Hibernia REIT plc (HBRN)
Hibernia REIT plc: Preliminary results for the financial year ended 31 March 2021
26-May-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014
(MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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PRELIMINARY RESULTS
For the financial year ended 31 March 2021
26 May 2021
Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces preliminary results for the financial year
ended 31 March 2021 (the "financial year"). Highlights include:
Continued high rent collection rates reflecting strong tenant base
? 99% of rent due for the financial year ended Mar-21 now received or on agreed payment terms
? Post financial year end, contracted rent received or on agreed payment terms is as follows:
? Commercial[1]: 99% for Q/E Jun-21
? Residential[2]: 98% for May-21; >99% for Apr-21
Net loss due to negative property revaluations but further increase in distributable income
? Annual contracted rent of EUR67.1m at Mar-21, up 2.2% since Mar-20, and office WAULT of 5.8yrs, down 9.4%
? Six new office leases on 45,600 sq. ft. adding EUR2.6m, or EUR0.3m net of lease expiries and adjustments on let space
? Three rent reviews and five lease variations agreed, adding incremental rent of EUR0.7m
? Five bolt-on acquisitions adding EUR0.5m of new rent
? Diluted IFRS loss per share of 3.7 cent due to negative revaluation movement on portfolio (Mar-20: EPS of 8.8 cent)
? EPRA EPS[3] of 6.3 cent, up 13.4% on last year due to increase in rental income (Mar-20: 5.5 cent)
? Final DPS of 3.4 cent, bringing the total for the financial year to 5.4 cent, up 13.7% (Mar-20: 4.75 cent)
Modest decline in portfolio value, mainly coming in the first quarter of our financial year
? Portfolio value of EUR1,427.4m, down 4.4%[4] in the financial year and down 0.7% in H2, primarily due to lower
net ERVs and higher yields assumed on our office assets
? 12-month Total Property Return[5] of -0.2% vs MSCI Ireland Property All Assets Index (excl. Hibernia) of -1.5%
? EPRA NTA per share3 of 172.7 cent, down 3.7% in the financial year but up 0.4% in H2, helped by the share
buyback
Robust balance sheet: flexibility and investment capacity further enhanced post year end by new US private placement
? Net debt of EUR278.8m, LTV3 of 19.5% (Mar-20: EUR241.4m, LTV 16.5%)
? EUR125m of 10- and 12-year unsecured US private placement notes with avg. coupon of 1.9% to be issued in late
Jul-21
? Weighted average debt maturity of 3.4 years at Mar-21, or 5.2 years pro-forma new USPP (Mar-20: 4.4 years)
? Cash and undrawn facilities net of committed expenditure of EUR110m, or EUR235m pro-forma of new USPP (Mar-20:
EUR136m)
Disciplined capital allocation
? EUR16.8m in development expenditure, mainly on two schemes to deliver 62,500 sq. ft. of Grade A office space (38%
pre-let): both expected to complete by Jul-21, following delays due to lockdowns (Mar-20: EUR21.3m)
? EUR11.1m invested in five bolt-on property acquisitions (Mar-20: EUR23.3m)
? EUR25m share buyback programme successfully executed; 23.1m shares repurchased and cancelled, an average price
per share of EUR1.08 (Mar-20: 17.6m shares repurchased for EUR25m, an average price per share of EUR1.42)
Progress on strategic priorities of:
? 1) Clustering
? Full planning now in place for Clanwilliam and Harcourt schemes, which can be commenced in the next seven and 18
months, respectively, and can deliver 539,000 sq. ft. of clustered, Grade A office space
? These schemes will take the proportion of Hibernia's office assets by value in clusters from 39%[6] to 65%[7]
? 2) ESG excellence
? Commitment to become a Net Zero Carbon business by 2030 and to align with the TCFD recommendations by 2022
? Real-time energy consumption monitoring system installed and operating in our managed in-place offices
? Received a four-star GRESB rating for the first time 2020 and a B- score in our inaugural CDP response
Kevin Nowlan, Chief Executive Officer of Hibernia, said:
"Our business has delivered a resilient performance in the financial year despite the extraordinary circumstances
resulting from the COVID-19 pandemic. While we recorded a net loss due to a modest decline in portfolio value, our
continued high rent collection rates have helped deliver double-digit growth in EPRA earnings and dividends.
"Since introducing COVID-19 safeguards in our buildings, our primary focus has been on the long-term evolution of the
portfolio to meet changing occupier expectations. We believe asset clustering and ESG excellence will be key elements
for us in providing the type of flexible, efficient, amenity-rich office space occupiers increasingly want and we have
made good progress with both in the financial year. Our Clanwilliam Court and Harcourt Square schemes now have full
planning permission and both can be started over the next 18 months; when complete they will increase the proportion of
our office portfolio held in clusters to 65%. We have also published our Sustainability Statement of Intent, which
sets challenging, long-term targets and outlines our commitment to becoming a net zero carbon business by 2030.
"Our leverage remains amongst the lowest in the pan-European REIT universe, giving us substantial capacity and
strategic flexibility for value-enhancing investment opportunities. In the financial year we invested EUR11m in small
acquisitions to enhance our existing properties, EUR17m in development expenditure and executed a highly accretive EUR25m
share buyback programme. Since March 2021 we have increased our available funding and average debt maturity by
agreeing to issue EUR125m of 10- and 12-year US private placement notes.
"With Ireland's vaccination programme gathering pace and a government roadmap for the easing of lockdown restrictions,
optimism is growing and this is starting to be seen in active demand for office space and tenant enquiries. While the
near-term outlook is likely to remain tied to progress on "unlocking", we are optimistic on our longer-term prospects
given our clear strategy, exciting development pipeline, balance sheet strength and talented team."
Contacts:
Hibernia REIT plc +353 (0)1 536 9100
Kevin Nowlan, Chief Executive Officer
Tom Edwards-Moss, Chief Financial Officer
Murray Consultants
Doug Keatinge: +353 86 037 4163, dkeatinge@murraygroup.ie
Andrew Smith: +353 83 076 5717, asmith@murraygroup.ie
About Hibernia REIT plc
Hibernia REIT plc is an Irish Real Estate Investment Trust ("REIT"), listed on Euronext Dublin and the London Stock
Exchange. Hibernia owns and develops property and specialises in Dublin city centre offices.
Results presentation details
There will be a results presentation at 10.00 a.m. Dublin time, today, 26 May 2021. If you think you will want to ask
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Disclaimer This announcement contains forward-looking
statements, which are subject to risks and uncertainties because
they relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends, and similar expressions
concerning matters that are not historical facts. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual
results, performance or achievements of the Group or the industry
in which it operates to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements speak
only as at the date of this announcement. The Group will not
undertake any obligation to release publicly any revision or
updates to these forward-looking statements to reflect future
events, circumstances, unanticipated events, new information or
otherwise except as required by law or by any appropriate
regulatory authority.
Chief executive officer's statement
At the onset of the pandemic, our key priority was safeguarding
our buildings for our tenants, visitors and staff. Since then, our
attention has returned to the longer term and ensuring our business
is evolving to meet changing occupier expectations.
Challenging market conditions Property investment volumes and
Dublin office take-up in 2020 fell by 58% and 54%, respectively,
versus 2019 due to the impact of the pandemic, and the market
remained subdued in Q1 2021, with COVID-19 restrictions in Ireland
at their highest level. As we have noted before, the structural
changes that have occurred in the Irish property market since 2007
(greater institutional ownership, less debt) have increased the
market's resilience to external shocks and this, together with the
strong Dublin office market fundamentals immediately prior to the
pandemic and support from governments and central banks, has
resulted in a relatively modest negative impact on market pricing
to date despite the rise in vacancy rates. Prime central Dublin
office yields have remained at around 4% since the start of the
pandemic and prime headline rents stood at around EUR57.50psf at
March 2021 versus EUR62.50 a year earlier.
Resilient performance Given market conditions, our leasing
activity in the financial year was limited and contracted rent grew
2.2% to EUR67.1m, primarily as a result of new lettings, rent
reviews and lease variations. Our rent collection rates for the
financial year have averaged 99% and this, as well as leases signed
in previous years, good cost control and the accretive EUR25m share
buyback executed in the year, resulted in a 13.4% increase in EPRA
EPS to 6.3 cent. We have proposed a final dividend per share of 3.4
cent, taking the total in respect of the financial year to 5.4
cent, an increase of 13.7%. The value of our property portfolio
declined 4.4% like-for-like, with the majority of this occurring in
the first quarter of the financial year, shortly after the onset of
the pandemic, resulting in a net loss per share of 3.7 cent for the
year and a 3.7% decrease in EPRA NTA per share to 172.7 cent.
Balance sheet strength Our leverage remains amongst the lowest
in the European REIT universe, giving us significant strategic
flexibility. At 31 March 2021 the LTV ratio was 19.5% and we had
EUR110m of cash and undrawn facilities net of commitments. Since
then, we have agreed to issue an additional EUR125m of 10- and
12-year US private placement notes with an average coupon of 1.9%,
increasing our investment capacity, significantly extending our
average debt term and reducing our average cost of debt. These new
notes will help fund the delivery of our office clusters at
Clanwilliam Court and Harcourt Square.
Responding to changing occupier expectations by focusing on
clusters and ESG excellence We believe office clusters and ESG
excellence will be key for us in providing the type of flexible,
efficient, amenity-rich office space with strong wellness and ESG
credentials that occupiers are increasingly seeking. This was our
strategic direction prior to the pandemic and we had already
completed our first cluster, the Windmill Quarter, and recruited a
full-time Sustainability Manager to lead our ESG programme. The
pandemic is accelerating many of these changes in occupier
requirements and consequently we are concentrating on refining our
clustering strategy and accelerating our ESG initiatives to deliver
top-grade office space suited to new, agile working and wellness.
We have now received full planning approval for our new office
clusters at Clanwilliam Court and Harcourt Square and we are
working to further enhance the active communal areas within these
schemes. Both developments can be started over the next 18 months
and, when complete, will increase the proportion of our office
portfolio held in clusters to 65%. We have also set new, long-term
targets in our recently published Sustainability Statement of
Intent and committed to becoming a Net Zero Carbon business by
2030.
Portfolio rich in opportunity As well as our developments at
Clanwilliam Court and Harcourt Square, which can be started in the
near term, our portfolio has many other opportunities for enhancing
shareholder value. We invested EUR16.8m in development expenditure
in the financial year, mostly on 2 Cumberland Place and 50 City
Quay. These schemes, which will deliver 62,500 sq. ft. of new
office space, 62% of which is still available to let (ERV:
EUR2.2m), were scheduled to complete in early 2021 but have been
delayed by the shutdown of development sites and are now expected
to complete in July 2021. Longer term, we are assessing our
in-place office portfolio for improvement opportunities and we own
155.2 acres of land and industrial assets in Dublin with potential
for rezoning in future for mixed-use schemes.
Optimistic on longer-term outlook With Ireland's vaccination
programme gathering pace and a government roadmap for the easing of
lockdown restrictions, optimism is growing and this is starting to
be seen in active demand for office space and tenant enquiries.
While the near-term outlook is likely to remain tied to progress on
"unlocking", we are optimistic on our longer-term prospects. We
have a clear strategy to provide occupiers with the type of office
space they want, a portfolio rich in opportunity, and the financial
strength and the team in place to deliver our plans.
Kevin Nowlan, Chief Executive Officer
Market review General economy
Against the backdrop of the COVID-19 pandemic and a 3.4% decline
in global GDP in 2020 (source: the OECD), the Irish economy has
performed very strongly, recording GDP growth of 3.3% in 2020, the
fastest in the developed world. Much of this was due to the
contribution of the multinational-dominated sectors, such as
technology and pharmaceuticals. Irish output, as measured by Gross
Value Added ("GVA"), in the foreign-owned sector increased by 18%
in 2020, while other domestic industries declined by 9.5% (source:
Goodbody).
The Irish Government continues to offer significant support to
the labour market through pandemic payments and wage subsidy
schemes: the standard measure of monthly unemployment was 5.8% in
April 2021 (compared with 5.1% in January 2020), while the COVID-19
adjusted measure of unemployment was 22.4% if all claimants of the
Pandemic Unemployment Payment ("PUP") were classified as unemployed
(source: the CSO). Much of this emergency support is going to the
hospitality and retail sectors, with office-based employment less
impacted, particularly given the strong performance of many
multinationals in Ireland. The labour market is expected to recover
gradually as restrictions ease, in-line with the vaccine rollout in
Ireland. Current Government expectations are that all adults in
Ireland will be vaccinated by late summer 2021 and the unemployment
rate (incl. PUP recipients) is projected to average 16.3% in 2021,
8.2% in 2022 and to reach 6.0% in 2024, a rate still above the
pre-pandemic level of 5.1% (source: the DoF).
While global progress on vaccines and the new EU-UK Trade and
Cooperation Agreement ("TCA"), which came into force on 1 January
2021 and averted the threat of a no-deal Brexit, have been positive
developments for the Irish economic outlook, nonetheless risks
remain over the pace of recovery from the pandemic and there is
additional friction to trade between Ireland and the UK as a result
of the TCA. International tax reforms could negatively affect
Ireland's attractiveness for foreign direct investment: while a lot
remains uncertain at present, changes to the way multinationals are
taxed have been discussed for some time by the OECD under the base
erosion and profit shifting ("BEPS 2.0") process and the US is also
discussing corporate tax reform. Irish property market overview
As we have noted before, the structural changes that have
occurred in Ireland's property market since 2007, namely greater
levels of institutional ownership and less debt, have given it
greater resilience than existed historically. Furthermore, the
Dublin office market entered the pandemic with much healthier
fundamentals than it had prior to the Global Financial Crisis in
2008, due in part to the limited speculative development funding
available this cycle. While prime headline quoting rents in March
2020 and March 2008 were both in excess of EUR60psf, the Dublin
office vacancy rate in March 2020 was 6.5% versus 12.3% in March
2008 and the unlet office space under construction totalled 3.0m
sq. ft. (6.9% of existing stock) in March 2020 versus 4.6m sq. ft.
(14.9% of existing stock) in March 2008 (source: Knight Frank,
Property Market Analysis). Irish property investment market
Total investment volumes in 2020 were EUR3.0bn, down 58% on the
record volumes transacted in 2019 but broadly in line with volumes
in 2017 (EUR2.3bn) and 2018 (EUR3.6bn). The PRS and office sectors
again dominated, together accounting for 78% of volumes (2019:
77%). Irish investors (excluding Irish REITs) accounted for only
15% of investment in 2020 (2019: 18%), indicative of the continued
interest from international investors in Irish property despite
significant restrictions on mobility and travel (source: Knight
Frank). Investment volumes remained resilient in Q1 2021 even
though Ireland was at the highest level of COVID-19 restrictions
throughout: investment spend amounted to EUR1.3bn (Q1 2020:
EUR0.7bn). The residential and office sectors again dominated,
representing 60% and 31% of total Q1 2021 volumes, respectively.
International capital continues to seek opportunities to invest in
Irish property, with 55% of Q1 investment acquired by overseas
investors (Q1 2020: 87%) (source: Knight Frank). Top five office
investment transactions (12 months to March 2021)
Building Price Capital value Buyer Buyer nationality
Project Tolka Portfolio, D2/4 EUR290m EUR994 Blackstone American
Bishop's Square, D2 EUR183m EUR1,003 GLL Real Estate Partners German
28 Fitzwilliam, D2 EUR178m EUR1,309 Amundi Real Estate French
Baggot Plaza, D4 EUR141m EUR1,090 Deka Immobilien German
76 Sir John Rogerson's Quay, D2 EUR95m EUR1,026 AM Alpha German
Top five total EUR887m
Source: Knight Frank.
