TIDMSERE
RNS Number : 0375R
Schroder Eur Real Est Inv Trust PLC
12 June 2018
12 June 2018
SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC
HALF YEAR REPORT AND ACCOUNTS
HALF YEAR RESULTS FOR THE PERIODED 31 MARCH 2018
PROFIT INCREASES BY 157% AS PORTFOLIO IS FULLY INVESTED IN
WINNING EUROPEAN CITIES
Schroder European Real Estate Investment Trust plc ("SEREIT" or
the "Company"), the company investing in European growth cities,
today announces its half year results for the period ended 31 March
2018 as required by the UK Listing Authority's Disclosure Guidance
and Transparency Rule 4.2.
Financial Highlights for six months ending 31 March 2018:
-- Profit for the six months increased 157% to EUR10.8 million
(31 March 2017: EUR4.2 million), driven by uplift in portfolio
values and growth in net income
-- Net asset value ('NAV') total return of 6.1% (31 March 2017: 2.5%)
-- 4.9% increase in NAV to EUR187.1 million, or 139.9 cps
(deducting the interim dividend declared in December 2017 and paid
in April 2018, the NAV would have been EUR184.6 million (138.1 cps)
as at 31 March 2018)
-- EPRA earnings of EUR6.5 million (31 March 2017: EUR2.6
million), reflecting the growth in rental income from acquisitions
and receipt of EUR2.4 million of the surrender premium for the
Hamburg asset
-- Dividend for quarter ended 31 March 2018 of 1.85 cps fully covered from income
-- Annualised dividend rate of 5.5% based on the euro equivalent
of the issue price as at admission, achieving the target dividend
stated at IPO. Total interim dividends declared to date relating to
the year ending 30 September 2018 of 3.7 cps, representing a 68%
increase over the same period in respect of the year ended 30
September 2017
-- Loan to value ('LTV') of 28% (30 September 2017: 22%). The
debt has a weighted average total interest rate of 1.3%, is either
fixed cost or capped and has a long duration of 6.4 years on
average
Operational highlights
-- Company fully invested
-- Acquisition of a data centre and office premises in the
Netherlands, secured on a long lease to a strong tenant, for a
price of EUR19.8 million, reflecting a net initial yield of 10%
-- Continued focus on winning cities and regions with 100% of
the portfolio by value located in the faster GDP growth locations
in Europe (source: Oxford Economics)
-- Lease surrender agreement at Hamburg office in return for a
premium of EUR3.9 million. Provides the opportunity to re-let space
in the strong Hamburg market
-- Contracted sale of two Casino supermarkets in France at a 10%
premium to December 2017 independent valuation
-- Portfolio valued at EUR237.3 million, reflecting an uplift of
approximately 9.5% on the combined purchase price
-- Successful execution of asset management initiatives across
the portfolio, including six new lettings and re-gears across
approximately 5,000 sqm
-- Portfolio occupancy of 97% and an unexpired lease term of 6.7 years to expiry.
Market Outlook
-- Eurozone growth continues to drive a strong occupational market
-- Low vacancy rates supporting favourable rental growth across
the majority of markets the Company is invested in.
Commenting, Sir Julian Berney Bt., Chairman of the Board,
said:
"This has been an active period for the Company, during which we
have delivered growth in NAV, net income and shareholder dividends.
We have executed on the strategy outlined at IPO, constructing a
high quality real estate portfolio, across the growth cities of
western continental Europe. Leveraging its local expertise,
Schroders is working on a number of asset management initiatives
across the portfolio to grow income and value and coupled with the
positive economic backdrop in our target markets, we believe the
Company is well positioned for the next stage of growth."
Jeff O'Dwyer, of Schroder Real Estate Investment Management
Limited, added:
"Our portfolio of assets across winning cities such as Berlin,
Hamburg, Stuttgart, Frankfurt and Paris continues to benefit from
improving occupational demand and strong investment markets.
Combined with the active asset management initiatives that we have
been driving, this has generated positive performance.
"Our immediate priority is to invest the capital that we are
receiving from the profitable sale of the two Casino supermarket
investments and we are in negotiations on a number of new
opportunities in both new and existing sectors. As previously
stated, our aspirations are to grow the portfolio through a
disciplined and consistent approach centred on enhancing income and
shareholder returns."
For further information:
Schroder Real Estate Investment Management
Duncan Owen / Jeff O'Dwyer 020 7658 6000
Ria Vavakis
Schroder Investment Management Limited 020 7658 2371
==============
FTI Consulting
Dido Laurimore / Ellie Sweeney / Richard
Gotla 020 3727 1000
==============
A presentation for analysts and investors will be held at 08.45
a.m. BST today at the offices of Schroders plc, 31 Gresham Street,
London EC2V 7QA. If you would like to attend, please contact James
Lowe at Schroders on +44 (0)20 7658 2083 or
james.lowe@Schroders.com
The Half Year Report is also being published in hard copy format
and an electronic copy of that document will shortly be available
to download from the Company's website www.schroders.co.uk/its.
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/0375R_1-2018-6-11.pdf
The Company has submitted a pdf of the hard copy format of its
Half Year Report to the National Storage Mechanism and it will
shortly be available for inspection at
www.morningstar.co.uk/uk/NSM.
A further announcement will be made in due course to confirm the
full timetable of the second interim dividend.
Chairman's Statement
Overview
During the period the Company has achieved two significant
milestones: full investment, following acquisition of an office and
data centre in the Netherlands; and growing the dividend to the
target level set at IPO. The dividend yield is 5.5% p.a. against
the euro equivalent of the issue price as at admission and, based
on the Euro:GBP exchange rate as at 31 March 2018, the dividend
represents 6.5% p.a. against GBP1 invested at IPO.
The acquisition in the Netherlands has taken the real estate
portfolio to 10 assets, located in growth cities and regions of
continental Europe. These markets are benefiting from the continued
favourable Eurozone economic outlook and mega-themes such as
urbanisation and improving infrastructure.
In February the Company announced the sale of its interest in
the two Casino supermarkets, representing a 10% premium to the 31
December 2017 valuation. Leveraging its extensive European local
presence, the Investment Manager is pursuing new investment
opportunities for the redeployment of the proceeds that will be
received in July. There are also a number of other value and
income-enhancing asset management initiatives underway across the
portfolio which will maximise performance. Further detail on these
matters is set out in the Investment Manager's Review.
Results
The Company's net asset value ("NAV") at 31 March 2018,
excluding non-controlling interests, was EUR187.1 million or 139.9
euro cents per share (GBP164.4 million or 123.0 pence per share).
Including dividends, the NAV total return over the period was
6.1%.
Including the recognition of the interim dividend declared in
December 2017, which went ex-dividend in March 2018 and was paid on
13 April 2018 from income, the Company's NAV would have reduced to
EUR184.6m or 138.1 euro cents per share (GBP162.2 million or 121.3
pence per share).
The profit for the six month period to 31 March 2018 was EUR10.8
million and the EPRA earnings were EUR6.5 million.
Strategy
The investment strategy is based on targeting high quality
assets in winning cities and regions in Continental Europe. The
current portfolio demonstrates this, with all of the assets located
in cities with GDP growth forecasts in the top two quartiles of all
European regions (Source: Oxford Economics).
Our target markets in Europe are benefiting from a broad-based
economic recovery, with positive growth forecasts, declining
unemployment and inflation under control. Rental growth is
returning to most parts of the market as occupier demand for good
quality, well-located assets remains healthy and development
activity is reasonably subdued. This will be positive for the
Company's portfolio and supports our growth ambitions for the
Company.
The Investment Manager's in-house research and local teams,
which totals 145 people across eight key target markets in Europe,
provide a market-leading platform to identify assets fitting the
investment strategy. The focus is on locations that are benefiting
from supply/demand imbalances, infrastructure improvements and
competing land uses. These assets are actively managed by the local
teams, with the objective of improving rental income and delivering
long-term capital growth.
Execution of this investment strategy has underpinned the
delivery of shareholder returns. The Company is keen to build on
this by growing in a disciplined way that continues to improve
earnings and value and brings additional benefits such as improved
share liquidity.
