure Measurement Management
arising from
Market risk - Long-term Sensitivity Derivative
interest rate borrowings at analysis products -
risk variable rates cap/swaption
arrangements
Credit risk Cash and cash Ageing Cash investment
equivalents, analysis, policy with
trade credit ratings minimum ratings;
receivables, where diversification
derivative applicable of deposits
financial where merited;
instruments Expected credit
loss matrix for
trade debtors
Liquidity risk Borrowings and Cash flow Availability of
other forecasts are borrowing
liabilities completed as facilities
part of
budgeting
process
The policies for managing each of these and the principal effects of these policies on the results for the
period are summarised below:
i. Risk management framework
The Group's Board has overall responsibility for the establishment and oversight of the Group's risk
management framework. The Audit Committee is responsible for developing and monitoring the Group's risk
management policies. Risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. All of
these policies are regularly reviewed in order to reflect changes in the market conditions and the Group's
activities. The Audit Committee is assisted in its work by internal audit, conducted by PwC Ireland, which
undertakes periodic reviews of different elements of risk management controls and procedures.
ii. Market risk
Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to
changes in market prices. Market risk reflects interest rate risk, currency risk and other price risks. The
Group has no financial assets or liabilities denominated in foreign currencies. The Group's financial assets
mainly comprise trade receivables. Financial liabilities comprise short-term payables, private placement
notes and bank borrowings. Therefore the primary market risk is interest rate risk.
The Group has both fixed and variable rate borrowings. Variable rate borrowings consist of an unsecured
revolving credit facility and the Group has partly hedged against increasing rates by entering into interest
rate caps and swaptions to restrict EURIBOR costs to a maximum of 0.75%.
The following therefore illustrates the potential impact on profit and loss for the period of a 1% or 2%
increase in EURIBOR:
As at 30 September 2020 (six months)
Impact on profit Impact on profit
+1% EURIBOR +2% EURIBOR
Increase Increase
&euro'000 &euro'000 &euro'000
Amount drawn (212,990) (1,065) (2,130)
Hedging (caps)
&euro125m expires 125,000) 156) 781)
November 2021:
strike 0.75%
Impact on profit (909) (1,349)
after hedging
1. This calculation uses the more advantageous hedge first and therefore shows the best-case scenario.
As at 31 March 2020 (year)
Impact on profit Impact on profit
+1% EURIBOR +2% EURIBOR
Increase Increase
&euro'000 &euro'000 &euro'000
Amount drawn (187,390) (1,874) (3,748)
Hedging (caps)
&euro125m expires 125,000 313 1,563
December 2021:
strike 0.75%
Impact on profit (1,561) (2,185)
after hedging
1. This calculation uses the more advantageous hedge first and therefore shows the best-case scenario.
Exposure to interest rates is limited to the exposure of the Group's costs from borrowings. Variable rate
borrowings were &euro213m (March 2020: &euro187m) and gross debt (note 13.b) was &euro288m in total of which
&euro75m was fixed rate private placement notes (March 2020: &euro262m of which &euro75m was fixed). The
Group's interest cost under its RCF was based on a EURIBOR rate of 0% throughout the period (together with
the 2% margin).
iii. Credit risk
Credit risk is the risk of loss of principal or loss of a financial reward stemming from a counterparty's
failure to repay a loan or otherwise meet a contractual obligation. Credit risk is therefore, for the Group
and Company, the risk that the counterparties underlying its assets default.
The Group has the following types of financial assets and cash that are subject to credit risk:
Cash and cash equivalents: These are held with major Irish and European institutions. The Board has
established a cash management policy for these funds which it monitors regularly. This policy includes
ratings restrictions, BB or better, and related investment thresholds, maximum balances of &euro25-50m with
individual institutions dependent on rating, to avoid concentration risks with any one counterparty. The
Group has also engaged the services of a Depository to ensure the security of the cash assets.
Trade and other receivables: Rents are generally received in advance from tenants and therefore there tends
to be a low level of credit risk associated with this asset class. As part of the Group's response to the
COVID-19 pandemic, a credit rating system was introduced for tenants. This is used, together with an
analysis of past loss patterns and future expectations of economic impacts, to create a matrix for the
calculation and allowance for expected credit losses. Included in non-current trade receivables is a net
amount of &euro0.4m relating to expenditure on fit-outs that is recoverable from tenants over the duration
of the lease (March 2020: &euro0.7m). This amount is monitored closely in the current economic environment
due to its long-term nature. An amount of &euro0.1m was due in relation to the sale of an investment
property at 30 September 2020 (March 2020: &euro0.1m). Trade receivables are mainly rents and related
amounts due from tenants and rent collection is closely monitored. Please see page 16 of this Half Yearly
Financial Report for rent collection information.