Knight Frank reports that prime Dublin office yields have
tightened to 3.75% at March 2021 (March 2020: 4%), given the level
of competitive demand in the market for the best Dublin office
assets, though other agents remain at c.4%. CBRE states that
despite some uncertainty about the future of the office, which is
unlikely to dissipate until such time as the majority of office
workers return to their buildings, the office sector remains the
preferred sector for institutional investors in Europe with most
focussed on securing core and core-plus opportunities. PRS
investment activity has continued to be robust. In 2020, the sector
comprised 38% of overall investment (2019: 33%) and in the first
quarter of 2021, it comprised 60% of investment (Q1 2020: 15%)
(source: Knight Frank). In its Spring 2021 yield matrix, Cushman
& Wakefield reports that PRS yields for prime Dublin properties
remain stable within a range of 3.75-4.25%. Top five PRS investment
transactions (12 months to March 2021)
Building Price Price per Buyer Buyer
unit nationality
Confidential portfolio, Dublin/Kildare EUR450m Confidential Ardstone Irish
Cheevers Court & Halliday House, Dun Laoghaire EUR195m EUR530k per SW3/DWS German
unit
The Prestige Portfolio, North Dublin EUR145m EUR457k per SW3/DWS German
unit
Off-market portfolio, North, South & West EUR140m Confidential GIC/Orange Capital Partners Singaporean
Dublin suburbs
Blackwood Square, Santry, Dublin 9 EUR124m EUR416k Quad Real Property Group/Roundhill Canadian
Capital
Top five total EUR1,054m
Source: Knight Frank.
In the 12 months to 31 March 2021, the MSCI Ireland Property All
Assets Index (the "Index") delivered a total property return of
-1.5%, excluding Hibernia (March 2020: 4.4%). Over this period the
Industrial sector has been the top performer in the Index, with a
total return of 11.0%, followed by the "Other" sector (which
includes PRS) at 4.7% (March 2020: 7.7% and 4.2%, respectively).
Offices delivered a total return of 1.2% (March 2020: 6.3%).
Hibernia's Total Property Return over the same period was -0.2%,
outperforming the Index, excluding Hibernia, by 1.3 percentage
points. Dublin office occupational market
Following a strong start to 2020, the onset of the pandemic
resulted in a significant slowdown in letting activity. Total
take-up was 1.5m sq. ft., a decline of 54% on 2019, with 0.8m sq.
ft. of this coming in Q1 2020, before the pandemic took hold
(source: Knight Frank). Unsurprisingly, demand was driven by
sectors which have continued to generate economic and employment
growth: 64% of take-up was from the multinational-dominated TMT
sector (2019: 55%). Only five letting transactions for more than
50,000 sq. ft. occurred in 2020, compared with 12 transactions in
2019. The city centre continued to be occupiers' preferred location
choice, accounting for 51% of volumes in 2020 (2019: 68%) (source:
Knight Frank), and this figure was somewhat lower than usual due to
one particularly large letting in the suburbs of 0.25m sq. ft. that
completed in Q1 2020. With the highest level of COVID-19
restrictions in place for the whole of Q1 2021, including the
closure of construction sites and a ban on property inspections,
the Dublin office market saw the lowest quarterly take-up on record
with <0.05m sq. ft. transacted (Q1 2020: 0.8m sq. ft) (source:
Knight Frank). Top 10 office lettings (12 months to March 2021)
Tenant Sector Building Area (sq. ft.) % of total take-up
Amazon TMT 2 Burlington Plaza, D4 76k 10%
Microsoft TMT 3 Dublin Landings, D1 44k 6%
HSE State 1 Heuston South Quarter, D8 44k 6%
OPW State 1GQ, George's Quay, D2 42k 6%
Gilead Pharma North Dock 2, D1 31k 4%
Ryanair Other 230/240 Airside Business Park, North Suburbs 30k 4%
3M TMT 2 Cumberland Place, D2 24k 3%
OPW State Paramount Place, North Suburbs 24k 3%
Rabobank Finance 76 Sir John Rogerson's Quay, D2 24k 3%
Twilio TMT 78 Sir John Rogerson's Quay, D2 20k 3%
Top 10 total 358k 49%
Source: Knight Frank. Please note Hibernia classifies 3M as
'healthcare' or 'other' in its industry classification.
Our active demand tracker, run in conjunction with Cushman &
Wakefield, saw a c.30% fall in active demand to 2.3m sq. ft.
between February 2020 and December 2020. The first signs of a
recovery are now beginning to emerge, with 2.7m sq. ft. of active
demand at the end of March 2021, representing a 17% increase on the
position at the end of December 2020. CBRE notes that several
requirements that had been on hold have been reactivated and some
new requirements initiated. Although the intensity of the
requirements (i.e. how soon the occupiers want the space) remains
relatively low, indicating occupier caution, it is encouraging to
note that CBRE is reporting approximately 0.5m sq. ft. of reserved
office space at the end of March 2021, which bodes well for leasing
activity as COVID-19 restrictions ease. Recent figures from the CSO
show that in the final quarter of 2020, the technology sector
recorded an annual increase in employment of 9%. Looking solely at
Dublin, the sector saw an annual increase in employment of 4%,
equating to 3,000 additional people employed. This trend is being
translated into active demand for office space, with approximately
30% of active demand at March 2021 coming from the technology
sector.
The overall Dublin office vacancy rate (which includes "shadow"
or "grey" space) increased to 9.9% at 31 March 2021 from 6.5% at 31
March 2020. The Grade A vacancy rate in the city centre, where all
of Hibernia's office portfolio is located, was 9.8%, up from 5.9%
at 31 March 2020 (source: Knight Frank). Of the 3.4pp increase in
overall Dublin office vacancy since 31 March 2020, 1.8pp related to
0.8m sq. ft. from un-let new buildings completing and 1.2pp related
to 0.5m sq. ft. of grey space coming back into the market as
tenants offered surplus space for sub-leasing: the remaining 0.4pp
came from lease expiries. Knight Frank estimates that approximately
0.25m sq. ft. of space could potentially come to the grey space
market in the next six to nine months, driven by space being made
available by the banking and public sectors. The main agents have
marked down their headline prime Dublin office rent assumptions by
7-10% and are also suggesting increased tenant incentives in some
cases. Knight Frank reports that prime rents in Dublin currently
stand at EUR57.50psf (Mar-20: EUR62.50psf). Office development
pipeline
We currently expect 7.5m sq. ft. of gross new space to be
delivered between 2021 and 2024 for the whole of Dublin (none
completed thus far due to the recently lifted lockdown), of which
83% will be in the city centre. 45% of office stock under
construction in Dublin has been let or reserved (46% in the city
centre), meaning there is 2.6m sq. ft. under construction but not
yet let (2.1m sq. ft. in the city centre). Since we reported in May
2020, the expected supply in Dublin between 2020 and 2023 is down
7% to 7.1m sq. ft. and the expected supply in the city centre over
the same period is down 2% to 5.6m sq. ft. (source: Knight
Frank/Hibernia).
Year Dublin city centre supply All Dublin supply
2021f 1.5m sq. ft. (79% pre-let) 1.7m sq. ft. (73% pre-let)
2022f 1.7m sq. ft. (42% pre-let) 2.1m sq. ft. (43% pre-let)
2023f 1.6m sq. ft. (28% pre-let) 1.8m sq. ft. (26% pre-let)
2024f 1.4m sq. ft. (28% pre-let) 1.9m sq. ft. (21% pre-let)
Total 2021-24 6.2m sq. ft. (44% pre-let) 7.5m sq. ft. (40% pre-let)
Source: Knight Frank/Hibernia. *Note: There have been no
development completions so far in 2021 due to the recently lifted
lockdown. Residential/PRS
There were 20,700 new home completions in 2020, down 1.9% on
2019 (source: the ESRI). This was a good outcome given the various
pandemic restrictions, but nevertheless represented the first
year-on-year decline since 2012, putting Ireland even further
behind the estimated natural demographic demand for at least 34,000
units per annum (source: the Central Bank of Ireland). For 2021,
the restrictions in effect for the first four months of the year,
under which most construction work was no longer deemed essential,
are likely to have had an adverse effect on overall housing supply.
The ESRI expects 15,000 units to be completed in 2021 and 16,000 in
2022. Dublin accounted for 29% of all Irish delivery in 2020,
slightly below the 33% proportion recorded in 2019, and when
combined with the commuter counties around Dublin, the Greater
Dublin Area ("GDA") accounted for 50% of Irish completions in 2020
(2019: 55%) (source: the CSO). Within the GDA, houses accounted for
69% of completions and apartments for 31% in 2020, still far from
the aspirations of the Ireland 2040 plan for compact urban growth.
At 19% of total completions, apartment building in Ireland is
running at the lowest level of any EU member state, with the
average being 59% (source: the European Commission). Knight Frank
estimates that there continues to be EUR3bn of capital looking to
deploy into PRS in Ireland and this is likely to keep prime yields
in the sector stable
at 3.75-4.00%.
The latest data from the Residential Tenancies Board ("RTB") for
Q4 2020 show that nationally rents grew by 2.7% year-on-year and
that the standardised average rent stood at EUR1,256 per month.
Rents grew faster outside Dublin than within: Dublin rents grew by
2.1% year-on-year while the GDA excluding Dublin grew by 5.0% and
other regions outside the GDA grew by 3.4%. Apartment rents grew
2.0% in Dublin and 2.7% outside Dublin.
Business review Progress against strategic priorities for
FY21
We have made good progress with the strategic priorities set out
in the 2020 Annual Report, and we summarise this in the table
below. As outlined in the CEO's Statement much of our attention in
the financial year has been on the longer term and ensuring our
business is evolving to meet changing occupier expectations: this
is the basis for our strategic focus on office clusters and ESG
excellence.
Strategic priority Key targets Progress in 12 months to March 2021
? Let remaining space in 2 ? In-place office vacancy of 7% (9%
Cumberland Place including Clanwilliam and Marine)
? Get office vacancy rate to 5% ? Contracted rental income +2% to
or below EUR67.1m
1. Grow rental income and, where possible, ? Agree two outstanding rent ? Net rental income +8% to EUR63.3m
WAULTs to drive dividends per share reviews and five rent reviews ? Three rent reviews and five lease
upcoming during FY21 variations agreed, adding
? Minimise impact from COVID-19 incremental rent of EUR0.7m
on rental income ? Average rent collection rates
running at 99% in FY21
? 2 Cumberland Place still on
? Deliver 2 Cumberland Place on budget but completion delayed by
budget in late 2020 COVID-19 site lockdowns and now
? Enhance and progress pipeline expected in Jul-21
2. Complete 2 Cumberland Place and work to schemes to improve potential ? Final grant of planning obtained
optimise development pipeline to maximise returns for 152,000 sq. ft. redevelopment
risk-adjusted returns for shareholders ? Assess timing of upcoming of Clanwilliam Court
(e.g. optimising clusters, progressing projects in light of market ? We continue to assess our
re-zonings) conditions upcoming schemes in the current
? Assess existing in-place market
portfolio for future value-add ? We are assessing in-place
opportunities portfolio for future
opportunities
? Continue to seek to dispose of ? EUR11.1m deployed in five
assets which do not meet our acquisitions adjacent to existing
expectations for forward Hibernia assets
3. Continue to recycle capital and make returns ? EUR16.8m invested in development
selective investments to enhance Group ? Make acquisitions or expenditure
returns investments where we see ? EUR25m share buyback programme
opportunities to enhance Group executed: 23.1m shares acquired
returns in the medium term and cancelled at an average price
of EUR1.08
? At Mar-21 cash and undrawn
? Maintain sufficient cash and facilities were EUR110m net of
undrawn facilities for any committed expenditure
investment opportunities that ? In May-21 the Group agreed to
4. Maintain balance sheet flexibility to arise issue EUR125m of new 10- and
take advantage of investment ? Ensure level of indebtedness 12-year USPP notes, adding
opportunities as they arise does not bring the Group close financial capacity and extending
to breaching any of the the average term
financial covenants in its debt ? The Group has significant
facilities headroom on all its financial
covenants (please see Financial
Review for further details)
? Real-time energy monitoring
system installed and operational
? Reduce energy consumption and ? Energy consumption and GHG
GHG emissions per square metre emissions reductions of 23% and
on a like-for-like and absolute 26% achieved on a like-for-like
5. Continue to improve environmental basis basis and 21% and 26% on an
efficiency of the portfolio ? Achieve LEED Platinum absolute basis
certification at 2 Cumberland ? On track for LEED Platinum in 2
Place Cumberland Place
? Revise Sustainability Strategy ? New Sustainability Statement of
Intent published, including a
commitment to become a Net Zero
Carbon business by 2030 Disposals and acquisitions
We made no disposals (March 2020: none) and invested EUR11.1m in
five acquisitions, all of which are adjacent to or within close
proximity of existing Hibernia assets and were "bolt-on" in nature
(March 2020: EUR23.3m). In addition, on 31 March 2021 we
transferred three assets acquired as part of a loan portfolio in
2014 into investment property at a cost of EUR0.6m. We continue to
review acquisition and disposal opportunities though we will be
disciplined in pursuing these, assessing them against investment in
the material development opportunities within our portfolio (see
developments and refurbishments section below for more details).
Portfolio overview
At 31 March 2021 the investment property portfolio consisted of
39 assets valued at EUR1,427.4m (March 2020: 36 assets valued at
EUR1,465.2m) which can be categorised as follows:
Value as at
March 2021 % of portfolio Equivalent yield1 Passing rent Contracted rent ERV
(all assets)
1. Dublin CBD offices
Traditional Core EUR415m 29% 5.0%2 EUR22.6m EUR22.7m EUR22.7m
IFSC EUR178m 12% 4.8% EUR8.3m EUR8.3m EUR10.9m
South Docks EUR546m3 38% 4.4% EUR26.9m EUR27.2m EUR27.8m
Total Dublin CBD offices EUR1,139m3 80% 4.7%2 EUR57.9m EUR58.2m EUR61.4m
2. Dublin CBD office developments4 EUR62m 4% - - EUR1.5m EUR3.6m
3. Dublin residential5 EUR168m6 12% 3.8%7 EUR6.0m7 EUR6.0m7 EUR6.7m7
4. Industrial/ other EUR59m 4% 3.2%8 EUR1.5m EUR1.5m EUR2.2m
Total EUR1,427m3,6 100% 4.5%2,7,8 EUR65.3m7 EUR67.1m7 EUR73.8m7 1. Yields on unsmoothed values and excluding the adjustment for 1WML owner-occupied space. 2. Harcourt Square, Clanwilliam Court and Marine House yields are calculated as the passing rent over the total value
(after costs) which includes residual land value. Excludes
Iconic Offices in Clanwilliam Court. 3. Excludes the value of space
occupied by Hibernia in 1WML. 4. 2 Cumberland Place and 50 City
Quay. 5. Includes 1WML residential element (Hanover Mills). 6.
Valuation assuming 80% net-to-gross and purchaser costs as per
C&W at Mar-21. 7. Residential income on net basis assuming
Hibernia cost where asset is stabilized and 80% net-to-gross
otherwise. 8. Current rental value assumed as ERV as these assets
are valued using a combination of price per acre and on an
income basis.
Note: differences in summation of totals in above table are due
to rounding.
The key statistics of our office portfolio, which comprised 84%
of our overall property portfolio by value at 31 March 2021 and 89%
by contracted rent (March 2020: 85% and 88%, respectively), are set
out below. The WAULT to break/ expiry of our completed office
developments (the majority of our office income) is 8.1 years. By
comparison, our acquired office assets have a WAULT to break or
expiry of just under three years, with those assets in our
development pipeline (Marine House, Clanwilliam Court and Harcourt
Square) having a WAULT of 1.3 years: this is to facilitate future
redevelopment activity.
