TIDMASLI
RNS Number : 1449O
Aberdeen Standard Eur Lgstc Inc PLC
28 May 2020
ABERDEEN STANDARD EUROPEAN LOGISTICS INCOME PLC
Legal Entity Identifier (LEI): 213800I9IYIKKNRT3G50
ANNUAL FINANCIAL REPORT FOR THE YEARED 31 DECEMBER 2019
1. STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
Financial Highlights as at 31 December 2019
Net asset value total Net Asset Value (EUR'000) Net asset value per
return 1 share (EUR)
2019: 8.6% 2019: 260,277 2019: 1.11
2018: (3.0)% 2 2018: 202,073 2018: 1.08
Share price total Premium/(Discount) Ordinary dividend per
return 1 to Net Asset Value 1 share
2019: (7.0)% 2019: (4.0)% 2019: 5.75c
2018: 3.0% 3 2018: 5.7% 2018: 1.7p
Ongoing Charges 1 IFRS Earnings Per Share Portfolio valuation
(EUR'000)
2019: 1.5% 2019: 9.6c 2019: 348,519
2018: 0.8% 2018: (2.5)c 2018: 148,918
Number of assets Average lease length Loan-To-Value (%)
in years
2019: 13 2019: 9.7 2019: 28.4%
2018: 6 2018: 12.3 2018: n/a
Average building size
(sqm)
2019: 26,421
1 Alternative Performance Measurements - see glossary on page
111 of the published Annual Report for the year ended 31 December
2019.
2 Period from incorporation on 25 October 2017 to 31 December
2018.
3 Period from launch on 15 December 2017 to 31 December
2018.
2. CHAIRMAN'S STATEMENT
Dear Shareholder,
It is a pleasure to present to you the second Annual Report of
the Company in respect of the year ended 31 December 2019.
However, it is sad to note that as I write this report the whole
world is still in the grip of the COVID-19 pandemic which looks set
to have a far-reaching impact on many people, businesses and the
global economy. Consequently, the following is to a great extent a
statement of historical record. Many of our tenants are involved in
the logistics of deliveries whether that be the important food
supply chain, pharmaceuticals or the now increasingly required
direct to home delivery service.
Notwithstanding the fact that some of these businesses are
working flat out, our Investment Manager's teams continue to remain
in close contact with all our tenants to be ready to address
concerns as and when they might arise.
Overview
The Company's successful launch in December 2017 was followed by
an issue of 47,000,000 new Ordinary Shares in July 2019 which
raised gross proceeds of approximately GBP46.4 million (equivalent
to approximately EUR51.7 million at the then prevailing exchange
rate).
The net proceeds of the second cash raise were invested in
accordance with the Company's Investment Policy over the second
half of 2019 in a number of warehouses in Europe helping to
diversify further our asset and tenant base.
Our Investment Manager has consistently invested with the aim of
creating a portfolio of assets diversified by both geography and
tenant throughout Europe, predominantly targeting well-located
assets in established distribution hubs and within close proximity
of cities that have excellent transport links.
The Company seeks to target for an investor at launch an annual
yield of 5.0 per cent. per Ordinary Share and a total Shareholder
return (NAV total return) of 7.5 per cent. per annum (each in Euro
terms). The longer-term nature and CPI indexation of the leases
that we have signed with tenants provides for a durability of
income that should support our targets once we are clear of the
pandemic and its ramifications.
Results
The audited Net Asset Value ("NAV") per Share as at 31 December
2019 was EUR1.11 (GBp - 94.21p), compared with the NAV per Share of
EUR1.08 (GBp - 96.7p) at the end of 2018, reflecting, with the
interim dividends declared, a NAV total return of 8.6% for the year
in euro terms.
The closing Ordinary Share price at 31 December 2019 was 90.40p
(31 December 2018 - 102.25p), representing a discount to NAV per
Share of 4.0%. At the date of this report the latest closing price
was 96.1p reflecting, predominantly, the extreme volatility in
global share prices and general investment uncertainty witnessed
since the outbreak of the COVID-19 pandemic.
COVID-19
It is clear that many economies across Europe and underlying
business sectors will be suffering from the government enforced
lockdowns that we have witnessed and the massive fall in global
trade seen as a consequence but we continue to work closely with
our tenants in an attempt to understand issues that they may be
facing and to help where possible.
The Investment Manager's asset managers have been in discussions
with a number of our tenants to understand their short-term
financial difficulties where raised and assess where genuine
challenges exist which may be alleviated by alternative rent
solutions. These include short-term deferral of payments into H2
2020 and lease extensions in combination with short rent free
periods rather than any rent reductions.
At the end of April 2020 all rents due from all of our tenants
for Q1 2020 had been paid in full. At that time, the Company had
also received payments reflecting 67% of rents due from tenants in
respect of the Q2 payment date. A further update from the Company
has indicated this to have risen to 75% and this is expected to
increase further to 82% in due course. Of the 18% outstanding,
c.EUR820,000 will be deferred, with EUR720,000 of this due for
payment by December 2020 and EUR100,000 due prior to June 2022. The
balance together with an additional EUR340,000 of rent payable for
2020 to 2022 is expected to be foregone in exchange for longer
lease terms currently under advanced negotiation. Lease extensions
are expected to be agreed for up to five years. As a result, the
Company expects that it will collect approximately 95% of Q2 rental
income by December 2020.
The Board, via the Investment Manager, continues to monitor
closely rent collections, cash forecasts, loan covenants and the
working practices of the Company's suppliers and the impact that
COVID-19 has had on all stakeholders.
Dividends
First and second interim dividends in respect of the year ended
31 December 2019 of 1.41 euro cents (equivalent to 1.27p) per
Ordinary Share were paid to Shareholders on 10 July 2019 and 7
October 2019 respectively. A third interim dividend of 1.41 euro
cents (equivalent to 1.27p) per Ordinary Share was declared on 19
November 2019 and paid to Shareholders on 20 December 2019. On 24
February 2020 the Board declared a fourth interim dividend of 1.41
euro cents per Ordinary Share (equivalent to 1.27p) which was paid
to Shareholders on 27 March 2020, making a total of 5.64 euro cents
paid in respect of the financial year under review. The equivalent
sterling rate paid was 5.08p per Share.
On 26 May 2020 the Board declared a first interim dividend of
1.41 euro cents (equivalent to 1.24p) per Ordinary Share payable on
26 June 2020 to Ordinary Shareholders on the register on 5 June
2020. The Board is very aware of the part that income plays in our
investors' portfolios, particularly at this time. It is encouraging
to note the rent collection statistics to date and the agreements
that our Investment Manager has negotiated with some of our tenants
with respect to rent deferrals to later in the financial year.
Despite current levels of cash reserves the Board will be
mindful of any further impact to tenants from the COVID-19 virus.
It is the intention to continue to pay quarterly interim dividends
in line with our policy where to do so will still give the Company
sufficient financial headroom. Dividends are declared in respect of
the quarters ending on the following dates: 31 March, 30 June, 30
September and 31 December in each year. The dividend target and any
dividend payment may be made up of both dividend income and income
which is designated as an interest distribution for UK tax purposes
and therefore subject to the interest streaming regime applicable
to investment trusts. Further details on this breakdown can be
found on page 17 of the published Annual Report for the year ended
31 December 2019.
Portfolio
Since my last report at the half yearly stage, the portfolio has
seen two new additions in the second half of 2019 in Warsaw, Poland
and Coslada (Madrid), Spain for a total value of EUR36.7
million.
In October, the Company completed the purchase of a newly built,
fully income producing logistics warehouse in Warsaw for a purchase
price of EUR27.5 million with rental payments made in euros. This
asset incorporates a cross-dock facility leased to DHL who selected
this area for city distribution operations due to its proximity to
the city centre. The Company also acquired an urban located
cross-dock logistics warehouse in Coslada, Spain, for a value of
EUR9.2 million, considered by the Investment Manager to be one of
the best locations for last-mile logistics in Spain which has an
attractive income profile and is fully leased to DHL, the world's
largest logistics company, on a renewed ten year CPI indexed
lease.
Since the year end, the Company completed the acquisition of an
urban located logistics warehouse in Den Hoorn, the Netherlands, in
January for a net value of EUR49.9 million. This is a newly built
warehouse located between the cities of the Hague and Rotterdam
with LED lighting and solar roof panels adding sustainable
credentials to this investment. This last purchase takes the
portfolio to a total of fourteen properties spread across five
countries.
Notwithstanding the short term impact expected from the
developing global economic crisis, the durability of the income
that we expect to generate given the length of the indexed leases,
our mix of tenants and the quality of the locations, I believe over
the long term will provide Shareholders with a well-diversified
portfolio which will enable the Company to meet its investment
objective.
Further details on the composition of the portfolio are provided
in the Investment Manager's Report.
Financing
Over the course of the year the Investment Manager's treasury
team has continued to source fixed term debt from banks which is
secured on certain assets or groups of assets within the portfolio.
These non-recourse loans range in maturities between six and ten
years with interest rates ranging between 0.94% and 1.62% per
annum.
As part of the acquisition of the property in Den Hoorn, the
Company finalised and drew down long term financing secured on the
properties at Den Hoorn and Zeewolde in the Netherlands. The
secured facility was arranged with Berlin HYP AG for a total value
of EUR35.7 million at an all-in interest rate of 1.25% and fixed
for an eight year term, bringing asset level gearing close to 35%
of GAV which remains the Company's target level.
The current average interest rate on the total fixed term debt
arrangements of EUR144.6 million is 1.4%. The Board continues to
keep the level of borrowings under review with the aggregate
borrowings always subject to the absolute maximum set at 50 per
cent. of gross assets, calculated at the time of drawdown for a
property purchase. The actual level of gearing may fluctuate over
the Company's life as and when new assets are acquired or whilst
short term asset management initiatives are being undertaken.
Banking covenants are reviewed by the Investment Manager on a
regular basis particularly with the stresses currently being
witnessed in other real estate sectors due to COVID-19.
Governance
The Company is a member of the Association of Investment
Companies and seeks to follow best practice regarding appropriate
disclosure.
In accordance with good governance, two Directors met with a
number of our Shareholders during the year to hear their views on
the Company and its performance since launch. Directors are
available to meet with investors to discuss the Company in more
detail throughout the year and may be contacted through the Company
Secretary.
The Board undertook a site visit during the year to view three
of the properties owned in the Netherlands, met with tenants where
possible and members of local staff and advisers of the Investment
Manager.
Following best practice, the whole Board is standing for
re-election at the forthcoming AGM and further details on each
Director may be found on pages 44 and 45 of the published Annual
Report for the year ended 31 December 2019.
Annual General Meeting
It is currently the Board's intention to hold the Company's
Annual General Meeting in London on 30 June 2020 at 2:00 p.m. at
the offices of Aberdeen Standard Investments, Bow Bells House, 1
Bread Street, London EC4M 9HH.
The formal Notice of AGM may be found from page 115 of the
published Annual Report for the year ended 31 December 2019.
On 23 March 2020, the UK Government announced compulsory Stay at
Home Measures to manage the COVID-19 pandemic in the UK. These
measures provided, among other things, that public gatherings were
not permitted and that leaving one's home should only be for
essential purposes. Whilst there has been some limited relaxation
of these restrictions, it is clear that social distancing will be
required for the foreseeable future and that, if possible, people
should stay at home. As the safety, security and health of the
Company's Shareholders, their guests and our advisers, including
the Investment Manager's personnel, is of paramount importance the
Board is changing how the AGM will be held this year. Whilst the
AGM will be held at the offices of Aberdeen Standard Investments in
London, it will be functional only and follow the minimum legal
requirements for an AGM. Only the formal business set out in the
Notice will be considered, with no attendance by the Investment
Manager and no refreshments. As there is a strong possibility that
Government guidance in June will continue to discourage public
gatherings, Shareholders are strongly discouraged from attending
the meeting and indeed entry may be refused if Government guidance
so requires. Arrangements will be made by the Company to ensure
that a minimum number of Shareholders required to form a quorum
will attend the meeting in order that the meeting may proceed.
A presentation from the Investment Manager, along with the AGM
results, will be made available to shareholders on the Company's
website shortly after the AGM.
In taking these steps, the Board is trying to balance the
requirement under company law to hold an AGM so that the matters
that it needs to seek Shareholder approval for can be considered,
whilst operating in a rapidly changing environment where public
gatherings are restricted. The Board strongly encourages all
Shareholders to exercise their votes in respect of the meeting in
advance by completing the enclosed form of proxy, or letter of
direction for those who hold shares through the Aberdeen Standard
Investments savings plans. This should ensure that your votes are
registered in the event that physical attendance at the AGM is not
possible or restricted.
The proposed resolutions are explained fully in the Directors'
Report on pages 51 to 52 of the published Annual Report for the
year ended 31 December 2019. We always welcome questions from our
Shareholders at the AGM but this year, given the format and the
prevailing circumstances, we would ask Shareholders to submit their
questions to the Board prior to the meeting. The Board and/or
Investment Manager will respond to all such questions received
either before or after the AGM. You may submit questions on the
Company, the Annual Report and the Notice of AGM in advance to
European.Logistics@aberdeenstandard.com
The situation in relation to COVID-19 continues to evolve and
the Company will update Shareholders on any changes to the above
arrangements for the AGM through its website at
www.eurologisticsincome.co.uk . Shareholders are advised to check
the Company's website for updates. We trust that Shareholders will
be understanding and supportive of this approach.
Outlook
Notwithstanding the unprecedented economic environment we are
now operating within, the Board and Investment Manager continue to
believe that logistics will remain one of the most favoured sectors
for investors in the coming years. The logistics industry is
experiencing unprecedented disruption as a result of systemic
changes to the way global economies are functioning and these
challenges are manifesting themselves in different ways across
different sectors. So far, logistics assets have benefited from
additional occupier demand arising from necessary supply chain
restructuring.
New technology is creating challenges for supply chains as
clients demand frequency and more complexity whilst the nature of
ecommerce, where Europe has lagged the UK, has increasingly
required operators to adapt faster to future shifts in consumption,
particularly so since the start of European lockdowns Our
Investment Manager has built a portfolio of fourteen properties,
predominantly around 30,000 square metres in size located close to
cities, airports and major motorway routes. These urban fringe
facilities while structured for current tenants tend to be in the
more liquid part of the sector where reconfiguration is easier and
tenant demand strongest helping to provide facilities with
optionality at the maturity of a lease. Leasing 'tension' has been
robust with land values under pressure from competing uses and with
income growth prospects potentially stronger than for ultra
big-boxes where risk is higher at maturity of the lease as the
number of potential occupiers are limited.
We continue to seek to understand our tenants' requirements and
the Investment Manager undertakes a regular tenant survey whilst
asset managers maintain crucial communications. The implementation
of green leases is an area where the Investment Manager is seeking
to obtain volumetric usage data on energy use, waste disposal and
water consumption in the future for further reporting and possible
cost savings. ESG is embedded within the Investment Manager's
investment process and although many of our assets are recently
built, a programme of works is being followed to enhance areas
where improvements can be made. The addition of solar panels for
green energy and other initiatives should enhance our scoring for
the next GRESB Survey and benefit tenant relationships as
businesses become far more aware of sustainability issues. Now more
than ever the Investment Manager's people on the ground act as an
important conduit to our tenants, seeking to maintain clear
communication links to understand how they are operating, their
concerns and their requirements for the future.
Notwithstanding the troubling times that we find ourselves in,
many of our tenants' businesses are well positioned in areas which
remain essential to the everyday operation of an economy.
E-commerce and the move to on-line shopping and delivery may well
be bolstered by the impact of COVID-19 when recovery comes. Despite
the disruption this is causing, the fundamentals for investment in
logistics real estate assets remains strong.
Further details about the Company and the assets in which it is
invested are available together with the 2019 prospectus, monthly
factsheet and Company announcements on our website at:
www.eurologisticsincome.co.uk
Tony Roper
Chairman 27 May 2020
3. INVESTMENT MANAGER'S REVIEW
Our Portfolio
A diversified portfolio with modern specifications in
established logistics locations
Setting aside the unprecedented economic environment we now find
ourselves in post year end, in a little over 2 years since the
launch of the Company we have invested EUR400 million in the
purchase of 14 warehouses across 5 countries in Europe1. Durability
of the income stream has been a key focus for this income driven
strategy which the Investment Manager believes can only be achieved
by a selective approach targeting the more liquid 'mid-box' segment
of the logistics market with a preference for warehouses with
modern specifications in established locations. We have now built
up exposure in the urban segment of the logistics market where
there are high growth expectations related to the scaling up of
e-commerce and where many parcel delivery specialists are seeking
to get closer to their end consumers.
The lockdowns experienced across Europe can only have encouraged
this increasing trend of change in consumer spending.
ASI's local transaction managers have sourced quality assets,
all fully leased with long indexed leases to tenants in line with
the Company's investment policy giving confidence that the Company
should be well positioned to deliver investors' income and capital
growth expectations over the long term.
ASI has local teams on the ground that know the market ASI is
the second largest real estate investor in Europe with currently
around EUR40 billion of assets under management. The Group has
local offices across Europe, 25 in total of which 11 are real
estate hubs. The property business is a local business. Speaking
the local language, having a network with the main participants and
understanding the merits of the market is essential to finding the
right warehouses and paying the right price. ASI's access to deals
is in part demonstrated by the fact that the Investment Manager has
closed 9 out of 14 transactions for properties within the portfolio
on an 'off-market' basis, meaning direct contact with the seller
without any further competition from other potential buyers. ASI's
strong reputation as a serious real estate investor with an
in-depth knowledge of complex transactions is extremely helpful in
the often competitive logistics market that certainly existed
before COVID-19. With a quality portfolio assembled, it is
extremely important, even more so in these challenging times, to
build and maintain relationships with our tenants and understand
their businesses and requirements, whilst keeping our buildings in
excellent condition and adding value where we can. This is the main
responsibility of our local asset managers, of which there are over
80 across Europe. The fact that we have local ASI transaction and
asset managers across Europe is what helps to set us apart from
many other investors.
Since the launch of the Company, the team has investigated more
than 170 investment opportunities across Europe representing a
total investment value of EUR9.1 billion resulting in 37 bids
(EUR1.5 billion) of which 19 were accepted by the vendors resulting
in an exclusive position and start of the due diligence process
finally resulting in 5 rejections and 14 deals closed.
Rejecting a deal during due diligence is never ideal but it is a
potential outcome of such in-depth analysis on the legal,
technical, fiscal and commercial aspects of a transaction so that
we fully understand all the risks we could be taking through the
addition of an asset to the portfolio. On behalf of the Company the
Investment Manager has issued or considered bids in: Austria,
Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Poland, Portugal, Slovenia, Spain and Sweden,
once again illustrating the access to a wide range of markets
through local teams.
A well-diversified, quality portfolio with long indexed leases.