Debt
During the period the Company completed a new EUR13m debt
facility secured against the Saint-Cloud office building in Paris.
This loan takes the Company's total third party debt as at 31 March
2018 to EUR73.4 million, representing a Loan to Value ("LTV") of
approximately 28% against the overall gross asset value of the
Company.
The Company is focused on maintaining a robust balance sheet and
overall leverage is capped at 35% at the time of drawing debt. The
debt strategy tailors gearing against those assets most suitable
for debt financing. The Company has five debt facilities in place
with an average weighted total interest rate of 1.30%. All interest
rates are either fixed or capped. Given the positive yield spread
it is likely the Company will draw further debt facilities against
future acquisitions and target overall gearing at around the capped
level.
Dividend
The Company has declared a second interim dividend in respect of
the year ending 30 September 2018 of 1.85 euro cents per share
payable on 20 July 2018 to shareholders on the register on 6 July
2018. The first and second interim dividends in respect of the year
ending 30 September 2018 amount to 3.7 euro cents per share,
representing a 68% increase compared to dividends declared over the
same period in respect of the year ended 30 September 2017.
The dividend is approximately 100% covered from recurring income
from the portfolio. This excludes the positive impact of the
receipt of EUR2.4 million in respect of the first payment for the
Hamburg lease surrender. Including the Hamburg surrender premium
receipt, the dividend cover is 172%.
The latest declared dividend represents an annualised rate of
5.5% based on the euro equivalent of the issue price at admission,
achieving the target dividend stated at IPO. Based on the Euro: GBP
exchange rate as at 31 March 2018, this equates to an annualised
rate of 6.5% on the GBP issue price at IPO of 100 pence per
share.
The Company will continue to pursue a progressive dividend
policy, which is sustainable from recurring income.
Outlook
Having delivered on the strategy outlined at IPO, the Company is
well-positioned for the next phase of its growth. The high quality
real estate portfolio across the growth cities of continental
Europe provides a strong platform for the Company. It generates an
attractive level of stable income which covers the dividend and
provides opportunities to grow income and values over the long
term.
Occupier demand and rental growth in the target markets of
Western Europe is increasing, underpinned by the continued economic
growth. This presents an opportunity for the Company and we look
forward to working with the Investment Manager to progress the
strategy.
Sir Julian Berney Bt.
Chairman
11 June 2018
Investment Manager's Report
Results
The Company's net asset value ("NAV") as at 31 March 2018 stood
at EUR187.1 million (GBP164.4m), or 139.9 euro cents (123.0 pence)
per share, achieving a NAV total return for the first six months of
the financial year of 6.1%.
The table below provides an analysis of the movement in NAV
during the reporting period as well as a corresponding
reconciliation in the movement in the NAV cents per share:
% change per cps(3)
NAV movement EUR million(1) Cps(2)
Brought forward as at 1 October 2017 178.3 133.3 -
================= ========= ====================
Transaction costs of investments made during the period (1.3) (1.0) (0.8)
================= ========= ====================
Capital expenditure (0.1) (0.1) (0.1)
================= ========= ====================
Unrealised gain in valuation of the real estate portfolio 6.2 4.7 3.5
================= ========= ====================
EPRA earnings 6.5 4.9 3.7
================= ========= ====================
Non-cash items (0.5) (0.4) (0.3)
================= ========= ====================
Dividend paid(4) (2.0) (1.5) (1.1)
================= ========= ====================
Carried forward as at 31 March 2018 187.1 139.9 4.9
================= ========= ====================
(1) Management reviews the performance of the Company
principally on a proportionally consolidated basis. As a result,
figures quoted in this table include the Company's share of joint
ventures on a line-by-line basis and exclude non-controlling
interests in the Company's subsidiaries
(2) Based on 133,734,686 shares
(3) Percentage change based on the starting NAV as at 1 October
2017
(4) This represents the fourth interim dividend for the year
ended 30 September 2017 which was paid in January 2018. The first
interim dividend for the year ending 30 September 2018 was paid to
investors from prior income on 13 April 2018 and is not included as
a NAV movement during the period
Market overview
The Eurozone has enjoyed its strongest period of growth during
the last 10 years with Schroders forecasting that Eurozone GDP will
grow by 2-2.5% through 2018-2019. Investment is increasing, while
unemployment continues to fall with consumer spending increases.
The acceleration in world trade means that external demand in the
form of exports should continue to grow. While stronger growth will
feed through to higher inflation, Schroders expects it to remain at
around 1.5% p.a. over the next couple of years, with the result
that the ECB is unlikely to raise interest rates before 2019. The
main downside risk is a trade war which would hurt the
export-orientated Eurozone.
Offices
The economic momentum continues to drive strong demand in most
European office markets and vacancy, particularly for modern space
in central locations, continues to erode. At the same time, the
supply pipeline for the next two years remains muted and new supply
is often pre-let. This in turn continues to filter through to
broad-based rental growth not just in CBD locations, but also in
other established and well-connected office locations.
Retail
While consumer spending is rising, much of the growth is
generated online with varying effects on the various physical
retail formats and sectors. The food sector remains resilient to
online sales and the trend away from big hypermarkets to smaller
supermarkets, convenience stores and organic food stores continues.
Retail warehouses that sell bulky goods or DIY products seem also
relatively immune. On the other hand, fashion sees the biggest
pressure from online sales. Several smaller chains have fallen into
insolvency and major retailers such as H&M and Inditex are
closing stores and investing heavily in their websites and
logistics. Yet for these brands prime high street unit shops, or a
presence in dominant shopping centres, is key for branding and
marketing.
Logistics/warehousing
In many respects the industrial sector resembles the office
market. Logistics take-up in continental Europe hit a new record in
2017, reflecting the cyclical recovery in demand from manufacturers
and third party logistics firms (3PLs) and the rapid structural
growth in online retail. Although development is increasing, the
vast majority of schemes are being built on a pre-let "build to
suit" basis and vacancy in most locations remains low. Prime
logistics rents increased by 3% on average last year (source:
CBRE).
Investment market
Retail was the one sector where liquidity declined last year.
The value of retail investment deals in Continental Europe was 16%
lower in 2017 than 2016 (source: RCA). Conversely, office and
industrial deals increased while, in the search for yield,
investment alternatives such as hotels increased, too. Looking
forward, the investment market is likely to remain highly
competitive in 2018. While the gap between prime real estate and
government bond yields has narrowed since 2015 to around 3.0%, it
still looks attractive given the favourable outlook for rental and
income growth in most sectors.
Investment progress
Over the six months since 1 October 2017, the Company completed
the following three significant transactions:
- Purchase completed: The Company acquired a long-term fully
leased, three storey office building and data centre in Apeldoorn,
The Netherlands for an all-in cost of EUR21.1 million and
generating a net income yield of approximately 10%.
- Lease surrender completed: The Company agreed terms for City
BKK to surrender its lease at the Hamburg office asset in Germany
in return for a cash payment to the Company of EUR3.9 million (of
which EUR2.4 million was received during this period). This EUR3.9
million cash payment represents 4.7 years of annual rental income
from City BKK. Negotiating a surrender with City BKK was a key
initiative within the acquisition strategy. The agreement gives the
Company the opportunity to reposition the property and re-lease the
space into a strengthening office sub-market which will also
diversify the property's income profile.
- Sale committed: The Casino Group has exercised a buy-back
option for the Company's 70% interest in two Casino supermarkets in
Biarritz and Rennes. The combined sale value for the 70% share is
EUR44.8 million, representing a 10% premium to the 31 December 2017
valuation. The sale will complete on 31 July 2018. The Company will
continue to receive rental income from the properties until the
sale completes.
The Company has invested EUR232 million since IPO and as of
today is fully deployed. The sale of the Casino supermarkets in
Rennes and Biarritz will provide the Company with investment
capacity of approximately EUR45m-EUR50m (including further
gearing). The Investment Manager is reviewing, and in exclusivity,
on a number of new investment opportunities that could be suitable
for redeployment of this capital when it is received later in the
year.