Contracted WAULT to WAULT to % of rent % of next rent % of rent MTM2 at
rent ERV review1 break/ upwards only review cap & next lease event
expiry collar
EUR26.9m EUR26.6m 2.8yrs 15% - 85%
1. Acquired in-place (EUR48psf) (EUR47psf) 1.8yrs
office portfolio
EUR9.7m EUR9.7m
Development pipeline 1.3yrs - - 100%
assets3 (EUR42psf) (EUR42psf) 1.3yrs
Investment assets EUR17.2m EUR16.9m
3.7yrs 23% - 77%
(EUR52psf) (EUR51psf) 2.1yrs
2. Completed office EUR31.3m EUR31.1m 1.9yrs 8.1yrs - 29% 71%
developments4 (EUR54psf) (EUR54psf)
Whole in-place office EUR58.2m EUR57.7m 1.9yrs 5.6yrs 7% 15% 78%
portfolio (EUR51psf) (EUR51psf)
EUR1.5m EUR1.4m
3. Committed office-let7 5.0yrs 10.0yrs 0% 0% 100%
(EUR61psf) (EUR59psf)
EUR59.7m EUR59.2m
Total office portfolio 1.9yrs 5.8yrs 7% 15% 78%
(EUR51psf) (EUR51psf)
4. Vacant in-place office - EUR3.7m5 - - - - -
(EUR47psf)
5. Committed office-unlet6 - EUR2.2m - - - - -
(EUR55psf)
Whole in-place office - EUR65.0m - - - - -
portfolio (after vacancy) (EUR51psf) 1. To earlier of review or expiry. 2. Mark-to-market. 3. Hibernia assumption that ERV of near term development pipeline is equal to current contracted rent. 4. 1 Cumberland Place, SOBO Works, 1&2DC, 1WML, 2WML, 1SJRQ. 5. Includes parking and retail in office buildings. 6. 2 Cumberland Place and 50 City Quay. 7. In Apr-20 3M signed a pre-lease in 2 Cumberland Place.
Since 31 March 2020 Group contracted rent has increased by 2.2%
to EUR67.1m, with the main drivers being the pre-let to 3M in 2
Cumberland Place and the five other new leases signed, which
outweighed the loss of income from the expiry of some leases in
Marine House and Clanwilliam Court. Three rent reviews and five
lease variations added a further EUR0.7m. The vacancy rate of the
in-place office portfolio, which was 7% by lettable area in March
2020, remained 7% at 31 March 2021, excluding Marine House and
Clanwilliam Court which we expect to redevelop in the near term:
including these two assets it rose to 9%. For further details on
the vacant space and the increase in contracted rent, please refer
to the asset management section below and for further details on
our plans for Marine House and Clanwilliam Court please see the
developments and refurbishments section below.
At 31 March 2021 our 10 largest tenants, all of which are large,
multinational companies or state entities, accounted for 54% of our
Group contracted rent of EUR67.1m. By sector, technology and state
entities accounted for 58% of contracted rent (please see the
selected portfolio information on pages 8 to 9). As noted elsewhere
in this document, our rent collection statistics have remained
strong throughout the pandemic. Portfolio performance
In the financial year ended 31 March 2021 the portfolio value
decreased EUR68m, or 4.4% on a like-for-like basis (i.e. excluding
acquisitions, disposals and capital expenditure). In the prior
financial year, the portfolio value increased EUR23m, or 2.0% on a
like-for-like basis, with gains in the investment portfolio and our
development assets reduced by the 1.5pp increase in the rate of
commercial stamp duty in Ireland in late 2019.
Value at March Value at March
2020* Capex Acquis-itions H1 H2 2021* Like-for-like
1 Revaluation Revaluation change
(all assets) (all assets)
Traditional Core EUR435m EUR0.6m - (EUR21m) EUR1m EUR415m (EUR20m) (4.7%)
IFSC EUR205m - - (EUR14m) (EUR13m) EUR178m (EUR27m) (13.1%)
South Docks EUR555m2 EUR2.2m EUR6.9m (EUR18m) - EUR546m2 (EUR17m) (3.1%)
1. Total Dublin CBD EUR1,194m2 EUR2.8m EUR6.9m (EUR53m) (EUR12m) EUR1,139m2 (EUR64m) (5.4%)
offices
2. Dublin CBD office EUR51m EUR15.1m - (EUR3m) (EUR1m) EUR62m (EUR4m) (5.7%)
developments
3. Dublin residential EUR159m EUR0.2m EUR0.9m3 EUR4m EUR3m EUR168m EUR7m 4.5%
4. Industrial/other EUR61m - EUR3.9m3 (EUR5m) (EUR1m) EUR59m (EUR5m) (7.7%)
Total EUR1,465m2 EUR18.1m EUR11.7m (EUR57m) (EUR11m) EUR1,427m2 (EUR66m) (4.4%) 1. Including acquisition costs. 2. Excludes the value of space occupied by Hibernia in 1WML. 3. Includes the internal transfer of three non-core assets into investment property.
Note: At Mar-20, 50 City Quay was included in the South Docks
segment. At Sep-20, this property was undergoing a substantial
refurbishment and so it was moved to Dublin CBD Office
Developments.
*Note: In the Mar-20 valuation C&W included a material
uncertainty clause for all assets valued, in line with RICS
guidance. In the Sep-20 valuation C&W removed the material
uncertainty clause for assets within the "Dublin residential" group
and in the Mar-21 valuation C&W removed the material
uncertainty clause for all assets within portfolio.
The valuation decrease in the portfolio during the financial
year, which came mostly in the first quarter as the initial impact
of the pandemic was felt, was driven by the following: ? CBD
offices: 5.4% reduction in value, largely due to a combination of
yield expansion and lower net effective rents
applied across the office portfolio. While yields on our most
prime offices and near-term developments (1SJRQ,
Harcourt Square, Clanwilliam Court and Marine House) remained
unchanged, yields on other offices moved out between
5bps and 20bps. Headline office ERVs remained largely unchanged,
but an additional three months rent free (over an
assumed 10-year term) was generally assumed, resulting in a c.
3% reduction in net effective rents across the
office portfolio. The value of our near-term developments
(Harcourt Square, Clanwilliam Court and Marine House)
declined due to the quantum of rental income left to be paid
under the current leases (prior to development)
reducing, but the residual site values remained broadly flat. ?
CBD office development: 5.7% reduction in value due to the same
valuation assumption changes applied to the CBD
offices segment noted above. In addition, the assumed period
required to let the vacant space once these properties
(2 Cumberland Place and 50 City Quay) reach practical completion
was increased. ? Residential: 4.5% increase in value, mainly due to
yield compression driven by the weight of capital seeking
investment opportunities in Dublin PRS. ? Industrial/other: 7.7%
reduction in value, primarily due to lower values per acre applied
to our land at Newlands.
While the industrial portfolio has experienced some yield
compression and ERV growth, the value increase has been
offset by a reduction in the value attributed to future
development potential as a result of the uncertainty
arising from the pandemic. Developments and refurbishments
Capital expenditure on developments in the financial year was
EUR16.8m (2020: EUR21.3m) and mostly related to 2 Cumberland Place,
our main active development. In August 2020 work started at 50 City
Quay, a small refurbishment project in the Windmill Quarter. Both
schemes have been delayed by the COVID-19 restrictions in Ireland
and are expected to be completed in July 2021, delivering a total
of 62,500 sq. ft. of Grade A office space, 38% of which is pre-let.
In the financial year we also received a final grant of planning
for the redevelopment of Clanwilliam Court. This means the three
office schemes in our near-term development pipeline now have full
planning permission to deliver 539,000 sq. ft. of Grade A office
space, and can be started in early 2022 (Marine House &
Clanwilliam Court, most likely as one project) and early 2023
(Harcourt Square). Committed development schemes
Construction is nearing completion at 2 Cumberland Place and 50
City Quay, with delivery expected in July 2021. 24,000 sq. ft. of
the 58,000 sq. ft. of offices in 2 Cumberland Place was pre-let to
3M Digital Science Community Ltd, a subsidiary of the 3M Company,
in April 2020. In August 2020 work commenced on the refurbishment
of 50 City Quay. The 4,500 sq. ft. office building is situated in
the Windmill Quarter, adjacent to 1SJRQ and faces the River Liffey.
The completion of both schemes has been impacted by COVID-19
restrictions, most notably the closure of construction sites in
Ireland from early January until early May 2021 and both are now
expected to complete in July 2021. Nonetheless, we are not
expecting material cost overruns on either scheme.
Please see further details on the schemes below:
Total area post Full Est. Capex to Est. total cost Office Expected practical
completion (sq. ft.) purchase capex complete (incl. land) ERV1 ERV1 completion ("PC") date
price
2 Cumberland 58k office2
Place, D2 EUR0m3 EUR35m EUR2m EUR598psf4 EUR3.4m EUR56.65psf Jul-21
1k retail/café
50 City Quay, 4.5k EUR3m EUR1m EUR1m EUR935psf EUR0.3m EUR55.00psf Jul-21
D2
62.5k office2
Total
committed EUR3m3 EUR36m EUR3m EUR617psf EUR3.7m EUR56.53psf
1k retail/café 1. Per C&W headline office ERV at Mar-21. 2. In Apr-20, 24,000 sq. ft. (41%) was pre-let to 3M on a 10-year lease 3. The site forms part of Cumberland Place and at the time of acquisition of Cumberland House no value was ascribed to
it. 4. Office demise only. Development pipeline
We received a final grant of planning from An Bord Pleanála, the
planning appeals board, for the 152,000 sq. ft. redevelopment of
Clanwilliam Court after Dublin City Council's initial planning
approval was the subject of a third-party appeal. This means we
have planning permission now for the three office projects in our
near-term development pipeline, Marine House, Clanwilliam Court and
Harcourt Square. Together these schemes can deliver 539,000 sq. ft.
of Grade A office space in Dublin's Traditional Core, a net
increase of 283,000 sq. ft. and a 25% increase in the size of our
current in-place office portfolio. We are also assessing the
longer-term redevelopment potential of certain other assets within
the portfolio.
We can start the redevelopment of Marine House and Clanwilliam
Court from early 2022, when the existing leases expire, and we can
start the redevelopment of Harcourt Square from early 2023. All
three schemes should be profitable under most market conditions:
based on the planning approvals we have in place, the valuations of
the three properties at 31 March 2021 (which include the present
value of the income remaining on the leases) equate to aggregate
capital values of EUR306[6] per buildable sq. ft. and the estimated
capital expenditure required to deliver the schemes is EUR555 per
buildable sq. ft., an all-in cost of EUR861[7] per buildable sq.
ft.
We continue to hold 155.2 acres of land with potential for
mixed-use development schemes in the longer term: re-zoning will be
necessary in all cases and consequently the timing of any future
developments remains uncertain at present.
Current area Area post Full
Office Sector completion purchase Comments
price1
(sq. ft.) (sq. ft.)
? Full planning for refurbishment and extension
of Marine House to provide 50k sq. ft. of
office accommodation
Marine House Office 41k 50k EUR30m
? Leases expire during 2021
? Redevelopment opportunity post 2021
141k office ? Potential to create an office cluster similar
Clanwilliam Office 93k EUR59m to Windmill Quarter (with Marine)
Court 11k ancillary
? Final planning grant received Aug-20
? Leased to OPW until Dec-22
? Site offers potential to create cluster of
337k office office buildings with shared facilities or a
Harcourt Office 122k EUR77m major HQ
Square
? Planning granted for 337k sq. ft. of offices
(343k incl. reception areas)
Total office
& ancillary EUR166m
256k 539k
Current area Area post Full
Mixed-use Sector completion purchase Comments
(sq. ft.) (sq. ft.) price1
? Strategic transport location
Newlands Industrial 143.7 acres n/a EUR48m2
(Gateway) / other ? Potential for future mixed-use redevelopment
subject to re-zoning
Dublin 128k on ? Strategic transport location
Industrial Industrial n/a EUR12m ? Potential for future mixed-use development
Estate 7.7 acres subject to re-zoning
Malahide Road 66k warehouse & ? Potential for future mixed-use development
Industrial Industrial 17k office on 3.8 n/a EUR8m subject to re-zoning
Park acres
Total
mixed-use EUR68m
155.2 acres n/a 1. Including transaction costs and capex spent to date. 2. Initial consideration. Asset management
Net capital expenditure on maintenance amounted to EUR0.7m in
the financial period or EUR0.3m net of refunds (March 2020:
EUR0.8m). Contracted rent increased by 2.2% to EUR67.1m (March
2020: EUR65.7m) as a result of: ? Six new lettings adding EUR2.6m,
including a pre-let of EUR1.5m; ? Rent reviews concluded and lease
variations adding EUR0.7m; ? Acquisitions adding EUR0.5m; and ?
Lease expiries, breaks, surrenders and adjustments reducing
contracted rent by EUR2.3m.
Some other key statistics at 31 March 2021: ? The vacancy rate
of the in-place office portfolio was 7% based on lettable area
(March 2020: 7%) and this available
space had an ERV of EUR3.1m, excluding retail and parking (March
2020: EUR4.0m). Including Marine House and Clanwilliam
Court, where the leases are being allowed to expire to enable
redevelopment, the vacancy rate was 9%; ? Average rent across the
in-place office portfolio was EUR51psf (March 2020: EUR50psf) and
the ERV was also EUR51psf
(March 2020: EUR51psf); ? Three office rent reviews were active
over 60,000 sq. ft. of office space, with a modest (<EUR1m)
uplift in
contracted rent expected (March 2020: two rent reviews active
over 30,000 sq. ft. with a <EUR1m uplift expected); ? Please see
page 16 in the Financial Review for rent collection statistics,
which remain strong. Summary of letting activity in the period
Office: ? Five new offices leases agreed over 21,600 sq. ft.,
adding EUR1.1m per annum of gross new rent, and one pre-let on
24,000 sq. ft., adding a further EUR1.5m per annum. Net of
expiries, breaks, surrenders and adjustments on let or
licensed space, the total incremental new rent was EUR0.4m per
annum. The term certain of the five new leases is 4.1
years and the term certain of the pre-let is 10 years. ? Two
rent reviews were concluded over 30,000 sq. ft., increasing
contracted rent by EUR0.6m: in aggregate the revised
rents were approximately 60% ahead of the previous contracted
rents and modestly ahead of the ERV at the date of
review.
Industrial: ? One rent review concluded over 22,000 sq. ft. and
three lease extensions signed over 217,000 sq. ft., increasing
contracted rent by EUR0.1m per annum.
Residential: ? A 3pp increase in the vacancy rate on our 334
residential units to 8% resulted in the contracted annual rent at
31
March 2021 reducing by EUR0.1m compared with 31 March 2020. ?
All let units are subject to the rental cap regulations. Key asset
management transactions by property ? Central Quay, South Docks: In
November 2020 we agreed to let 12,000 sq. ft. to Hines Real Estate
Ireland Limited
("Hines") on a long lease on terms in line with the June 2020
ERV. Hines previously occupied 8,000 sq. ft. in
Clanwilliam Court and its lease there was terminated. The move
resulted in a net increase in Hibernia's contracted
annual rent of EUR0.2m. In January 2021 we let a 3,000 sq. ft.
ground floor unit to Europ Assistance S.A. on a
10-year lease, adding EUR0.1m to contracted rent, in line with
the September 2020 ERV. Separately, Invesco has served
notice to exercise a break option on its lease of 11,000 sq. ft.
in the building with effect from November 2021:
this will result in a 12-month rental penalty. ? 2 Cumberland
Place, Traditional Core: Construction of the 58,000 sq. ft. office
building is approaching completion
(see further details above). In April 2020 we agreed to lease
24,000 sq. ft. to 3M Digital Science Community Ltd, a
subsidiary of 3M Company, on a 10-year lease on terms ahead of
the September 2019 ERV. ? Hardwicke House, Traditional Core: In
December 2020, two rent reviews over 30,000 sq. ft. were concluded
modestly
ahead of ERV at the date of review, adding EUR0.6m to contracted
rent. ? Gateway, D22/24: In July 2020 we agreed lease extensions
for two of the terminals to July 2021 and we have agreed a
rent review on another unit of the site, which is also let on
short term rolling leases. In total these agreements
have increased our contracted rent by EUR0.2m per annum. ?