The team at ASI are stock-pickers, building a high conviction
portfolio from the bottom-up, with buildings considered to deliver
stable and growing cash-flows in normal market conditions. This
does not mean that we do not take top-down views on markets. Since
launch, our focus has been very much on the European Continent and
not the UK. There are good reasons for this. First of all, the UK
was more advanced in the cycle with prime yields already close to
4% in 2018 against approximately 5%+ for prime stock on the
Continent. Secondly, financing costs were more attractive on the
Continent where German banks have been very active. All-in costs
for a 7 year loan facility could easily cost 100 bps less on the
Continent, creating a wider yield spread with the property yield.
And lastly, a standard lease agreement on the Continent typically
has full CPI indexation of the annual rent providing an inflation
hedge.
A key focus for the Company has been the durability of income
streams. This means we are not buying bespoke warehouses with long
leases in solitary locations. We have invested in warehouses that
will have a second life thanks to modern building specifications in
terms of free height, floor load capacity, number of loading doors
and yard depth. All of these features are highly relevant for
logistics operators nowadays. Also all warehouses are located
alongside main transportation corridors, or close to large
population centres or airports, where logistics activity can be
found, making these very liquid investments, both from an occupier
and an investor perspective.
1 Including Den Hoorn in the Netherlands which closed in January
2020 for a net purchase price of EUR49.9 million.
We have built a well-diversified property portfolio with 14
buildings in 5 European countries and 33 tenants creating good risk
diversification. Eight buildings were newly constructed and have
been erected between 2018 and 2020 showing the low average age of
the portfolio and also highlighting the good relationships we have
with project developers. Average lease length is almost 10 years
all with indexed leases to tenants.
As at 31 December 2019 The Netherlands is the largest market in
the portfolio with an allocation of 47%, followed by France (18%),
Germany (15%), Poland (13%) and Spain (7%). The high allocation to
the Netherlands is a very conscious decision as the Netherlands
holds a strong position as gateway to the Western Europe market
with excellent road connections to Schiphol airport and the port of
Rotterdam, the largest port in Europe. The Investment Manager is in
discussions with the developer of the Zeewolde property with
regards a small flooring defect in relation to the depth of heating
pipes where racking has been installed. The tenant's operations
continue uninterrupted and we expect a satisfactory outcome to
these discussions. In Avignon temporary chilling equipment has been
installed for the tenant whilst the developer resolves an issue
around compliance with local regulations. No liability falls upon
the Company with any additional costs deemed payable by the
developer.
Performance over the year
With the capital raise undertaken during 2019 and recent strong
valuation uplifts seen for many of our properties, we ended the
year with a property portfolio valued at EUR348.5 million with
total assets of EUR383.0 million. This excludes the acquisition of
the Den Hoorn property which completed in January 2020. The
year-end net asset value of EUR1.11 per share, when accounting for
dividends paid and reinvested, on a total return basis, reflects a
total return for the year of 8.6% per share in euro terms. It was
pleasing to see the strong uplift in the portfolio valuation over
the final quarter of 2019. The 4% quarterly valuation 2 Including
Den Hoorn in the Netherlands which closed in January 2020 for a net
purchase price of EUR49.9 million.
increase in Q4 illustrated the continued supply and demand
imbalance for real estate within key European logistics hubs and
highlighted the level of investor demand within this growing
sector. While largely driven by a contraction in yields, an
increase in market rents, particularly in Germany where Erlensee
and Flörsheim performed strongly, was also a key driver in the
portfolio valuation uplift.
Durable income streams driving future performance
All properties held within the portfolio were income producing
at the year end with long leases. This includes a rental guarantee
in respect of the office space at Ede for a value of EUR257,000 per
annum available until July 2023 while the Investment Manager seeks
a suitable tenant.
The weighted average unexpired lease term is 9.7 years excluding
breaks and 8.8 years if including breaks. Long leases mean we are
able to benefit from yearly indexation for a longer period of time.
There are local differences with indexation though. In the UK,
typically, rents may be reviewed regularly or increased at the
maturity of a lease by negotiation whereas on the Continent leases
are predominantly indexed each year using the Consumer Price Index
(CPI) as a basis. There can be local differences, for example the
French L'indice des Loyers des Activités Tertiaries (ILAT) is an
index based on a combination of construction costs, CPI and GDP
growth. In Germany, the indexation of rents is only triggered once
the cumulative CPI indexation rate of the preceding years exceeds a
certain threshold which is then implemented by a certain portion of
that threshold. Part of ASI's due diligence process when
considering a purchase is a check on the financial strength of the
tenants to ensure, as much as possible, that a tenant is able to
pay the rent for the foreseeable future. ASI has used the Dun &
Bradstreet Failure Scoring system as the main source to check on
tenants' solvency and as a relative measure of risk. However, we
can also leverage off of the knowledge of ASI's financial equity
analysts if there are reasons for a more in-depth analysis. The
average credit rating at the year end was 78 out of 100 points and
could then have been considered as 'strong'. Of course since the
year end, and with the onset of the COVID-19 pandemic, many
businesses have been required to close or scale back operations.
During this difficult period we are keeping in close contact with
our tenants
seeking to better understand the impact to their businesses and
how we may work together to address their concerns and provide
support.
Prior to the emergence of COVID-19, there was an undersupply
situation across Europe with high demand for modern logistics space
and a lack of sufficient new builds. At the same time, construction
costs and land prices were increasing all resulting in upward
pressure on rents. The Company had started to see signs of this in
the portfolio, reflected more recently for example in 4% higher
market rents applied by our valuation adviser for our German
assets.
Top 10 tenants based on current rents
Contracted Rent Contracted Rent WAULT
Tenant Property (EUR000 p.a.) (%) (years)2
Avignon (Noves)
Waddinxveen
1 Biocoop Ede 2,311 12 10.6
2 Combilo Zeewolde 1,814 10 13.9
Meung Sur Loire
's Heerenberg
3 Kruidvat Leon 1,597 8 8.6
4 VSH Fittings Oss Erlensee 1,532 8 14.5
5 Office Depot Krakow 1,447 8 6.8
6 JCL 1,431 8 12.0
7 Decathlon 1,054 6 9.2
8 Orangeworks 840 4 14.5
9 Bergler 504 3 9.8
10 Lynka 504 3 7.9
----------------------- ---------------- --------------- --------------- ---------
Subtotal 13,034 70 11.0
----------------------- ---------------- --------------- --------------- ---------
Other tenants 6,005 30 6.7
----------------------- ---------------- --------------- --------------- ---------
Portfolio at 31/12/2019 19,039 100 9.7
----------------------- ---------------- --------------- --------------- ---------
Van der Helm Den Hoorn 2,808 10.0
----------------------- ---------------- --------------- --------------- ---------
Portfolio including Den Hoorn purchase 21,847 9.7
Modest gearing with attractive all-in costs
Financing costs on the Continent remain very attractive,
particularly when compared to the UK. The Company has used gearing
in those markets where all-in loan costs are lowest, such as
France, Germany and the Netherlands, where German banks have been
very active. All-in costs of the loan portfolio is currently 1.4%
with an average loan duration of 7.3 years of which 6.3 years are
remaining.
The Company's stated Investment Policy targets a long term
target Loan to Value ratio (LTV) of 35% at asset level. This may
fluctuate through the use of shorter term loan facilities and in
advance of cash raises allowing the Company to commit to further
opportunities as they arise.
Property Portfolio as at 31 December 2019
As at the year end the current portfolio LTV was 28.4%, but
including the Den Hoorn purchase in January 2020 it will be close
to 35%. The maximum LTV stated in the original prospectus is 50% at
the time of a specific drawdown. On a temporary basis the Company's
LTV could rise above 35% with the use of a credit line which would
allow us to buy a warehouse or implement an asset-management
initiative, typically ahead of a capital raise in order to reduce a
potential cash-drag. The Company has been in discussions with a
range of lenders considering a small Group level loan facility that
would enable the Investment Manager to undertake further asset
purchases or asset management initiatives.
WAULT % of
Country Location SPA signed Closing Built (years)1 portfolio2
Germany Flörsheim Dec-17 Feb-18 2015 8.2 5.9
France Avignon Jul-18 Oct-18 2018 10.4 11.8
Netherlands Ede Aug-18 Aug-18 1999/ 2005 7.9 7.0
Netherlands Oss (forward funding) Oct-18 Jul-19 2019 14.5 4.2
Zeewolde (forward
Netherlands funding) Nov-18 Jun-19 2019 14.5 7.5
Netherlands Waddinxveen Nov-18 Nov-18 1983/ 1994/ 13.9 8.8
2002/ 2018
Germany Erlensee Jun-18 Feb-19 2018 8.3 9.4
Spain Leon Jul-18 Mar-19 2019 9.2 4.4
France Meung-sur-Loire Nov-18 Feb-19 2004 6.8 6.3
Poland Krakow Feb-19 Feb-19 2018 4.8 6.5
Netherlands 's Heerenberg Jun-19 Jul-19 2009/2011 12.0 6.4
Poland Warsaw Sep-19 Oct-19 2019 7.7 6.9
Spain Madrid Dec-19 Dec-19 1999 10.0 2.5
TOTAL (1) 9.7 87.5
Property acquired post 31 December 2019
WAULT % of portfolio2
Country Location SPA signed Closing Built (years)1
Netherlands Den Hoorn Dec-19 Jan-20 2020 10.0 12.5
TOTAL (2) 10.0 12.5
TOTAL (1+2) 9.7 100.0
1 Weighted average unexpired lease term excluding break
options.
2 Relative to Q4 valuations and net purchase prices of asset
with signed SPA.
COVID-19 and Outlook
As mentioned in the Chairman's Statement, the Investment Manager
and its people on the ground continue to maintain close and regular
contact with our tenants in an attempt to support any of those that
may be struggling over the short term due to Europe wide lockdowns
and business interruption. In the main discussions have reached
their conclusion and where rental deferrals have been agreed the
great proportion of these are expected to be deferred to later in
2020. Updates issued by the Company in April and May provide detail
to investors. Where our tenants have requested rent free periods we
have negotiated extended lease terms in consideration of immediate
reductions which provides greater certainty for the longer
term.
Despite the obvious short term disruption caused by the COVID-19
pandemic, as countries and their economies start to get back to
work we still view the logistics sector as being one that will
perform well and attract continued investment. New people are
adopting ecommerce for every day purchases, particularly older
generations. Growing confidence and familiarity with this form of
retailing is likely to accelerate the growth in the share of
spending through ecommerce platforms which will drive the demand
for logistics. Another demand driver is rising inventory levels as
companies experience elevated risks to their supply chains whilst
trying to make lines more resilient to shocks and, for the same
reason, the onshoring of activities bringing production back closer
to home and resulting in increased manufacturing locations. Despite
short term challenges experienced by tenants, we expect the
logistics market to perform well in the mid-term thanks to strong
demand drivers in a market that is heavily under-supplied across
Europe. Core and Core+ sustainable strategies like this it is
expected will be most resilient as businesses alter their supply
chains and increase technology in response to changing consumer
demands.
Aberdeen Standard Investments Ireland Limited
27 May 2020
4. STRATEGIC REPORT - OVERVIEW OF STRATEGY
The Company
The Company is a UK investment trust with a premium listing on
the Main Market of the London Stock Exchange. The Company invests
in European logistics real estate to achieve its investment
objective noted below.
The Company was incorporated in England and Wales on 25 October
2017 with registered number 11032222 and launched on 15 December
2017.
Investment Objective
The Company aims to provide a regular and attractive level of
income return together with the potential for long term income and
capital growth from investing in high quality European logistics
real estate.
Investment Policy
The Company aims to deliver the investment objective through
investment in, and management of, a diversified portfolio of "big
box" logistics warehouses and "last mile" urban logistics assets in
Europe.
The Company invests in a portfolio of assets diversified by both
geography and tenant throughout Europe, predominantly targeting
well-located assets at established distribution hubs and within
population centres.
In particular, the Investment Manager seeks to identify assets
benefitting from long-term, index-linked, leases as well as those
which may benefit from structural change, and will take into
account several factors, including but not limited to:
- the property characteristics (such as location, building
quality, scale, transportation links, workforce availability and
operational efficiencies);
- the terms of the lease (focusing on duration, inflation-linked
terms, the basis for rent reviews and the potential for growth in
rental income); and
- the strength of the tenant's financial covenant.
The Company may forward fund the development of, or commit to
the forward purchase of, new assets when the Investment Manager
believes that to do so would enhance returns for shareholders
and/or secure an asset at an attractive yield. The Company intends
that forward funded or forward purchased assets will be wholly or
predominantly pre-let at the time the investments are committed
to.
Diversification of Risk
The Company manages its assets at all times in a manner which is
consistent with the spreading of investment risk. The following
investment limits and restrictions apply to the Company and its
business which, where appropriate, will be measured at the time of
investment and once the Company is fully invested:
- the Company only invests in assets located in Europe;
- no more than 50 per cent. of Gross Assets may be concentrated in a single country;
- no single asset may represent more than 20 per cent. of Gross Assets;
- forward funded commitments must be predominantly pre-let and
the Company's overall exposure to forward funded commitments is
limited to 20 per cent. of Gross Assets;
- the Company's maximum exposure to any single developer is
limited to 20 per cent. of Gross Assets;
- the Company will not invest in other closed-ended investment companies;
- the Company may only invest in assets with tenants which have
been classified by the Investment Manager's investment process as
having strong financial covenants; and
- no single tenant may represent more than 20 per cent. of the
Company's annual gross income measured annually.
The Company is not required to dispose of any asset or to
rebalance the Portfolio as a result of a change in the respective
valuations of its assets.
The Company conducts its affairs so as to qualify as an
investment trust for the purposes of section 1158 of the
Corporation Tax Act 2010.
Borrowing and Gearing
The Company employs gearing with the objective of improving
shareholder returns. Debt is typically secured at the asset level
and potentially at the Company level with or without a charge over
some or all of the Company's assets, depending on the optimal
structure for the Company and having consideration to key metrics
including lender diversity, cost of debt, debt type and maturity
profiles.
Borrowings are typically non-recourse and secured against
individual assets or groups of assets and the aggregate borrowings
will always be subject to an absolute maximum, calculated at the
time of drawdown for a property purchase, of 50 per cent. of Gross
Assets. Where borrowings are secured against a group of assets,
such group of assets shall not exceed 25 per cent. of Gross Assets
in order to ensure that investment risk remains suitably
spread.
The Board has established gearing guidelines for the Alternative
Investment Fund Manager ("AIFM") in order to maintain an
appropriate level and structure of gearing within the parameters
set out above. Under these guidelines, the Investment Manager seeks
to maintain aggregate asset level borrowings at or around 35% of
Gross Asset Value. These limits may be exceeded from time to time
particularly through the use of short term financing facilities as
the Investment Manager seeks to manage certain aspects of the
portfolio, including, for example, building extensions. These
limits may be exceeded in the short term from time to time.
The Board will keep the level of borrowings under review. In the
event of a breach of the investment guidelines and restrictions set
out above, the AIFM will inform the Board upon becoming aware of
the same, and if the Board considers the breach to be material,
notification will be made to a Regulatory Information Service and
the AIFM will look to resolve the breach with the agreement of the
Board. The Directors may require that the Company's assets are
managed with the objective of bringing borrowings within the
appropriate limit while taking due account of the interests of
shareholders. Accordingly, corrective measures may not have to be
taken immediately if this would be detrimental to shareholder
interests.
Any material change to the Company's investment policy set out
above will require the approval of shareholders by way of an
ordinary resolution at a general meeting and the approval of the
Financial Conduct Authority. Non-material changes to the investment
policy may be approved by the Board.
Comparative Index
The Company does not have a benchmark.
Duration
Although the Company does not have a fixed life, under the
Company's articles of association the Directors are required to
propose an ordinary resolution for the continuation of the Company
at the Annual General Meeting to be held in 2025 and then every
third year thereafter.
Manager
Under the terms of the Management Agreement, the Company has
appointed Aberdeen Standard Fund Managers Limited as the Company's
alternative investment fund manager for the purposes of the AIFM
Rules. The AIFM has delegated portfolio management to the Amsterdam
Branch of Aberdeen Standard Investments Ireland Limited as
Investment Manager.
Pursuant to the terms of the Management Agreement, the AIFM is
responsible for portfolio and risk management on behalf of the
Company and will carry out the on-going oversight functions and
supervision and ensure compliance with the applicable requirements
of the AIFM Rules. The AIFM and the Investment Manager are both
legally and operationally independent of the Company.
Dividend Policy
Subject to compliance with all legal requirements the Company
intends to pay interim Sterling dividends on a quarterly basis. The
Company will declare dividends in Euros, but shareholders will
receive dividend payments in Sterling. The date on which the
Euro/Sterling exchange rate is set will be announced at the time
the dividend is declared. Distributions made by the Company may
take the form of either dividend income or "qualifying interest
income" which may be designated as interest distributions for UK
tax purposes.
The Company targets an annual yield of 5.0 per cent. per
Ordinary Share for an investor at launch whilst continuing to aim
for a total NAV return of 7.5 per cent. per annum (each in Euro
terms).
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to
assess the Company's success in achieving its objective and to
determine the progress of the Company in pursuing its Investment
Policy. The main KPIs identified by the Board in relation to the
Company, which are considered at each Board meeting, are as
follows:
KPI Description
NAV Return (per share) 1 The Board considers the Company's NAV
total return to be the best indicator
of performance over time and is therefore
the main indicator of performance used
by the Board. Performance for the year
and since inception is set out on page
17 of the published Annual Report for
the year ended 31 December 2019. The
Company is targeting, for an investor
in the Company at launch, a total NAV
return of 7.5 per cent. per annum (in
EUR terms).
-----------------------------------------------------
Share Price (on a total The Board also monitors the price at
return basis) 1 which the Company's shares trade on a
total return basis over time. A graph
showing the share price performance is
shown on page 18 of the published Annual
Report for the year ended 31 December
2019.
-----------------------------------------------------
(Discount)/ Premium 1 The (discount)/premium relative to the
NAV per share represented by the share
price is closely monitored by the Board.
A graph showing the share price (discount)/premium
relative to the NAV is shown on page
18 of the published Annual Report for
the year ended 31 December 2019.
-----------------------------------------------------
Dividend The Board's aim is to pay a regular quarterly
dividend enabling shareholders to rely
on a consistent stream of income. Dividends
paid are set out on page 17 of the published
Annual Report for the year ended 31 December
2019. The Company is targeting, for an
investor in the Company at launch, an
annual dividend yield of 5.0 per cent.
per Ordinary Share (in EUR terms).
-----------------------------------------------------
Ongoing Charges Ration ("OCR") The OCR is the ratio of expenses as a
1 percentage of average daily shareholders'
funds calculated in accordance with the
industry standard. The Board reviews
the OCR regularly as part of its review
of all expenses. The aim is to ensure
that the Company remains competitive
and is able to deliver on its yield target
to Shareholders. The Company's OCR is
disclosed on page 17 of the published
Annual Report for the year ended 31 December
2019.