Trade receivables are managed under a "held to collect" business model as described in note 21 to the 2020
Annual Report. The Expected Credit Losses ("ECL") on financial and contract assets recognised during the
period were &euro213k (March 2020: &euro147k). Details on the Group's policy on providing ECL can be found
in the introduction to Section IV of consolidated financial statements in the 2020 Annual Report. The Group
has a diverse range of tenants, many of which are large multinational companies. 58% of the Group's
contracted rent (gross of residential property costs and the Iconic arrangement) is from the technology and
state entity sectors (March 2020: 60%).
The maximum amount of credit exposure is therefore:
As at 30 September As at 31 March 2020
2020 unaudited audited
&euro'000 &euro'000
Other financial 3 34
assets
Trade and other 15,981 13,966
receivables
Cash and cash 29,341 28,454
equivalents
Balance at end of 45,325 42,454
period
iv. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. The Group ensures that it has sufficient available funds to meet obligations as they fall due. Net
current assets, a measure of the Group's ability to meet its current liabilities, at the period end were:
As at 30 As at 31
September March
2020 2020
unaudited audited
&euro'000 &euro'000
Net current assets at the period end 13,468 6,638
The nature of the Group's activities means that the management of cash is particularly important and is
managed over a four-year period. The budget and forecasting process includes cash forecasting, capital and
operational expenditure projections, cash inflows and dividend payments on a quarterly basis over the
four-year horizon. This allows the Group to monitor the adequacy of its financial arrangements.
The Group had access at 30 September 2020 to &euro107m (March 2020: &euro133m) in undrawn amounts under its
revolving credit facility (note 13.a), which matures in December 2023. As a precaution given the uncertainty
caused by COVID-19, the Group has implemented a policy of maintaining a minimum cash balance of &euro15m at
all times for liquidity purposes.
Exposure to liquidity risk
Listed below are the contractual cash flows of the Group's financial liabilities. This includes contractual
maturity in relation to borrowings which is also the earliest maturity of the facilities assuming that
covenants are not breached. Covenants are reviewed quarterly and scenario analyses performed as to the
circumstances under which these covenants could be breached in order to monitor going concern and viability
(see also note 2.e). Only trade and other payables relating to cash expenditure are included; the balance
relates either to non-cash items or deferred income. These include interest margins payable and contracted
repayments. EURIBOR is assumed at 0% throughout the period.
As at 30 September 2020 (unaudited)
Carrying Contractual 6 6-12 1-2 2-5 >5
amount mo
nt
hs
cash flows months years years years
or
le
ss
Non-derivatives
Borrowings 286,115 310,742 3, 3,077 6,154 219,7 78,65
07 76 8
7
Trade payables 1,404 1,404 1, - - - -
40
4
Contract 2,709 2,709 2, - - - -
liabilities 70
9
Total 290,228 314,855 7, 3,077 6,154 219,7 78,65
19 76 8
0
At 31 March 2020 (audited)
Carrying Contractual 6 6-12 1-2 2-5 >5
cash flows mo months years years years
nt
hs
amount or
le
ss
Non-derivatives
Borrowings 260,208 285,517 2, 2,821 5,642 194,6 79,60
82 29 4
1
Trade payables 2,240 2,240 2, - - - -
24
0
Contract 3,177 3,177 3, - - - -
liabilities 17
7
Total 265,625 290,934 8, 2,821 5,642 194,6 79,60
23 29 4
8
v. Capital management
The Group's objectives when managing capital are to:
· Safeguard its ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders
· Maintain an optimal capital structure to minimise the cost of capital
In order to maintain or adjust capital, the Group may adjust the amount of dividends paid to shareholders
(whilst ensuring it maintains compliance with the dividend distribution requirements of the Irish REIT
regime) return capital to shareholders, issue new shares or sell assets to reduce debt. In August 2020, the
Company commenced a second share buyback programme to return &euro25m to shareholders which completed on 16
November 2020 (note 11). The Group is also obliged to distribute at least 85% of its property rental income
annually via dividends under the REIT regime regulations.