Marine House, Traditional Core: Most of the leases in the 41,000
sq. ft. office building expired in June 2020. We
have taken the decision to offer short term lease arrangements
to align with the neighbouring blocks in Clanwilliam
Court, where leases mostly expire in late 2021 or early 2022. At
present Marine House is 53% occupied, generating
rent of EUR0.8m per annum. Key in-place office properties with
vacancy at period end
As noted above, the in-place office portfolio vacancy rate at 31
March 2020 was 7% and it remained at this level at 31 March 2021,
excluding Marine House and Clanwilliam Court, where the leases are
being run down to facilitate redevelopment of the properties in the
near term. Including Marine House and Clanwilliam Court, the office
vacancy rate at 31 March 2021 was 9%. The main office investment
assets with vacancy are: ? Central Quay, South Docks: 11,000 sq.
ft. of office accommodation available to lease; ? The Forum, IFSC:
all 47,000 sq. ft. of office accommodation and 50 car parking
spaces are available to lease; and ? Other: 9,000 sq. ft. of
available space. Future rent reviews, break options and lease
expiries
The table below summarises upcoming rent reviews and lease
expiries by financial year, as well as setting out the ERVs for
this space, at 31 March 2021. As noted in the footnote below, only
a relatively small amount of income, EUR6.0m, is subject to break
options over the next five years.
Current income ERV @ Mar-21
FY Expiries for near term All other lease Rent Expiries for near term All other lease Rent
development expiries review development expiries review
Mar-21 EUR0.1m EUR0.1m EUR2.9m EUR0.1m EUR0.1m EUR3.2m
Mar-22 EUR3.6m EUR0.7m EUR11.6m EUR3.6m EUR0.7m EUR11.9m
Mar-23 EUR6.0m EUR0.7m EUR8.8m EUR6.0m EUR0.5m EUR8.2m
Mar-24 - EUR3.3m EUR4.8m - EUR3.3m EUR4.7m
Mar-25 - EUR2.9m EUR11.4m - EUR2.9m EUR11.2m
Total EUR9.7m EUR7.7m EUR39.5m1 EUR9.7m EUR7.4m EUR39.3m1
Note: The table above shows upcoming rent reviews and expiries:
break options amount to an additional EUR6.0m over the period to
Mar-25 as follows :EUR0.2m in FY22, EUR2.8m in
FY23, EUR1.4m in FY24 and EUR1.5m in FY25
1. EUR9.0m of this income is capped & collared at next
review and a further EUR4.0m is subject to upward only rent review
provisions.
Sustainability/ESG
Improving our sustainability performance is a key strategic
priority. In the four years to December 2020 (our sustainability
data is measured on a calendar year basis), we achieved a reduction
of over 50% in greenhouse gas emissions intensity from
landlord-obtained utilities in our managed offices on a
like-for-like basis and a reduction of over 55% on an absolute
basis. Our performance in 2020 (a reduction of 26% in greenhouse
gas emissions intensity from landlord-obtained utilities in our
managed offices on a like-for-like basis and on an absolute basis
when compared against 2019) was helped by the reduction in office
usage due to the pandemic and also as a result of the real-time
energy monitoring system we have installed in our managed office
buildings. We received our third successive EPRA Gold Award for the
quality of our sustainability performance disclosures in 2020, our
first four star GRESB rating and a B minus rating in our response
to the CDP Climate Change questionnaire - a positive result for our
first submission.
As mentioned in previous statements, a major area of focus for
us in the financial year was assessing pathways towards Net Zero
Carbon emissions and considering the disclosure recommendations of
the TCFD. In April 2021 we published "Transforming Dublin
Responsibly", our Sustainability Statement of Intent. This replaced
our existing Sustainability Strategy, setting long-term targets for
the business, including commitments to become a Net Zero Carbon
business by 2030 and to fully align our disclosures with the TCFD
recommendations by 2022. For further details please see the
sustainability section of our website
(https://www.hiberniareit.com/sustainability).
Financial review
As at 31 March 2021 31 March 2020 Movement
IFRS NAVPS 173.6c 179.8c (3.4)%
EPRA NTAPS1 172.7c 179.2c (3.7)%
Net debt1 EUR278.8m EUR241.4m +15.5%
Group LTV1 19.5% 16.5% +3.0pp
Financial year ended 31 March 2021 31 March 2020 Movement
(Loss)/profit after tax (EUR25.2m) EUR61.0m (141.3)%
EPRA earnings1 EUR42.2m EUR38.1m +10.8%
Diluted IFRS EPS (3.7)c 8.8c (142.0)%
EPRA EPS1 6.3c 5.5c +13.4%
Proposed final DPS1 3.4c 3.0c +13.3%
FY21 DPS1 5.4c 4.75c +13.7%
1. An alternative performance measure ("APM"). The Group uses a
number of such financial measures to describe its performance,
which are not defined under IFRS and which are therefore considered
APMs. In particular, measures defined by EPRA are an important way
for investors to compare similar real estate companies. For further
information see Supplementary Information at the end of this
report.
The key drivers of the 6.5 cent decrease in EPRA NTA per share
since 31 March 2020, were: ? A 9.9 cent per share reduction due to
revaluation losses on the property portfolio, including a 0.5 cent
per share
reduction from active developments: 6.9 cent of these
revaluation losses came in the first quarter; ? A 6.3 cent per
share increase from EPRA earnings; ? Payment of the FY20 final
dividend and FY21 interim dividend, which reduced NTA by 5.0 cent
per share; and ? Other items, primarily the share buy-back, which
increased NTA by 2.1 cent per share.
EPRA earnings were EUR42.2m, up 10.8% (or EUR4.1m) compared with
the prior financial year due to: ? A full year of income from
leases agreed in the prior year, which added EUR5.1m to earnings.
These included leases
within completed office developments (e.g. 1SJRQ, 2WML) and
leases in our office investment assets (e.g. South Dock
House, Observatory); ? Activity in the current financial year,
including rent reviews, new lettings, acquisitions and rent waived,
which
added EUR0.8m to earnings; ? Lease expiries and terminations,
which reduced earnings by EUR1.2m; and ? A modest increase in costs
(primarily a larger finance expense due to a larger drawn debt
position) which reduced
earnings by EUR0.6m.
The Group recorded an after-tax loss of EUR25.2m in the
financial year, a reduction of 141.3% over the prior year profit
after tax of EUR61.0m, due to revaluation losses on the investment
property portfolio of EUR67.6m (2020: revaluation gain of
EUR22.9m). Funding position
Group leverage target: our through-cycle target remains a loan
to value ratio of 20-30%.
The Group's debt funding is fully unsecured and comprises a
revolving credit facility ("RCF") and private placement notes. The
weighted average maturity of the Group's debt at 31 March 2021 was
3.4 years (March 2020: 4.4 years), with no debt due before December
2023. In May 2021, the Group agreed to issue EUR125m of new private
placement notes to five institutional investors, with closing
occurring in late July 2021. The new notes will help finance the
Group's development pipeline and provide long-term, low-cost
funding. Pro-forma for the new private placement notes the weighted
average maturity of the Group's debt at 31 March 2021 was 5.2
years. Please see the table below for further details on the
Group's debt facilities.
Instruments Quantum Maturity Interest cost Security
2.0% over EURIBOR on drawn funds
Revolving credit facility (five year) EUR320m December 2023 Unsecured
0.8% undrawn commitment fee (fixed)
Private placement notes (seven year) EUR37.5m January 2026 2.36% coupon (fixed) Unsecured
Private placement notes (ten year) EUR37.5m January 2029 2.69% coupon (fixed) Unsecured
Total at 31 March 2021 EUR395m 3.4 years
Private placement notes (ten year) EUR62.5m July 2031 1.88% coupon (fixed) Unsecured
Private placement notes (twelve year) EUR62.5m July 2033 1.92% coupon (fixed) Unsecured
Total including new issuance EUR520m 5.2 years
At 31 March 2021, net debt was EUR278.8m (March 2020:
EUR241.4m), equating to an LTV of 19.5% (March 2020: 16.5%). The
main capital expenditure items driving the increase in net debt in
the financial year were development expenditure of EUR16.8m,
acquisition expenditure of EUR11.1m and the share buyback of EUR25m
(please see further details below in capital management). Cash and
undrawn facilities at 31 March 2021 amounted to EUR116m or EUR110m,
net of committed expenditure (March 2020: EUR154m and EUR136m,
respectively). Pro-forma for the new private placement notes, cash
and undrawn facilities at 31 March 2021 amounted to EUR241m or
EUR235m, net of committed expenditure. Assuming full investment of
the available facilities in property, including the new private
placement notes, the LTV, based on market values at 31 March 2021,
would be c. 31%.
The Group has significant headroom on the financial covenants on
its borrowings: the table below outlines the principal financial
covenants and the headroom above each at 31 March 2021.
Key covenant Calculation Requirement At 31 March Headroom to covenant limit
21
Loan to value Gross debt/(portfolio <50% 20.8%1 Portfolio value would have to fall 59% before breach
value + cash) (March 2020: 65%)
Interest cover Underlying EBIT/total >1.5x 6.4x2 Underlying EBIT would have to fall 77% before breach
ratio finance costs (March 2020: 76%)
Net worth Net Asset Value >EUR400m EUR1,149m Net Asset Value would have to fall 65% before breach
(March 2020: 68%) 1. Reported LTV is calculated as net debt/portfolio value, giving a ratio of 19.5%. 2. Based on 12-month historic interest cover at 31 March 2021. Interest rate hedging
Group hedging policy: to ensure the majority of the interest
rate risk on drawn debt balances is fixed or hedged.
In December 2020, the Group entered interest rate caps on
EUR200m of notional debt for a premium of EUR0.6m, taking advantage
of the low interest rate expectations at the time. These caps have
a strike rate of 0.25% EURIBOR and cover the five-year period to
December 2025. The Group's existing interest rate hedging
instruments on EUR125m of notional debt, which have a strike rate
of 0.75% EURIBOR, are expected to expire in December 2021. At 31
March 2021 the Group's interest rate risk on its RCF drawings of
EUR227m (2020: EUR187m) were mitigated by these instruments, which
cover EUR325m of notional exposure (2020: EUR125m) and the Group
had EUR75m of fixed coupon private placement notes (2020: EUR75m).
This means 143% of the interest rate risk on the RCF drawings was
hedged (2020: 67%) and 132% of the Group's overall interest rate
risk on its debt was fixed or hedged (2020: 76%). The "over-hedged"
position at 31 March 2021 results in no additional financial risk
to the Group. Please see the table below for further details on the
Group's hedging instruments at 31 March 2021.
Instrument Notional Strike rate Exercise date Effective date Termination date
Cap EUR125m 0.75% n/a February 2019 December 2021
Swaption EUR125m 0.75% December 2021 December 2021 December 2023
Cap EUR200m 0.25% n/a December 2020 December 2025 Capital management
In August 2020, given the prevailing share price, we announced a
EUR25m share buyback programme to complete the return to
shareholders of the proceeds of the sale of 77 Sir John Rogerson's
Quay, which were received in early 2019. The share buyback
programme completed on 16 November 2020, at which point 23.1m
shares had been repurchased and cancelled at an average purchase
price per share of EUR1.08. The buyback programme was accretive to
both EPRA NTAPS and EPRA EPS, with the effects seen particularly in
the second half of the financial year, when the majority of the
shares were repurchased and cancelled. No shares are being held in
treasury. Rent collection
Our tenants are important stakeholders in our business, and we
have been working closely with them to offer support, where needed,
in the current circumstances. This has included allowing some
tenants to pay rent monthly in advance rather than quarterly in
advance on a temporary basis and, in a limited number of cases,
rent deferrals or waivers. On average our rent collection rates in
the financial year averaged 99% across our commercial and
residential properties. Commercial tenants[1]
As shown in the table below, our commercial rent collection has
remained strong since the start of the pandemic.
Quarter ending
Commercial rent FY21
Jun-21 (Q1 FY22)
Rent received
Within seven days 88% 89%
Within 14 days 92% 91%
Within 30 days 94% 94%
Within 60 days 97% 98.5%
Rent received at 24 May 2021 97% 98.5%
Rent on payment plans
Monthly rent not yet due 2% -
Rent deferred - 0.5%
Rent on payment plans at 24 May 2021 2% 0.5%
Rent unpaid
Rent due 1% 0.5%
Rent waived - 0.5%
Rent unpaid at 24 May 2021 1% 1% Residential tenants[2]
At close of business on 24 May 2021, 98% of the rent due for the
month of May had been received and the occupancy rate in our
residential units was 94%. At the same point in April, 98% of that
month's contracted rent had been received and the occupancy rate
was 93%. We have now received 99% of the April rent due. Across
FY21 we have now received 99% of rent due and the occupancy rate
averaged 94%. Dividend
Group dividend policy: to distribute 85-90% of rental profits
via dividends each financial year, in compliance with the
requirement of the Irish REIT legislation to distribute at least
85%. The interim dividend in a financial year will usually be
30-50% of the total ordinary dividends paid in respect of the prior
financial year.
The Board has proposed a final dividend of 3.4 cent per share
(March 2020: 3.0 cent), taking the total dividend for the financial
year to 5.4 cent per share. This is a 13.7% increase on prior year
(March 2020: 4.75 cent) and represents 86% of EPRA EPS for the
financial year (March 2020: 86%). Subject to approval at the
Group's AGM on 27 July 2021, the final dividend is expected to be
paid on 30 July 2021 to shareholders on the register at 2 July
2021. The final dividend will be a Property Income Distribution in
respect of the Group's property rental business, as defined under
the Irish REIT legislation.
Selected portfolio information
1. Summary EPRA measures
Financial year ended Financial year ended
EPRA performance measure Unit
31 March 2021 31 March 2020
EPRA earnings EUR'000 42,223 38,093
EPRA EPS cent 6.3 5.5
Diluted EPRA EPS cent 6.2 5.5
EPRA cost ratio - including direct vacancy costs % 25.0% 26.8%
EPRA cost ratio - excluding direct vacancy costs % 23.5% 25.2%
EPRA performance measure Unit As at 31 March 2021 As at 31 March 2020
EPRA Net Initial Yield ("NIY") % 4.4% 4.1%
EPRA "topped-up" NIY % 4.4% 4.4%
IFRS NAV EUR'000 1,148,638 1,231,149
IFRS NAV per share cent 173.6 179.8
EPRA Net Reinstatement Value ("EPRA NRV") cent 192.7 199.5
EPRA Net Tangible Assets ("EPRA NTA") cent 172.7 179.2
EPRA Net Disposal Value ("EPRA NDV") cent 171.2 178.3
EPRA vacancy rate % 8.5% 6.9%
Adjusted EPRA vacancy rate % 7.3% 6.9%
Note: These EPRA measures are APMs. Please see Supplementary
Information at the end of this report for further details.
2. Top 10 tenants by contracted rent and percentage of
contracted rent roll1
Top 10 tenants EURm % Sector
1 HubSpot Ireland Limited 10.5 16% Technology
2 OPW 6.0 9% State entity
3 Twitter International Company 5.1 8% Technology
4 Zalando 2.9 4% Technology
5 Autodesk Ireland Operations 2.8 4% Technology
6 Informatica Ireland EMEA 2.1 3% Technology
7 Riot Games 2.0 3% Technology
8 Travelport Digital Limited 1.8 3% Technology
9 Deloitte 1.7 2% Professional services
10 BNY Mellon Fund Services 1.6 2% Banking and capital markets
Top 10 tenants 36.5 54%
Remaining tenants 30.6 46%
Whole portfolio 67.1 100%
1. Includes net residential rents and excludes income from joint
arrangement with Iconic Offices in Clanwilliam Court.
3. Contracted rent by tenant type
Sector EURm %
Technology 29.0 43%
State entities 9.9 15%
Insurance & Investment Management 7.1 10%
Professional services 4.1 6%
Other 2.6 4%
Media 2.3 3%
Banking & Capital Markets 1.6 2%
Aviation 1.2 2%
Car Parking 0.7 1%
Retail & Leisure 0.6 1%
Serviced offices 0.5 1%
Energy 0.2 1%
Industrial assets 1.5 2%
Residential assets 6.0 9%
Total 67.1 100%
4. In-place office contracted rent and WAULT progression
Mar-19 Movement Mar-20 Movement Mar-21
to Mar-20 to Mar-21
All office contracted rent1 EUR50.4m +14% EUR57.7m +3% EUR59.7m
In-place office contracted rent1 EUR50.4m +14% EUR57.7m +1% EUR58.2m
In-place office WAULT2 7.5yrs -15% 6.4yrs -13% 5.6yrs
In-place office vacancy3 12% -5pp 7% - 7%4
1. Excl. arrangement with Iconic Offices at Block 1,
Clanwilliam.