Real estate portfolio
The portfolio comprises 10 institutional grade properties, c.97%
let, across winning cities and regions in France, Germany, Spain
and the Netherlands. All investments are owned 100% except for the
Rennes and Biarritz supermarkets (70% interest) and the Metromar
shopping centre, Seville (50% interest).
The redeployment of the Casino sale proceeds will be focused on
acquiring assets that complement the existing portfolio and
maintain good asset diversity, a stable income base and the
opportunity for long-term capital growth through active asset
management. The Investment Manager has an identified pipeline of
acquisitions spanning a number of sectors, including light
industrial and logistic investments, and is confident of deploying
the capital in the near term.
The table below gives an overview of the portfolio:
Property Country Sector Contracted rents Value
EURm % total EUR0-EUR20m EUR20m-EUR40m EUR40m-EUR60m >EUR60m
======= ========== =========== ============= ============= =======
Paris (B-B) France Office 2.4 14.8% X
============ ======== ======= ========== =========== ============= ============= =======
Paris (SC) France Office 3.5 21.7% X
============ ======== ======= ========== =========== ============= ============= =======
Berlin Germany Retail 1.6 10.0% X
============ ======== ======= ========== =========== ============= ============= =======
Seville Spain Retail 2.0 12.2% X
============ ======== ======= ========== =========== ============= ============= =======
Casino Supermarket,
Biarritz* France Retail 1.3 7.8% X
============ ======== ======= ========== =========== ============= ============= =======
Apeldoorn Netherlands Mixed 2.4 14.9% X
============ ======== ======= ========== =========== ============= ============= =======
Casino Supermarket,
Rennes* France Retail 0.9 5.9% X
============ ======== ======= ========== =========== ============= ============= =======
Hamburg Germany Office 0.5 3.4% X
============ ======== ======= ========== =========== ============= ============= =======
Stuttgart Germany Office 0.8 5.0% X
============ ======== ======= ========== =========== ============= ============= =======
Frankfurt Germany Retail 0.7 4.3% X
============ ======== ======= ========== =========== ============= ============= =======
Portfolio at 31/03/2018* 16.1 100.0 237.3
======= ========== ==================================================
Biarritz &
Rennes* France Retail 2.2 13.8%
============ ======== ======= ========== =========== ============= ============= =======
Portfolio excluding Casino
supermarkets 13.9 86.2% 192.5
======= ========== ==================================================
* The value assigned to the Casino supermarkets in this table
reflects the option price exercised by the Casino Group. The Casino
buy-back prices are at a 10% premium to the 31 December 2017
valuation.
The portfolio's country and sector allocations, pre and post the
Casino supermarket sales, are specified below:
Portfolio Portfolio
excluding Casino excluding Casino
Country allocation Portfolio at supermarkets Sector Portfolio at supermarkets
(% contracted 31/03/2018 allocation 31/03/2018
rent) (% contracted
rent)
France 50.2% 42.1% Office 44.8% 51.9%
================= ================= ================== ================== =================
Germany 22.7% 26.4% Retail 40.3% 30.8%
================= ================= ================== ================== =================
Spain 12.2% 14.2% Mixed 14.9% 17.3%
================= ================= ================== ================== =================
Netherlands 14.9% 17.3% Other 0.0% 0.0%
================= ================= ================== ================== =================
Total 100.0% 100.0% Total 100.0% 100.0%
================= ================= ================== ================== =================
Lease expiry profile
The 10 asset portfolio is 97% let generating EUR16.1 million
p.a. in contracted income. The rent on all leases is indexed to
inflation and individual asset business plans are being implemented
to improve future earnings and capital growth potential.
The average unexpired lease term is 4.6 years to first break and
6.7 years to expiry. Excluding the Casino supermarkets, the
contracted rents are EUR13.9m with average unexpired lease terms to
first break and expiry of 4.7 years and 6.1 years.
The lease expiry profile to earliest break is shown below. The
near-term lease expiries provide asset management opportunities to
renegotiate leases, extend weighted average unexpired lease terms,
improve income security and generate rental growth. In turn, this
activity benefits NAV total return.
Top 10 tenants
The top 10 tenants comprise a wide range of occupiers from
different industry segments as shown below:
Contracted Unexpired
rent (EURm Contracted lease term
Tenant Property Tenant risk p.a.) rent (% (years)
(1) ) (2) (3)
1 KPN Apeldoorn Low 2.4 15% 8.8
============== ================== ============== ============ ============= ============
2 Alten Paris (B-B) Low 2.3 14% 3.0
============== ================== ============== ============ ============= ============
3 Casino Rennes & Biarritz Low 1.9 12% 4.2
============== ================== ============== ============ ============= ============
4 Hornbach Berlin Low 1.6 10% 7.8
============== ================== ============== ============ ============= ============
5 Filassistance Paris (SC) Low 0.9 5% 1.3
============== ================== ============== ============ ============= ============
6 LandBW Stuttgart Low 0.7 4% 7.9
============== ================== ============== ============ ============= ============
7 Thesee Paris (SC) Medium 0.6 4% 1.4
============== ================== ============== ============ ============= ============
8 Ethypharm Paris (SC) Low 0.5 3% 3.2
============== ================== ============== ============ ============= ============
9 Moody's Paris (SC) Low 0.4 2% 1.3
============== ================== ============== ============ ============= ============
10 Outscale Paris (SC) Low 0.4 2% 2.1
============== ================== ============== ============ ============= ============
Total top 10 tenants 11.7 71% 5.0
============ ============= ============
Remaining tenants 4.4 29% 3.3
============ ============= ============
Total 16.1 100% 4.6
============ ============= ============
(1) Regular tenant risk assessments are undertaken for the
largest tenants. Among other considerations, the Investment
Manager's risk assessments are based on Dun & Bradstreet
ratings and failure scores
(2) Percentage based on total contracted rent as at financial
period end
(3) Unexpired lease term until earliest termination in years as
at 31 March 2018 weighted by contracted rent
Valuation
The current portfolio value of EUR237.3 million reflects an
increase of 9.5% (EUR20.5 million) compared to the combined
purchase price of the 10 asset portfolio. Transaction costs have
already been fully recovered through valuation uplifts since
acquisition.
The portfolio valuation has increased by 2.8% for the six months
to 31 March 2018. Valuation uplift is positive for most assets. The
Hamburg office asset was the notable exception as the property had
a value decline of -4.2%, reflecting EUR0.7 million. The main
reason for this is the surrender agreed with City BKK for its lease
at the Hamburg asset in return for a cash payment to the Company of
EUR3.9 million to be received in two instalments: EUR2.4 million in
2018 and another EUR1.5 million to be received in 2019.
A fall in the Seville valuation has been offset by a
corresponding reduction in the initial purchase price as a result
of certain purchase conditions being met. The Seville valuation
remains above initial purchase price by 1.9%. Including the
purchase price reduction, Seville valuation performance was
positive for the six months since 1 October 2017.
With regard to the assets which saw their values increase, the
valuation uplift was particularly strong for the properties in
Paris Saint-Cloud (+3.8%/EUR1.3 million), Stuttgart (+2.3%/EUR0.4
million) and Paris B-B (+1.4%/EUR0.6 million), all benefiting from
strong rental and investment markets.
The external valuation of the Casino supermarkets remained flat
over the six month period. However, the sale price of the buy-back
option exercised by the Casino Group is at a 10% premium (EUR4.1
million) to the current external valuation. Therefore these
properties are held at a value reflecting the sale price.
The newly acquired property in Apeldoorn witnessed a valuation
uplift against its purchase price (+2.0%/EUR0.4 million).
Asset management
We manage each asset around an identified business plan,
constructed by our local real estate professionals and approved by
the Investment Manager's investment committee. Our asset management
expertise assists in de-risking assets, enhancing income profiles
and positioning investments to benefit from occupier demand and
ultimately growth, all positively contributing to the delivery of
the Company's return performance.