-----------------------------------------------------
1 Alternative Performance Measurements - see glossary on page
111 of the published Annual Report for the year ended 31 December
2019.
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a
material adverse effect on the Company and its financial condition,
performance and prospects. The Board has carried out a robust
assessment of the principal risks set out in the table below and
overleaf together with a description of the mitigating actions
taken by the Board. The Board confirms that it has a process in
place for regularly reviewing emerging risks that may affect the
Company in the future. The principal risks associated with an
investment in the Company's shares can be found in the Company's
latest Prospectus dated 5 July 2019, published on the Company's
website. The Board reviews the risks and uncertainties faced by the
Company regularly. The new, key risk, that has emerged for the
Company since the end of the period under review is the outbreak of
the global COVID-19 pandemic which has disrupted businesses and
contributed to stock market volatility from which the Company has
not been immune. The longer term effects of the virus are
unknown.
The Board has sought assurances from its key service providers,
including the Investment Manager, that they are each invoking
business continuity procedures and appropriate contingency
arrangements to ensure that they are able to continue to meet their
contractual obligations to the Company. In all other respects, the
Company's principal risks and uncertainties have not changed
materially since the date of the Annual Report and are not expected
to change materially for the current financial year.
Description Mitigating Action
Strategic Risk: Strategic Objectives
and Performance * The Company's strategy and objectives are regularly
The Company's strategic objectives reviewed by Board to ensure they remain appropriate
and performance, both absolute and effective.
and relative, become unattractive
to investors leading a widening
of the discount, potential hostile * The Board receives regular presentations on the
shareholder actions and the Board economy and also the property market to identify
fails to adapt the strategy and/or structural shifts and threats so that the strategy
respond to investor demand. can be adapted if necessary.
* There is regular contact with shareholders both
through the Investment Manager and the broker with
additional direct meetings undertaken by the Chairman
and other directors.
* Board reports are prepared by the Investment Manager
detailing performance, NAV return and share price
analysis versus peers.
* Cash flow projections are prepared by the Investment
Manager and reviewed quarterly by the Board.
* Shareholder/market reaction to Company announcements
is monitored.
------------------------------------------------------------------------
Investment and Asset Management
Risk: Investment Strategy - ASI has real estate research
Poorly judged investment strategy, teams which provide performance
regional allocation, use of gearing, forecasts for different sectors
inability to deploy capital and and regions.
the mis-timing of disposals and - There is a team of experienced
acquisitions, resulting in poor portfolio managers who have detailed
investment returns. knowledge of the markets in which
they operate.
- ASI has a detailed investment
process for both acquisitions and
disposals that require to be signed
off internally before the Board
reviews any final decision.
- The Board is very experienced
with certain Directors having a
knowledge of property markets.
------------------------------------------------------------------------
Investment and Asset Management
Risk: * ASI has experienced investment managers with
Developing and refurbishing property extensive development knowledge with in-depth
Increased construction costs, construction research undertaken on each acquisition/ development
defects, delays, contractor failure,
lack of development permits, environmental
and third party damage can all * Development contracts are negotiated by experienced
impact the resulting capital value teams supported by approved lawyers.
from investments.
* Due diligence is undertaken on developers including
credit checks and current pipelines.
* Construction and risk insurance checked.
* Post completion the developer is responsible for
defects and monies are held in escrow for a period of
time after handover.
------------------------------------------------------------------------
Investment and Asset Management
Risk: Health and Safety * For new properties health and safety is included as a
Failure to identify and mitigate key part of due diligence.
major health & safety issues or
to react effectively to an event
leading to injury, loss of life, * Asset managers visit buildings on a regular basis.
litigation and any ensuing financial
and reputational impact.
* Property managers are appointed by ASI to monitor
health & safety in each building and reports are made
to the asset managers on a monthly basis.
* Asset managers visit each building at least twice a
year.
* Tenants are responsible for day to day operations of
the properties.
------------------------------------------------------------------------
Investment and Asset Management
Risk: * The Investment Manager undertakes in depth research
Environment on each property acquisition with environmental
Properties could be negatively surveys and considers its impact on the environment
impacted -- by hazardous materials and local communities.
(for example asbestos or other
ground contamination) or an extreme
environmental event (e.g. flooding) * The Investment Manager has adopted a thorough
or the tenants' own operating activities environmental policy which is applied to all
could create environmental damage. properties in the portfolio.
Failure to achieve environmental
targets could adversely affect
the Company's reputation and result * Experienced advisers on environmental, social and
in penalties and increased costs governance matters are consulted externally where
and reduced investor demand. Legislative required
changes relating to sustainability
could affect the viability of asset
management initiatives.
------------------------------------------------------------------------
Financial Risks Macroeconomic
Macroeconomic changes (e.g. levels - ASI Research teams take into
of GDP, employment, inflation, account macroeconomic conditions
interest rate and FX movements), when collating forecasts. This
political changes (e.g. new legislation) research is fed into Investment
or structural changes (e.g. new Manager decisions on purchases/sales
technology or demographics) negatively and regional allocations.
impact commercial property values - The portfolio is EU based and
and the underlying businesses of diversified across a number of
tenants (market risk and credit different countries and also has
risk). Falls in the value of investments a diverse tenant base seeking to
could result in breaches of loan minimise risk concentration.
covenants and solvency issues. - There is a wide range of lease
expiry dates within the portfolio
in order to minimise re-letting
risk.
- The Company has no exposure to
speculative development and forward
funding is only undertaken where
the development is predominantly
pre-let.
- Rigorous portfolio reviews are
undertaken by the Investment Manager
and presented to the Board on a
regular basis.
- Annual asset management plans
are developed for each property
and individual investment decisions
are subject to robust risk versus
return evaluation and approval.
------------------------------------------------------------------------
Financial Risks: Gearing
Gearing risk - an inappropriate * Regular covenant reporting to banks is undertaken as
level ofgearing, magnifying investment required.
losses in a declining market, could
result in breaches of loan covenants
and threaten the Company's liquidity * The gearing target is set at an indicative 35% asset
and solvency. An inability to secure level limit and an absolute Company limit of 50%.
adequate borrowing with appropriate
tenor and competitive rates could
also negatively impact the Company. * The Company's diversified European logistics
portfolio, underpinned by its tenant base, should
provide sufficient value and income in a challenging
market to meet the Company's future liabilities.
* The portfolio has attracted very competitive terms
and interest rates from lenders for the Company's
loan facilities.
* The Investment Manager has relationships with
multiple funders and wide access to different sources
of funding on both a fixed and variable basis.
* Financial modelling is undertaken and stress tested
annually as part of the Company's viability
assessment and whenever new debt facilities are being
considered.
* Loan covenants are continually monitored and reported
to the Board on a quarterly basis and also reviewed
as part of the disposal process of any secured
property.
------------------------------------------------------------------------
Financial Risks: Liquidity Risk
and FX Risk - The diversified portfolio is
The inability to dispose of property geared towards a favoured sector.
assets in order to meet financial - A cash cushion is maintained
commitments of the Company or obtain and an overdraft facility is currently
funds when required for in place.
asset acquisition or payment of - Investment is focused on mid-sized
expenses or dividends. Movements properties which is considered
in foreign exchange and interest the more liquid part of the sector.
rates or other external events
could affect the ability of the
Company to pay its dividends.
------------------------------------------------------------------------
Financial Risks: Credit Risk
* The property portfolio has a balanced mix of
Credit Risk - the risk that the generally good quality tenants and reflects diversity
counterparty will be unable or across business sectors.
unwilling to meet a commitment
entered into by the Group:
failure of a tenant to pay rent * Rigorous due diligence is performed on all
or failure of a deposit taker, prospective tenants and their financial performance
future lender or a current exchange continues to be monitored during their lease.
rate swap counterparty .
* Rent collection from tenants is closely monitored so
that early warning signs might be detected.
* Deposits are spread across various ASI approved banks
and AAA rated liquidity funds.
* The assets of the Company are denominated in a
non-sterling currency, predominantly the Euro. No
currency hedging is planned for the capital, but the
Board periodically considers the hedging of dividend
payments having regard to availability and cost.
------------------------------------------------------------------------
Financial Risks: Insufficient Income
Generation - At regular Board meetings forecast
Insufficient income generation dividend cover is considered. There
due to macro-economic factors including is regular contact with the broker
the current COVID-19 pandemic, and shareholders to ascertain,
and/or due to inadequate asset where possible, views on dividend
management resulting in long voids cover. The Investment Manager seeks
or rent arrears or insufficient a good mix of tenants in properties.
return on cash; dividend cover - A review of tenant risk and profile
falls to a level whereby the dividend is undertaken using, for example,
needs to be cut and/ or the Company the Dun & Bradstreet Failure Scoring
becomes unattractive to investors. method and tenant covenants are
Level of ongoing charges becomes thoroughly considered before a
excessive. lease is granted.
- The ASI team consists of asset
managers on the ground who undertake
asset management reviews and implementation
and there is a detailed approval
process within ASI for lettings.
------------------------------------------------------------------------
Regulatory Risks: Compliance
The regulatory, legal and tax environment * The Company has an experienced Company Secretary who
in which the Company's assets are will advise on changes once any new proposals are
located is subject to change and published. There is regular contact with tax advisers
could lead to a sub-optimal corporate in relation to tax computations and transfer pricing.
structure and result in increased
tax charges or penalties.
* Directors receive regular updates on relevant
regulatory changes from the Company's professional
advisers.
* The highest corporate governance standards are
required from all key service providers and their
performance is reviewed annually by the Management
Engagement Committee.
------------------------------------------------------------------------
Operational Risks: Service Providers
Poor performance/inadequate procedures * ASI have an experienced Fund Manager and Property
at service providers leads to error, Administration Team.
fraud, non-compliance with contractual
agreements and/or with relevant
legislation or the production of * The Company has engaged an experienced registrar:
inaccurate or insufficient information Equiniti is a reputable worldwide organisation.
for the Company (NAV, Board Reports,
Regulatory Reporting) or loss of
regulatory authorisation. Key service * All service providers have a strong control culture
providers include the Manager, that is regularly monitored.
Company Secretary, the Depositary,
the Custodian, the managing agents
and the Company's Registrar. * ASI aim to meet all service providers once a year and
the Management Engagement Committee reviews all major
service providers annually.
* The Company has the ability to terminate contracts.
------------------------------------------------------------------------
Operational Risks: Business continuity
Business continuity risk to any * ASI has a detailed business continuity plan in place
of the Company's service providers with a separate alternative working office if
or properties, following a catastrophic required and the ability for the majority of its
event e.g.pandemic, terrorist attack, workforce to work from home.
cyber attack, power disruptions
or civil unrest, leading to disruption
of service, loss of data etc * ASI has a dedicated Chief Information Security
Officer who leads the Chief Information Security
Office (including the following functions: Security
Operations & Delivery, Security Strategy,
Architecture & Engineering, Data Governance & Privacy,
Business Resilience, Governance & Risk (Security &
IT).
* Properties within the portfolio are all insured.
* The IT environment of service providers is reviewed
as part of the initial appointment and on an ongoing
basis.
------------------------------------------------------------------------
Promoting the Company
The Board recognises the importance of promoting the Company to
prospective investors both for improving liquidity and enhancing
the value and rating of the Company's shares. The Board believes an
effective way to achieve this is through subscription to, and
participation in, the promotional programme run by the Manager on
behalf of a number of investment trusts under its management. The
Company's financial contribution to the programme is matched by the
Manager. The Manager reports quarterly to the Board giving analysis
of the promotional activities as well as updates on the shareholder
register and any changes in the make up of that register.
The purpose of the programme is both to communicate effectively
with existing shareholders and to gain new shareholders with the
aim of improving liquidity and enhancing the value and rating of
the Company's shares. Communicating the long-term attractions of
the Company is key and therefore the Company also supports the
Manager's investor relations programme which involves regional
roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge
represented on the Board in order to allow the Board to fulfil its
obligations. The Board also recognises the benefits and is
supportive of the principle of diversity in its recruitment of new
Board members.
The Board will not display any bias for age, gender, race,
sexual orientation, religion, ethnic or national origins, or
disability in considering the appointment of its Directors.
However, the Board will continue to ensure that any future
appointments are made on the basis of merit against the
specification prepared for each appointment and, therefore, the
Company does not consider it appropriate to set diversity targets.
At 31 December 2019, there were two male Directors and two female
Directors on the Board.
Socially Responsible Investment Policy
Further details on the socially responsible investment policies
adopted by the Manager are disclosed on page 37 of the published
Annual Report for the year ended 31 December 2019.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated day to
day management and administrative functions to Aberdeen Standard
Fund Managers Limited. There are therefore no disclosures to be
made in respect of employees. The Company's socially responsible
investment policy is outlined in the Investment Manager's
Review.
Due to the nature of the Company's business, being a Company
that does not offer goods and services to customers, the Board
considers that it is not within the scope of the Modern Slavery Act
2015 because it has turnover below the threshold of GBP36 million.
The Company is therefore not required to make a slavery and human
trafficking statement. In any event, the Board considers the
Company's supply chains, dealing predominantly with professional
advisers and service providers in the financial services industry,
to be low risk in relation to this matter.
Emissions relating to properties owned by the Company are the
responsibility of the tenants and any emissions relating to the
Company's registered office are the responsibility of the Manager.
The Company therefore has no greenhouse gas emissions to report
from the operations of its business, nor does it have
responsibility for any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors' Reports)
Regulations 2013.
Viability Statement
The Company does not have a formal fixed period strategic plan
but the Board formally considers risks and strategy at least
annually. The Board considers the Company, with no fixed life, to
be a long term investment vehicle, but for the purposes of this
viability statement has decided that a period of three years is an
appropriate period over which to report. The Board considers that
this period reflects a balance between looking out over a long term
horizon and the inherent uncertainties of looking out further than
three years.
In assessing the viability of the Company over the review period
the Directors have conducted a robust review of the principal risks
focussing upon the following factors:
- The principal risks detailed in the Strategic Report;
- The ongoing relevance of the Company's investment objective in the current environment;
- The demand for the Company's shares evidenced by the
historical level of premium or discount;
- The level of income generated by the Company;
- The level of gearing including the requirement to negotiate
new facilities and repay or refinance future facilities; and
- The flexibility of the Company's bank facilities and putting
these facilities in place in time to meet commitments.
The Directors have reviewed summaries from the portfolio models
prepared by the Investment Manager which have been stress tested to
highlight the performance of the portfolio in a number of varying
economic conditions coupled with potential opportunities for
mitigation. The Directors have also stress tested the financial
position of the Company with particular attention on the economic
impact of COVID-19. The COVID-19 pandemic is expected to impact the
Company through a reduction in rental income and potential
reduction in investment property valuation. The Company has
prepared cash flow forecasts which reflect the expected impact of
COVID-19, including reasonably possible downside scenarios. The
impact of reductions in rental income could be mitigated through a
reduction in dividends to shareholders if considered necessary by
the Board. The Company has modelled severe but plausible downside
scenarios, taking into account specific tenant risks. These
scenarios modelled reduced rental income through to 2022 and the
worst case model equates to an overall 33% reduction of rental
income per annum over that period.
Accordingly, taking into account the Company's current position
and the potential impact of its principal risks and uncertainties,
the Directors have a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as they
fall due for a period of three years from the date of this Report.
In making this assessment, the Board has considered that matters
such as significant economic uncertainty, stock market volatility
and changes in investor sentiment could have an impact on its
assessment of the Company's prospects and viability in the future.
In undertaking this review the Directors have also considered the
impact of the COVID-19 pandemic.
s172 Statement
The Board is required to describe to the Company's shareholders
how the Directors have discharged their duties and responsibilities
over the course of the financial year under section 172 (1) of the
Companies Act 2006 (the "s172 Statement"). This s172 Statement
requires the Directors to explain how they have promoted the
success of the Company for the benefit of its members as a whole,
taking into account the likely long term consequences of decisions,
the need to foster relationships with all stakeholders and the
impact of the Company's operations on the environment.
The Board's philosophy is that the Company should operate in a
transparent culture where all parties are treated with respect and
provided with the opportunity to offer practical challenge and
participate in positive debate which is focused on the aim of
achieving the expectations of shareholders and other stakeholders
alike. The Board reviews the culture and manner in which the
Investment Manager operates at its regular meetings and receives
regular reporting and feedback from the other key service
providers.
Investment trusts are long-term investment vehicles, with a
recommended holding period of five or more years with no employees.
The Company's Board of Directors sets the investment mandate as
published in the most
recent prospectus, monitors the performance of all service
providers and is responsible for reviewing strategy on a regular
basis.
The key service provider for the Company is the Alternative
Investment Fund Manager (the "Manager") and the relationship with
the Manager is reviewed at each Board meeting and relationships
with other service providers are reviewed at least annually.
Shareholders are seen as key stakeholders in the Company. The Board
seeks to meet at least annually with shareholders at the Annual
General Meeting and this includes informal meetings with them over
lunch following the formal business of the AGM. This is seen as a
very useful opportunity to understand the needs and views of the
shareholders. In between AGMs the Directors and Manager also
conduct programmes of investor meetings with larger institutional,
private wealth and other shareholders to ensure that the Company is
meeting their needs. Such regular meetings may take the form of
joint presentations with the Investment Manager or meetings with a
Director where any matters of concern may be raised directly.
The other key stakeholder group is that of the underlying
tenants that occupy space in the properties that the Company owns.
The Board aims to conduct a site visit at least annually with the
aim of meeting tenants locally and discussing their businesses and
needs and assessing where improvements may be made or expectations
managed. The Investment Manager's asset managers are tasked with
conducting meetings with building managers and tenant
representatives in order to ensure the smooth running of the day to
day management operations of the properties. The Board receives
reports on the tenants' activities at its regular Board meetings.
The Board via the Management Engagement Committee also ensures that
the views of its service providers are heard and at least annually
reviews these relationships in detail. The aim is to ensure that
contractual arrangements remain in line with best practice,
services being offered meet the requirements and needs of the
Company and performance is in line with the expectations of the
Board, Manager, Investment Manager and other relevant stakeholders.
Reviews will include those of the Company depositary, custodian,
share registrar, broker and auditor.
During the COVID-19 lock down the Board and the Manager have
continued to work effectively from home under the government
guidelines. With regular reporting by the Manager the Board has
continued to have oversight of the Company's service providers and
their continued operations during this period.
The Investment Manager's Report details the key investment
decisions taken during the year and subsequently. The Investment
Manager has continued to invest the Company's assets in accordance
with the mandate provided by shareholders at launch, under the
oversight of the Board. During the year further gearing was
introduced into the portfolio with the aim of maintaining gearing
at asset level at or around 35% over the longer term. The Manager
has been successful in negotiating the debt facilities at
competitive market rates, resulting in the Company's blended all-in
interest rate across all its debt being 1.4% which is to the
benefit of all shareholders. In July 2019 the Board took the
decision to undertake a further equity fund raising exercise
resulting in an additional GBP46.4m of new equity which the Manager
has invested. Increasing the size of the Company directly benefits
shareholders by spreading the fixed cost base of the Company over a
larger asset base and diversifying the portfolio by asset and
tenant base.