2. To earlier of break or expiry.
3. By net lettable office area. Office area only (i.e. excl.
retail, basement, gym, Townhall etc.).
4. Excl vacancy in near term development properties - i.e.
Marine House and Clanwilliam Court. Including these the vacancy
rate would be 9%.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has carried out a thorough assessment of the principal
risks and uncertainties facing the Group, together with the
potential impact on the business and the mitigating actions and
controls that are in place. In dealing with COVID-19 we have
focused not just on the near-term effects, but on the possible
long-term impacts. The direct impact of COVID-19 on the Group's
business has been relatively modest, the risks it currently
presents primarily centre around how quickly economic and property
market activity can recover and whether it changes occupier and/or
investor behaviour to the detriment of the Group in the longer
term. In 2019-20 we identified COVID-19 as an emerging risk: we now
see it as an operating risk in all aspects of our business and
consider its effects as part of the environment in which we
operate.
The principal risks and uncertainties facing the Group are set
out below on pages 19 to 23, together with the potential impact and
the mitigating actions and controls in place. Further detail on the
Group's approach to risk management and mitigation will be included
in the 2021 Annual Report, due to be published in June 2021. The
main changes to our principal risks since 31 March 2020 are:
Key risks added (excluding amalgamations): ? Uncertain recovery
from the COVID-19 pandemic.
Key risks removed (excluding amalgamations): ? COVID-19 pandemic
(we now see it as an operating risk in all aspects of our business
and therefore do not treat it
as a separate risk). ? Weakening economy. ? Contractor or
subcontractor default. ? Poor asset management.
Residual impacts increased: ? Ireland's attractiveness is
negatively impacted. ? Failure to motivate and retain team
resulting in failure to execute the Group's business plan.
Residual impacts reduced: ? None.
Exposure Key controls and mitigants Key activities in 2020-21
R1: Failure to anticipate or react to market trends resulting in inappropriate business strategy
Failure to anticipate changing trends in
occupier and investor behaviour, resulting
in an inappropriate business strategy and
below target returns. Regular dialogue with existing/ potential
? Close monitoring of tenants.
In our view the pandemic has accelerated trends in the Dublin
structural changes in the workplace, with market and other major Tenant survey undertaken in late 2020 with
tenants increasingly looking for greater international cities positive feedback received and no indication
flexibility, more collaborative space, ? Conversations with of a material reduction in the office space
better amenities, and stronger wellness tenants and stakeholders requirements of our tenants.
and ESG credentials. and annual tenant survey
? Regular review of Staff attended several CPD training seminars
strategy and risks and conferences to keep informed about trends
? Board and Committee in the global market.
Residual risk impact: oversight of all
significant investment A strategy review was completed by the Board
High and divestment in February 2021.
opportunities
Our Remuneration Policy, reviewed this year,
focuses on near- and longer-term performance
Risk trend: measures to align with strategy and has an
increased focus on ESG performance measures.
Increasing
R2: Uncertain recovery from the COVID-19 pandemic
? Active monitoring of
While the initial indicators are showing a economic and market
rapid economic recovery from the pandemic indicators, and regular We have been closely monitoring our markets
as the vaccine roll-out progresses, there financial forecasting, and the pace of economic recovery in Ireland
is no certainty this will continue, and stress testing and and internationally.
new strains of the virus could result in scenario planning
further disruption. ? Risk appetite limits are Tenant credit risk assessment is a continuing
in place for key focus: both before and during the leasing
operating indicators. relationship. The impacts of the
? The Group has a talented macro-economic conditions are a particular
Residual risk impact: and experienced team with focus.
in-depth knowledge of our
High market Relationships with professional advisers such
? The Group has a low as tax & legal advisors, property
leverage (LTV of 19.5% at professionals and sustainability experts
Mar-21) and long office assist management to monitor market risk and
Risk trend: WAULT (5.8 years at international developments.
Mar-21)
New risk
R3: Ireland's attractiveness is negatively impacted
Ireland's economy is highly dependent on
international trade and foreign direct
investment. Regulatory or tax changes,
either domestic or international (e.g.
BEPS, US tax developments), could result The Group is a member of IIP (Irish
in Ireland becoming less attractive for Institutional Property) and continues to
investment versus other jurisdictions. ? The Group regularly engage with government agencies and
This in turn could reduce demand for reviews and manages its politicians, to promote the development of a
Dublin offices from occupiers and risk profile stable, competitive real estate sector in
investors. ? The Group considers a Ireland.
variety of scenarios when
The pandemic will add a considerable considering its strategic The Group engages with government departments
strain on public sector finances for many objectives, financial and regulators such as the Department of
years to come and may impact domestic forecasting, and business Finance and Revenue on matters that directly
politics and international regulation. plans impact the Group.
? Use of expert advisers
? The UK's exit from the EU The Group engages expert tax and legal
removes one of Ireland's advisers to monitor the impact of any changes
Residual risk impact: key competitors as a to government policies, and international
destination for foreign changes or trends that may impact Ireland's
High direct investment to take competitiveness, for example international tax
advantage of the EU reform and US tax developments.
Single Market
Risk trend:
Increasing
R4: Failure to respond appropriately and sufficiently to climate change risks
The Group fails to appropriately and
proactively respond to climate change
risks. This could result in a loss of Release of Sustainability Statement of Intent.
value to shareholders, as well as This includes commitments to a Net Zero Carbon
reputational damage and/or regulatory ? Full-time Sustainability strategy, implementation of TCFD reporting,
issues. Manager science-based targets, and several other
? Sustainability Committee measures.
The pandemic has increased the focus on monitors our ESG
ESG and wellness in the office performance, risks, and Implementation of ISO 45001/14001 standards,
environment, thus increasing the risk of controls EHS management system.
failure to respond appropriately. ? Use of external advisers
where required We have reviewed our Remuneration Policy and
? Participation in industry have proposed increasing their weighting
benchmarks to monitor our towards ESG performance measures.
Residual risk impact: ESG performance and
reporting status We have actively engaged with our main
Medium stakeholders, tenants and investors, via
meetings and a tenant survey to understand
their concerns and interests. We also carried
out our annual staff survey.
Risk trend:
Unchanged
R5: Risk of tenant default
Tenant default leading to loss of income,
reduced cash flow and poor returns.
The pandemic has highlighted the ? Risk indicators regarding
importance of a robust and diverse tenant sector, tenant and
base and increased the risk of financial geographic concentration The covenant strength of all major tenants has
difficulties for some tenants. form a key part in all been assessed at least once in the financial
leasing and investment year. The covenant strength of all prospective
decisions tenants was assessed.
? A detailed assessment of
Residual risk impact: the covenant strength of The Group has a strong tenant base: during
commercial tenants is FY21 rent collection rates have remained at c.
Medium completed before agreeing 99% despite the pandemic. Where tenants have
leases and continues to legitimately requested assistance, the Group
be assessed periodically has engaged in agreeing appropriate payment
plans.
Risk trend:
Decreasing
R6: Poor or mistimed execution of development projects
? Regular review of the
pipeline and schedule
Failure to manage the development pipeline against portfolio
to deliver the profits anticipated through sectors, financing, risk
poor management and/or misjudgement of the appetites and market 2 Cumberland Place and 50 City Quay, our two
property market trends resulting in poor trends active developments were due to complete in
returns and leasing performance. ? Rigorous monitoring of FY21 but have been delayed by the construction
development expenditure lockdowns in Ireland and are now expected to
Active developments have been delayed due against approved budgets complete in early July 2021. We are not
to lockdowns and the letting market has ? Reputable and experienced expecting material cost overruns from the
been less active. Future tenant professionals and delays. Of the 62,500 sq. ft. the two schemes
requirements may change as a result of the contractors are will deliver, 38% was pre-let to 3M in early
pandemic. appointed, with due FY21 and we are currently engaging with
diligence completed on potential tenants regarding the remaining
main contractors before unlet space.
signing and before each
Residual risk impact: payment is made to a We have obtained full planning approval to
contractor commence the development of the Clanwilliam
Medium ? Incorporation of cluster from early 2022 and the Harcourt
sustainable elements in cluster from early 2023. Both schemes have low
building design break-even rents and much of our recent focus
? Marketing of properties has been on optimising the designs for ESG and
Risk trend: starts well in advance of collaborative work. We retain flexibility on
completion date to when development commences.
Decreasing de-risk the development
portfolio
R7: Failure to motivate and retain team resulting in failure to execute the Group's business plan
? Employee remuneration is
strongly linked to Group
and individual
Loss of knowledge, experience and performance and variable
leadership could have negative impacts on pay contains a
the Group's ability to achieve its significant deferred Along with regular video calls within
strategic priorities. element departments, we have a weekly all-hands video
? Periodic assessment of call to keep our staff up to date with the
People in Ireland have been working remuneration packages for activities of all our departments. In
remotely for most of the year due to the all staff is completed to addition, we have held several virtual social
pandemic, which can cause difficulties ensure they remain events and training sessions.
with team cohesion and motivation. competitive
? Employee performance and Margaret Fleming was appointed to the role of
goal setting, with Designated Non-Executive Director for
regular performance Workforce Engagement and has held several
Residual risk impact: reviews workshops with staff during the year.
? Succession planning at a
Medium Board level is led by the The annual staff survey was completed: recent
Nomination committee. surveys have shown a high degree of employee
Staff development is also satisfaction.
supported to allow for
Risk trend: internal promotion The Nominations Committee considered
? Team events and succession planning as part of its remit.
Increasing opportunity for feedback
through surveys and team
meetings
R8: Disruption from external threat/event, cyber-attack, or fraud
Damage or losses due to fraud, error, ? Business continuity and
cybercrime, or an external event may crisis management plans In accordance with public health guidance, our
result in significant disruption and are reviewed at least head office staff have been working from home
damage to the Group's portfolio, annually since mid-March 2020. The transition to remote
reputation and/or operations. ? External IT consultants working has been smooth, assisted by our
complete regular testing cloud-based IT systems. Maintaining our
The pandemic has resulted in the and review of the Group's collaborative, team culture and ensuring staff
installation of new control measures in systems welfare have been a key priority.
our buildings. Working from home during ? IT and security updates
the pandemic has increased the risk of are issued to all staff At the start of the pandemic, we appointed one
cyber-attacks and fraud. on a regular basis of our team to oversee our COVID-19 response
? Effective internal and we have developed an individual plan for
controls and fraud each building. This has been discussed with
prevention measures are tenants and covers access control, physical
Residual risk impact: in place and reviewed distancing measures, additional cleaning,
regularly by staff and on sanitising and signage.
Medium a scheduled basis by the
Group's internal auditor, The Group has continued to improve its IT
PwC security measures during the financial year. A
? Insurance policies review of the Group's information security
Risk trend: include cover for measures was completed in 2019 by PwC, and a
catastrophic events cyber security audit is planned for early in
Unchanged FY22.
R9: Inappropriate capital structure/lack of funds for investment
Failure to meet target returns due to
funding limitations and inability to fund ? The Group has a target In December 2020, the Group entered interest
the development pipeline and/or invest in loan to value ratio of rate caps on EUR200m of notional debt. These
accretive opportunities. 20-30% through the cycle, have a strike rate of 0.25% EURIBOR and cover
which is well below debt the five-year period to December 2025.
covenant limits, and the
majority of interest rate
The pandemic has had a volatile impact on exposure fixed or hedged
financial markets which could negatively ? All debt is unsecured and In May 2020, the Group agreed to issue EUR125m
affect the availability of funds and has with staggered of new 10- and 12-year unsecured US private
potential returns. maturities: the weighted placement notes with average coupon of 1.9%.
average maturity at The weighted average debt maturity at Mar-21
Mar-21 was 3.4 years of 3.4 years, has increased to 5.2 years
? Active monitoring and pro-forma the new debt issue.
Residual risk impact: assessment of current and
future financial and cash
Low flow requirements and
availability of funding At 31 March 2021 the Group had cash and
is maintained. undrawn facilities net of commitments of
? Board oversight EUR110m, rising to EUR235m including the new USPP
Risk trend: notes.
Decreasing
Consolidated income statement For the financial year ended 31
March 2021
Financial year ended Financial year
ended
31 March 2021
31 March 2020
Notes EUR'000 EUR'000
Revenue 5 72,712 67,930
Rental income 5 66,487 61,812
Property operating expenses 5 (3,181) (3,227)
Net rental and related income 5 63,306 58,585
Operating expenses
Administration expenses 8 (13,062) (13,246)
Expected credit losses on financial assets (423) (147)
Total operating expenses (13,485) (13,393)
Operating profit before gains and losses 49,821 45,192
Gains and (losses) on investment property 7 (67,581) 22,856
Other gains 81 10
Operating (loss)/profit (17,679) 68,058
Finance income 11 1 3
Finance expense 11 (7,723) (7,198)
(Loss)/profit before income tax (25,401) 60,863
Income tax credit 12 188 180
(Loss)/profit for the financial year attributable to owners of the (25,213) 61,043
parent
EPRA earnings for the financial year 14 42,223 38,093
Earnings per share
Basic earnings per share (cent) 14 (3.7) 8.9
Diluted earnings per share (cent) 14 (3.7) 8.8
EPRA earnings per share (cent) 14 6.3 5.5
Diluted EPRA earnings per share (cent) 14 6.2 5.5
Consolidated statement of comprehensive income For the financial
year ended 31 March 2021
Financial Financial
year year ended
ended 31 31 March
March 2020
2021
Notes EUR'000 EUR'000
(Loss)/profit for the financial year attributable to owners of the parent (25,213) 61,043
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
(Loss)/gain on revaluation of land and buildings 17 (304) 1,658
Items that may be reclassified subsequently to profit or loss:
Net fair value gain on hedging instruments entered into for cash flow hedges 22.b 676 54
Total other comprehensive income 372 1,712
Total comprehensive income for the financial year attributable to owners of the parent (24,841) 62,755
Consolidated statement of financial position As at 31 March
2021
31 March 2021 31 March 2020
Notes EUR'000 EUR'000
Assets
Non-current assets
Investment property 16 1,427,413 1,465,183
Property, plant and equipment 17 7,858 8,631
Other assets 16 - 534
Other financial assets 19 972 34
Trade and other receivables 20 9,210 10,215
Total non-current assets 1,445,453 1,484,597
Current assets
Trade and other receivables 20 3,970 3,751
Cash and cash equivalents 18 31,634 28,454
Total current assets 35,604 32,205
Total assets 1,481,057 1,516,802
Equity and liabilities
Capital and reserves
Share capital 21 66,166 68,466
Share premium 21 580,444 630,276
Capital redemption reserve fund 21 4,070 1,757
Other reserves 22 6,638 5,379
Retained earnings 23 491,320 525,271
Total equity 1,148,638 1,231,149
Non-current liabilities
Financial liabilities 24 299,956 259,691
Deferred tax liabilities 25 206 395
Total non-current liabilities 300,162 260,086
Current liabilities
Financial liabilities 24 485 517
Trade and other payables 26 27,997 21,873
Contract liabilities 27 3,775 3,177
Total current liabilities 32,257 25,567
Total equity and liabilities 1,481,057 1,516,802
IFRS NAV per share (cent) 15 173.6 179.8
Diluted IFRS NAV per share (cent) 15 172.7 179.2
EPRA NTA per share (cent) 15 172.7 179.2
Consolidated statement of cash flows For the financial year
ended 31 March 2021
Financial year ended 31 Financial year ended 31
March 2021 March 2020
Notes EUR'000 EUR'000
Cash flows from operating activities
Rent received 70,775 64,734
Other property income 7,160 6,560
Property expenses paid (9,291) (8,918)
Cash paid to and on behalf of employees (6,554) (6,024)
Other administrative expenses paid (3,818) (5,606)
Interest received 1 3
Other income 13 10
Income tax refund - 81
Net cash from operating activities 58,286 50,840
Cash flows from investing activities
Purchase of investment property 28.a (7,978) (22,675)
Capital expenditure on investment property 28.b (20,316) (25,266)
Cash received from sale of investment property 136 34,503
Purchase of property, plant and equipment (61) (2,066)
Sale of property, plant and equipment - 50
Net cash flow (absorbed) by investing activities (28,219) (15,454)
Cash flows from financing activities
Dividends paid (33,777) (25,866)
Cash expended on share buyback (25,035) (25,036)
Borrowings drawn 42,100 57,945
Borrowings repaid (2,500) (29,968)
Finance expenses paid (7,100) (6,369)
Purchase of derivative hedges (561) -
Share issue costs (14) (10)
Net cash (outflow) from financing activities (26,887) (29,304)
Net increase in cash and cash equivalents 3,180 6,082
Cash and cash equivalents start of financial year 28,454 22,372
Increase in cash and cash equivalents 3,180 6,082
Net cash and cash equivalents at end of financial year 31,634 28,454
The consolidated statement of cash flows, including the
comparative information, has been presented here using the direct
approach under International Accounting Standard ("IAS") 7
Statement of Cash Flows. In previous financial statements the
indirect approach has been presented. Further details on this
change can be found in note 2.a.