Capital comprises share capital, retained earnings and other reserves as disclosed in the consolidated
statement of changes in equity. At 30 September 2020 the total capital of the Group was &euro1,167m (March
2020: &euro1,231m).
The key performance indicators used in evaluating the achievement of strategic objectives, and as
performance measurements for remuneration, are as follows:
· Total property return ("TPR") %: Measures the relative performance of the Company's investment property
portfolio versus the Irish property market, as calculated by the MSCI.
· Total accounting return ("TAR") %: Measures the absolute growth in the Group's EPRA Net Tangible Assets
("NTA") per share over the previous period-end EPRA NTA per share and adding back dividends per share
paid. This was previously based on the EPRA NAV per share. EPRA issued new guidelines on NAV measures in
October 2019 and therefore the TAR is now based on one of these, EPRA NTA (see page 54).
· EPRA earnings per share (cent): Measures the profit after tax excluding revaluations and gains and
losses on disposals and associated taxation (if any). For property companies it is a key measure of a
company's operational performance and capacity to pay dividends.
· Total shareholder return ("TSR") %: Measures growth in share value over a period assuming dividends are
re-invested in the purchase of shares. Allows comparison of performance against other companies in the
Group's listed peer group.
The Group seeks to leverage its equity capital in order to enhance returns (note 13.a). The loan to value
ratio ("LTV") is expressed as net debt (note 13.b) divided by total investment property value (as shown in
the balance sheet). The Group's policy is to maintain an LTV ratio of 20-30% on a through cycle basis and
not to incur debt above an LTV ratio of 40% (see note 13.b).
Loan covenants
Under the terms of the major borrowing facilities, the Group is required to comply with the following key
financial covenants:
· The LTV ratio must not exceed 50%;
· Interest cover must be greater than 1.5 times on both a 12-month historical and forward basis; and
· The net worth (Net Asset Value) of the Group must exceed &euro400m at all times.
The Group has complied with these key covenants throughout the reporting period.
Other
In addition, the LTV ratio must remain under 50% under the rules of the Irish REIT regime.
The Company's share capital is publicly traded on Euronext Dublin and the London Stock Exchange.
As the Company is authorised under the Alternative Investment Fund regulations it is required to maintain a
minimum of 25% of its annual fixed overheads as capital. This is managed through the Company's risk
management process. The limit was monitored throughout the period and no breaches occurred.
Section 5 - Other
*****************
This section contains notes that do not belong in any of the previous categories.
16. Capital commitments
The Group enters into development contracts to develop buildings in its portfolio. The total capital
expenditure commitment in relation to these over the next one to two years is estimated at &euro11m (March
2020: &euro18m). The Group has also committed to return &euro25m of share capital to shareholders (note 11)
and &euro16m remained to be returned at 30 September 2020 (March 2020: &euronil).
17. Contingent liabilities
Accounting policy
See note 33 of the 2020 Annual Report.
The Group has not identified any contingent liabilities which are required to be disclosed in the condensed
consolidated financial statements.
18. Related parties
18.a Subsidiaries
All transactions between the Company and its subsidiaries are eliminated on consolidation. See note 34.a of
the 2020 Annual Report for a list of major subsidiaries.
18.b Other related party transactions
Thomas Edwards-Moss (CFO) rents an apartment from the Group at market rent and paid &euro17k in rent during
the period (March 2020: &euro14k). Stewart Harrington (Non-Executive Director) also rented an apartment from
the Group at market rent and paid &euro17k in rent during the period (March 2020: &euro9k).
19. Events after the reporting period
19.a Interim dividend
On 16 November 2020 the Directors approved the interim dividend of 2.0 cent per share (&euro13.2m) which
will be paid on 28 January 2021 to shareholders on the register on 8 January 2021.
19.b Share buyback programme
In August 2020 the Group announced a second &euro25m share buyback programme. As at 30 September 2020 8.1m
shares had been repurchased and cancelled at an average price of &euro1.11. The buyback completed on 16
November 2020, at which point 23.1m shares had been repurchased and cancelled at an average price per share
of &euro1.08.