Details of how the Board and Manager and Investment Manager have
sought to address environmental, social and governance matters
across the portfolio are disclosed on pages 37 to 42 of the
published Annual Report for the year ended 31 December 2019.
The Company is still in its infancy having been launched at the
end of 2017. However, it is a long term investor and the Board has
established the necessary procedures and processes to promote the
long term success of the Company. The Board will continue to
monitor, evaluate and seek to improve these processes as the
Company grows, to ensure that the investment proposition is
delivered to shareholders and other stakeholders in line with their
expectations.
Future
Many of the non-performance related matters likely to affect the
Company in the future are common across all closed ended investment
companies, such as the current COVID-19 pandemic and its impact,
the attractiveness of investment companies as investment vehicles,
and the impact of regulatory changes. These factors need to be
viewed alongside the outlook for the Company, both generally and
specifically, in relation to the portfolio. The Board's view on the
general outlook for the Company can be found in my Chairman's
Statement whilst the Investment Manager's views on the outlook for
the portfolio are included on page 26 of the published Annual
Report for the year ended 31 December 2019.
Tony Roper
Chairman
27 May 2020
5. EXTRACTS FROM THE DIRECTORS' REPORT
The Directors present their Report and the audited financial
statements for the year ended 31 December 2019.
Results and Dividends
Details of the Company's results and dividends are shown on page
17 of the published Annual Report for the year ended 31 December
2019. The dividend policy is disclosed in the Strategic Report on
page 9 of the published Annual Report for the year ended 31
December 2019.
Investment Trust Status
The Company was incorporated on 25 October 2017 (registered in
England & Wales No. 11032222) and has been accepted by HM
Revenue & Customs as an investment trust subject to the Company
continuing to meet the relevant eligibility conditions of Section
1158 of the Corporation Tax Act 2010 and the ongoing requirements
of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all
financial periods commencing on or after 15 December 2017. The
Directors are of the opinion that the Company has conducted its
affairs for the year ended 31 December 2019 so as to enable it to
comply with the ongoing requirements for investment trust
status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the
requirements as a qualifying security for Individual Savings
Accounts. The Directors intend that the Company will continue to
conduct its affairs in this manner.
Share Capital
On 5 July 2019, the Company announced the intention to raise
further funds through a placing, open offer and offer for
subscription seeking to incrementally add to and further diversify
the portfolio. On 26 July 2019, the Board announced that the
Company had raised gross proceeds of approximately GBP46.4 million
(equivalent to approximately EUR51.8 million at the then prevailing
exchange rate). Applications had been received for 47,000,000 new
Ordinary shares of 1p (new Shares) which were subsequently issued
at the issue price of 98.75p per Share. Application was made for
the admission of the new Shares to the premium segment of the
Official List and to trading on the London Stock Exchange's main
market for listed securities on 31 July 2019. Following the issue
of these new Shares, the total number of Shares in issue and
therefore the voting rights in the Company is now 234,500,001
Shares.
The Company's capital structure is summarised in note 15 to the
financial statements. At 31 December 2019, there were 234,500,001
fully paid Ordinary shares of 1p each in issue. During the year no
Ordinary shares were purchased in the market for treasury or
cancellation and, except as noted above, no further new Ordinary
shares were issued.
Voting Rights and Share Restrictions
Ordinary shareholders are entitled to vote on all resolutions
which are proposed at general meetings of the Company. The Ordinary
shares carry a right to receive dividends. On a winding up, after
meeting the liabilities of the Company, the surplus assets will be
paid to Ordinary shareholders in proportion to their
shareholdings.
There are no restrictions concerning the transfer of securities
in the Company; no special rights with regard to control attached
to securities; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements
which the Company is party to that might affect its control
following a takeover bid.
Borrowings
A full breakdown of the Company's loan facilities is provided in
note 4 to the financial statements on page 99 of the published
Annual Report for the year ended 31 December 2019.
Management Agreement
Under the terms of a Management Agreement dated 17 November 2017
between the Company and the AIFM, Aberdeen Standard Fund Managers
Limited (and amended by way of side letters on 22 February 2019 and
25 May 2018), the AIFM was appointed to act as alternative
investment fund manager of the Company with responsibility for
portfolio management and risk management of the Company's
investments. Under the terms of the Management Agreement, the AIFM
may delegate portfolio management functions to the Investment
Manager and is entitled to an annual management fee together with
reimbursement of all reasonable costs and expenses incurred by it
and the Investment Manager in the performance of its duties.
Pursuant to the terms of the Management Agreement, the AIFM is
entitled to receive a tiered annual management fee (the "Annual
Management Fee") calculated by reference to the Net Asset Value (as
calculated under IFRS) on the following basis:
- On such part of the Net Asset Value that is less than or equal
to EUR1.25 billion, 0.75 per cent. per annum.
- On such part of the Net Asset Value that is more than EUR1.25
billion, 0.60 per cent. per annum.
No annual management fee was charged on uninvested funds until
such time as 75 per cent. of the initial Net Proceeds from launch
had been invested , which happened during 2018. The Annual
Management Fee is payable in Euros quarterly in arrears, save for
any period which is less than a full calendar quarter.
The Company may terminate the Management Agreement by giving the
AIFM not less than 12 months' prior written notice.
The AIFM has also been appointed by the Company under the terms
of the Management Agreement to provide
day-to-day administration services to the Company and provide
the general company secretarial functions required by the Companies
Act. In this role, the AIFM will provide certain administrative
services to the Company which includes reporting the Net Asset
Value, bookkeeping and accounts preparation. Effective from March
2020 accounting and administration services undertaken on behalf of
the Company have been delegated to Brown Brothers Harriman.
The AIFM has also delegated the provision of the general company
secretarial services to Aberdeen Asset Management PLC.
Risk Management
Details of the financial risk management policies and objectives
relative to the use of financial instruments by the Company are set
out in note 21 to the financial statements.
The Board
The current Directors, Ms Gulliver, Mr Heawood, Mr Roper and Ms
Wilde, together with Mr Pascal Duval who retired from the Board on
11 June 2019, were the only Directors who served during the year.
In accordance with the Articles of Association, each Director will
retire from the Board at the Annual General Meeting convened for 30
June 2020 and, being eligible, will offer himself or herself for
election to the Board. In accordance with Principle 23 of the AIC's
2019 Code of Corporate Governance, each Director will retire
annually and submit themselves for re-election at the AGM.
The Board considers that there is a balance of skills and
experience within the Board relevant to the leadership and
direction of the Company and that all the Directors contribute
effectively.
In common with most investment trusts, the Company has no
employees. Directors' & Officers' liability insurance cover has
been maintained throughout the period at the expense of the
Company.
The Role of the Chairman and Senior Independent Director
The Chairman is responsible for providing effective leadership
to the Board, by setting the tone of the Company, demonstrating
objective judgement and promoting a culture of openness and debate.
The Chairman facilitates the effective contribution, and encourages
active engagement, by each Director. In conjunction with the
Company Secretary, the Chairman ensures that Directors receive
accurate, timely and clear information to assist them with
effective decision-making. The Chairman leads the evaluation of the
Board and individual Directors, and acts upon the results of the
evaluation process by recognising strengths and addressing any
weaknesses. The Chairman also engages with major shareholders and
ensures that all Directors understand shareholder views.
The Senior Independent Director acts as a sounding board for the
Chairman and as an intermediary for other directors, when
necessary. The Senior Independent Director takes responsibility for
an orderly succession process for the Chairman, and leads the
annual appraisal of the Chairman's performance and is also
available to shareholders to discuss any concerns they may
have.
Corporate Governance
The Company is committed to high standards of corporate
governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company
has applied the principles identified in the UK Corporate
Governance Code as published in July 2018 (the "UK Code"), which is
available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk .
The Board has also considered the principles and provisions of
the AIC Code of Corporate Governance as published in February 2019
(the "AIC Code"). The AIC Code addresses the principles and
provisions set out in the UK Code, as well as setting out
additional provisions on issues that are of specific relevance to
the Company. The AIC Code is available on the AIC's website:
theaic.co.uk .
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the FRC
provides more relevant information to shareholders.
The Board confirms that, during the year, the Company complied
with the principles and provisions of the AIC Code and the relevant
provisions of the UK Code, except as set out below.
The UK Code includes provisions relating to:
- interaction with the workforce (provisions 2, 5 and 6);
- the need for an internal audit function (provision 26);
- the role and responsibility of the chief executive (provisions 9 and 14);
- previous experience of the chairman of a remuneration committee (provision 32); and
- executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to
the position of the Company, being an externally managed investment
company. In particular, all of the Company's day-to-day management
and administrative functions are outsourced to third parties. As a
result, the Company has no executive directors, employees or
internal operations. The Company has therefore not reported further
in respect of these provisions.
During the year ended 31 December 2019, the Board had four
scheduled meetings and a further 13 ad hoc Board meetings as well
as numerous update calls. In addition, the Audit Committee met
three times and there were two meetings of the Management
Engagement Committee and three meetings of the Nomination Committee
Between meetings the Board maintains regular contact with the
Manager and Investment Manager. In addition to an organised site
visit to inspect three properties in the Netherlands, Directors
have attended the following scheduled Board meetings and Committee
meetings during the year ended 31 December 2019 (with their
eligibility to attend the relevant meeting in brackets):
Audit Committee
Director Board MEC Nomination
T Roper1 4 (4) 1 (1) 2 (2) 3 (3)
C Gulliver 4 (4) 3 (3) 2 (2) 3 (3)
D Wilde 4 (4) 3 (3) 2 (2) 3 (3)
J Heawood 4 (4) 3 (3) 2 (2) 3 (3)
1 Mr Roper was appointed Chairman on 11 June 2019 and ceased
membership of the Audit Committee from that date.
Policy on Tenure
The Board's policy on tenure is that Directors need not serve on
the Board for a limited period of time only.
The Board does not consider that the length of service of a
Director is as important as the contribution he or she has to make,
and therefore the length of service will be determined on a
case-by-case basis. However, in accordance with corporate
governance best practice and the future need to refresh the Board
over time, it is currently expected that Directors will not
typically serve on the Board beyond the Annual General Meeting
following the ninth anniversary of their appointment.
Board Committees Audit Committee
The Audit Committee Report is on pages 57 and 58 of the
published Annual Report for the year ended 31 December 2019.
Nomination Committee
All appointments to the Board of Directors are considered by the
Nomination Committee which comprises all of the Directors and is
chaired by the Chairman of the Company. The Nomination Committee
advises the Board on succession planning, bearing in mind the
balance of skills, knowledge and experience existing on the Board,
and will make recommendations to the Board in this regard.
The Nomination Committee also advises the Board on its balance
of relevant skills, experience and length of service of the
Directors serving on the Board. The Board's overriding priority
when appointing new Directors in the future will be to identify the
candidate with the best range of skills and experience to
complement existing Directors. The Board recognises the benefits of
diversity and its policy on diversity is disclosed in the Strategic
Report on page 14 of the published Annual Report for the year ended
31 December 2019.
The Committee has put in place the necessary procedures to
conduct, on an annual basis, an appraisal of the Chairman of the
Board, Directors' individual self evaluation and a performance
evaluation of the Board as a whole and its Committees. In 2019
questionnaires covering the Board, individual Directors, the
Chairman and the Audit Committee Chairman were completed. The
Chairman then met each Director individually to review their
responses.
This evaluation highlighted certain areas of further focus such
as continuing professional development but concluded that
collectively the Board has a very relevant and appropriate balance
of experience, knowledge of property markets, legal regulation,
promotion and financial accounting and continues to work in an
effective manner. Consideration will be given to conducting an
externally facilitated evaluation in the future.
Management Engagement Committee
The Management Engagement Committee comprises all of the
Directors and is chaired by Mr Heawood.
The Committee reviews the performance of the Manager and
Investment Manager and its compliance with the terms of the
management and secretarial agreement.
The terms and conditions of the Manager's appointment, including
an evaluation of fees, are reviewed by the Committee on an annual
basis. Based upon the competitive management fee and expertise of
the Manager, the Committee believes that the continuing appointment
of the Manager on the terms agreed is in the interests of
shareholders as a whole.
Remuneration Committee
Under the FCA Listing Rules, where an investment trust has only
non-executive directors, the Code principles relating to directors'
remuneration do not apply.
Accordingly, matters relating to remuneration are dealt with by
the full Board, which acts as the Remuneration Committee.
The Company's remuneration policy is to set remuneration at a
level to attract individuals of a calibre appropriate to the
Company's future development. Further information on remuneration
is disclosed in the Directors' Remuneration Report on pages 53 to
55 of the published Annual Report for the year ended 31 December
2019.
Terms of Reference
The terms of reference of all the Board Committees may be found
on the Company's website eurologisticsincome.co.uk and copies are
available from the Company Secretary upon request. The terms of
reference are reviewed and re-assessed by the relevant Board
committee for their adequacy on an annual basis.
Going Concern
In accordance with the Financial Reporting Council's guidance
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern.
The Board has set limits for borrowing and regularly reviews the
level of any gearing, cash flow projections and compliance with
banking covenants.
The Directors are mindful of the principal risks and
uncertainties disclosed on pages 10 to 14 and the Viability
Statement on page 14 of the published Annual Report for the year
ended 31 December 2019 and have reviewed forecasts detailing
revenue and liabilities and they believe that the Company has
adequate financial resources to continue its operational existence
for the foreseeable future and at least 12 months from the date of
this Annual Report.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements. In coming to this conclusion, the Board has
also considered the impact where feasible of the COVID-19 pandemic.
The Manager is in contact with tenants and third party suppliers
and continues to have a constructive dialogue with all parties. A
range of scenarios have been modelled looking at possible impact to
cash flows in the short to medium term and this is kept under
review as the situation develops.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors prepare a list of other positions held and
all other conflict situations that may need to be authorised either
in relation to the Director concerned or his/her connected persons.
The Board considers each Director's situation and decides on any
course of action required to be taken if there is a conflict,
taking into consideration what is in the best interests of the
Company and whether the Director's ability to act in accordance
with his or her wider duties is affected. Each Director is required
to notify the Company Secretary of any potential, or actual,
conflict situations that will need authorising by the Board.
Authorisations given by the Board are reviewed at each Board
meeting.
No Director has a service contract with the Company although
Directors are issued with letters of appointment upon appointment.
The Directors' interests in contractual arrangements with the
Company are as shown in note 22 to the financial statements. No
other Directors had any interest in contracts with the Company
during the year or subsequently.
The Board has adopted appropriate procedures designed to prevent
bribery. The Company receives periodic reports from its service
providers on the anti-bribery policies of these third parties. It
also receives regular compliance reports from the Manager.
The Criminal Finances Act 2017 has introduced the corporate
criminal offence of "failing to take reasonable steps to prevent
the facilitation of tax evasion". The Board has confirmed that it
is the Company's policy to conduct all of its business in an honest
and ethical manner. The Board takes a zero-tolerance approach to
facilitation of tax evasion, whether under UK law or under the law
of any foreign country.
Accountability and Audit
The respective responsibilities of the Directors and the auditor
in connection with the financial statements are set out on pages 56
and 65 of the published Annual Report for the year ended 31
December 2019 respectively.
Each Director confirms that:
- so far as he or she is aware, there is no relevant audit
information of which the Company's auditor is unaware; and,
- each Director has taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Additionally there have been no important events since the
period end that impact this Annual Report.
The Directors have reviewed the level of non-audit services
provided by the independent auditor during the year amounting to
EUR41,300 (2018: EUR45,000) for reporting accountant services
provided to the Company in connection with the Prospectus issued in
July 2019, together with the independent auditor's procedures in
connection with the provision of such services, and remain
satisfied that the auditor's objectivity and independence is being
safeguarded.
Independent Auditor
The auditor, KPMG LLP, has indicated its willingness to remain
in office. The Directors will place a resolution before the Annual
General Meeting to re-appoint KPMG LLP as auditor for the ensuing
year, and to authorise the Directors to determine its
remuneration.
Internal Control
The Board is ultimately responsible for the Company's system of
internal control and for reviewing its effectiveness and confirms
that there is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Company. This process
has been in place for the year under review and up to the date of
approval of this Annual Report and financial statements. It is
regularly reviewed by the Board and accords with the FRC
Guidance.
The Board has reviewed the effectiveness of the system of
internal control. In particular, it has reviewed and updated the
process for identifying and evaluating the significant risks
affecting the Company and policies by which these risks are
managed.
The Directors have delegated the investment management of the
Company's assets to members of the Standard Life Aberdeen Group
within overall guidelines, and this embraces implementation of the
system of internal control, including financial, operational and
compliance controls and risk management. Internal control systems
are monitored and supported by the Standard Life Aberdeen Group's
internal audit function which undertakes periodic examination of
business processes, including compliance with the terms of the
management agreement, and ensures that recommendations to improve
controls are implemented.
Risks are identified and documented through a risk management
framework by each function within the Standard Life Aberdeen
Group's activities. Risk includes financial, regulatory, market,
operational and reputational risk. This helps the internal audit
risk assessment model identify those functions for review. Any
weaknesses identified are reported to the Board, and timetables are
agreed for implementing improvements to systems.
The implementation of any remedial action required is monitored
and feedback provided to the Board.
The significant risks faced by the Company have been identified
as being financial; operational; and compliance-related.
The key components of the process designed by the Directors to
provide effective internal control are outlined below:
- the AIFM prepares forecasts and management accounts which
allows the Board to assess the Company's activities and review its
performance;
- the Board and AIFM have agreed clearly defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are regularly submitted to the Board and
there are meetings with the AIFM and Investment Manager as
appropriate;
- as a matter of course the AIFM's compliance department
continually reviews Aberdeen Standard Investments' operations and
reports to the Board on a six monthly basis;
- written agreements are in place which specifically define the
roles and responsibilities of the AIFM and other third party
service providers and, where relevant, ISAE3402 Reports, a global
assurance standard for reporting on internal controls for service
organisations, or their equivalents are reviewed;
- the Board has considered the need for an internal audit
function but, because of the compliance and internal control
systems in place within Aberdeen Standard Investments, has decided
to place reliance on the Manager's systems and internal audit
procedures; and
- at its March 2020 meeting, the Audit Committee carried out an
annual assessment of internal controls for the year ended 31
December 2019 by considering documentation from the AIFM,
Investment Manager and the Depositary, including the internal audit
and compliance functions and taking account of events since 31
December 2019. The results of the assessment, that internal
controls are satisfactory, were then reported to the Board at the
subsequent Board meeting.
Internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against mis-statement and loss.
Substantial Interests
The Board has been advised that the following shareholders owned
3% or more of the issued Ordinary share capital of the Company at
31 December 2019:
Shareholder No. of Ordinary shares % held
held
East Riding of Yorkshire 28,000,000 11.9
Brewin Dolphin Capital & Investments
(Ireland) 20,830,473 8.9
CCLA Investment Management 20,003,567 8.5
Quilter Cheviot Investment Management 16,559,138 7.1
Canaccord Genuity Wealth Management 12,569,096 5.4
AJ Bell, stockbrokers 9,354,740 4.0
Hargreaves Lansdown, stockbrokers 9,271,490 3.9
Aberdeen Standard Capital International 8,586,001 3.7
Aberdeen Standard Investments 8,354,235 3.6
There have been no significant changes notified in respect of
the above holdings between 31 December 2019 and 27 May 2020.
Relations with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Annual Report will be widely distributed to
other parties who have an interest in the Company's performance.
Shareholders and investors may obtain up to date information on the
Company through the Manager's freephone information service and the
Company's website eurologisticsincome.co.uk.
The Board's policy is to communicate directly with shareholders
and their representative bodies without the involvement of the
Standard Life Aberdeen Group (either the Company Secretary or the
Investment Manager) in situations where direct communication is
required and usually a representative from the Board is available
to meet with major shareholders on an annual basis in order to
gauge their views.
The Notice of the Annual General Meeting, included within the
Annual Report and financial statements, is sent out at least 20
working days in advance of the meeting.
In normal circumstances, all Shareholders normally have the
opportunity to put questions to the Board or the Investment
Manager, either formally at the Company's Annual General Meeting or
at the subsequent buffet luncheon for Shareholders. This year, due
to the UK Government's compulsory Stay at Home measures to manage
the COVID-19 pandemic in the UK, Shareholders are unlikely to be
able to attend the AGM and no refreshments will be provided.
Shareholders are however invited to send any questions for the
Board and or the Investment Manager on the Annual Report by email
to European.Logistics@aberdeenstandard.com. The Company Secretary
is available to answer general shareholder queries at any time
throughout the year.
Annual General Meeting
Special Business Directors' Authority to Allot Relevant
Securities
Approval is sought in Resolution 10, an ordinary resolution, to
renew the Directors' existing general power to allot shares but
will also provide a further authority (subject to certain limits)
to grant rights to subscribe for or to convert any security into
shares under a fully pre-emptive rights issue. The effect of
Resolution 10 is to authorise the Directors to allot up to a
maximum of 154,770,000 shares in total (representing approximately
66% (as at the latest practicable date before publication of this
Annual Report) of the existing issued share capital of the
Company), of which a maximum of 77,385,000 shares (approximately
33% (as at the latest practicable date before publication of this
Annual Report) of the existing issued share capital of the Company)
may only be applied other than to fully pre-emptive rights issues.
This authority is renewable annually and will expire at the
conclusion of the next Annual General Meeting in 2021, or June
2021, whichever is earlier. The Directors do not have any immediate
intention to utilise this authority.
Special Business Disapplication of Pre-emption Rights Resolution
11 is a special resolution that seeks to renew the Directors'
existing authority until the conclusion of the next Annual General
Meeting to make limited allotments of shares for cash of up to a
maximum of 23,450,000 shares representing 10% of the issued share
capital (as at the latest practicable date before publication of
this Annual Report) other than according to the statutory
pre-emption rights which require all shares issued for cash to be
offered first to all existing shareholders.
This authority includes the ability to sell shares that have
been held in treasury (if any), having previously been bought back
by the Company. The Board has established guidelines for treasury
shares and will only consider buying in shares for treasury at a
discount to their prevailing NAV and selling them from treasury at
or above the then prevailing NAV.
New shares issued in accordance with the authority sought in
Resolution 11 will always be issued at a premium to the NAV per
Ordinary share at the time of issue.
The Board will issue new Ordinary shares or sell Ordinary shares
from treasury for cash when it is appropriate to do so, in
accordance with its current policy. It is therefore possible that
the issued share capital of the Company may change between the date
of this document and the Annual General Meeting and therefore the
authority sought will be in respect of 10% of the issued share
capital as at the date of the Annual General Meeting rather than
the date of this document. This authority is renewable annually and
will expire at the conclusion of the next Annual General Meeting in
2021 or June 2021, whichever is earlier.
Special Business Purchase of the Company's Shares Resolution 12
is a special resolution proposing to renew the Directors' authority
to make market purchases of the Company's shares in accordance with
the provisions contained in the Companies Act 2006 and the Listing
Rules of the Financial Conduct Authority. The minimum price to be
paid per Ordinary share by the Company will not be less than
GBP0.01 per share (being the nominal value) and the maximum price
should not be more than the higher of an amount equal to 5% above
the average of the middle market quotations for an Ordinary share
taken from the London Stock Exchange Daily Official List for the
five business days immediately preceding the date on which the
Ordinary share is contracted to be purchased; and (ii) the higher
of the price of the last independent trade and the current highest
independent bid on the trading venue where the purchase is carried
out.
The Directors do not intend to use this authority to purchase
the Company's Ordinary shares unless to do so would result in an
increase in NAV per share and would be in the interests of
Shareholders generally. The authority sought will be in respect of
14.99% of the issued share capital as at the date of the Annual
General Meeting rather than the date of this document.
The authority being sought in Resolution 12 will expire at the
conclusion of the Annual General Meeting in 2021, or June 2021,
whichever is earlier unless it is renewed before that date. Any
Ordinary shares purchased in this way will either be cancelled and
the number of Ordinary shares will be reduced accordingly or under
the authority granted in Resolution 11 above, may be held in
treasury.
If Resolutions 10 to 12 are passed then an announcement will be
made on the date of the Annual General Meeting which will detail
the exact number of Ordinary shares to which each of these
authorities relate.
These powers will give the Directors additional flexibility
going forward and the Board considers that it will be in the
interests of the Company that such powers be available. Such powers
will only be implemented when, in the view of the Directors, to do
so will be to the benefit of Shareholders as a whole.
Special Business Notice of Meetings
Resolution 13 is a special resolution seeking to authorise the
Directors to call general meetings of the Company (other than
Annual General Meetings) on 14 days' clear notice. This approval
will be effective until the Company's next Annual General Meeting
in 2021 or June 2021 whichever is earlier. In order to utilise this
shorter notice period, the Company is required to ensure that
Shareholders are able to vote electronically at the general meeting
called on such short notice. The Directors confirm that, in the
event that a general meeting is called, they will give as much
notice as practicable and will only utilise the authority granted
by Resolution 13 in limited and time sensitive circumstances.
Dividend Policy
As a result of the timing of the payment of the Company's
quarterly dividends, the Company's Shareholders are unable to
approve a final dividend each year. In line with good corporate
governance and as reported last year, the Board therefore proposes
to put the Company's dividend policy to Shareholders for approval
at the Annual General Meeting and on an annual basis
thereafter.
Resolution 3 is an ordinary resolution to approve the Company's
dividend policy. The Company's dividend policy shall be that
dividends on the Ordinary Shares are payable quarterly in relation
to periods ending March, June, September and December and the last
dividend referable to a financial year end will not be categorised
as a final dividend that is subject to Shareholder approval. It is
intended that the Company will pay quarterly dividends consistent
with the expected annual underlying portfolio yield. The Company
has the flexibility in accordance with its Articles to make
distributions from capital.
Shareholders should note that references to "dividends" are
intended to cover both dividend income, and income which is
designated as an interest distribution for UK tax purposes and
therefore subject to the interest streaming regime applicable to
investment trusts.
Recommendation
Your Board considers Resolutions 10 to 13 to be in the best
interests of the Company and its members as a whole and most likely
to promote the success of the Company for the benefit of its
members as a whole. Accordingly, your Board unanimously recommends
that Shareholders should vote in favour of Resolutions 10 to 13 to
be proposed at the AGM, as they intend to do in respect of their
own beneficial shareholdings amounting to 155,000 Ordinary
shares.
By order of the Board
Aberdeen Asset Management PLC - Secretaries
Bow Bells House 1 Bread Street
London EC4M 9HH 27 May 2020
6. FINANCIAL HIGHLIGHTS
31 December 31 December
2019 2018
Total assets (EUR'000) 382,981 210,730
Total equity shareholders' funds (net
assets) (EUR'000) 260,277 202,073
Net asset value per share (euros) 1.11 1.08
Net asset value per share (pence) 94.21 96.70
Share price (mid market) (pence) 90.40 102.25
Market capitalisation (GBP'000) 211,988 191,719
Share price (discount)/ premium to sterling
net asset value1 (4.0)% 5.7%
Dividends and earnings
Net asset value total return per share
(EUR)1 8.6% 3.0%
Dividends paid per share 5.75c (5.11p) 1.70p
Revenue reserves (EUR'000) 7,471 40
Gain/(Loss) (EUR'000) 19,429 (3,740)
Operating costs
Ongoing charges ratio (Group only expenses)1 1.5% 0.8%
Ongoing charges ratio (Group and property
expenses)1 1.7% 0.9%
Performance (total return)
Year ended Since Launch
31 December 2019 % return
Share price1 (6.99)% (3.36)%
Net Asset Value (EUR)1 8.63% 5.26%
1 Considered to be an Alternative Performance Measure (see
Glossary on page 111 of the published Annual Report for the year
ended 31 December 2019 for more information).
Dividends declared in respect of the Financial Year to 31
December 2019 (pence)
Dividend Distribution Qualifying xd Record date Payment date
Interest date
First Interim 0.94 0.33 20-Jun-19 21-Jun-19 10-Jul-19
Second Interim 1.19 0.08 19-Sep-19 20-Sep-19 07-Oct-19
Third Interim 1.04 0.23 28-Nov-19 29-Nov-19 20-Dec-19
Fourth Interim 0.90 0.37 04-Mar-20 05-Mar-20 26-Mar-20
Total 4.07 1.01
7. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and have elected to prepare the parent Company
financial statements in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable, relevant, reliable and prudent;
- for the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
- for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent
company financial statements;
- assess the Group and parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
- use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
parent Company's transactions and disclose with reasonable accuracy
at any time the financial position of the parent Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole;
- the Strategic Report and Directors' Report includes a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual Report and financial statements, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders
to assess the group's position and performance, business model
and strategy.
By order of the Board
Tony Roper
27 May 2020
8. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
For the period
Year ended 25 October 2017
31 December 2019 to 31 December 2018
========================================== ================================== ==================================
Revenue Capital Total Revenue Capital Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
========================================== ======== ========= ============= ======== ========= =============
REVENUE
Rental Income 13,376 - 13,376 2,323 - 2,323
Property service charge
income 2,233 - 2,233 - - -
Other operating income 23 - 23 211 - 211
===================================== === ======== ========= ============= ======== ========= =============
Total Revenue 2 15,632 - 15,632 2,534 - 2,534
===================================== === ======== ========= ============= ======== ========= =============
GAINS/(LOSSES) ON INVESTMENTS
Gains/(losses) on Revaluation
of investment properties 9 - 16,852 16,852 - (4,080) (4,080)
===================================== === ======== ========= ============= ======== ========= =============
Total Income and gains/(losses)
on investments 15,632 16,852 32,484 2,534 (4,080) (1,546)
===================================== === ======== ========= ============= ======== ========= =============
EXPITURE
Investment management fee (1,695) - (1,695) (587) - (587)
Direct property expenses (265) - (265) (225) - (225)
Property service charge
expenditure (2,233) - (2,233) - - -
SPV property management
fees (154) - (154) (26) - (26)
Other expenses 3 (1,728) - (1,728) (1,005) - (1,005)
===================================== === ======== ========= ============= ======== ========= =============
Total expenditure (6,075) - (6,075) (1,843) - (1,843)
===================================== === ======== ========= ============= ======== ========= =============
9,557 16,852 26,409 691 (4,080) (3,389)
==================================================== ========= ============= ======== ========= =============
FINANCE COSTS
=============================================================== ============= =================== =============
Finance costs 4 (1,411) - (1,411) (658) - (658)
===================================== === ======== ========= ============= ======== ========= =============
Net return before taxation 8,146 16,852 24,998 33 (4,080) (4,047)
===================================== === ======== ========= ============= ======== ========= =============
Taxation 5 (415) (4,662) (5,077) - - -
===================================== === ======== ========= ============= ======== ========= =============
Net return for the year/period 7,731 12,190 19,921 33 (4,080) (4,047)
===================================== === ======== ========= ============= ======== ========= =============
OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED
TO PROFIT OR LOSS
Currency translation differences
on capital proceeds - 136 136 - 407 407
Currency translation on
conversion of distribution
payments - (328) (328) 7 (107) (100)
Effect of foreign exchange
differences (300) - (300) - - -
===================================== === ======== ========= ============= ======== ========= =============
Other comprehensive (loss)/profit (300) (192) (492) 7 300 307
===================================== === ======== ========= ============= ======== ========= =============
Total comprehensive return
for the period 7,431 11,998 19,429 40 (3,780) (3,740)
===================================== === ======== ========= ============= ======== ========= =============
Basic and diluted earnings/(loss)
per share 7 3.72c 5.86c 9.58c 0.02c (2.47c) (2.45c)
===================================== === ======== ========= ============= ======== ========= =============
9. CONSOLIDATED BALANCE SHEET
As at 31 December 2019
As at 31 December As at 31 December
2019 2018
Notes Total Total
EUR'000 EUR'000
======================================= ================= =================
NON-CURRENT ASSETS
Investment properties 9 348,519 148,918
================================== === ================= =================
348,519 148,918
======================================= ================= =================
CURRENT ASSETS
Trade and other receivables 10 9,883 11,679
Cash and cash equivalents 11 24,579 50,133
================================== === ================= =================
Total current assets 34,462 61,812
======================================= ================= =================
Total assets 382,981 210,730
======================================= ================= =================
CURRENT LIABILITIES
Trade and other payables 12 9,352 8,657
Derivative financial instruments 14 8 -
================================== === ================= =================
Total current liabilities 9,360 8,657
======================================= ================= =================
NON-CURRENT LIABILITIES
Bank Loans 13 107,916 -
Deferred tax liability 5 5,428 -
================================== === ================= =================
Total non-current liabilities 113,344 -
======================================= ================= =================
Total liabilities 122,704 8,657
======================================= ================= =================
Net assets 260,277 202,073
======================================= ================= =================
SHARE CAPITAL AND RESERVES
Share capital 15 2,645 2,122
Share premium 16 50,364 -
Special distributable reserve 17 191,579 203,691
Capital reserve 18 8,218 (3,780)
Revenue reserve 7,471 40
================================== === ================= =================
Equity shareholders' funds 260,277 202,073
======================================= ================= =================
Net asset value per share 8 EUR 1.11 EUR1.08
================================== === ================= =================
10. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
================================ ========== ============ ========================= ========= ========= =========
Balance at 31 December
2018 2,122 - 203,691 (3,780) 40 202,073
Share Issue 15/16 523 51,147 - - - 51,670
Share Issue costs 16 - (783) - - - (783)
Total Comprehensive
return
for the year - - - 11,998 7,431 19,429
Dividends paid 6 - - (12,112) - - (12,112)
========================= ===== ========== ============ ========================= ========= ========= =========
Balance at 31 December 2019 2,645 50,364 191,579 8,218 7,471 260,277
================================ ========== ============ ========================= ========= ========= =========
For the period 25 October 2017 to 31 December 2018
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
================================ ========== ============ ========================= ========= ========= =========
Balance at 25 October - - - - - -
2017
Original Share Issue 15/16 2,122 210,102 - - - 212,224
Share Issue costs 16 - (2,875) - - - (2,875)
Share premium conversion - (207,227) 207,227 - - -
Total Comprehensive
return
for the period - - - (3,780) 40 (3,740)
Dividends paid 6 - - (3,536) - - (3,536)
========================= ===== ========== ============ ========================= ========= ========= =========
Balance at 31 December 2018 2,122 - 203,691 (3,780) 40 202,073
================================ ========== ============ ========================= ========= ========= =========
11. CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
Year ended 31 For the period
December 2019 25 October 2017
Notes to 31 December
EUR'000 2018
EUR'000
======================================================== ============== ================
CASH FLOWS FROM OPERATING ACTIVITIES
Net gain/(loss) for the period before
taxation 19,921 (4,047)
Adjustments for:
(Gains)/Losses on investment properties 9 (16,852) 4,080
Decrease/(increase) in operating trade
and other receivables 10 1,796 (11,679)
Increase in operating trade and other
payables 12 6,123 8,657
Finance costs 4 1,411 658
Tax paid 5 - -
================================================= ===== ============== ================
Cash generated by operations 12,399 (2,331)
======================================================== ============== ================
Net cash inflow/(outflow) from operating activities 12,399 (2,331)
======================================================== ============== ================
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment properties 9 (182,749) (152,998)
Derivative financial instruments 8 -
Currency translation differences (492) 307
================================================= ===== ============== ================
Net cash outflow from investing activities (183,233) (152,691)
======================================================== ============== ================
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 6 (12,112) (3,536)
Finance costs 4 (1,411) (658)
Bank loans drawn 13 107,916 -
Proceeds from share issue 15/16 51,670 212,224
Issue costs relating to share issue 16 (783) (2,875)
================================================= ===== ============== ================
Net cash inflow from financing activities 145,280 205,155
======================================================== ============== ================
Net (decrease)/increase in cash and cash equivalents (25,554) 50,133
======================================================== ============== ================
Opening balance 50,133 -
======================================================== ============== ================
Closing cash and cash equivalents 24,579 50,133
======================================================== ============== ================
REPRESENTED BY
Cash at bank 11 24,579 6,279
Money market funds 11 - 43,854
================================================= ===== ============== ================
24,579 50,133
======================================================== ============== ================
12. NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
The principal accounting policies adopted by the Group are set
out below, all of which have been applied consistently throughout
the period.
(a) Basis of Accounting
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS'), which comprise standards and interpretations approved by
the International Accounting Standards Board ('IASB'), and
International Accounting Standards and Standing Interpretations
Committee interpretations approved by the International Accounting
Standards Committee ('IASC') that remain in effect, and to the
extent that they have been adopted by the European Union, and the
Listing Rules of the UK Listing Authority.
The audited Consolidated Financial Statements of the Group have
been prepared under the historical cost convention as modified by
the measurement of investment property and derivative financial
instruments at fair value. The consolidated financial statements
are presented in Euro.
In compliance with the AIC's Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture
Capital Trusts (Issued November 2014 and updated in October 2019
with consequential amendments), the consolidated statement of
comprehensive income is separated between capital and revenue
profits and losses.