Consolidated statement of changes in equity For the financial
year ended 31 March 2021
Share Share Capital Property Cash flow Share-based Retained
capital premium redemption revaluation hedge payment earnings Total
reserve fund reserve reserve reserve
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 1 April 2019 69,759 624,483 - 1,889 (288) 7,556 515,140 1,218,539
Profit for the financial - - - - - - 61,043 61,043
year
Other comprehensive income - - - 1,658 54 - - 1,712
for the financial year
Balance before transactions 69,759 624,483 - 3,547 (234) 7,556 576,183 1,281,294
with shareholders
Issue of share capital 464 5,793 - - - (6,257) (10) (10)
Own shares acquired and
cancelled in the financial (1,757) - 1,757 - - - (25,036) (25,036)
year
Dividends paid - - - - - - (25,866) (25,866)
Share-based payments - - - - - 767 - 767
Balance at 31 March 2020 68,466 630,276 1,757 3,547 (234) 2,066 525,271 1,231,149
(Loss) for the financial - - - - - - (25,213) (25,213)
year
Other comprehensive income - - - (304) 676 - - 372
for the financial year
Balance before transactions 68,466 630,276 1,757 3,243 442 2,066 500,058 1,206,308
with shareholders
Capital reorganisation - (50,000) - - - - 50,000 -
Issue of share capital 13 168 - - - (181) (14) (14)
Own shares acquired and
cancelled in the financial (2,313) 2,313 - - - (25,035) (25,035)
year
Dividends paid - - - - - - (33,777) (33,777)
Share-based payments - - - - - 1,068 88 1,156
Balance at 31 March 2021 66,166 580,444 4,070 3,243 442 2,953 491,320 1,148,638
Section I - General
This section contains the significant accounting policies and
other information that apply to the Group's financial statements as
a whole. Those policies applying to individual areas such as
investment property are described within the relevant note to the
consolidated financial statements. This section also includes a
summary of the new European Union ("EU") endorsed accounting
standards, amendments and interpretations that have not yet been
adopted and their expected impact on the reported results of the
Group. 1. General information
Hibernia REIT plc (the "Company"), registered number 531267,
together with its subsidiaries and associated undertakings (the
"Group"), is engaged in property investment and development
(primarily office) in the Dublin market with a view to maximising
its shareholders' returns.
The Company is a public limited company and is incorporated and
domiciled in Ireland. It is regulated by the Central Bank of
Ireland. The address of the Company's registered office is 1WML,
Windmill Lane, Dublin, D02 F206, Ireland.
The ordinary shares of the Company are listed on the primary
listing segment of the Official List of Euronext (the "Irish
Official List") and the premium listing segment of the Official
List of the UK Listing Authority (the "UK Official List" and,
together with the Irish Official List, the "Official Lists") and
are traded on the regulated markets for listed securities of
Euronext Dublin and the London Stock Exchange plc. 2. Basis of
preparation 2.a Statement of compliance and basis of
preparation
These consolidated financial statements of Hibernia REIT plc are
non-statutory consolidated financial statements for the purpose of
the Companies Act 2014. The Auditor has not completed its audit but
the Directors do not expect that there will be changes to the
financial information between these non-statutory consolidated
financial statements and the statutory financial statements that
will be contained in the Annual Report. The Annual Report of the
Group is expected to be published in late June 2021. The
consolidated financial statements of Hibernia REIT plc have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU and the Companies Act 2014.
IFRS as adopted by the EU differ in certain respects from IFRS as
issued by the International Accounting Standards Board ("IASB").
The Group financial statements therefore comply with Article 4 of
the EU IAS Regulation. The consolidated financial statements have
been prepared on the historical cost basis, except for the
revaluation of investment properties, owner-occupied buildings and
derivative financial instruments that are measured at fair value at
the
end of each reporting period. Historical cost is generally based
on the fair value of the consideration given in exchange for goods
and services. The financial statements for the year ended 31 March
2020 that are presented in the consolidated financial statements
represent an abbreviated version of the full financial statements
for that year on which the independent Auditor, Deloitte Ireland
LLP, issued an unqualified audit report with no emphasis of matter
and are not annexed to these financial statements. The consolidated
financial statements of the Group for the year ended 31 March 2020
(the "Annual Report 2020") are available upon request from the
Company Secretary or from www.hiberniareit.com. The financial
statements for the financial year ended 31 March 2020 have been
filed in the Companies Registration Office.
The Group has decided to adopt the direct approach in preparing
the consolidated statement of cash flows in these financial
statements in place of the indirect approach which has been used in
prior financial periods. The consolidated cash flow statement in
these consolidated financial statements is therefore presented on
this basis. The comparatives have also been presented in line with
this approach. The Group has chosen to make this accounting policy
change in order to provide more relevant and reliable information
for readers of the financial statements. The main impact of this
form of presentation is to present the Group's operating cash flows
in a clearer and more useful way, with no need for reconciliation
to arrive at the major operating cash flows, such as cash received
from rental income. No other amendments to presentation are
included as this change does not impact net asset values,
profitability or any other financial disclosures.
Apart from the change in presentation above, the Group has made
no other amendments to its accounting policies nor has the Group
early adopted any forthcoming IASB standards (note 3). 2.b
Alternative performance measures ("APMs")
The Group uses alternative performance measures to present
certain aspects of its performance. These are explained and, where
appropriate, reconciled to equivalent IFRS measures in the
Supplementary Information section (unaudited) at the end of this
document. The main APMs used are those issued by the European
Public Real Estate Association ("EPRA"), which is the
representative body of the listed European real estate industry.
EPRA issues guidelines and benchmarks for reporting both financial
and sustainability measures. These are important in allowing
investors to compare and measure the performance of real estate
companies across Europe on a consistent basis. EPRA earnings and
EPRA Net Tangible Assets ("NTA") are presented within the
consolidated financial statements and are fully reconciled to IFRS
as these two measures are among the key performance indicators for
the Group's business. 2.c Functional and presentation currency
These consolidated financial statements are presented in euro,
which is the Company's functional currency and the Group's
presentation currency. 2.d Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). The accounting policies of all consolidated
entities are consistent with the Group's accounting policies. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases. The Group
controls an entity when it has power over the entity and the
ability to use its power over the entity to affect the returns. All
intragroup assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group
are eliminated in full on consolidation. 2.e Assessment of going
concern
The consolidated financial statements have been prepared on a
going concern basis.
The Board has assessed the viability of the Group over a
four-year period to March 2025. It is satisfied that a
forward-looking assessment of the Group for this period is
sufficient to enable a reasonable assessment of viability, and also
in order to opine on the appropriateness of the going concern basis
of preparation of the financial statements. This assessment
considers the Group's current position and the principal and
emerging risks that it faces (see pages 19 to 23 for further
detail). All of these risks are considered to be material in the
assessment of going concern and viability. The Group has acted to
mitigate the impacts recognised, and this is also summarised on
pages 19 to 23.
An analysis of revenue and a disaggregation of income is
outlined in notes 5 and 6. Due to the nature of rental collections,
a significant portion of revenue is collected in advance of its due
date and 88% of commercial rent for the quarter ending 30 June 2021
had been collected within seven days of the gale date rising to 97%
within 60 days of the gale date. 98% of the residential rent due
for the month of May 2021 had been collected by the date of this
Statement. Information on the Group's financial assets and approach
to credit risk is contained in Section IV: introduction, note 20
and note 29.d.
Detail on the financial performance and financial position of
the Group is provided in the consolidated financial statements. In
particular, note 29 includes details on the Group's financial risk
management and exposures.
The Group has a cash balance as at 31 March 2021 of EUR32m
(March 2020: EUR28m), is generating positive operating cash flows
and, as discussed in note 24, has in place debt facilities with
average maturity of 3.4 years, no debt maturities until December
2023, and an undrawn balance of EUR93m at 31 March 2021 (March
2020: EUR133m). In addition, the Group has agreed to issue an
additional EUR125m in fixed rate private placement notes in July
2021. These bring the Group's average maturity of debt at 31 March
2021 to 5.2 years on a pro-forma basis. The Group's capital
commitments at 31 March 2021 were EUR3m (March 2020: EUR18m). As at
31 March 2021, the Group's low leverage (LTV 19.5%) means it could
withstand a 59% decline in its portfolio value and a 77% decline in
earnings before interest and tax (60% decline in rental income)
without breaching debt covenants at that date. The weighted average
unexpired lease term ("WAULT") is 5.8 years (March 2020: 6.4 years)
for the office portfolio. There are no reasons to expect that the
Group will not be able to meet its liabilities as they fall due for
the foreseeable future.
Therefore, the Directors have concluded that the going concern
assumption remains appropriate. 2.f Significant judgements
Not all of the Group's accounting policies require the Directors
to make difficult, subjective or complex judgements. Any judgements
made are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The following are the significant judgements used in preparing
these consolidated financial statements:
Net asset value of the Group
The Company's shares are trading at a significant discount to
the net asset value per share reported in these consolidated
financial statements: at 31 March 2021 the closing share price was
EUR1.104 and the discount to both the IFRS NAV per share and the
EPRA NTA per share was 36%. As at close of business on 25 May 2021,
being the last day before the publication of these Preliminary
Results, the share price was EUR1.16 and the discount to both was
33%. The Group's main assets are its investment properties, which
comprise 96% of total assets or 124% of net asset value. These are
independently valued at the financial year end and are measured at
fair value in line with IFRS 13. More information on the valuation
of the Group's investment properties can be found in below and in
note 16 to these consolidated financial statements. The Group's
property, plant and equipment is mainly its head office in 1WML,
which is also carried at fair value and independently valued at 31
March 2021. The balance of assets are assessed for impairment under
a simplified expected credit loss model. The Group carries no
intangible assets or goodwill. As outlined above, the Group has
sufficient headroom above its debt covenants to ensure that its
financing remains in place. It is therefore the opinion of the
Directors that no impairment on the net asset value of the Group is
indicated, despite the discount to NAV/NTA at which its shares
currently trade.
Valuation of investment property
The valuation of the Group's property portfolio is a key element
of the Group's Net Asset Value as well as impacting variable
executive and employee remuneration. The Directors have appointed
an independent valuer (Cushman & Wakefield, the "Valuer") to
perform the valuations and report to them on its opinion as to the
fair value of these properties. However, the nature of the
valuation process is inherently subjective and values are derived
using comparable market transactions and the Valuer's assessment of
market sentiment. This is therefore a significant judgement on this
basis.
The Group's investment properties are held at fair value and
were valued at 31 March 2021 by the Valuer. Investment property is
valued in accordance with guidance in the appropriate sections of
the Valuation Technical and Performance Standards ("VPS") and the
Valuation Practice Guidance Applications ("VPGA") contained within
the Royal Institution of Chartered Surveyors ("RICS") Valuation -
Global Standards 2019 (the "Red Book"). Valuations are compliant
with the International Valuation Standards ("IVS"). Fair value
under IFRS 13 is "the price that would be received to sell an
asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date". The Red Book
confirms that the references in IFRS 13 to market participants and
a sale make it clear that for most practical purposes fair value is
consistent with market value. Further information on the valuations
and the sensitivities is given in note 16. Property valuations are
complex and involve data which is not publicly available, and a
degree of judgement. The valuations are based upon the key
assumptions of estimated rental values and market-based yields.
The Directors have reviewed the valuation process undertaken,
changes in market conditions, recent transactions in the market,
valuation movements on individual buildings and the Valuer's
expectations in relation to future rental growth and yield
movement. With the continued market uncertainty as a result of both
the pandemic and Brexit, the Directors have also considered the
extent to which this has been impacting the property investment and
occupational markets in relation to both liquidity and activity.
When the Valuer assessed the Group's property portfolio as at 31
March 2020, it did so on the basis of a material uncertainty clause
given the initial disruption caused by the pandemic and the limited
market evidence available at that date. While market conditions may
move rapidly in response to changes in the control or future spread
of COVID-19, the valuations are no longer subject to a material
uncertainty clause: the Valuer has indicated that property markets
are mostly functioning again, with transaction volumes and other
relevant evidence at levels where an adequate quantum of market
evidence exists on which it could base its valuation opinion as at
31 March 2021. The Directors have concluded that the valuation is
suitable for inclusion in the Group's consolidated financial
statements at 31 March 2021. Valuation basis of investment
property
The valuation approach for each property, while generally
similar, differs based on the physical and investment and/ or
development attributes of the property. A judgement must be made to
decide on the valuation premise appropriate for each asset as its
'highest and best use'. This judgement impacts on the valuation
technique that is appropriate for the measurement, considering the
availability of data with which to develop inputs that represent
the assumptions that market participants would use when pricing the
property. All valuations are at Level 3 in the fair value
hierarchy. 'Highest and best use'
All investment properties in the Group's portfolio are valued in
accordance with their current use, which is also the highest and
best use except for the following: ? Harcourt Square, Marine House
and Clanwilliam Court Blocks 1, 2 and 5 where, in accordance with
IFRS 13:27, the
valuations take into account the redevelopment potential upon
expiry of the current leases which reflects the
highest and best use. It is the Directors' intention to pursue
the redevelopment of these properties when the
leases expire. Planning permission is in place for these
developments. These properties are valued on a combination
of an investment basis until the end of the leases and on a
residual basis thereafter. ? Newlands (including Gateway) which is
currently partly rented on short-term leases, has been valued on a
price per
acre basis as early stage plans are in place to redevelop this
property in future and this approach reflects the
highest and best use of this property. ? Properties in Malahide
Road Industrial Park and Dublin Industrial Estate which are
currently partly rented on
short-term leases, have been valued on a basis that includes
recognition of their potential as redevelopment sites. ? A disused
building which is valued on a residual basis but with regard to
city centre land values per acre. ? 2 Cumberland Place is close to
practical completion and therefore the valuation methodology is on
an investment
basis, with outstanding capital expenditure recognised within
the valuation. ? 50 City Quay refurbishment is close to practical
completion and therefore the valuation methodology is on an
investment basis, with outstanding capital expenditure
recognised within the valuation. 2.g Analysis of sources of
estimation uncertainty
Valuation of investment property
Although valuations are based on the Directors' best knowledge
of the amount, event or actions, actual results may differ from
those estimates. The Group's investment properties are held at fair
value and were valued at 31 March 2021 by the Valuer on the basis
discussed in 2.f above. Further information on the valuations and
the sensitivities around the inputs used is given in note 16.