Supplementary Information (unaudited)
*************************************
I. Alternative Performance Measures
The Group has applied the European Securities and Markets Authority (ESMA) "Guidelines on Alternative
Performance Measures" in this Half Yearly Financial Report. An Alternative Performance Measure ("APM") is a
measure of financial or future performance, position or cash flows of the Group which is not a measure
defined by International Financial Reporting Standards ("IFRS").
The APMs used in this Half Yearly Financial Report are described in detail on page 188 of the 2020 Annual
Report.
II. European Public Real Estate Association ("EPRA") Performance Measures (unaudited)
EPRA Performance Measures are calculated according to the EPRA Best Practices Recommendations October 2019.
EPRA performance measures are used in order to enhance transparency and comparability with other public real
estate companies in Europe. EPRA earnings and EPRA NTA measures are also included within the financial
statements, in which they are audited annually, as they are important key performance indicators for
variable remuneration. All measures are presented on a consolidated basis only and, where relevant, are
reconciled to IFRS figures as presented in the consolidated financial statements.
EPRA performance Unit Six months Six months ended
measure ended
30 September 2019
30 September
2020
EPRA earnings &euro'000 22,439 19,284
EPRA EPS cent 3.3 2.8
Diluted EPRA EPS cent 3.3 2.8
EPRA cost ratio - % 21.3% 23.3%
including direct
vacancy costs
EPRA cost ratio - % 19.9% 22.1%
excluding direct
vacancy costs
EPRA performance Unit As at 30 As at 31 March
measure September 2020 2020
EPRA net initial % 4.5% 4.1%
yield ("NIY")
EPRA "topped-up" NIY % 4.5% 4.4%
IFRS NAV &euro'000 1,167,061 1,231,149
IFRS NAV per share cent 172.5 179.8
EPRA net cent 191.0 199.5
reinstatement value
("EPRA NRV")
EPRA net tangible cent 171.9 179.2
assets ("EPRA NTA")
EPRA net disposal cent 170.9 177.9
value ("EPRA NDV")
EPRA NAV per share cent 172.0 179.3
(old measure)
EPRA NNNAV per share cent 171.3 178.3
(old measure)
EPRA vacancy rate % 8.1% 6.9%
Adjusted EPRA % 7.5% 6.9%
vacancy rate
II.a EPRA earnings
EPRA earnings, earnings from operational activities, are presented as they are a key measure of the Group's
underlying operating results and an indication of the extent to which current dividend payments are
supported by earnings. Unrealised changes in valuation, gains or losses on disposals of properties and
certain other items are excluded as they are not considered to be part of the core activity of an investment
property company. The EPRA earnings table can be found in note 7 to the condensed consolidated financial
statements.
II.b EPRA cost ratio
A key measure to enable meaningful measurement and comparison of the changes in a company's operating costs.
Six months Six months ended Financial year
ended ended 31 March
2020
30 September
30 September 2019
2020 &euro'000
&euro'000
&euro'000
Total operating 5,884 5,753 13,393
expenses under
IFRS
Property 1,369 1,210 3,051
expenses
Net service (167) (39) 65
charge
(income)/expens
e
EPRA costs 7,086 6,924 16,509
including
direct vacancy
costs
Direct vacancy (478) (357) (964)
costs
EPRA costs 6,608 6,567 15,545
excluding
direct vacancy
costs
Gross rental 33,222 29,749 61,701
income
EPRA cost ratio 21.3% 23.3% 26.8%
including
direct vacancy
costs
EPRA cost ratio 19.9% 22.1% 25.2%
excluding
direct vacancy
costs
1. Costs and revenue are adjusted in accordance with EPRA for operating expenses not recharged specifically
to tenants but which are de facto included in the rents
The Group has not capitalised any overheads in the current period or the prior financial year. Property
expenses are reduced by the costs which are reimbursed through rental receipts.
II.c EPRA vacancy rate
This provides comparable and consistent vacancy data for investors based on the Valuer's assessment of gross
ERV. The EPRA vacancy rate measures the ERV of vacant space expressed as a percentage of the total ERV of
the completed portfolio.