New and revised standards and interpretations issued in the
current period
The accounting policies adopted have been consistently applied
throughout the period presented, unless otherwise stated. This
includes the below noted Standards and Interpretations that became
effective during the period, which the group has incorporated in
the preparation of the financial statements:
- IFRS 16 Leases ("IFRS 16") replaces IAS 17 Leases ("IAS 17")
and is effective for annual periods beginning on or after 1 January
2019. The key changes are the lessee and lessor accounting models
are no longer symmetrical.
- For lessees, the accounting for leases will change to a new
single lessee accounting model, requiring recognition of a
right-of-use asset (right to use underlying leased asset) and a
lease liability (obligation to make lease payments) for a lease
with a term greater than 12 months, exclusion to recognition is if
the underlying asset is of a low value when new.
- For lessors, this remains relatively unchanged - IFRS 16
retains IAS 17's distinction of finance and operating lease
however, IFRS 16 has introduced changes for the lessor where the
lessor acts as an intermediate lessor in the lease contract.
- The Group has made an assessment of the leases, where the
Group acts as intermediate lessor in the lease agreement, and has
identified that the Group has no investment properties held on
leased land. Subsequent to the year end the Group acquired a
property on leased land which will be included in the 2020
financial statements in compliance with the requirement of IFRS
16.
- The Group has made no adjustments to its financial statements
following adoption of IFRS 16.
- IFRIC 23 Uncertainty over Income Tax Treatments ("IFRIC 23")
is effective for annual periods beginning on or after 1 January
2019. IFRIC 23 clarifies the recognition and measurement
requirements in IAS 12 Income Taxes when there is uncertainty over
income tax treatments. The Group has made no adjustments to its
financial statement following adoption of IFRIC 23 and hence not
discussed further.
- There are a number of amended standards issued which are
effective from annual periods beginning on or after 1 January 2020.
The Group does not anticipate these to have a material impact on
the annual consolidated financial statements of the Group and hence
not discussed and are detailed below:
- Amendments to IAS 1 Presentation of Financial Statements ("IAS
1") and IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors ("IAS 8") definition of material.
- An amendment of IFRS 3 Business Combinations ("IFRS 3") definition of business.
(b) Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires the
directors to make judgements, estimates and assumptions that affect
the amounts recognised in the financial statements and contingent
liabilities. However, uncertainty about these judgements,
assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amount of the asset
or liability affected in future periods.
Key estimation uncertainties
Fair value of investment properties: Investment property is
stated at fair value as at the balance sheet date as set out in
note 9 to these accounts.
The determination of the fair value of investment properties
requires the use of estimates such as future cash flows from the
assets. The estimate of future cash flows includes consideration of
the repair and condition of the property, lease terms, future lease
events, as well as other relevant factors for the particular
asset.
These estimates are based on local market conditions existing at
the balance sheet date.
(c) Basis of Consolidation and Going Concern
The consolidated financial statements comprise the accounts of
the Company and its subsidiaries drawn up to 31 December 2019.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date
on which control is transferred out of the Group. The Group applies
the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is
the fair value of the assets transferred, the liabilities incurred
to the former owners of the acquire and the equity interests issued
by the Group. The consideration transferred includes the fair value
of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree
on an acquisition by acquisition basis, either at fair value or at
the non-controlling interest's proportionate share of the
recognised amounts of acquiree's identifiable net assets. The
excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the
fair value of the identifiable net assets acquired is recorded as
goodwill.
If the total of consideration transferred, non-controlling
interest recognised and previously held interest measured is less
than the fair value of the net assets of the subsidiary acquired in
the case of a bargain purchase, the difference is recognised
directly in the consolidated statement of comprehensive income.
Going Concern
The Group and Company meets its longer term funding and working
capital requirements through a combination of cash balances, rental
income and a number of bank loans with different banks (see note
13). Following the purchase of Den Hoorn (January 2020 EUR49.9m)
and a further loan advance of EUR35.7m, also January 2020, the
Group had cash resources of approximately EUR8m. In addition, the
Company is due a repayment of VAT paid on the property at Leon
amounting to EUR3.2 million. Repayment is expected shortly.
As detailed in note 13 there are five bank facilities none of
which are due to expire before June 2025. The new loan utilised in
January 2020 has a redemption date of 14 January 2028. The Group
also has an undrawn GBP6m overdraft with Societe Generale.
The existence of the COVID-19 crisis is expected to impact the
Group through a reduction in rental income and potential reduction
in investment property valuation. The Company has prepared cash
flow forecasts which reflect the expected impact of COVID-19,
including severe but plausible downside scenarios taking into
account specific tenant risks. The impact of reductions in rental
income in the scenarios could be mitigated through a reduction in
dividends to shareholders if considered necessary by the Board.
The scenarios model reduced rental income through to 2022 and
the worst case model equates to an overall 33% reduction of rental
income per annum over that period. There are no anticipated
breaches of loan to value covenants as a result of reasonably
possible reductions in property values or rental income. Regarding
interest cover covenants of those three bank loans subject to
financial covenants, two are secured over multiple properties. This
affords the Group headroom on the interest cover covenants under
all scenarios. The third bank loan is secured over only one
property, with a single tenant, and as such is more exposed to the
risk of rental reductions. The Group is able to mitigate this risk
through a combination of maintaining sufficient cash resources
under the modelled scenarios to, as permitted under the provisions
of the loan facility agreement, potentially cure a breach should it
occur, or provide additional security, or let the property should
it become vacant. While the Company cannot predict with any
certainty the full impact of the COVID-19 crisis the financial
forecast prepared, including the downside scenarios, indicate that
it can continue to operate as a going concern and meet its
liabilities as they fall due.
Accordingly, the Directors have a reasonable expectation that
the Company will be able to continue as a going concern and meet
its liabilities as they fall due for a period of at least 12 months
from the date of this report.
(d) Functional and Presentation currency
Items included in the consolidated financial statements of the
Group are measured using the currency of the primary economic
environment in which the Company and its subsidiaries operate ("the
functional currency") which is Euro. The consolidated financial
statements are also presented in Euro. All figures in the
consolidated financial statements are rounded to the nearest
thousand unless otherwise stated.
(e) Foreign Currency
Transactions denominated in foreign currencies are converted at
the exchange rate ruling at the date of the transaction. Monetary
and non-monetary assets and liabilities denominated in foreign
currencies held at the financial period end are translated using
London closing foreign exchange rates at the financial period end.
Any gain or loss arising from a change in exchange rates subsequent
to the date of the transaction is included as an exchange gain or
loss to capital or revenue in the Consolidated Statement of
Comprehensive Income as appropriate. Foreign exchange movements on
investments are included in the Consolidated Statement of
Comprehensive Income within gains on investments.
(f) Revenue Recognition
Rental income, excluding VAT, arising from operating leases
(including those containing stepped and fixed rent increases) is
accounted for in the Consolidated Statement of Comprehensive Income
on a straight line basis over the lease term. Lease premiums paid
and rent free periods granted, are recognised as assets and are
amortised over the non-cancellable lease term.
Interest income is accounted for on an accruals basis and
included in operating income.
(g) Expenses
All expenses are accounted for on an accruals basis. The Group's
investment management fees, finance costs and all other expenses
are charged through the Consolidated Statement of Comprehensive
Income. Service charge costs, to the extent they are not
recoverable from tenants, are accounted for on an accruals basis
and are included in total expenditure. All expenses are recorded
through the revenue column of the Consolidated Statement of
Comprehensive Income, except for gains or losses on investment
properties.
(h) Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from 'profit before tax' as reported
in the Consolidated Statement of Comprehensive Income because of
items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The Group's
current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Where corporation tax arises in subsidiaries, these amounts are
charged to the Consolidated Statement of Comprehensive Income. The
current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the date of the balance
sheet in the countries where the Group operates.
The Manager periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax
regulation is subject to interpretation, and establishes provisions
where appropriate on the basis of amounts expected to be paid to
the tax authorities.
Deferred tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the Consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences to the extent
that it is probable that taxable profits will be available against
which those deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other
than in a business combination) of assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries except
where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such
investments are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future. The carrying amount
of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part
of the asset to be recovered. Deferred tax liabilities and assets
are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The
measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
The carrying values of the Group's investment properties are
assumed to be realised by sale at the end of use. The capital gains
tax rate applied is that which would apply on a direct sale of the
property recorded in the Consolidated Balance Sheet regardless of
whether the Group would structure the sale via the disposal of the
subsidiary holding the asset, to which a different tax rate may
apply. The deferred tax is then calculated based on the respective
temporary differences and tax consequences arising from recovery
through sale.
(i) Investment Properties
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Any subsequent capital
expenditure incurred in improving investment properties is
capitalised in the period during which the expenditure is incurred
and included within the book cost of the property.
After initial recognition, investment properties are measured at
fair value, with the movement in fair value recognised in the
Consolidated Statement of Comprehensive Income and transferred to
the Capital Reserve. Fair value is based on the external valuation
provided by CBRE GmbH, chartered surveyors, at the balance sheet
date. The assessed fair value is reduced by the carrying amount of
any accrued income resulting from the spreading of lease incentives
and/or minimum lease payments.
On derecognition, gains and losses on disposals of investment
properties are recognised in the Consolidated Statement of
Comprehensive Income.
Recognition and derecognition occurs when the risks and rewards
of ownership of the properties have transferred between a willing
buyer and a willing seller.
Investment property is transferred to current assets held for
sale when it is expected that the carrying amount will be recovered
principally through sale rather than from continuing use. For this
to be the case, the property must be available for immediate sale
in its present condition, subject only to terms that are usual and
customary for sales of such property and its sale must be highly
probable.
The Group may enter into forward funding agreements with third
party developers in respect of certain properties. Under these
agreements the Group will make payments to the developer as
construction progresses. The value of these payments is assessed
and certified by an expert and capitalised in the period during
which the expenditure is incurred and included within the book cost
of the property.
Investment properties are recognised for accounting purposes
upon completion of contract. Properties purchased under forward
funding contracts are recognised at certified value to date.
(j) Distributions
Interim distributions payable to the holders of equity shares
are only recognised in the Consolidated Statement of Changes in
Equity in the period in which they are paid. An annual shareholder
resolution is voted upon to approve the Group's distribution
policy.
(k) Operating Lease Contracts - the Group as Lessor
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
an evaluation of the terms and conditions of the arrangements, that
it retains all the significant risks and rewards of ownership of
these properties and so accounts for leases as operating leases.
Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased
asset and recognised as an expense on a straight-line basis over
the lease term.
(l) Share Issue Expenses
Incremental external costs directly attributable to the issue of
shares that would otherwise have been avoided are written off to
the share premium reserve.
(m) Segmental Reporting
The Group is engaged in property investment in Europe. Operating
results are analysed on a geographic basis by country. In
accordance with IFRS 8 'Operating Segments', financial information
on business segments is presented in note 19 of the Consolidated
financial statements.
(n) Cash and Cash Equivalents
Cash and cash equivalents are defined as cash in hand, demand
deposits, and other short-term highly liquid investments readily
convertible within three months or less to known amounts of cash
and subject to insignificant risk of changes in value.
(o) Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
instruments.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in the Consolidated Statement of
Comprehensive Income.
Financial assets
Financial assets are measured at amortised cost, financial
assets 'at fair value through profit or loss' (FVTPL), or financial
assets 'at fair value through other comprehensive income' (FVOCI).
The classification is based on the business model in which the
financial asset is managed and its contractual cash flow
characteristics. All purchases and sales of financial assets are
recognised on the trade date basis.
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market.
Loans and receivables (including trade and other receivables,
bank balances and cash, and others) are measured at amortised cost
using the effective interest method, less any impairment. The Group
holds the trade receivables with the objective to collect the
contractual cash flows. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when
the effect of discounting is immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
For all other financial assets, objective evidence of impairment
could include:
- significant financial difficulty of the issuer or counterparty; or
- breach of contract, such as a default or delinquency in
interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy
or financial re-organisation; or
- the disappearance of an active market for that financial asset
because of financial difficulties. The Group's financial assets are
subject to the expected credit loss model. For trade receivables,
the Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from
initial recognition of the receivables. The expected loss rates are
based on the payment profiles of tenants over a period of 12 months
before 31 December 2019, and the corresponding historical credit
losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the liability of the tenants to
settle the receivable. Such forward-looking information would
include:
- changes in economic, regulatory, technological and
environmental factors, (such as industry outlook, GDP, employment
and politics);
- external market indicators; and
- tenant base.
Derecognition of financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. If the Group
neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received. On derecognition of a financial asset in
its entirety, the difference between the asset's carrying amount
and the sum of the consideration received and receivable is
recognised in the Consolidated Statement of Comprehensive
Income.
(p) Financial liabilities
Financial liabilities are classified as 'other financial
liabilities'.
Other financial liabilities
Other financial liabilities (including borrowings and trade and
other payables) are subsequently measured at amortised cost using
the effective interest method. The effective interest method is a
method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid
or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through
the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount on
initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is
recognised in the Consolidated Statement of Comprehensive
Income.
(q) Reserves
Share Capital
This represents the proceeds from issuing Ordinary shares and is
non-distributable.
Share Premium
Share premium represents the excess consideration received over
the par value of Ordinary shares issued and is classified as
equity. Incremental costs directly attributable to the issue of
Ordinary shares are recognised as a deduction from share
premium.
Special Distributable Reserve
The special reserve is a distributable reserve to be used for
all purposes permitted, including the buyback of shares and the
payment of dividends.
Capital Reserve
The capital reserve is a distributable reserve subject to
applicable legislation and practice, and the following are
accounted for in this reserve:
- gains and losses on the disposal of investment properties;
- increases and decreases in the fair value of investment
properties held at the period end, which are not distributable.
Revenue Reserve
The revenue reserve is a distributable reserve and reflects any
surplus arising from the net return on ordinary activities after
taxation.
(r) Derivative financial instruments
The Company used forward foreign exchange contracts to mitigate
potential volatility of income returns and to provide greater
certainty as to the level of Sterling distributions expected to be
paid in respect of the period covered by the relevant currency
hedging instrument, it does not seek to provide a long-term hedge
for the Company's income returns, which will continue to be
affected by movements in the Euro/Sterling exchange rate over the
longer term.
Derivatives are measured at fair value calculated by reference
to forward exchange rates for contracts with similar maturity
profiles. Changes in the fair value of derivatives are recognised
in the Statement of Comprehensive Income as revenue or capital
depending on their nature.
2. Revenue
Year ended 31 December Period ended 31 December
2019 2018
EUR'000 EUR'000
------------------------------- ---------------------- ------------------------
Rental income 13,376 2,323
Other income 23 211
Property service charge income 2,233 -
=============================== ====================== ========================
Total revenue 15,632 2,534
=============================== ====================== ========================
Included within rental income is amortisation of rent free
periods granted.
3. Expenditure
Year ended 31 December Period ended 31 December
2019 2018
EUR'000 EUR'000
=================================== ====================== ========================
Professional fees 1,017 353
Directors' fees 170 213
Audit fee for statutory services1 138 137
Other expenses 216 112
Broker fees 58 68
Depositary fees 24 26
Stock exchange fees 42 20
Directors liability insurance
expense 10 20
Registrar fees 40 18
Custody expense - 17
Employers NI 13 13
Savings scheme expense - 8
=================================== ====================== ========================
Total expenses 1,728 1,005
=================================== ====================== ========================
1 The auditor was paid EUR41,300 (exclusive of VAT) in respect
of non-audit services relating to their role as reporting
accountant for the additional issue of ordinary shares in the year.
This cost is included within share issue costs in note 16. The
Audit fee above reflects the 2019 audit fee of EUR115,000 and
irrecoverable VAT of EUR23,000.
4. Finance Costs
Year ended 31 December Period ended 31 December
2019 2018
EUR'000 EUR'000
============================== ====================== ========================
Liquidity fund interest paid 37 658
Interest on bank loans 1,158 -
Bank interest 98 -
Amortisation of loan costs 118 -
============================== ====================== ========================
Total finance costs 1,411 658
============================== ====================== ========================
The Company held cash in the Aberdeen Global Liquidity Fund plc
which charges interest. Throughout the period the interest rate on
this euro denominated fund was negative.
5. Taxation
The Company is resident in the United Kingdom for tax purposes.
The Company is approved by HMRC as an investment trust under
sections 1158 and 1159 of the Corporation Tax Act 2010. In respect
of each accounting period for which the Company continues to be
approved by HMRC as an investment trust the Company will be exempt
from UK taxation on its capital gains. The Company is, however,
liable to UK Corporation tax on its income. The Company is able to
elect to take advantage of modified UK tax treatment in respect of
its "qualifying interest income" for an accounting period referred
to as the "streaming" regime. Under regulations made pursuant to
the Finance Act 2009, the Company may, if it so chooses, designate
as an "interest distribution" all or part of the amount it
distributes to Shareholders as dividends, to the extent that it has
"qualifying interest income" for the accounting period. Were the
Company to designate any dividend it pays in this manner, it would
be able to deduct such interest distributions from its income in
calculating its taxable profit for the relevant accounting period.
The Company should in practice be exempt from UK corporation tax on
dividend income received, provided that such dividends (whether
from UK or non-UK companies) fall within one of the "exempt
classes" in Part 9A of the CTA 2010.
A reconciliation between the tax charge and the product of
accounting profit/(loss) multiplied by the applicable tax rate for
the year ended 31 December 2019.
(a) Tax charge in the Group Statement of Comprehensive Income
Year ended Period ended
31 December 2019 31 December 2018
============================ ================================ ============================
Revenue Capital Total Revenue Capital Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
============================ ======== ======== ============ ======== ======== ========
Current taxation: Overseas
taxation 415 - 415 - - -
Deferred taxation:
Overseas taxation - 4,662 4,662 - - -
============================ ======== ======== ============ ======== ======== ========
415 4,662 5,077 - - -
============================ ======== ======== ============ ======== ======== ========
Year ended Period ended
31 December 2019 31 December 2018
============================ ============================ ============================
Revenue Capital Total Revenue Capital Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
============================ ======== ======== ======== ======== ======== ========
Net result before taxation 8,146 16,852 24,998 33 (4,080) (4,047)
Theoretical tax at
UK 1,548 3,202 4,750 6 (775) (769)
corporation tax rate
of 19%
Effect of:
Tax Losses arising (782) - (782) - 775 775
Income not taxable (351) (3,202) (3,553) (6) - (6)
============================ ======== ======== ======== ======== ======== ========
Taxation on return 415 - 415 - - -
============================ ======== ======== ======== ======== ======== ========
(b) Tax in the Group Balance Sheet
Year ended Period ended
31 December 2019 31 December 2018
====================== ================================ ================================
Revenue Capital Total Revenue Capital Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
====================== ======== ======== ============ ======== ======== ============
Deferred tax assets:
On tax losses - 766 766 - - -
====================== ======== ======== ============ ======== ======== ============
- 766 766 - - -
====================== ======== ======== ============ ======== ======== ============
Year ended Period ended
31 December 2019 31 December 2018
=============================== ================================ ================================
Revenue Capital Total Revenue Capital Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
=============================== ======== ======== ============ ======== ======== ============
Deferred tax liabilities
Differences between
tax and property revaluation - 5,428 5,428 - - -
=============================== ======== ======== ============ ======== ======== ============
Taxation on return - 5,428 5,428 - - -
=============================== ======== ======== ============ ======== ======== ============
6. Dividends
Year ended Period ended 31
31 December 2019 December 2018
EUR'000 EUR'000
==================================== ======================= =========================
2018 Third interim dividend of
1.3p per share paid 22 March 2019 2,856 -
2019 First interim dividend of
1.41c (1.27p) paid 10 July 2019 2,644 1,461
(2018 First interim: 0.7p)
2019 Second interim dividend of
1.41c (1.27p) paid 7 October 2019 3,306 2,075
(2018 Second interim: 1.0p)
2019 Third interim dividend of
1.41c (1.27p) paid 20 December
2019 3,306
==================================== ======================= =========================
12,112 3,536
==================================== ======================= =========================
A fourth interim dividend of 1.41c/1.27p per share was paid on
27 March 2020 to Shareholders on the register on 24 February 2020.
Although this payment relates to the year ended 31 December 2019,
under IFRS it will be accounted for in the year in which it has
been paid. A portion of this dividend will be paid from the revenue
reserve.