Fauststraat 1, Apeldoorn, the Netherlands
-- Acquired in February 2018 for a purchase price of EUR19.8 million
-- Valuation at 31 March 2018: EUR20.2 million
-- Lettable area: c.23,700 sq.m
-- Investment rationale:
ü Attractive nine year income stream from a strong tenant;
ü Established and strategic location c.1 hour from
Amsterdam;
ü Longer term alternative use potential;
ü Mixed-use asset comprising data centre/office use; and
ü The technology (ICT) influence provides additional
portfolio
diversification into a growth sector
Due to the core, long-term lease profile asset management
initiatives are limited in the short term. In the longer term we
continue to explore alternative use potential.
Boulevard Jean Jaurès, Boulogne-Billancourt (Paris) 92100,
France
-- Acquired in March 2016 for a purchase price of EUR37.5 million
-- Valuation at 31 March 2018: EUR42.1 million
-- Lettable area: c.6,900 sq.m
-- Investment rationale:
ü Mixed-use area with a high incidence of competing uses;
ü Affordable and sustainable rents;
ü Supply-constrained location; and
ü Modest capital value per sq.m
Asset management over the period centred on the investigation of
alternative use potential and liaising with the tenant to advance
longer term occupational intentions.
Großbeerenstraße, 12107 Berlin, Germany
-- Acquired in March 2016 for a purchase price of EUR24.3 million
-- Valuation at 31 March 2018: EUR26.0 million
-- Lettable area: c.16,800 sq.m
-- Investment rationale:
ü Above average population growth;
ü Supply-constrained location;
ü Mixed-use area with a high incidence of competing uses;
and
ü Large site area of 4 hectares
Due to the core, long-term lease profile, asset management
initiatives are limited in the short-term. We continue to explore
ways to utilise the site to a greater density and income
potential.
Neckarstraße, 70190, Stuttgart, Germany
-- Acquired in April 2016 for a purchase price of EUR14.4million
-- Valuation at 31 March 2018: EUR15.6 million
-- Lettable area: c.5,800 sq.m
-- Investment rationale:
ü Supply-constrained location;
ü Mixed-use area with a high incidence of competing uses;
ü Affordable/sustainable rents; and
ü Improving infrastructure driven by the neighbouring
"Stuttgarter 21" redevelopment
Asset management over the period has centred on improving
neighbouring fire certification conformance.
Hammerbrookstraße, 20097, Hamburg, Germany
-- Acquired in April 2016 for a purchase price of EUR14.4 million
-- Valuation at 31 March 2018: EUR16.0 million
-- Lettable area: c.7,000 sq.m
-- Investment rationale:
ü Modest capital value per sq.m;
ü Mixed-use area with a high incidence of competing uses;
ü The City-Sud sub-market is one stop from the city centre and
is evolving as a destination where people want to live, work and
socialise;
ü Affordable/sustainable rents that represent approximately a
third of the prime city centre; and
ü Location has medium to longer term growth potential
Asset management over the period included the negotiation of the
EUR3.9 million lease surrender premium with City BKK. With vacancy
rates in the sub-market falling substantially, we felt now was the
right time to take on leasing risk and utilise our asset management
expertise to de-risk.
Lorscher Straße, 60489, Frankfurt - Rodelheim, Germany
-- Acquired in May 2016 for a purchase price of EUR11.1 million
-- Valuation at 31 March 2018: EUR11.5 million
-- Lettable area: c.4,500 sq.m
-- Investment rationale:
ü Supermarket anchored convenience retail centre servicing a
growing urban catchment;
ü Larger than standard supermarket size allowing for a broader
grocery offer relative to local competition;
ü Mixed-use area with a dense residential population; and
ü Above average provision of parking
Asset management over the period has included the prolongation
of the beverage store lease on a short-term basis and review of the
building's fire safety regulations.
Le Directoire, Saint-Cloud (Paris), France
-- Acquired in February 2017 for a purchase price of EUR30.0 million
-- Valuation at 31 March 2018: EUR35.2 million
-- Lettable area: c.15,800 sq.m
-- Investment rationale:
ü Supply-constrained location;
ü Leased on affordable/sustainable rents;
ü Attractive capital value per sq.m substantially less than
replacement cost;
ü Benefits from future infrastructure improvements; and
ü Mixed-use area with strong competition from multiple uses
Asset management over the period included:
- Re-gearing of c.25% of the office area with the merging of
Fila Assistance and Garantie Assistance. Revised lease is on a
4/6/9 year term at an annual rent 13% above ERV;
- A new six year lease agreement with Ethypharm, a pharmaceutical company, for 2,450 sq.m;
- Progression of a long-term lease with a local governmental
body, for c.270 sq.m of vacant storage accommodation; and
- Commencement of the renovation of lift lobbies, with
completion in H2 2018, demonstrating to tenants our commitment to
the premises
Metromar Shopping Centre, Seville, Spain
*Values refer to 50% interest
-- Acquired in May 2017 for a purchase price of EUR26.2 million
which has been subsequently adjusted to EUR25.5 million
-- Valuation at 30 September 2017: EUR26.0 million
-- Lettable area: c.23,000 sq.m
-- Investment rationale:
ü Dominant retail offer for the local urban catchment;
ü Anchored by grocery and leisure, both relatively immune to
e-commerce;
ü Attractive capital value per sq.m substantially less than
replacement cost; and
ü Local region is undergoing strong population growth driven by
infrastructure improvements
Asset management over the period included:
- Signing of a new lease with leisure specialist Urban Planet
for c.1,200 sq.m to an historically non-income-producing space.
This addition will complement the centre's existing leisure
offering and is expected to significantly drive customer footfall
and dwell time;
- Removed underperforming restaurant and added a new burger
specialist, strengthening the restaurant offer for consumers;
- Progressed design initiatives to improve brand, signage,
wayfaring, lighting and general vibrancy; and
- Progressed discussions concerning the leasing of the former Massimo Dutti space
The Casino supermarket properties have been excluded from this
asset management overview due to their pending sale to the Casino
Group. The sale's price represents a 10% premium to last quarter's
independent valuation.
Finance
As at 31 March 2018, the Company's total debt was EUR73.4
million across five loan facilities. This represents a loan to
value of 28% against the Company's gross asset value.
The loans drawn are secured against the four German properties
in Berlin, Frankfurt, Stuttgart and Hamburg, the Spanish asset in
Seville and three French assets in Paris Saint-Cloud, Biarritz and
Rennes.
The current blended all-in interest rate is 1.3%, significantly
below the portfolio yield of 5.8% p.a.
The average unexpired loan term is 6.4 years.
As part of the sale of the Casino supermarkets the Company's
share of the debt associated with that investment will be
transferred to the buyer.
Maturity Outstanding
Lender Property date principal Interest rate
(1)
Deutsche Pfandbriefbank Berlin/Frankfurt 30/06/2026 16,500,000 1.31%
===================== ============ ============ ================
Stuttgart/Hamburg 30/06/2023 14,000,000 0.85%
===================== =============================================== ============ ================
Credit Agricole(1) Casino supermarkets 30/07/2023 18,200,000 3M Euribor +
1.35%
===================== ============ ============ ================
BRED Banque Populaire Paris (SC) 15/12/2024 13,000,000 3M Euribor +
1.30%
===================== ============ ============ ================
Münchener Hypothekenbank(1) Seville 22/05/2024 11,678,750 1.76%
===================== ============ ============ ================
Total 73,378,750
============ ================
(1) All statistics in the Investment Manager's report reflect a
50% ownership share of Seville and a 70% ownership share of the
Casino supermarket investments. As a result, debt allocations for
those investments in the table above are similarly
proportioned.
The German and Spanish loans are fixed rate for the duration of
the loan term.
The French loans are based on a margin above 3 month Euribor and
the Company has acquired an interest rate cap to limit future
potential interest costs if Euribor were to increase. The strike
rate on the caps are 1.25% p.a. The market value of the interest
caps are positive at EUR0.4 million as at the end of March
2018.
Outlook
Having reached full investment, the current focus is centred on
maximising performance from the portfolio. The disposal and
reinvestment of the Casino supermarket sale proceeds, and
value-enhancing asset management initiatives such as the surrender
and re-letting of space in the Company's Hamburg asset, are good
examples of how we are actively pursuing this strategy.