EPRA vacancy rate: Calculated as recommended excluding current developments/refurbishments projects
underway:
2 Cumberland Place and 50 City Quay.
Six months ended Financial year ended
30 September 2020 31 March 2020
&euro'000 &euro'000
Annualised ERV vacant 5,963 5,208
units
Annualised ERV completed 73,487 75,173
portfolio
EPRA vacancy rate 8.1% 6.9%
Adjusted EPRA vacancy rate: Calculated as above but also excluding the Clanwilliam Court properties
(Clanwilliam Blocks 1,2 and 5 and Marine House) which are scheduled to move to the development portfolio
segment in the next 12-18 months and are therefore will be unavailable to rent when the current leases
expire:
Six months ended Financial year ended
30 September 2020 31 March 2020
&euro'000 &euro'000
Annualised ERV vacant 5,075 5,208
units
Annualised ERV completed 67,728 75,173
portfolio
Adjusted EPRA vacancy 7.5% 6.9%
rate
II.e EPRA Net Initial Yield ("EPRA NIY") and EPRA "topped-up" Net Initial Yield
This measures the inherent yield of the portfolio according to set guidelines to allow investors to compare
real estate investment companies across Europe on a consistent basis, using current cash passing rent. EPRA
'topped-up' NIY measures the yield based on rents adjusted for the expiration of lease incentives, i.e. on a
contracted rent basis. EPRA NIY is calculated using the fair value of investment property per the Valuer's
Report excluding owner occupied property.
As at 30 September 2020
Office Residential Industrial/land Total Development Total
&euro'm &euro'm &euro'm &euro'm &euro'm &euro'm
Investment 1,161 164 56 1,381 56 1,437
property
per
Valuer's
report
Less: Owner (7) - - (7) - (7)
occupied
Less: - - (30)2 (30) (56) (86)
Development
/refurbishm
ent
Completed 1,154 164 26 1,344 - 1,344
property
portfolio1
Allowance 114 7 1 122
for
purchasers'
costs3
Gross up 1,268 171 27 1,466
completed
property
portfolio
(A)
Annualised 57 8 2 67
cash
passing
rental
income4
Property (1) (1) - (2)
outgoings
Annualised 56 7 2 65
net rents
(B)
Expiry of - - - -
lease
incentives
and fixed
uplifts5
'Topped-up' 56 7 2 65
annualised
net rent
(C)
EPRA NIY 4.5% 3.9% 7.2% 4.5%
(B/A)
EPRA 4.5% 3.9% 7.2% 4.5%
'Topped-up'
NIY (C/A)
1. Investment property fair value under IFRS includes an reduction of &euro9m in relation to income
spreading.
2. Lands at Newlands Cross are excluded from industrial/land as held for future development and were
undeveloped at 30 September 2020.
3. Purchasers' costs are extracted from the valuations report and are approximately 9.92% for commercial
property and 4.42% for residential.
4. Cash passing rent includes residential rents gross, as property outgoings are included separately, and
variable rent from the Iconic arrangement in Clanwilliam Court.
5. The expiry of lease incentives and fixed uplifts are mainly within one year.
As at 31 March 2020
Office Residential Industrial/land Total Development Total
&euro'm &euro'm &euro'm &euro'm &euro'm &euro'm
Investment 1,212 159 61 1,432 48 1,480
property
per
Valuer's
report
Less: Owner (7) - - (7) - (7)
occupied
Less: - - (33)1 (33) (48) (81)
Development
/refurbishm
ent
Completed 1,205 159 28 1,392 - 1,392
property
portfolio
Allowance 120 7 3 130
for
purchasers'
costs2
Gross up 1,325 166 31 1,522
completed
property
portfolio
(A)
Annualised 55 7 2 64
cash
passing
rental
income3
Property (1) (1) - (2)
outgoings
Annualised 54 6 2 62
net rents
(B)
Expiry of 4 - - 4
lease
incentives
and fixed
uplifts4
'Topped-up' 58 6 2 66
annualised
net rent
(C)
EPRA NIY 4.1% 3.7% 5.2% 4.1%
(B/A)
EPRA 4.4% 3.7% 6.1% 4.4%
'Topped-up'
NIY (C/A)
1. Lands at Newlands Cross are excluded as held for future development and were undeveloped at 31 March 2020
2. Purchasers' costs are approximately 9.96% for commercial property and 4.46% for residential
3. Cash passing rent includes residential rents gross, as property outgoings are included separately, and
rents from the Iconic arrangement in Clanwilliam
4. The expiry of lease incentives and fixed uplifts are mainly within one year
II.f EPRA NAV measures
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