7. Earnings per Share (Basic and Diluted)
Year ended Period ended
31 December 2019 31 December 2018
=========================================== =================== =================
Revenue net profit attributable
to Ordinary shareholders (EUR'000) 7,731 33
Weighted average number of shares
in issue during the period 207,845,206 165,415,705
Total revenue return per ordinary
share 3.72c 0.02c
=========================================== =================== =================
Capital return attributable to Ordinary
shareholders (EUR'000) 12,190 (4,080)
Weighted average number of shares
in issue during the period 207,845,206 165,415,705
Total capital return per ordinary
share 5.86c (2.47c)
=========================================== =================== =================
Total return per ordinary share 9.58c (2.45c)
=========================================== =================== =================
Earnings per share is calculated on the revenue and capital loss
for the period (before other comprehensive income) and is
calculated using the weighted average number of shares in the
period of 207,845,206 (2018: 165,415,705 shares).
8. Net Asset Value Per Share
2019 2018
========================================== =========== ===========
Net assets attributable to shareholders
(EUR'000) 260,277 202,073
Number of shares in issue at 31 December 234,500,001 187,500,001
========================================== =========== ===========
Net asset value per share (EUR) 1.11 1.08
========================================== =========== ===========
The Company announced an unaudited NAV of EUR260,720,000 as at
31 December 2019 on 28 February 2020. An additional EUR443,000 of
accrued expenditure represents the difference between the unaudited
NAV and the above. The Net asset value per share (EUR) is changed
from 111.2c to 111.0c.
9. Investment Properties
2019 2018
EUR'000 EUR'000
====================================== ========== ===========
Opening carrying value Purchases
at cost 148,918 - 152,998
Gains / (losses) on revaluation to
fair value 182,749 (4,080)
16,852
====================================== ========== ===========
Total carrying value at 31 December 348,519 148,918
====================================== ========== ===========
Losses on investment properties at
fair value comprise
Valuation gains/(losses) 15,514 (3,813)
Movements in lease incentives 1,338 (267)
====================================== ========== ===========
16,852 (4,080)
====================================== ========== ===========
Valuation Methodology
Valuations were performed by CBRE GmbH, an accredited
independent valuer with a recognised and relevant professional
qualification. The valuer has sufficient current local and national
knowledge of the particular property markets involved and has the
skills and understanding to undertake the valuations
competently.
The Investment Manager appoints a suitable valuer (such
appointment is reviewed on a periodic basis) to undertake a
valuation of all the direct real estate investments on a quarterly
basis. The valuation is undertaken in accordance with the RICS
Valuation - Global Standards 2017, (Red Book), published by the
Royal Institution of Chartered Surveyors.
The Investment Manager meets with the valuer on a quarterly
basis to ensure the valuer is aware of all relevant information for
the valuation and any change in the investments over the quarter.
The Investment Manager then reviews and discusses draft valuations
with the valuer to ensure correct factual assumptions are made
prior to the valuer issuing a final valuation report.
The fair value of completed investment property is determined
predominantly using the income capitalisation method, and in two
instances the discounted cash flow method. The income
capitalisation method is based on capitalising the net income
stream at an appropriate yield. In establishing the net income
stream the valuer has reflected the current rent payable to lease
expiry, at which point the valuer has assumed that each unit will
be re-let at their opinion of estimated rental value. The valuer
has made allowances for vacancies and rent-free periods where
appropriate, as well as deducting non- recoverable costs where
applicable. The appropriate yield is selected on the basis of the
location of the building, its quality, tenant credit quality and
lease terms amongst other factors. The discounted cash flow method
approach is based on estimations of the investment property's
ability to generate future annual net operating income over a hold
period of 10 years. Growth and inflation are included explicitly in
the cash flow forecast. The valuer calculates the present value of
cashflow generated by the investment property plus the present
value of the exit value at the end of the 10-year hold period. The
cash flow is discounted at a rate the valuer considers appropriate
for the specific investment property.
The Property Valuer takes account of deleterious materials
included in the construction of the investment properties in
arriving at its estimate of Fair Value when the Investment Manager
advises of the presence of such materials.
The majority of the leases are on a full repairing and insurance
basis and as such the Group is not liable for costs in respect of
repairs or maintenance to its investment properties.
The fair value of these investment properties amounted to
EUR350,125,000. The difference between the fair value and the value
per the Consolidated balance sheet at 31 December 2019 consists of
accrued income relating to the pre-payment for rent-free periods
recognised over the life of the lease totalling EUR1,606,000 which
is separately recorded in the financial statements as a current
asset.
The following disclosure is provided in relation to the adoption
of IFRS 13 Fair Value Measurement. All properties are deemed Level
3 for the purposes of fair value measurement and the current use of
each property is considered the highest and best use.
Country and sector Fair Value Valuation techniques Key Unobservable Range (weighted
EUR'000 inputs average)
======================== ========== ====================== ================= ====================
Netherlands - Logistics 135,500 Income Capitalisation Annual rent per 42.26 - 67.02
and Discounted sq ft (54.54)
Cash Flow
Capitalisation 5.05% - 5.55%
rate (5.34%)
Germany - Logistics 61,300 Discounted Cash Annual rent per 64.92 - 67.67
Flow and Income sq ft (66.61)
Capitalisation
Capitalisation 3.8% - 3.95%
rate (3.89%)
France - Logistics 72,400 Discounted Cash Annual rent per 47.94 - 90.07
Flow sq ft (75.41)
Capitalisation 4.90% - 5.00%
rate (4.93%)
Poland - Logistics 53,400 Income Capitalisation Annual rent per 38.56 - 64.2
and sq ft (51.76)
Discounted Cash Capitalisation 5.5% - 6.25%
Flow rate (5.86%)
Spain - Logistics 27,525 Discounted Cash Annual rent per 17.98 - 32.28
Flow sq ft (27.08)
Capitalisation 4.75% - 6% (5.54%)
rate
======================== ========== ====================== ================= ====================
Sensitivity Analysis
The table below presents the sensitivity of the valuation to
changes in the most significant assumptions underlying the
valuation of investment property. As the majority of Investment
Properties are valued using the Income Capitalisation method, this
is the most significant assumption analysed.
Country and sector Assumption Movement Effect on Valuation
========================= ====================== ==================== ====================
+50 basis points (11,900)
- 50 basis points 14,100
+50 basis points (6,900)
Capitalisation - 50 basis points 8,800
rate Capitalisation +50 basis points (6,400)
rate Capitalisation - 50 basis points 7,700
rate Capitalisation +50 basis points (4,100)
rate - 50 basis points 4,800
Capitalisation +50 basis points (2,425)
Netherlands - Logistics rate - 50 basis points 2,875
====================== ==================== ====================
Germany - Logistics
====================
France - Logistics
Poland - Logistics
Spain - Logistics
======================================================================= ====================
10. Trade and Other Receivables
2019 2018
EUR'000 EUR'000
========================= ========== ==========
Rents receivable 3,327 1,174
Accrued income 160 226
VAT receivable 3,310 -
Cash held by Solicitors 165 975
Lease incentives 1,606 267
Deferred tax 766 -
Other receivables 549 9,037
========================= ========== ==========
Total receivables 9,883 11,679
========================= ========== ==========
The ageing of these receivables is as follows:
2019 2018
EUR'000 EUR'000
======================= ========== ==========
Less than 6 months 5,813 11,679
Between 6 & 12 months 4,070 -
Over 12 months - -
======================= ========== ==========
9,883 11,679
======================= ========== ==========
11. Cash and Cash Equivalents
2019 2018
=================================
EUR'000 EUR'000
================================= ======= =======
Cash at bank 24,579 6,279
Money market funds - 43,854
================================= ======= =======
Total cash and cash equivalents 24,579 50,133
================================= ======= =======
12. Trade and Other Payables
2019 2018
EUR'000 EUR'000
===================================== ======== ========
Rental income received in advance 2,224 710
Accrued acquisition and development
costs 1,521 5,930
Management fees payable 471 563
All other fees payable 651 1,454
VAT payable 670 -
Other payables 11 -
Accruals 659 -
Trade creditors 1,948 -
Tenant deposits 1,197 -
===================================== ======== ========
Total payables 9,352 8,657
===================================== ======== ========
13. Bank Loans
2019 2018
EUR'000 EUR'000
======================================= ======== ========
Bank borrowings drawn 108,900 -
Loan issue costs paid (1,102) -
Accumulated amortisation of loan issue
costs 118 -
======================================= ======== ========
Total Bank Loans -
======================================= ======== ========
Property Country Loan Start date End date Lender Interest
Rate
(EUR'000)
================================== ========= =========== ========== =========== =============
Erlensee Germany 17,800 20/02/2019 31/01/2029 DZ HYP 1.62%
Florsheim Germany 12,400 18/02/2019 30/01/2026 DZ HYP 1.54%
Avignong + Meung
Sur Loire France 33,000 12/02/2019 12/02/2026 BAYERN LB 1.57%
(Ede/Waddinxveen) Netherlands 37,700 06/06/2019 06/06/2025 BERLIN HYP (1.22%) 1.05%
+ Oss
's Heerenberg Netherlands 8,000 27/06/2019 27/06/2025 BERLIN HYP 0.94%
=================== ============== ========= =========== ========== =========== =============
108,900
================================== ========= =========== ========== =========== =============
14. Derivative Financial Instruments
2019 2018
EUR'000 EUR'000
Forward foreign exchange contracts 8 -
8 -
----------------------------------- -------- --------
The Company employed currency hedging to provide greater
certainty as to the level of Sterling distributions paid in respect
of the year. A forward FX contract was entered into fixing the EUR:
GBP exchange rate at EUR1.11:GBP1 for the three interim
distributions paid in the year.
15. Share Capital
2019 2018
=========================================
EUR'000 EUR'000
========================================= ======= =======
Opening Balance 2,122 -
Manager's shares issued in the period - 56
Manager's shares redeemed in the period - (56)
Ordinary shares issued on incorporation - 1
Ordinary shares issued 523 2,121
========================================= ======= =======
As at 31 December 2,645 2,122
========================================= ======= =======
Ordinary shareholders participate in all general meetings of the
Company on the basis of one vote for each share held.
Each Ordinary share has equal rights to dividends and equal
rights to participate in a distribution arising from a winding up
of the Company. The Ordinary shares are not redeemable.
The total number of shares authorised, issued and fully paid at
IPO was 187,500,001. The nominal value of each share is GBP0.01 and
amount paid for each share was GBP1.00. Share proceeds were
received in tranches between 15 and 18 December 2017 and converted
to Euro at a rate of GBP1:EUR1.131868907.
On incorporation, the issued share capital of the Company was
one Ordinary Share of a nominal value of GBP0.01, which was
subscribed for by Aberdeen Asset Management PLC. On 8 November 2017
the Company issued 50,000 Management Shares of a nominal value of
GBP1.00 each which were subscribed for by Aberdeen Asset Management
PLC. The Management Shares were fully paid up and were redeemed
immediately following the Initial admission out of the proceeds of
the Initial Issue. The Management Shares redeemable at any time
(subject to the provisions of the Companies Act) by the Company and
carried the right to receive a fixed annual dividend equal to 0.01
per cent. of the nominal amount of each of the Management Shares
payable on demand. For so long as there are shares of any other
class in issue, the holders of the Management Shares did not have
any right to receive notice of or vote at any general meeting of
the Company.
On 31 July 2019, the Group increased its share capital by the
issue of 47,000,000 new Ordinary Shares at 98.75p (EUR1.09) per
share.
16. Share Premium
2019 2018
===========================================
EUR'000 EUR'000
=========================================== ======= =========
Opening Balance - -
Premium arising on issue of new shares 51,147 210,102
Share issue costs deducted (783) (2,875)
Transfer to special distributable reserve - (207,227)
=========================================== ======= =========
Balance at 31 December 50,364 -
=========================================== ======= =========
The share premium was converted to EUR using the issue date
exchange rate of 1.0827021 (2018: 1.131869).
17. Special Distributable Reserve
2019 2018
EUR'000 EUR'000
===================================== ========== ==========
Opening Balance 203,691 -
Transfer from share premium account - 207,227
Dividends Paid (12,112) (3,536)
===================================== ========== ==========
Balance at 31 December 191,579 203,691
===================================== ========== ==========
At a General Meeting held on 8 November 2017, a special
resolution was passed authorising, conditional on the issue of
Ordinary shares by the Company, the amount standing to the credit
of the share premium account of the Company following issue to be
cancelled. In order to cancel the share premium account the Company
was required to obtain a Court Order, which was received on 13
March 2018. A Statement of Capital form was lodged at Companies
House with a copy of the Court Order on 16 March 2018. With effect
from that date the amount of the share premium account cancelled
was credited as a special distributable reserve in the Company's
books of account.
18. Capital Reserves
Realised capital Unrealised gains/(losses) Total capital
reserve EUR'000 reserve
EUR'000 EUR'000
================================ ================ =================================== =============
As at 31 December 2018 345 (4,125) (3,780)
Movement in deferred taxation - (4,662) (4,662)
Movement in fair value gains
of - 16,852 16,852
Investments
Currency (losses)/gains during
the year (200) 8 (192)
================================ ================ =================================== =============
Balance at 31 December 2019 145 8,073 8,218
================================ ================ =================================== =============
Realised capital Unrealised Total capital
reserve losses reserve
EUR'000 EUR'000 EUR'000
=================================== ================ ================ ================
As at 25 October 2017
Movement in fair value losses -
of investments - - (4,080) - (4,080)
Realised currency gains/(losses)
during the year 345 (45) 300
=================================== ================ ================ ================
Balance at 31 December 2018 345 (4,125) (3,780)
=================================== ================ ================ ================
19. Operating Segments
The Group's reportable segments are the geographical areas in
which it operates. These operating segments reflect the components
of the Group that are regularly reviewed to allocate resources and
assess performance.
Parent
Netherlands Poland Germany Spain France Company Total
2019 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
================== ============= ========= ========= ============ ============= ================= =============
Total Assets 142,387 56,872 63,252 32,416 77,258 10,796 382,981
Total Liabilities 47,825 3,183 32,953 1,776 36,007 1,055 122,704
Total
Comprehensive
return for the 4,622 449 1,759 563 3,208 (3,170) 7,431
period (Revenue)
Total
Comprehensive
return for the 1,588 1,575 2,638 1,222 (200) 5,175 11,998
period (Capital)
Included in Total
Comprehensive
Income
Net gain / (loss)
from
the fair value 5,455 1,622 5,315 2,197 2,263 - 16,852
adjustment on
investment
property
Rental income 5,319 1,324 2,494 637 3,602 - 13,376
================== ============= ========= ========= ============ ============= ================= =============
Parent Company
Netherlands Germany Spain France EUR'000 Total
2018 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
================================= ============= ========= ========= ========= ============== =========
Total Assets 89,772 24,081 1,689 47,726 47,462 210,730
Total Liabilities 6,211 439 20 1,386 601 8,657
Total Comprehensive return
for the 828 932 (26) 322 (2,016) 40
period (Revenue)
Total Comprehensive return
for the (3,427) (266) (387) 300 (3,780)
period (Capital)
Included in Total Comprehensive
Income
Net gain / (loss) from fair
value (3,427) (266) - (387) - (4,080)
adjustment on investment
property
Rental income 885 1,025 - 413 - 2,323
================================= ============= ========= ========= ========= ============== =========
20. Financial instruments and investment properties Fair value hierarchy
IFRS 13 requires the Group to classify its financial instruments
held at fair value using a hierarchy that reflects the significance
of the inputs used in the valuation methodologies. These are as
follows:
Level 1 - quoted prices in active markets for identical
investments;
Level 2 - other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit
risk, etc.); and
Level 3 - significant unobservable inputs.
The following table shows an analysis of the fair values of
investment properties recognised in the balance sheet by level of
the fair value hierarchy:
Level 1 Level 2 Level 3 Total fair value
31 December 2019 EUR'000 EUR'000 EUR'000 EUR'000
======================= ========== ========== ========= =================
Investment properties - - 348,519 348,519
======================= ========== ========== ========= =================
Level 1 Level 2 Level 3 Total fair value
31 December 2018 EUR'000 EUR'000 EUR'000 EUR'000
======================= ======== ======== ======== ================
Investment properties - - 148,918 148,918
======================= ======== ======== ======== ================
The lowest level of input is the underlying yields on each
property which is an input not based on observable market data.
Level 1 Level 2 Level 3
31 December 2019 EUR'000 EUR'000 EUR'000
====================== =========================== =================== ===================
Derivative Financial
Instruments - 8 -
====================== =========================== =================== ===================
The lowest level of input is EUR:GBP exchange rate.
21. Risk Management
The Group's financial instruments comprise securities and other
investments, cash balances, loans and debtors and creditors that
arise directly from its operations; for example, in respect of
sales and purchases awaiting settlement, and debtors for accrued
income. The Group also has the ability to enter into derivative
transactions in the form of forward foreign currency contracts,
futures and options, for the purpose of managing currency and
market risks arising from the Group's activities. No derivatives
transactions were undertaken during the year.
The main risks the Group faces from its financial instruments
are (a) market price risk (comprising of (i) interest rate risk,
(ii) foreign currency risk and (iii) other price risk), (b)
liquidity risk and (c) credit risk.
(a) Market price risk
The fair value or future cash flows of a financial instrument
held by the Group may fluctuate because of changes in market
prices. This market risk comprises three elements - interest rate
risk, foreign currency risk and other price risk.
(i) Market risk arising from interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment and borrowing decisions.