We have identified new investments which are in various stages
of exclusivity for the redeployment of the profitable Casino sale.
We will continue to take a disciplined approach to growth to
enhance shareholder returns and the aspirations are to grow the
portfolio in an accretive way in order to deliver investors with
further diversification, cost economies of scale and ultimately
enhanced liquidity.
Schroder Real Estate Investment Management Limited
11 June 2018
Regulatory Information
Principal risks and uncertainties
The principal risks and uncertainties with the Company's
business fall into the following risk categories: strategic;
investment management; custody; gearing and leverage; accounting,
legal and regulatory; and service provider. A detailed explanation
of the risks and uncertainties in each of these categories can be
found on pages 31 and 32 of the Company's published Annual Report
and Accounts for the year ended 30 September 2017. The Company is
aware of potential changes to tax legislation, one retrospective,
which, if implemented, may impact the Company. The Company is
monitoring these matters closely. Otherwise, these risks and
uncertainties have not materially changed during the six months
ended 31 March 2018 and are not expected to change during the
remaining six months of the financial year.
Going concern
Having assessed the principal risks and uncertainties, and the
other matters discussed in connection with the viability statement
as set out on page 32 of the published Annual Report and Accounts
for the year ended 30 September 2017, the Directors consider it
appropriate to adopt the going concern basis in preparing the
accounts.
Related party transactions
There have been no transactions with related parties that have
materially affected the financial position or the performance of
the Company during the six months ended 31 March 2018.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated set of half year interim financial
statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union; and
-- the Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Conduct
Authority's Disclosure Guidance and Transparency Rules.
Sir Julian Berney Bt.
Chairman
11 June 2018
Condensed Consolidated Interim Statement of Comprehensive
Income
Six months to Six months Year to
to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
Rental and service charge income 10,347 7,416 17,296
Other income 2 2,400 - -
Property operating expenses (3,899) (2,011) (5,527)
Net rental and related income 8,848 5,405 11,769
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Net valuation gain on investment property 4 6,359 1,588 4,284
Realised gain/(loss) on foreign exchange 1 (6) (4)
Net fair value (loss)/gain of financial instruments at fair
value through profit or loss (39) 158 72
Expenses
Investment management fee (849) (962) (1,849)
Valuers' and other professional fees (309) (418) (666)
Administrators and accounting fee (147) (146) (306)
Auditors' remuneration (134) (148) (280)
Directors' fees (62) (64) (120)
Other expenses (119) (155) (291)
Total expenses (1,620) (1,893) (3,512)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Operating profit before net finance costs 13,549 5,252 12,609
Finance income 378 5 174
Finance costs (502) (471) (918)
Net finance costs (124) (466) (744)
Share of profit/(loss) of joint venture 5 292 - (185)
Profit before taxation 13,717 4,786 11,680
Taxation (815) (158) (505)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Profit after taxation 12,902 4,628 11,175
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Attributable to:
Owners of the parent 10,798 4,211 10,288
Non-controlling interests 2,104 417 887
----------------------------------------------------------------- ----- ---------------- ------------- -----------
12,902 4,628 11,175
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Basic and diluted earnings per share attributable to owners of
the parent 3 8.1c 3.2c 7.7c
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Profit after taxation 12,902 4,628 11,175
Other comprehensive profit/(loss) items that may be
subsequently reclassified to profit or loss:
Currency translation differences - 35 (3)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total other comprehensive profit/(loss) - 35 (3)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total comprehensive profit for the period 12,902 4,663 11,172
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total comprehensive profit attributable to:
Owners of the parent 10,798 4,246 10,285
Non-controlling interests 2,104 417 887
----------------------------------------------------------------- ----- ---------------- ------------- -----------
12,902 4,663 11,172
----------------------------------------------------------------- ----- ---------------- ------------- -----------
All items in the above statement are derived from continuing
operations. The accompanying notes 1 to 14 form an integral part of
the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Financial
Position
31/03/2018 30/09/2017 31/03/2017
Assets Notes EUR000 EUR000 EUR000
Non-current assets (unaudited) (audited) (unaudited)
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Investment property 4 166,173 202,563 199,881
Investment in joint ventures 5 6,582 6,290 -
Loans to joint ventures 10,035 10,035 -
Non-current assets 182,790 218,888 199,881
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Trade and other receivables 850 2,063 3,542
Interest rate derivative contracts 7 232 273 359
Cash and cash equivalents 21,268 28,521 42,977
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current assets 22,350 30,857 46,878
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Assets of disposal group held for sale 6 70,389 - -
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total assets 275,529 249,745 246,759
==================================================== ====== ============ =========== ============ ===
Equity
Share capital 8 15,215 15,167 15,751
Share premium 30,310 30,215 31,379
Retained earnings 9,442 650 (1,817)
Other reserves 132,151 132,294 130,597
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Issued capital and reserves attributable to owners 187,118 178,326 175,910
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Non-controlling interest 9,795 7,691 7,221
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total equity 196,913 186,017 183,131
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 9 43,079 58,772 58,707
Deferred tax 883 473 141
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Non-current liabilities 43,962 59,245 58,848
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current liabilities
Trade and other payables 3,980 4,483 4,729
Current income tax liabilities 114 - 51
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current liabilities 4,094 4,483 4,780
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Liabilities of disposal group held for sale 30,560 - -
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total liabilities 78,616 63,728 63,628
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total equity and liabilities 275,529 249,745 246,759
==================================================== ====== ============ =========== ============ ===
Net Asset Value per ordinary share 10 139.9c 133.3c 131.5c
---------------------------------------------------- ------ ------------ ----------- ------------ ---
The accompanying notes 1 to 14 form an integral part of the
condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Changes in
Equity
Non-controlling
Share Share Retained Other Owners interests Total
Note capital premium earnings reserves of the equity
parent
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2017 15,167 30,215 650 132,294 178,326 7,691 186,017
Total
comprehensive
income - - 10,798 - 10,798 2,104 12,902
Dividends paid 11 - - (2,006) - (2,006) - (2,006)
Unrealised
foreign
exchange 48 95 - (143) - - -
Balance as at
31 March
2018
(unaudited) 15,215 30,310 9,442 132,151 187,118 9,795 196,913
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Non-controlling
Share Share Retained Other interests Total
Note capital premium earnings reserves Sub-total equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR'000 EUR'000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Profit for the
year - - 10,288 - 10,288 887 11,175
Other
comprehensive
loss for the
year - - - (3) (3) - (3)
Dividends paid 11 - - (6,152) - (6,152) - (6,152)
New equity
issuance 1,390 15,288 - (245) 16,433 - 16,433
Unrealised
foreign
exchange (217) 45 - 172 - - -
Balance as at
30 September
2017
(audited) 15,167 30,215 650 132,294 178,326 7,691 186,017
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- -----------
Non-controlling
Share Share Retained Other Owners interests Total
Note capital premium earnings reserves of the equity
parent
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Total
comprehensive
income - - 4,211 35 4,246 417 4,663
Dividends paid 11 - - (2,542) - (2,542) - (2,542)
New equity
issuance 1,390 15,288 - (232) 16,446 - 16,446
Unrealised
foreign
exchange 367 1,209 - (1,576) - - -
Balance as at
31 March
2017
(unaudited) 15,751 31,379 (1,817) 130,597 175,910 7,221 183,131
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
The accompanying notes 1 to 14 form an integral part of the
condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Cash Flows
Six months Six months Year to
to to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
------------------------------ ---- ----- ------------- ------------- -----------
Operating activities
Profit before tax for
the period/year 13,717 4,786 11,680
Adjustments for:
Net valuation gain on
investment property 4 (6,359) (1,588) (4,284)
Share of (profit)/loss
of joint venture (292) - 185
Realised foreign exchange
(gains)/losses (1) 6 4
Finance income (378) (5) (174)
Finance expense 502 471 918
Net fair value (loss)/gain
of financial instruments
at fair value through
profit or loss 39 (158) (72)
Operating cash generated
before changes in working
capital 7,228 3,512 8,257
Decrease/(increase) in
trade and other receivables (113) (1,614) 434