The Board conducts a detailed review of each property valuation
to ensure that appropriate assumptions have been applied. The most
significant estimates affecting the valuation included yields and
estimated rental values ("ERVs"). For development projects, other
assumptions including costs to completion and risk premium
assumptions are also factored into the valuation. In accordance
with the Group's policy on revenue recognition from leases, the
valuation provided by the Valuer is adjusted only by the fair value
of the income accruals ensuing from the recognition of lease
incentives and the deferral of lease costs. The total reduction in
the Valuer's investment property valuation in respect of these
adjustments at 31 March 2021 was EUR8.7m (March 2020: EUR8.1m).
There were no other significant judgements or key estimates that
might have a material impact on the consolidated financial
statements at 31 March 2021. 2.h Treatment of tax basis in relation
to properties
Asset sales
Following changes to the Irish REIT legislation introduced in
October 2019, if a REIT disposes of an asset of its property rental
business and does not (i) distribute the gross disposal proceeds to
shareholders by way of dividend; (ii) reinvest them into other
assets of its property rental business (whether by acquisition or
capital expenditure) within a three-year window (being one year
before the sale and two years after it); or (iii) use the disposal
proceeds to repay (a) debt specifically used to acquire, enhance or
develop the property sold or (b) other debt in limited
circumstances, then the REIT will be liable to tax at a rate of 25%
on 85% of the gross disposal proceeds, subject to having sufficient
distributable reserves. No sales of assets of the Group's property
rental business have happened since these rule changes took effect
in October 2019. In addition, the Group has a very substantial
development pipeline over the near and medium term in which to
reinvest any sales proceeds. As a result, the Group does not
anticipate having to pay tax on uninvested sales proceeds for the
foreseeable future and no deferred tax has been provided in the
Group's accounts relating to this. Recently completed commercial
assets
Under the Irish REIT legislation, assets where the cost of
development exceeds 30% of the market value of the asset at the
date of commencement of development and which are sold within three
years of practical completion of the development could be liable to
tax at a rate of 25% on the profits made from the sale. In the case
of Hibernia, assets which meet these criteria at 31 March 2021 are:
2WML (completed early 2019) and 1SJRQ (also completed early 2019).
In addition, 2 Cumberland Place and 50 City Quay are under
construction and are expected to complete in mid-2021. All these
assets are held for long-term property rental and since none of
these assets is expected to be sold within three years of
completion, no deferred tax has been provided in the Group's
accounts for this eventuality. Recently completed residential
assets
Hanover Mills (completed in early 2018): this property is held
for long-term property rental and was developed on this basis. VAT
was payable on the construction costs which has been treated as
irrecoverable and recognised as part of the capital costs of the
project. If the property was sold within five years of completion,
the Group would be obliged to charge VAT on the sale but would be
entitled to a recovery of the VAT incurred on the construction
costs on an apportioned basis according to the VAT life of the
building. It is not intended to sell this property within the
five-year period and, in the opinion of the Directors, no amendment
to the Valuer's valuation of this asset is deemed necessary. 3.
Application of new and revised International Financial Reporting
Standards ("IFRS") Changes in accounting standards
The following standards and interpretations were effective for
the Group from 1 April 2020 but did not have a material impact on
the results or financial position of the Group: Amendments and
interpretations which became effective during the year but had no
material impact on the Group's financial statements ? Amendments to
References to the Conceptual Framework in IFRS Standards; ?
Amendment to IAS 1 and IAS 8 Definition of Material; ? Amendment to
IFRS 3 Definition of a Business; and ? Amendments to IFRS 9, IAS 39
and IFRS 7 (September 2019) Interest Rate Benchmark Reform Phase 1.
Standards, amendments, and interpretations in issue but not yet
effective nor adopted early
The Directors do not anticipate that these standards or
amendments will have any material effect on the Group's financial
statements. ? Amendments to IAS 1 Classification of Liabilities as
Current or Non-current; ? Amendments to IAS 1 and IFRS Practice
Statement 2 Disclosure of Accounting Policies; ? IFRS 10 and IAS 28
(amended) Sale or Contribution of Assets between an investor and
its Associate or Joint Venture.
This is indefinitely deferred; ? Amendments to IFRS 3 Reference
to the Conceptual Framework; ? Amendments to IAS 8 Definition of
Accounting Estimates; ? Amendments to IFRS 9, IAS 39, IFRS 7, IFRS
4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2; ?
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets
and Liabilities arising from a Single
Transaction; ? Amendments to IFRS 16 (amended) Covid-19-Related
Rent Concessions; ? Amendments to IAS 16 (amended) Property, Plant
and Equipment: Proceeds before Intended Use; ? Amendments to IAS 37
Onerous contracts: the Costs of Fulfilling a Contract; and ? Annual
Improvements to IFRS Standards 2018-2020 (May 2020).
Section II - Performance
This section includes notes relating to the performance of the
Group for the year, including segmental reporting, earnings per
share and Net Asset Value per share as well as specific elements of
the consolidated statement of income. 4. Operating segments 4.a
Basis for segmentation
The Group is organised into five business segments, against
which the Group reports its segmental information. There were
previously six. The 'other' category, which contained assets which
were acquired as part of a portfolio purchase but were not intended
for the investment property portfolio, has been discontinued as the
remaining assets, which were held at a fair value of EUR0.6m, have
been transferred into investment property (note 16). This segment
is therefore no longer managed separately as there are no assets
left in this category nor are any planned for the future. The
'industrial/land' segment was renamed 'industrial/other' as there
are some immaterial assets included here that are investment
property but do not readily fall into the other segment
classifications.
These segments mainly represent the different investment
property classes. The Group has divided its business in this manner
as the various segments differ in their character and returns
profiles depending on market conditions and reflect the strategic
objectives that the Group has targeted. The following table briefly
describes each segment:
Reportable Description
segment
Office assets comprise central Dublin completed office buildings, which are either generating rental
income or are available to let. Those assets which are multi-tenanted or multi-let are mainly managed by
Office assets the Group. Income comprises rental income and service charge income, including management fees, while
expenses comprise service charge expenses and other property expenses. Where only certain floors of a
building are undergoing refurbishment, the asset generally remains in this category.
Office development assets are not currently revenue generating and are the properties that the Group has
Office currently under development in line with its strategic objectives. Development profits, recognised in
development line with progress towards the completion of the projects, enhance Net Asset Value ("NAV"), Total
assets Accounting Return ("TAR") and Total Portfolio Return ("TPR"). Once completed these assets are transferred
to the office assets segment at fair value.
Residential This segment contains the Group's completed multi-tenanted residential assets.
assets
Industrial/ This segment contains industrial units, land and other minor assets, such as retail.
other assets
Central
assets and Central assets and costs include the Group head office assets and expenses.
costs
The Board reviews the internal management reports, including
budgets, at least quarterly at its scheduled meetings. There is
some interaction between reportable segments, for example completed
development property is transferred to income-generating segments.
These transfers are made at fair value on an arm's length basis
using values determined by the Group's Valuer. 4.b Information
about reportable segments
The Group's key measure of underlying performance of a segment
is total income after revaluation gains and losses, which comprises
revenue (rental and service charge income), property outgoings,
revaluation of investment properties and other gains and losses.
Total income after revaluation gains and losses includes rental
income, which is used as the basis to report key measures such as
EPRA Net Initial Yield ("NIY") and EPRA 'topped-up' NIY. These APMs
(detailed in the Supplementary Information section at the back of
this report) measure the cash passing rent returns on market value
of investment properties before and after an adjustment for the
expiry of rent-free periods or other lease incentives,
respectively.
An overview of the reportable segments is set out below: Group
consolidated segment analysis
For the financial year ended 31 March 2021
Office Office Residential Industrial/ Central assets Group
assets development assets other assets and costs consolidated
assets position
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Total revenue 63,323 - 7,164 2,225 - 72,712
Rental income 57,476 - 7,164 1,847 - 66,487
Property operating expenses (1,698) (3) (1,363) (117) - (3,181)
Net rental and related income 55,778 (3) 5,801 1,730 - 63,306
Operating expenses
Administration expenses - - - - (12,552) (12,552)
Expected credit losses on
(401) - - (22) - (423)
financial assets
Depreciation - - - - (510) (510)
Total operating expenses (401) - - (22) (13,062) (13,485)
Operating profit/(loss) before gains 55,377 (3) 5,801 1,708 (13,062) 49,821
and losses
Gains and (losses) on investment (65,439) (3,466) 7,132 (5,808) - (67,581)
property
Other gains - - - 81 - 81
Operating profit/(loss) (10,062) (3,469) 12,933 (4,019) (13,062) (17,679)
Net finance expense - - - - (7,722) (7,722)
Profit/(loss) before income tax (10,062) (3,469) 12,933 (4,019) (20,784) (25,401)
Income tax - - (41) 229 - 188
Profit for the financial year (10,062) (3,469) 12,892 (3,790) (20,784) (25,213)
attributable to owners of the parent
Total segment assets 1,149,928 62,170 168,242 58,878 41,839 1,481,057
Investment property 1,138,819 62,006 167,710 58,878 - 1,427,413
For the financial year ended 31 March 2020
Industrial
Office Office Residential / Central assets Group
assets development assets and costs consolidated
assets other position
assets
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Total revenue 59,492 - 7,197 1,241 - 67,930
Rental income 53,374 - 7,197 1,241 - 61,812
Property operating expenses (1,905) (14) (1,289) (19) - (3,227)
Net rental and related income 51,469 (14) 5,908 1,222 - 58,585
Operating expenses
Administration expenses - - - - (12,726) (12,726)
Expected credit losses on financial (147) - - - - (147)
assets
Depreciation - - - - (520) (520)
Total operating expenses (147) - - - (13,246) (13,393)
Operating profit/(loss) before gains
51,322 (14) 5,908 1,222 (13,246) 45,192
and losses
Gains and (losses) on investment 5,494 18,243 4,861 (5,742) - 22,856
property
Other gains and (losses) - - - 25 (15) 10
Operating profit/(loss) 56,816 18,229 10,769 (4,495) (13,261) 68,058
Net finance expense - - (7,195) (7,195)
Profit/(loss) before income tax 56,816 18,229 10,769 (4,495) (20,456) 60,863
Income tax - - - 152 28 180
Profit for the financial year
attributable to owners of the parent
56,816 18,229 10,769 (4,343) (20,428) 61,043
Total segment assets 1,209,584 48,000 159,969 61,868 37,381 1,516,802
Investment property 1,196,925 47,999 159,459 60,800 - 1,465,183 4.c Geographic information
All of the Group's assets, revenue, and costs are based in the
Dublin area, mainly in central Dublin. 4.d Major customers
The Group closely monitors its tenants, and in particular its
largest tenants, by contribution to its contracted rent roll. The
top 10 tenants are presented below based on contracted rents as at
the financial year end. This is concentrated on office tenants as
the next largest segment, residential, consists mainly of private
individuals and therefore contains no major concentration of credit
risk.
The Group's top 10 tenants are as follows, expressed as a
percentage of Group contracted rent:
As at 31 March 2021
Tenant Business sector Contracted rent (EUR'm)
%
HubSpot Ireland Limited Technology 10.5 15.4%
OPW State entity 6.0 8.8%
Twitter International Company Technology 5.1 7.5%
Zalando Technology 2.9 4.2%
Autodesk Ireland Operations Technology 2.8 4.1%
Informatica Ireland EMEA Technology 2.1 3.1%
Riot Games Technology 2.0 2.9%
Travelport Digital Limited Technology 1.8 2.6%
Deloitte & Touche Professional services 1.7 2.5%
BNY Mellon Fund Services (Ireland) Insurance and investment 1.6 2.3%
DAC management
Top 10 tenants 36.5 53.4%
Remaining tenants 31.8 46.6%
Whole portfolio 68.3 100.0%
1. Contracted rent includes residential rents on a gross basis.
As at 31 March 2020
Tenant Business sector Contracted rent (EUR'm)
%
HubSpot Ireland Limited Technology 10.5 15.6%
OPW State entity 6.0 8.9%
Twitter International Company Technology 5.1 7.6%
Zalando Technology 2.9 4.3%
Autodesk Ireland Operations Technology 2.8 4.2%
Informatica Ireland EMEA Technology 2.1 3.1%
Riot Games Technology 2.0 3.0%
Electricity Supply Board State entity 1.9 2.8%
Travelport Digital Limited Technology 1.8 2.7%
BNY Mellon Fund Services (Ireland) Insurance and investment 1.6 2.4%
DAC management
Top 10 tenants 36.7 54.6%
Remaining tenants 30.4 45.4%
Whole portfolio 67.1 100.0% 5. Revenue and net rental and related income Accounting policy
The Group recognises revenue from the following major sources: ?
Rental income; ? Service charge income; and ? Other ad-hoc income
such as surrender premia and fees from other activities associated
with the Group's property
business.
Revenue is measured based on the consideration to which the
Group expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The Group
recognises revenue when it transfers control of a product or
service to a customer.
Rental income
Rental income is the Group's major source of income and arises
from properties under operating leases. Rental income, including
fixed rental uplifts, is recognised in the consolidated income
statement on a straight-line basis over the period of the lease
until the next break or expiry. All incentives given to tenants
under lease arrangements are recognised as an integral part of the
net consideration agreed for the use of the leased asset and are
therefore recognised on the same straight-line basis. Contingent
rents, being lease payments that are not fixed at the inception of
a lease, such as turnover rents, are recorded as income in the
period in which they are earned.
Lease modifications, a change in the scope or consideration for
the lease, result in the commencement of a new lease and rental
income is recognised including any changes to the lease terms, from
the date of the modification over the remaining period of the
lease.
Service charge income
The Group manages the majority of its multi-let buildings under
service contracts. These contracts operate for rolling one-year
periods over which the Group provides communal services such as
security, cleaning, waste and other occupation services to the
tenants in its buildings. The tenants pay a service charge, based
on the area they occupy, which is collected in advance based on
budgeted costs. This income stream is recognised as revenue in
accordance with the policy described under 'Property-related income
and expenses' below.
Other income
All other income is recognised in accordance with the following
model:
1. Identify the contract with a customer.
2. Identify all the individual performance obligations within
the contract.
3. Determine the transaction price.
4. Allocate the price to the performance obligations.
5. Recognise revenue as the performance obligations are
fulfilled.
Property-related income and expenses
Property-related income and expenses comprise service charge
income (revenue from contracts with customers) and service charge
expenses (costs of goods and services) as well as other property
expenses. The Group enters into property management arrangements
with tenants as part of its activities. These arrangements
constitute a separate performance obligation to the obligations
under the rental leases. Buildings with multiple tenants share the
costs of common areas and pooled services under these arrangements.
The Group manages these costs for tenants and earns a management
fee for the provision of shared services on a cost-plus basis. As a
landlord, costs of vacant areas are absorbed by the Group and
included in other property expenses.
The service charge income stream is accounted for as a single
performance obligation which is satisfied over time because the
tenant simultaneously receives and consumes the benefits of the
Group's activities in providing services under the agreement.
Service charge income and expenditure is therefore recognised on an
input basis. Tenants reimburse expenses in advance based on
budgets, with over and under spends reconciled and settled
annually. Service charge accounts are maintained for each managed
building and the application and management of funds are
independently reviewed on the tenants' behalf.
Property operating expenses comprise expenses relating to
properties that are not recharged to tenants, i.e. void costs,
residential management costs and other related property expenses.
Revenue can be analysed as follows:
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Gross rental income1 66,157 59,937
Rental incentives 330 1,875
Rental income 66,487 61,812
Revenue from contracts with customers2 6,225 6,118
Total revenue 72,712 67,930
1. Gross rental income includes EUR0.9m relating to variable rents (March 2020: EUR1.1m). 2. Revenue from contracts with customers is service charge income. Net rental and related income
Financial year ended 31 March 2021 Financial year ended 31 March 2020
EUR'000 EUR'000
Total revenue 72,712 67,930
Costs of goods and services1 (6,150) (6,183)
Property expenses (3,256) (3,162)
Net rental and related income 63,306 58,585 1. Costs of goods and services are service charge expenses.
Further information on the sources and characteristics of
revenue and rental income is provided in note 6.