Interest risk profile
The interest rate risk profile of the portfolio of financial
assets and liabilities at the year end were as follows:
Interest Local currency Foreign exchange Euro equivalent
rate '000 rate EUR'000
As at 31 December 2019 %
========================== ========= =============== ================= ================
Assets:
Euro (0.60) 23,393 EUR1.00 23,393
Pound Sterling 0.07 1,005 0.85 1,186
========================== ========= =============== ================= ================
Total 24,579
========================== ===============================================================
Interest Local currency Foreign exchange Euro equivalent
rate '000 rate EUR'000
As at 31 December 2018 %
========================== ========= =============== ================= ================
Assets:
Euro (0.60) 46,774 EUR 1.00 46,774
Pound Sterling 0.07 3,015 0.89757 3,359
========================== ========= =============== ================= ================
Total 50,133
========================== ===============================================================
The floating rate assets consist of cash deposits on call
earning interest at prevailing market rates.
An increase of 1 per cent in interest rates as at the reporting
date would have increased the reported profit by
EUR501,000. A decrease of 1 per cent would have reduced the
reported profit by EUR501,000. Other financial assets (eg debtors)
are not subject to interest rate risk.
(ii) Market risk arising from foreign currency risk
The income and capital value of the Groups investments and
liabilities can be affected by exchange rate movements as some of
the Group's assets and income are denominated in currencies other
than Euro which is the Group's reporting currency.
The revenue account is subject to currency fluctuation arising
from overseas income.
Foreign currency risk profile
Foreign currency risk exposure by currency of denomination:
Net monetary Total currency
Investment exposure exposure exposure
As at 31 December 2019 EUR'000 EUR'000 EUR'000
========================== ======================= ============== ================
Pound Sterling - 4,652 4,652
========================== ======================= ============== ================
Total foreign currency - 4,652 4,652
========================== ======================= ============== ================
Euro 348,519 (92,894) 255,625
========================== ======================= ============== ================
Total 348,519 (88,242) 260,277
========================== ======================= ============== ================
Net monetary Total currency
Investment exposure exposure exposure
As at 31 December 2018 EUR'000 EUR'000 EUR'000
========================== ======================= ============== ================
Danish krone - 6 6
Norwegian krone - 26 26
Pound Sterling - 3,129 3,129
========================== ======================= ============== ================
Total foreign currency - 3,161 3,161
========================== ======================= ============== ================
Euro 148,918 49,994 198,912
========================== ======================= ============== ================
Total 148,918 53,155 202,073
========================== ======================= ============== ================
The asset allocation between specific markets can vary from time
to time based on the manager's opinion of the attractiveness of the
individual markets.
Foreign currency sensitivity
The following table details the Group's sensitivity to a 10%
increase and decrease in sterling against the relevant foreign
currencies and the resultant impact that any such increase or
decrease would have on net return before tax and equity
shareholders' funds. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts
their translation at the year end for a 10% change in foreign
currency rates.
As at 31 December As at 31 December
2019 2018
EUR'000 EUR'000
================= ================= =================
Danish krone - 0.6
Norwegian krone - 2.6
Pound Sterling 465.2 312.9
================= ================= =================
(iii) Market risk arising from other price risk
Other price risks (i.e. changes in market prices other than
those arising from interest rate or currency risk) may affect the
value of the quoted investments.
Other price risk sensitivity
If the investment valuation fell by 10% at 31 December 2019, the
impact on net return before tax and equity shareholders' funds
would have been negative EUR35m. If the investment portfolio
valuation rose by 10% at 31 December 2019, the impact on net return
before tax and equity shareholders' funds would have been positive
EUR35m. Exposures vary throughout the period as a consequence of
changes in the net assets of the Group arising out of the
investment and risk management processes.
(b) Liquidity risk
This is the risk that the Group will encounter difficulty in
meeting obligations associated with financial liabilities. All
creditors are payable within three months.
The Group's liquidity risk is managed by the Investment Manager
placing cash in liquid deposits and accounts. Liquidity risk is the
risk that the Group will encounter in realising assets or otherwise
raising funds to meet financial commitments and also includes:
- The level of dividends and other distributions to be paid by
the Group may fluctuate and there is no guarantee that any such
distributions will be paid.
- The Group's target returns are targets only and are based on
estimates and assumptions about a variety of factors all of which
are beyond the Group's control and which may adversely affect the
Group's ability to make its target returns. The Group may not be
able to implement its investment policy and strategy in a manner
that generates dividends in line with the target returns or the
Group's investment objective. Liquidity risk is not considered to
be significant.
(c) Credit risk
This is the risk of failure of the counterparty to a transaction
to discharge its obligations under that transaction that could
result in the Group suffering a loss.
The risk is not considered significant by the Board, and is
managed as follows:
The Group acquired a portfolio of European logistics properties
and has a number of leases with tenants. In the event of default by
a tenant, the Group will suffer a rental shortfall and incur
additional costs, including legal expenses, in maintaining,
insuring and re-letting the property until it is re-let. The Board
receives regular reports on concentrations of risk and any tenants
in arrears. The Investment Manager monitors such reports in order
to anticipate and minimise the impact of defaults by tenants. Cash
is held only with reputable financial institutions with high
quality external credit ratings.
None of the Group's financial assets is secured by
collateral.
The maximum credit risk exposure as at 31 December 2019 was
EUR34.2m (2018 - EUR61.8m). This was due to trade receivables and
cash as per notes 10 and 11.
(d) Taxation and Regulation risks
All cash is placed with financial institutions with a credit
rating of -A or above. Bankruptcy or insolvency may cause the
Group's ability to access cash placed on deposit to be delayed or
limited. Should the credit quality or the financial position of the
financial institutions currently employed significantly
deteriorate, the Investment Manager would move the cash holdings to
another financial institution. There are no significant
concentrations of liquidity risk within the Group.
The Company must comply with the provisions of the Companies Act
and, as the shares are admitted to the premium segment of the
Official List, the Listing Rules and the Disclosure Guidance and
Transparency Rules.
A breach of the Companies Act could result in the Company and/or
the Board being fined or being the subject of criminal proceedings.
Breach of the Listing Rules could result in the shares being
suspended from listing. Legal and regulatory changes could occur
that may adversely affect the Company. Changes in the regulation of
companies may adversely affect the value of the Portfolio and the
ability of the Company to pursue its investment objective. The
Company has obtained UK Investment Trust Company status. The
Company must comply with the provisions of sections 1158 and 1159
of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory
Instruments 2011/2999 to maintain this status. Breaching these
regulations could result in the Company paying UK Corporation Tax
it would otherwise be exempt from, adversely affecting the
Company's ability to pursue its investment objective.
Capital Management
The Group considers that capital comprises issued Ordinary
shares and long term borrowings. The Group's capital is deployed in
the acquisition and management of subsidiaries in line with the
Group's investment objective.
Specifically to provide a regular and attractive level of income
return together with the potential for long term income and capital
growth from investing in high quality European logistics real
estate.
The following investment limits and restrictions apply to the
Group and its business which, where appropriate, are measured at
the time of investment and once the Group is fully invested:
- the Group will only invest in assets located in Europe;
- no more than 50 per cent. of Gross Assets will be concentrated in a single country;
- no single asset may represent more than 20 per cent. of Gross Assets;
- forward funded commitments will be wholly or predominantly
pre-let and the Group's overall exposure to forward funded
commitments will be limited to 20 per cent. of Gross Assets;
- the Group's maximum exposure to any single developer will be
limited to 20 per cent of Gross Assets;
- the Group will not invest in other closed-ended investment companies;
- the Group may only invest in assets with tenants which have
been classified by the Investment Manager's investment process as
having strong financial covenants; and
- no single tenant will represent more than 20 per cent. of the
Group's annual gross income measured annually.
The Group's principal use of cash will be to fund investments in
accordance with its investment policy, on-going operational
expenses and to pay dividends and other distributions to
shareholders, as set out in the Prospectus. The Group may from time
to time have surplus cash (for example, following the disposal of
an investment). Pending reinvestment of such cash, it is expected
that any surplus cash will be temporarily invested in cash
equivalents, money market instruments, bonds, commercial paper or
other debt obligations with financial institutions or other
counterparties having a single -A (or equivalent) or higher credit
rating as determined by an internationally recognised rating
agency; or "government and public securities" as defined for the
purposes of the FCA rules.
The Group monitors capital primarily through regular financial
reporting and also through a gearing policy. The Group intends to
use gearing with the objective of improving shareholder returns.
Debt will typically be secured at the asset level and potentially
at the Group level with or without a charge over some or all of the
Group's assets, depending on the optimal structure for the Group
and having consideration to key metrics including lender diversity,
cost of debt, debt type and maturity profiles. Borrowings will
typically be non-recourse and secured against individual assets or
groups of assets and the aggregate borrowings at asset level will
always be subject to an absolute maximum, calculated at the time of
drawdown for a property purchase, of 50 per cent. of Gross Assets.
Where borrowings are secured against a group of assets, such group
of assets shall not exceed 25 per cent. of Gross Assets in order to
ensure that investment risk remains suitably spread. The Board has
established gearing guidelines for the AIFM in order to maintain an
appropriate level and structure of gearing within the parameters
set out above. Under these guidelines, aggregate borrowings at
asset level are expected to be at or around 35 per cent. of gross
assets. The Board will keep the level of borrowings under review
and the aggregate borrowings will always be subject to the absolute
maximum set at the time of the Group's launch, calculated at the
time of drawdown for a property purchase, of 50 per cent. of Gross
Assets.
22. Related Party Transactions
The Company's Alternative Investment Fund Manager ('AIFM')
throughout the period was Aberdeen Standard Fund Managers Limited
("ASFML"). Under the terms of a Management Agreement dated 17
November 2017 the AIFM is appointed to provide investment
management services, risk management services and general
administrative services including acting as the Company Secretary.
The agreement is terminable by either the Company or ASFML on not
less than 12 months' written notice.
Under the terms of the agreement portfolio management services
are delegated by ASFML to Aberdeen Standard Investments Ireland
Limited ('ASIIL'). The total management fees charged to the
Consolidated Statement of Comprehensive Income during the period
were EUR1,695,000 (2018: EUR587,000), of which EUR471,000 (2018:
EUR563,000) were payable at the period end. Under the terms of a
Global Secretarial Agreement between ASFML and Aberdeen Asset
Management PLC ('AAM PLC'), company secretarial services are
provided to the Company by AAM PLC.
The remuneration of Directors is detailed below. Further details
on the Directors can be found on pages 44 to 45 of the published
Annual Report for the year ended 31 December 2019.
2019 2018
===================
EUR'000 EUR'000
=================== ======= =======
Pascal Duval 21 51
Caroline Gulliver 40 45
John Heawood 34 39
Tony Roper 41 39
Diane Wilde 34 39
=================== ======= =======
170 213
=================== ======= =======
Please note the above figures are all Euro, while those in the
directors remuneration report are stated in GBP. Mr Duval retired
on 11 June 2019.
The Directors' shareholdings are detailed below. On 31 July 2019
Mr Roper acquired 15,000 shares, Ms Gulliver acquired 15,000
shares, Ms Wilde acquired 20,000 shares and Mr Heawood acquired
10,000 shares all transactions having been undertaken as part of
the Placing, Open Offer and Offer for Subscription at 98.75p per
share.
31 December 2019 31 December 2018
Ordinary shares Ordinary shares
============ ================ ================
T Roper 45,000 30,000
============ ================ ================
C Gulliver 40,000 25,000
============ ================ ================
J Heawood 30,000 20,000
============ ================ ================
D Wilde 40,000 20,000
============ ================ ================
P Duval1 n/a 30,000
============ ================ ================
1 Retired as a Director on 11 June 2019.
The Company invested in the Aberdeen Standard Liquidity fund
which is managed by Aberdeen Standard Fund Managers Limited. As at
31 December 2019 the Company invested EUR0 in the Fund (2018:
EUR43.9m). No additional fees are payable to Aberdeen Standard Fund
Managers Limited as a result of this investment. Due to negative
interest rates, interest of EUR98,000 (2018: EUR658,000) was
incurred.
23. Lease Analysis
The group leases out its investment properties under operating
leases.
The future income under non-cancellable operating leases, based
on the unexpired lease length at the year end was as follows (based
on total rents).
2019 2018
EUR'000 EUR'000
============================ ======== ========
Less than one year 19,039 6,894
Between one and five years 74,014 26,485
Over five years 106,778 40,499
============================ ======== ========
Total 199,831 73,878
============================ ======== ========
24. Post Balance Sheet Events
Following the year end the Group completed the acquisition of an
asset in Den Hoorn, The Netherlands. The Group also drew external
debt secured against 2 assets, Den Hoorn and Zeewolde.
The outbreak of the Novel Coronavirus ("COVID-19") in 2020 has
resulted in significant loss of life, adversely impacted global
commercial activity and contributed to significant volatility in
certain equity and debt markets. The global impact of the outbreak
is rapidly evolving and on 11 March 2020, the World Health
Organization declared a pandemic. Many countries have reacted by
instituting quarantines, prohibitions on travel and the closure of
offices, businesses, schools, retail stores and other public
venues. Businesses are also implementing similar precautionary
measures.
Such measures, as well as the general uncertainty surrounding
the dangers and impact of COVID-19, are creating significant
disruption in supply chains and economic activity and are having a
particularly adverse impact on transportation, hospitality,
tourism, entertainment and other industries. The impact of COVID-19
has led to significant volatility and declines in the global public
equity markets and it is uncertain how long this volatility will
continue. As COVID-19 continues to spread, the potential impacts,
including a global, regional or other economic recession, are
increasingly uncertain and difficult to assess.
The outbreak of COVID-19 and the resulting financial and
economic market uncertainty could have a significant adverse impact
on the Company, including the fair value of its investments. The
most significant conditions relating to COVID-19 arose after the
reporting period and as a result the Directors consider the
emergence of the COVID-19 Coronavirus pandemic to be a
non-adjusting post balance sheet event. Any future impact on the
Company is likely to be in connection with the assessment of the
fair value of investments and stability of rental income at future
dates.
At the date of reporting it is not possible to quantify the
future financial impact of COVID-19 on the Company's investments or
rental income with any degree of certainty, other than as already
announced to the market through an RIS. The Directors will continue
to closely analyse and review the impact of COVID-19 and will take
appropriate action as required.
25. Capital Commitments
As at the 31 December 2019 the Group had capital commitments of
EUR49.9m in relation to the acquisition at Den Hoorn, the
Netherlands.
26. Ultimate Parent Company
In the opinion of the Directors on the basis of shareholdings
advised to them, the Company has no immediate or ultimate
controlling party.
SUSTAINABILITY
EPRA FINANCIAL REPORTING (UNAUDITED)
One of EPRA's aims is to improve the transparency, comparability
and relevance of the published results of listed real estate
companies in Europe. EPRA performance measures calculated in line
with 'Best Practice Recommendation Guidelines - November 2016' are
therefore enclosed.
EPRA Performance Measures
31 December 2019 31 December 2018
Total Total
================================================= ================ ================
EPRA earnings (EUR'000) 7,247 340
EPRA earnings per share (cents) 3.49 0.18
EPRA NAV (EUR'000) 264,947 202,073
EPRA NAV per share (cents) 112.98 107.77
EPRA NNNAV (EUR'000) 260,277 202,073
EPRA NNNAV per share (cents) 110.99 107.77
EPRA Net Initial Yield 4.74% 1.68%
EPRA topped-up Net Initial Yield 5.10% 1.78%
EPRA Vacancy Rate 0.0% 0.0%
EPRA Cost Ratios - including direct vacancy
costs 29% 79%
EPRA Cost Ratios - excluding direct vacancy
costs 29% 79%
A. EPRA Earnings (EUR000)
Earnings per IFRS income statement 19,429 (3,740)
Adjustments to calculate EPRA Earnings,
exclude:
Net changes in fair value of investment
properties (16,852) (4,080)
Deferred tax 4,662 -
Changes in fair value of financial instruments 8 -
EPRA Earnings 7,247 340
================ ================
Weighted average basic number of shares 207,845 187,500
EPRA Earnings per share (cents per share) 3.49 0.18
B. EPRA Net Asset Value (EUR000)
IFRS NAV 260,277 202,073
Exclude
Fair value of financial instruments 8 -
Deferred tax adjustment 4,662
================ ================
264,947 202,073.00
Shares in issue at end of year 2,345,000 1,875,000
================ ================
EPRA NAV per share (cents per share) 112.98 107.77
================================================= ================ ================
31 December 2019 31 December 2018
Total Total
======================================================= ================ ================
C. EPRA Triple Net Asset Value (NNNAV)
EPRA NAV 264,947 202,073
Fair value of financial instruments (8) -
Deferred tax adjustment (4,662) -
================ ================
EPRA NNNAV 260,277 202,073
EPRA NNNAV cents per share 110.99 107.77
D. EPRA Net Initial Yield and 'topped up'
NIY disclosure
Investment property - wholly owned 350,125 149,185
Less developments - (23,740)
Completed property portfolio 350,125 125,445
Allowance for estimated purchasers' costs 17,145 5,279
Gross up completed property portfolio valuation 367,270 130,724
Annualised cash passing rental income 17,717 2,391
Property outgoings (319) (198)
Annualised net rents 17,398 2,193
Add: notional rent expiration of rent free
periods or other lease 1,322 138
Incentives
Topped-up net annualised rent 18,720 2,331
EPRA NIY 4,74% 1.68%
EPRA "topped-up" NIY 5.10% 1.78%
E. EPRA Cost Ratios
Administrative / property operating expense
line per IFRS 6,075 1,843
income statement
Less recoverable service charge (2,233) -
Direct vacancy costs - -
================ ================
EPRA Costs (excluding direct vacancy costs) 3,842 1,843
Gross Rental income less ground rent costs 13,376 2,323
EPRA Cost Ratio (including direct vacancy
costs) 29% 79%
EPRA Cost Ratio (excluding direct vacancy
costs) 29% 79%
======================================================= ================ ================
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31
December 2019 are an abridged version of the Company's full Annual
Report and financial statements, which have been approved and
audited with an unqualified report and did not include any
reference to matters to which the auditor drew attention by way of
emphasis without qualifying the report, and did not contain a
statement under s.498 of the Companies Act 2006.
The Annual Report will be posted to shareholders in June 2020
and additional copies will be available from the registered office
of the Company and on the Company's website,
eurologisticsincome.co.uk*
The Annual General Meeting will be held at 2:00 pm on 30 June
2020 at Bow Bells House, 1 Bread Street, London EC4M 9HH.
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise and may be affected by exchange rate
movements. Investors may not get back the amount they originally
invested.
*Neither the content of the Company's website nor the content of
any website accessible from hyperlinks on the Company's website (or
any other website) is (or is deemed to be) incorporated into, or
forms (or is deemed to form) part of this announcement.
For Aberdeen Standard European Logistics Income PLC
Aberdeen Asset Management PLC, Secretaries
27 May 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFFELETIDFII
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