Increase in trade and
other payables 816 2,288 1,647
------------------------------------ ----- ------------- ------------- -----------
Cash generated from/(used
in) operations 7,931 4186 10,338
Finance costs paid (664) (424) (751)
Interest received 381 5 9
Tax paid (224) (12) (145)
Net cash generated from
operating activities 7,424 3,755 9,451
------------------------------------ ----- ------------- ------------- -----------
Investing Activities
Acquisition of investment
property (21,070) (33,182) (33,159)
Additions (123) (3) (12)
Investment in joint ventures - - (16,510)
Net cash used in investing
activities (21,193) (33,185) (49,681)
------------------------------------ ----- ------------- ------------- -----------
Financing Activities
New bank loan advance 13,000 - -
Interest rate cap purchased (227) - -
Share issue net proceeds - 16,446 16,434
Dividends paid 11 (2,006) (2,542) (6,152)
------------------------------------ ----- ------------- ------------- -----------
Net cash generated from
financing activities 10,767 13,904 10,282
------------------------------------ ----- ------------- ------------- -----------
Net decrease in cash and
cash equivalents for the
year (3,002) (15,526) (29,948)
------------------------------------ ----- ------------- ------------- -----------
Opening cash and cash
equivalents 28,521 58,476 58,476
------------------------------------ ----- ------------- ------------- -----------
Foreign exchange losses 1 27 (7)
------------------------------------ ----- ------------- ------------- -----------
Transfer to disposal group
held for sale 6 (4,252) - -
------------------------------------ ----- ------------- ------------- -----------
Closing cash and cash
equivalents 21,268 42,977 28,521
------------------------------------ ----- ------------- ------------- -----------
The accompanying notes 1 to 14 form an integral part of the
condensed consolidated financial statements
Notes to the financial statements
1. Significant accounting policies
The Company is a closed-ended investment company incorporated in
England and Wales. The condensed interim financial statements of
the Company for the period ended 31 March 2018 comprise those of
the Company and its subsidiaries (together referred to as the
"Group"). The shares of the Company are listed on the London Stock
Exchange (Primary listing) and the Johannesburg Stock Exchange
(Secondary listing). The registered office of the Company is 31
Gresham Street, London, EC2V 7QA.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 30
September 2017 were approved by the Board of Directors on 5
December 2017 and were delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
These condensed interim financial statements have been reviewed
and not audited.
Statement of compliance
The condensed interim financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom Financial Conduct Authority and IAS 34 Interim
Financial Reporting as adopted by the EU. They do not include all
of the information required for the full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Group as at and for the year ended 30
September 2017. The condensed interim financial statements have
been prepared on the basis of the accounting policies set out in
the Group's annual financial statements for the year ended 30
September 2017. The financial statements for the year ended 30
September 2017 have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union. The Group's annual financial statements refer to new
Standards and Interpretations none of which had a material impact
on the financial statements.
Basis of preparation
The financial statements are presented in euros rounded to the
nearest thousand. They are prepared on a going concern basis,
applying the historical cost convention except for the measurement
of investment property and derivative financial instruments that
have been measured at fair value.
The accounting policies have been consistently applied to the
results, assets, liabilities and cash flow of the entities included
in the consolidated financial statements and are consistent with
those of the year end financial report.
Going concern
The Directors have examined significant areas of possible
financial risk including cash and cash requirements and the debt
covenants. The Directors have not identified any material
uncertainties which would cast significant doubt on the Group's
ability to continue as a going concern for a period of not less
than twelve months from the date of the approval of the financial
statements. The Directors have satisfied themselves that the Group
has adequate resources to continue in operational existence for the
foreseeable future.
Use of estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of policies and the reported amounts of
assets and liabilities, income and expenses. These estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
The most significant estimates made in preparing these financial
statements are the same as that applied in the consolidated
financial statements for the year ended 30 September 2017.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being property investment, and in one
geographical area, Continental Europe. The chief operating
decision-maker is considered to be the Board of Directors who are
provided with consolidated IFRS information on a quarterly
basis.
Financial risk factors
The Directors are of the opinion that there have been no
significant changes to the financial risk profile of the Group
since the end of the last annual financial reporting period for the
year ended 30 September 2017 of which they are aware.
The main risks arising from the Group's financial instruments
and properties are: market price risk, currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly reviews
and agrees policies for managing each of these risks.
2. Other income
Other income relates to a lease surrender premium agreement at
the Company's Hamburg office asset in Germany, part of the
principal of which was received during the period.
3. Basic and diluted earnings per share
The basic and diluted earnings per share for the Group is based
on the net profit for the period, excluding non-controlling
interests and currency translation differences, of EUR10,798,000
(31 March 2017: EUR4,211,000, 30 September 2017: EUR10,288,000) and
the weighted average number of ordinary shares in issue during the
period of 133,734,686 (31 March 17: 131,811,609, 30 September 2017:
132,775,782).
EPRA (1) earnings reconciliation
Six months to Six months to Year to 30/09/2017
31/03/2018 31/03/2017
EUR000 EUR000 EUR000
----------------------------------------------------------- -------------- -------------- -------------------
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate EPRA earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Exchange differences on monetary items (unrealised) - (35) 3
Share of joint venture (gain)/loss on investment property (156) - 429
Minority interest's net revenue (378) (370) (744)
Deferred tax 410 111 443
Finance costs/(income): interest rate cap 39 (158) (72)
EPRA profit 6,458 2,623 6,947
----------------------------------------------------------- -------------- -------------- -------------------
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
IFRS earnings per share (cents per share) 8.1 3.2 7.7
EPRA earnings per share (cents per share) 4.8 2.0 5.2
(1) European Public Real Estate Association ('EPRA') earnings
per share reflects the underlying performance of the company
calculated in accordance with the EPRA guidelines.
Headline (2) earnings reconciliation
Six months to Six months to Year to 30/09/2017
31/03/2018 31/03/2017
EUR000 EUR000 EUR000
--------------------------------------------------------------- -------------- -------------- -------------------
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate headline earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Share of joint venture (gain)/ loss on investment property (156) - 429
Minority Interests net revenue (378) (370) (744)
Deferred tax 410 - 443
Finance costs: interest rate cap 39 (158) (72)
Headline earnings 6,458 2,547 6,944
--------------------------------------------------------------- -------------- -------------- -------------------
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
Headline and diluted headline earnings per share (cents per
share) 4.8 1.9 5.2
(2) Headline earnings per share reflects the underlying
performance of the company calculated in accordance with the
Johannesburg Stock Exchange listing requirements.
4. Investment property
Freehold
-------------------------------------------
EUR000
------------------------------------------- ---------
Fair value as at 30 September 2016 165,365
--------------------------------------------- ---------
Property acquisitions 32,925
Additions 3
Net valuation gain on investment property 1,588
--------------------------------------------- ---------
Fair value as at 31 March 2017 199,881
--------------------------------------------- ---------
Property acquisitions -
Additions (14)
Net valuation gain on investment property 2,696
--------------------------------------------- ---------
Fair value as at 30 September 2017 202,563
--------------------------------------------- ---------
Property acquisitions 21,127
Additions 124
Net valuation gain on investment property 6,359
--------------------------------------------- ---------
230,173
Transfer to disposal group held for sale (64,000)
Fair value as at 31 March 2018 166,173
--------------------------------------------- ---------
The fair value of investment properties, as determined by the
valuer, and excluding the Rennes/Anglet Casino supermarket assets
held for sale and valued at the option price, totals EUR166,500,000
(30 September 2017: EUR202,700,000) with the valuation amount
relating to a hundred per cent ownership share for all the assets
in the portfolio.
None of this amount is attributable to trade or other
receivables in connection with lease incentives. The fair value of
investment properties disclosed above includes a tenant incentive
adjustment of EUR327,000 (30 September 2017: EUR137,000).
The fair value of investment property has been determined by
Knight Frank LLP, a firm of independent chartered surveyors, who
are registered independent appraisers. The valuation has been
undertaken in accordance with the RICS Valuation - Global Standards
2017, incorporating the International Valuations Standards, and
RICS Professional Standards UK January 2014 (revised April
2015).
The properties have been valued on the basis of "Fair Value" in
accordance with the RICS Valuation - Professional Standards VPS4
(1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial
Statements which adopt the definition of Fair Value used by the
International Accounting Standards Board.
The valuation has been undertaken using appropriate valuation
methodology and the Valuer's professional judgement. The Valuer's
opinion of Fair Value was primarily derived using recent comparable
market transactions on arm's length terms, where available, and
appropriate valuation techniques (The Investment Method).
The properties have been valued individually and not as part of
a portfolio.
All investment properties are categorised as Level 3 fair values
as they use significant unobservable inputs. There have not been
any transfers between levels during the period. Investment
properties have been classed according to their real estate sector.
Information on these significant unobservable inputs per class of
investment property is disclosed below:
Quantitative information about fair value measurement using
unobservable inputs (Level 3) as at 31 March 2018 (unaudited)
Industrial Retail Office Other Total
(including
retail
warehouse)
Fair value EUR276.70m
(EURm) - EUR147.65m EUR129.05m - (3)
----------- ------------ ----------- ------ ---------------
Area ('000
sq m) - 73.330 60.423 - 133.753
----------- ------------ ----------- ------ ---------------
Net passing Range - 94.73 - 65.73 - - 94.73 - 344.78
rent 140.01 344.78
EUR psm Weighted 118.50 198.01 155.58
per annum average (2)
----------------------------- ------------ ----------- ------ ---------------
Gross ERV Range - 97.39 - 79.76 - - 97.39 - 419.91
psm per 193.45 419.91
annum
Weighted 141.34 239.86 187.29
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Net initial Range - 4.62 - 2.61 - - 2.61 - 10.78
yield (1) 5.57 10.78
Weighted 5.27 6.20 5.70
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Equivalent Range - 4.60 - 4.48 - - 4.48 - 9.97
yield 6.06 9.97
Weighted 5.52 6.15 5.81
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Notes:
(1) Yields based on rents receivable after deduction of head
rents and non-recoverables
(2) Weighted by Market Value
(3) This table includes the Joint Venture investment property
and the Held for Sale investment property.
Quantitative information about fair value measurement using
unobservable inputs (Level 3) as at 30 September 2017
(audited).
Retail (incl. Office Total
retail
warehouse)
Fair value
(EUR000) 148,300 107,300 255,600
--------------- ---------------- ---------------
Area
('000 sq.m) 73.330 35.504 108.834
--------------- ---------------- ---------------
Net passing Range 94.73 - 145.32 131.03 - 344.63 94.73 - 344.63
rent EUR per
sqm per annum
Weighted average 118.92 240.86 170.11
(2)
------------------------------------ --------------- ---------------- ---------------
Gross ERV per Range 97.39 - 185.61 126.12 - 413.10 97.39 - 413.10
sqm per annum
Weighted average 139.03 265.45 192.10
(2)
------------------------------------ --------------- ---------------- ---------------
Net initial Range 4.62 - 5.62 4.59 - 8.96 4.59 - 8.96
yield (1)
Weighted average 5.29 6.43 5.77
(2)
------------------------------------ --------------- ---------------- ---------------
Equivalent Range 4.60 - 5.93 4.47 - 7.25 4.47 - 7.25
yield
Weighted average 5.49 5.46 5.48
(2)
------------------------------------ --------------- ---------------- ---------------
Notes:
(1) Yields based on rents receivable after deduction of head
rents and non-recoverables
(2) Weighted by market value
(3) This table includes the Joint Venture investment property
valued at EUR52.9 million which is disclosed
within the summarised information within note 12 as part of total assets
Sensitivity of measurement to variations in the significant
unobservable inputs
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
of the Group's property portfolio, together with the impact of
significant movements in these inputs on the fair value
measurement, are shown below:
Unobservable input Impact on fair value measurement of Impact on fair value measurement of significant
significant increase in input decrease in input
Passing rent Increase Decrease
----------------------------------------------- ------------------------------------------------
Gross ERV Increase Decrease
----------------------------------------------- ------------------------------------------------
Net initial yield Decrease Increase
----------------------------------------------- ------------------------------------------------
Equivalent yield Decrease Increase
----------------------------------------------- ------------------------------------------------
There are interrelationships between the yields and rental
values as they are partially determined by market rate conditions.
The sensitivity of the valuation to changes in the most significant
inputs per class of investment property is shown below:
Estimated movement in fair value Retail Office Total
of investment properties at 31 EUR'000 EUR'000 EUR'000
March 2018
Increase in ERV by 5% 5,250 5,200 10,450
---------- ---------- ----------
Decrease in ERV by 5% -5,300 -5,500 -10,800
---------- ---------- ----------
Increase in net initial yield by
0.25% -6,650 -6,050 -12,700
---------- ---------- ----------
Decrease in net initial yield by
0.25% 7,300 6,300 13,600
---------- ---------- ----------
Estimated movement in fair value of Retail Office Total
investment properties at 30 September EUR'000 EUR'000 EUR'000
2017
Increase in ERV by 5% 5,200 4,600 9,800
---------- ---------- ----------
Decrease in ERV by 5% -5,200 -4,950 -10,150
---------- ---------- ----------
Increase in net initial yield by 0.25% -6,700 -5,750 -12,450
---------- ---------- ----------
Decrease in net initial yield by 0.25% 7,350 5,900 13,250
---------- ---------- ----------
5. Investment in joint ventures
The Group has a 50% interest in a joint venture called Urban SEREIT
Holdings Spain S.L. The principal place of business of the joint
venture is Calle Velazquez 3, 4th Madrid 28001 Spain.
31/3/2018
EUR000
Balance as at 1 October 2017 6,290
---------------------------------------------------------- --------------
Share of profit/(loss) for the period 442
Dividends (150)
Balance as at 31 March 2018 6,582
---------------------------------------------------------- --------------
30/9/2017
EUR000
Balance as at 1 October 2016 -
------------------------------------------------- -------------- --------------
Purchase of interest in joint venture 6,475
Share of profit/(loss) for the period (185)
Balance as at 30 September 2017 6,290
------------------------------------------------- -------------- --------------
During the period ended 31 March 2017 there
were no interests in joint ventures.
Summarised joint venture financial information: 31/3/2018 30/9/2017
EUR000 EUR000
---------------------------------------------------------------- --------------
Total assets 59,586 59,719
Total liabilities (46,422) (47,139)
Net assets 13,164 12,580
Net asset value attributable to the Group 6,582 6,290
------------------------------------------------- -------------- --------------
Six months Six months
to 31/3/2018 to 31/3/2017
EUR000 EUR000
------------------------------------------------- -------------- --------------
Revenues 2,838 -
Total comprehensive profit 884 -
Total comprehensive profit attributable to the 442 -
Group
------------------------------------------------- -------------- --------------
6. Non-current assets classified as held for sale
The assets and liabilities related to the Group company SCI
Rennes Anglet, comprising the Casino supermarkets, were presented
as held for sale at 31 March 2018 following the decision by Casino
Group to exercise a buy-back option on the Group's 70% share of
these assets. Under the option, the repurchase will complete on 31
July 2018. Casino Group will also take over the Group's share of
the existing debt facility on the assets.
The two investment properties held for sale are at their
respective option price and do not form part of the Knight Frank
valuation.
All other assets and liabilities of the disposal group are
presented at their carrying amount or fair value as required by
IFRS 5.
Net assets of disposal group classified as held for sale
31/03/2018
EUR000
----------------------------- -------------
Investment property 64,000
Derivatives 228
Trade and other receivables 1,909
Cash and cash equivalents 4,252
Total assets 70,389
Interest-bearing loans and
borrowings 28,561
Trade and other payables 1,999
Total liabilities 30,560
Net assets held for sale 39,829
------------------------------- -------------
7. Derivative financial instruments
The group has an interest rate cap in place purchased for
EUR260,000 from Credit Agricole Corporate and Investment Bank on 10
August 2016 in connection to a EUR26.0 million loan facility drawn
from the same bank with a maturity date of July 2023. The cap
interest rate is 1.25% with a floating rate option being Euribor 3
months. In line with IFRS 9 this derivative is reported in the
financial statements at its fair value. As at 31 March 2018 the
fair value of the interest rate cap was EUR228,000. Transaction
costs incurred in obtaining the instrument are being amortised over
the extended period of the above mentioned loan. During the period
this asset has been reclassified as part of a disposal group held
for sale (note 6).
During the period the group entered into another interest rate
cap purchased for EUR227,000 from BRED Banque Populaire on 20
December 2017 in connection to a EUR13.0 million loan facility
drawn from the same bank with a maturity of 15 December 2024. The
cap interest rate is 1.25% with a floating rate option being
Euribor 3 months. In line with IFRS 9, this derivative is reported
in the financial statements at its fair value. As at 31 March 2018
the fair value of the interest rate cap was EUR232,000.
8. Issued capital and reserves
Share capital
As at the date of this report, the Company has 133,734,686
ordinary shares in issue with a par value of 10.00 pence (no shares
are held in Treasury). The total number of voting rights of the
Company is 133,734,686.
The Sterling value of issued share capital was GBP13,373,000 (30
September 2017: GBP13,373,000, 31 March 2017: GBP13,373,000) and
the Euro value at the period end was EUR15,215,000 (30 September
2017: EUR15,167,000, 31 March 2017: EUR15,751,000).
9. Interest-bearing loans and borrowings
Six months
to
31/03/2018
EUR000
---------------------------- ------------
Brought forward 58,772
Drawdown of borrowings 13,000
Capitalisation of finance
costs (204)
Amortisation of finance
costs 72
------------------------------ ------------
71,640
Transfer to disposal group
held for sale (28,561)
Carried forward 43,079
------------------------------ ------------
Year ended
30/09/2017
EUR000
--------------------------- ------------
Brought forward 58,724
Capitalisation of finance
costs (80)
Amortisation of finance
costs 128
----------------------------- ------------
Carried forward 58,772
----------------------------- ------------
Six months
to
31/03/2017
EUR000
--------------------------- ------------
Brought forward 58,724
Capitalisation of finance
costs (81)
Amortisation of finance
costs 64
----------------------------- ------------
Carried forward 58,707
----------------------------- ------------
Bank loan - BRED Banque Populaire
The Group entered into a EUR13.0 million loan facility with BRED
Banque Populaire on 18 December 2017.
The facility matures on 15 December 2024 and carries an interest
rate of 1.30% plus Euribor 3 months per annum payable quarterly.
The facility was subject to a EUR70,000 arrangement fee which is
being amortised over the period of the loan. The debt has an LTV
covenant of 60% and the interest cover ratio should be above 400%.
The loan is collateralised by property assets owned by the Group
with a carrying value of EUR35,200,000.
Bank loan - Deutsche Pfandbriefbank AG
On 3 August 2016 the Group entered into two loan facilities
totalling EUR30.50 million with Deutsche Pfandbriefbank AG.
Of the total amount drawn EUR14.0 million matures on 30 June
2023 and carries a fixed interest rate of 0.85% payable quarterly;
the remaining EUR16.5 million matures on 30 June 2026 and carries a
fixed interest rate of 1.31%. The facility was subject to a 0.35%
arrangement fee which is being amortised over the period of the
loan. The debt has an LTV covenant of 65% and the debt yield must
be at least 8.0%.
The lender has a charge over property owned by the Group with a
value of EUR69,000,000. A pledge of all shares in the borrowing
Group companies is in place.
Bank loan - Credit Agricole Corporate and Investment Bank
The Group entered into a EUR26.0 million loan facility with
Credit Agricole Corporate and Investment Bank on 29 July 2016.
The facility matures on 29 July 2023 and carries an interest
rate of 1.35% plus Euribor 3 months per annum payable quarterly.
The facility was subject to a 0.85% arrangement fee which is being
amortised over the period of the loan.
The debt has an LTV covenant of 65% and the interest cover ratio
should be above 200%. The loan is collateralised by property assets
owned by the Group with a carrying value of EUR64,000,000.
During the period this loan has been reclassified as part of a
disposal group held for sale (note 6).
Business partner loan - Casino Group
On 28 June 2016 the Group entered into a EUR10.75 million loan
facility with Casino Group, a 30% minority investor in the share
capital of SCI Rennes Anglet, a 70% owned subsidiary of the Group.
The loan matures on 28 June 2031 and carries an interest rate of
2.08% payable annually. The interest can be capitalised if not
paid. On 1 August 2016 EUR7.69 million was repaid leaving a loan
balance outstanding as at 31 March 2018 of EUR3.06 million.
During the period this loan has been reclassified as part of a
disposal group held for sale (note 6).
10. NAV per ordinary share
The NAV per ordinary share is based on the net assets excluding
non-controlling interests of EUR187,118,000 (30 September 2017:
EUR178,326,000, 31 March 2017: EUR175,910,000) and 133,734,686
ordinary shares in issue at the Statement of Financial Position
reporting date (30 September 2017: 133,734,686, 31 March 2017:
133,734,686).
11. Dividends paid
In respect of the six months ended 31 Number of Rate 31/03/2018
March 2018
ordinary
shares (cents) EUR000
--------------------------------------- ------------ -------- -----------
Interim dividend paid 19 January 2018 133,734,686 1.50 2,006
--------------------------------------- ------------ -------- -----------
A dividend for the quarter ended 31 December 2017 of
EUR2,474,000 was paid on 13(th) April 2018.
In respect of the six months ended Number of Rate 31/03/2017
31 March 2017
ordinary shares (cents) EUR000
--------------------------------------------------------- -------- -----------
Interim dividend paid 27 January 2017 133,734,686 0.9 1,205
Interim dividend paid 17 March 2017 133,734,686 1.0 1,337
---------------------------------------- ---------------- -------- -----------
Total 1.9 2,542
---------------------------------------- ---------------- -------- -----------
Notes to the financial statements (continued)
In respect of the year ended 30 September Number of Rate 30/09/2017
2017
ordinary shares (cents) EUR000
------------------------------------------------------------- -------- -----------
Interim dividend paid on 27 January
2017 133,734,686 0.90 1,205
Interim dividend paid on 17 March 2017 133,734,686 1.00 1,337
Interim dividend paid on 7 July 2017 133,734,686 1.20 1,604
Interim dividend paid on 1 September
2017 133,734,686 1.50 2,006
Total interim dividends paid 4.60 6,152
-------------------------------------------- ---------------- -------- -----------
12. Related party transactions
Schroder Real Estate Investment Management Limited is the
Group's Investment Manager.
The Investment Manager is entitled to a fee, together with
reasonable expenses, incurred in the performance of its duties. The
fee is payable monthly in arrears and shall be an amount equal to
one twelfth of the aggregate of 1.1% of the EPRA NAV of the
Company. The Investment Management Agreement can be terminated by
either party on not less than twelve months written notice, such
notice not to expire earlier than the third anniversary of
admission, or on immediate notice in the event of certain breaches
of its terms or the insolvency of either party. The total charge to
profit and loss during the period was EUR849,000 (six months ended
31 March 2017: EUR962,000, year ended 30 September 2017:
EUR1,849,000). At the period end EUR881,000 was outstanding (six
months ended 31 March 2017: EUR480,000, year ended 30 September
2017: EUR125,000).
Directors are the only officers of the Company and there are no
other key personnel. The Directors' remuneration for services to
the group for the six months ended 31 March 2018 was EUR62,000 (six
months ended 31 March 2017: EUR64,000, year ended 30 September
2017: EUR120,000) equivalent to GBP54,055. Each of the three
directors owns 10,000 shares in the Company.
13. Capital commitments
At 31 March 2018 the Group had capital commitments of EUR400,000
(30 September 2017: GBPNil, 31 March 2017: GBPNil).
14. Post balance sheet events
There were no post balance sheet events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFITRIILLIT
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