Included in property expenses is an amount of EUR0.9m (March
2020: EUR1.0m) relating to void costs on office properties, i.e.
costs relating to properties which were available to let but were
not income-generating for at least part of the financial year.
Property operating expenses
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Service charge income 6,225 6,118
Service charge expenses (6,150) (6,183)
Property expenses (3,256) (3,162)
Property operating expenses (3,181) (3,227) 6. Disaggregation of revenue and rental income
The Group's business is the rental of its investment properties,
the development of properties for its investment portfolio and the
provision of managed multi-let buildings to its tenants. The
Group's revenue consists of rental income, service charge income
and other ad-hoc receipts from its property business such as
surrender premia. The majority of its contracts are longer-term,
with some being 10 years or greater, excluding residential tenancy
arrangements which are generally one year in duration. Service
charge arrangements are generally provided for under the lease
contract but constitute a different performance obligation, the
conditions attaching to which are negotiated annually.
Note 4 'Operating segments' discloses the analysis of revenue
and income and expense in line with the Group's business model,
i.e. by investment property category. In order to complete the
disaggregation of revenue by categories that depict how the nature,
amount, timing and uncertainty of revenue and cash flows are
affected by economic factors, analyses of the revenue for the
period by duration of lease contracts (to next break date) and by
tenant industry sector are provided below. Additional information
on portfolio characteristics that impact on income is set out in
the business review. Total revenue by duration of lease contract
(based on next break date or expiry)
Service charge income is included within the one-year segment as
these arrangements, while provided for under the lease contracts,
are generally negotiated on an annual basis. Other income is
once-off in nature and is recognised in the one year or less
duration. Financial year ended 31 March 2021
Lease contracts: One year or less Between one and five Greater than five Total
years years
EUR'000 EUR'000 EUR'000 EUR'000
Office assets 12,211 19,342 32,227 63,780
Office development - - - -
assets
Residential assets 6,854 310 - 7,164
Industrial/other assets 1,330 438 - 1,768
Total segmented revenue 20,395 20,090 32,227 72,712 Financial year ended 31 March 2020
Lease contracts:
One year or less Between one and five years Greater than five years Total
EUR'000 EUR'000 EUR'000 EUR'000
Office assets 8,379 23,205 27,747 59,331
Office development assets - - - -
Residential assets 6,769 428 - 7,197
Industrial/other assets 1,307 95 - 1,402
Total segmented revenue 16,455 23,728 27,747 67,930
Gross rental income by tenant industry sector
During the financial year the tenant industry sectors were
reviewed and amended to provide greater clarity. The comparative
information has also been updated.
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 % EUR'000 %
Technology 28,588 43.1 25,185 40.9
State entities 9,797 14.8 10,263 16.6
Residential 7,164 10.8 7,197 11.6
Insurance and investment management 6,748 10.1 7,126 11.5
Professional services 4,473 6.7 3,761 6.1
Media 2,203 3.3 2,044 3.3
Industrial assets 1,680 2.5 1,623 2.6
Serviced offices 1,342 2.0 1,424 2.3
Aviation 1,189 1.8 1,189 1.9
Real estate 1,049 1.6 309 0.5
Banking and capital markets 829 1.2 440 0.7
Car parking 680 1.0 662 1.1
Retail 555 0.8 401 0.6
Other 190 0.3 188 0.3
Total 66,487 100.0 61,812 100 7. Gains and (losses) on investment property
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Gains and (losses) on investment property (67,581) 22,856
There were no sales of investment property during this or the
prior financial year. 8. Administration expenses Accounting
policy
Administration expenses are recognised on an accruals basis in
the consolidated income statement.
Operating profit for the financial year has been stated after
charging:
Financial year ended 31 March 2021 Financial year ended 31 March 2020
EUR'000 EUR'000
Non-Executive Directors' costs 612 561
Staff costs 7,325 6,829
Professional fees ? property 688 1,100
Professional fees ? corporate 2,073 1,967
Independent Valuer's fees 346 285
Depository fees 283 315
Depreciation 510 520
Other administration expenses 1,225 1,669
Administration expenses 13,062 13,246
All fees paid to Non-Executive Directors are for services as
Directors of the Company. Non-Executive Directors receive no other
benefits. Annualised Non-Executive Directors' fees are EUR565k
(March 2020: EUR625k).
'Professional fees ? property' are those incurred in relation to
legal and other expenses associated with acquisitions/
disposals/lettings which did not proceed, planning consulting in
relation to future development projects and other similar expenses
relating to property. 'Professional fees ? corporate' are various
fees relating to legal, internal audit, tax and other consulting
services not relating directly to property.
Fees are paid to the Valuer in return for its services in
providing independent valuations of the Group's investment
properties on an at least twice-yearly basis. The fees are charged
on a fixed rate per property valuation. Auditor's remuneration
(excluding VAT)
Financial year ended Financial year ended
31 March 2020
31 March 2021
EUR'000
EUR'000
Audit of the Group financial statements 120 117
Other assurance services1 61 68
Tax advisory services - -
Other non-audit services - -
Total 181 185 1. Other assurance services include the review of the Interim Report and audit of Group subsidiary financial
statements. 9. Employment
The average monthly number of persons (including Executive
Directors) directly employed during the financial year in the Group
was 35 (March 2020: 36).
Total employees at financial year end:
Financial year ended Financial year ended
31 March 2021 31 March 2020
Number Number
At financial year end:
Administration 26 27
Building management services
Head office staff 4 4
On-site staff 5 5
9 9
Total employees 35 36
No amount of staff costs was capitalised into investment
properties.
The staff costs for the above employees were:
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Wages and salaries (including bonuses) 5,858 5,543
Social insurance costs 644 653
Employee share-based payment expense 1,455 1,252
Pension costs ? defined contribution plan 343 376
Total 8,300 7,824
Staff costs are allocated to the following expense headings:
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Administration expenses 7,325 6,829
Net property expenses1 975 995
Total 8,300 7,824 1. Part of this is recovered directly from tenants via the service charge arrangements within Hibernia managed
buildings. 10. Share-based payments Accounting policy
The Group has a number of share-based payment arrangements in
place. These share-based payments are transactions in which the
Group receives services in exchange for its equity instruments or
by incurring liabilities for cash amounts based on the price of the
Group's shares. The equity-settled share-based payment awards
granted under these arrangements are measured at the fair value of
the award at the date of grant. The cost of the award is charged to
the consolidated income statement over the vesting period of the
awards based on the probable number of awards that will eventually
vest, with a corresponding credit to shareholders' equity.
The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
the share-based payment reserve. When these shares vest they are
assessed for tax purposes at the current market share price and
employee taxes are generally settled through payroll in cash.
Employees therefore receive the number of shares net of taxes at
vesting date. Share-based payments that are cash-settled are
remeasured at fair value at each accounting date. At the end of
each reporting period, the Group revises its estimate of the number
of equity instruments expected to vest.
Movements in share-based payments during the financial year by
scheme
Financial year ended 31 March 2021
Balance outstanding at start Settled during Provided during Balance outstanding at end
of financial year financial year of financial year
financial year
EUR'000 '000 Shares EUR'000 '000 EUR'000 '000 Shares EUR'000 '000 Shares
Shares
a. Annual bonus 358 310 - - 480 420 838 730
b. Long-term incentive 621 411 - - 879 715 1,500 1,126
payments
c. Employee incentives ? 1,087 769 (568) (391) 96 64 615 442
previous arrangements
Total 2,066 1,490 (568) (391) 1,455 1,199 2,953 2,298
Financial year ended 31 March 2020
Balance outstanding at Settled during Provided during Balance outstanding at
start of financial year financial year end of financial year
financial year
'000 '000
EUR'000 EUR'000 Shares EUR'000 '000 Shares EUR'000 '000 Shares
Shares
a. Annual bonus 23 17 - - 335 293 358 310
b. Long-term incentive - - - - 621 411 621 411
payments
c. IMA performance-related 6,069 4,495 (6,107) (4,519) 38 24 - -
payments payable to Vendors
c. Employee incentives ? 1,464 1,087 (635) (476) 258 158 1,087 769
previous arrangements
Total 7,556 5,599 (6,742) (4,995) 1,252 886 2,066 1,490
Remuneration Policy
This policy was introduced in 2018 and was described in full in
the 2018 Annual Report and is available on our website. A revised
remuneration policy will be published in our 2021 Annual Report and
put to shareholders at the 2021 AGM.
Remuneration consists of the following:
1. Basic pay
2. Annual bonus
3. Long-Term Incentive Plan ("LTIP")
The split between personal and Group performance targets is set
depending on an employee's ability to influence Group outcomes, but
all employees have an element of Group performance within their
targets. We have also started to include ESG criteria within
certain employees' targets. All Group employees are eligible to
participate in the Annual Bonus scheme while the LTIP applies to
Executive Directors and to members of the Senior Management Team,
other than in exceptional circumstances. 10.a Annual Bonus
Two thirds of any annual bonus award is usually settled in cash
and one third in the grant of shares in the Company, subject to a
three-year service condition. The deferred shares awarded under the
annual bonus are subject only to continued employment. The fair
value of the share award is therefore the number of shares granted
at the closing share price on the date of grant. An allowance in
relation to expected departures is made and the amount amortised
over the vesting period. 848k share awards were calculated as
potentially due in respect of the financial year ended at 31 March
2021, subject to approval by the Remuneration Committee (March
2020: 930k). At 31 March 2021, 1,074k shares remained to be
provided for in respect of the 2019, 2020 and 2021 financial years.
10.b Long-Term Incentive Plan ("LTIP")
The LTIP commenced during the financial year ended 31 March 2020
with the first grant on 31 July 2019. This award consists of
nil-cost options which vest after three years. Under the LTIP,
recipients are granted a variable number of equity instruments
depending on market and other conditions as illustrated below.
LTIP conditions Weighting Reference Performance condition type
Service condition SC n/a
Relative Total Property Return 33% TPR Non-market
Total Accounting Return 33% TAR Non-market
Relative Total Shareholder Return 33% TSR Market
There is a two-year restricted holding period post vesting, but
this is not subject to measurement as all conditions terminate on
vesting. The LTIP awards are measured as follows:
Non-market-based conditions: The fair value of the shares to be
issued is determined using the grant date market price. The
expected number of shares is calculated based on the expectations
of the number of shares which may vest at the vesting date and
amortised over the vesting period. At each accounting date, the
calculation of the number of shares is revised according to current
expectations or performance. The number of shares is discounted
using an estimate of the expected employee departure rate.
Market-based condition: The relative TSR performance condition
measures the Company's TSR performance against the constituents of
the FTSE EPRA NAREIT Developed Europe index. The expected
performance of Hibernia REIT plc shares over the vesting period is
calculated using a Monte Carlo simulation of 10,000 possible
outcomes which are then averaged. Inputs are share price volatility
and the average growth rate of comparators. These inputs are
calculated with reference to relevant historic data and financial
models. It should be recognised that the assumption of an average
growth rate is not a prediction of the actual level of returns that
will be achieved. The volatility assumption in the distribution
gives a measure of the range of outcomes that may occur on either
side of this average value. This is used to amortise the fair value
of an expected cost over the vesting period. The service condition
is ignored for this calculation but applied in accruing the amounts
due. On vesting, any difference in amounts accrued versus actual
outcomes is amended through reserves.
At 31 March 2021
Total awards
made Balance
Grant Share price at Share equivalents provided provided
date grant date at maximum '000 shares
vesting EUR'000
'000 shares
LTIP dated 31 July 2019 31 July 1.51 1,853 600 906
2019
LTIP dated 29 July 2020 29 July 1.13 2,438 526 594
2020
Total LTIP awards as at 4,291 1,126 1,500
financial year end
At 31 March 2020
Total awards
made Balance
Grant Share price at Share equivalents provided provided
date grant date at maximum '000 shares
vesting EUR'000
'000 shares
LTIP dated 31 July 2019 31 July 1.51 1,853 411 621
2019
Total LTIP awards as at 1,853 411 621
financial year end
One-third of each award made is subject to a relative TSR
measure against the constituents of the FTSE EPRA NAREIT Developed
Europe Index. One-third each is made against TPR and TAR measures.
600k shares were provided for the TPR element as at 31 March 2021
(March 2020: 190k), 173k shares (March 2020: 130k) were provided
against the TAR element based on the performance for the period and
353k shares (March 2020: 92k) were provided against the TSR element
based on the fair value calculated using a TSR pricing model as
described above. Results and inputs are summarised in the table
below.
TSR Valuation: LTIP awards dated: 31 July 2019
29 July 2020
Fair value per award (TSR tranche) (EUR per share) 0.81 1.06
Inputs Source
Risk free interest rate (%) European Central Bank (0.12) (0.80)
Expected volatility Hibernia (%) Datastream 27.7 17.1
Average comparator volatility (%) Datastream 31.7 18.6
Average comparator correlation (%) Datastream 40.5 20.8
Median 0.94 Median 1.01
Averaging factors Datastream
Hibernia 1.15 Hibernia 1.16 10.c Employee incentives - previous arrangements
Investment Management Agreement ("IMA") performance-related
payments to Vendors and staff
IMA performance-related payments refer to those payments that
were made under the IMA for each financial year and settled mainly
in shares of the Company until the expiry of the agreement on 26
November 2018. These arrangements expired with the introduction of
the 2018 Remuneration Scheme and all remaining balances have been
settled since 31 March 2021.
Employee incentives - interim arrangements
This covered employees who were providing services that were not
part of the original IMA. This arrangement expired with the
introduction of the 2018 Remuneration Scheme and the final vesting
date was 31 March 2021. The remaining balances have been settled
since 31 March 2021. 11. Finance income and expense Accounting
policy
Finance expenses directly attributable to the construction of
investment properties, which take a considerable length of time to
prepare for rental to tenants, are added to the costs of those
properties until such time as the properties are substantially
ready for use. All other finance expenses and income are recognised
in the income statement as they occur using the effective interest
method. The effective interest method is a method of calculating
the amortised cost of a financial asset or financial liability (or
group of financial assets or financial liabilities) and of
allocating the interest income, interest expense and fees paid and
received over the relevant period.
The effective interest expense on borrowings arises as a result
of the recognition of interest expense, commitment fees and
arrangement fees.
Finance income is interest earned on the Group's cash
deposits.
Financial year ended 31 Financial year ended 31
March 2021 March 2020
EUR'000 EUR'000
Interest on revolving credit facility 5,753 5,230
Interest on private placement notes 1,888 1,894
Other finance costs 334 215
Gross finance expense 7,975 7,339
Less: Capitalised interest at an average rate of 2.1% (252) (141)
(March 2020: 2.1%)
Finance expense 7,723 7,198
Interest costs capitalised in the financial year were EUR0.3m
(March 2020: EUR0.1m) in relation to the Group's development and
refurbishment projects. The capitalisation rate used is the
effective interest rate on the cost of borrowing applied to the
portion of investment that is financed from borrowings. 12. Income
tax expense Accounting policy
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except insofar as it applies to
business combinations or to items recognised in other comprehensive
income.
Current tax: Current tax is the expected tax payable or
receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Hibernia REIT plc has elected for Real Estate Investment Trust
("REIT") status under section 705E of the Taxes Consolidation Act,
1997. As a result, the Group does not pay Irish corporation tax on
the profits and gains from its qualifying rental business in
Ireland provided it meets certain conditions. With certain
exceptions, corporation tax is still payable in the normal way in
respect of income and gains from a Group's residual business that
is, its non-property rental business. Reconciliation of the income
tax expense for the financial year:
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Profit before tax (25,401) 60,863
Tax charge on profit at standard rate of 12.5% (3,175) 7,608
Non-taxable revaluation surplus 8,365 (2,931)
REIT tax-exempt profits (5,534) (4,737)
Other (including additional tax rate on residual income) 173 (402)
Over provision in respect of prior periods (17) 282
Income tax (credit) for the financial year (188) (180)
The Directors confirm that the Group has remained in full
compliance with the Irish REIT rules and regulations up to and
including the date of this report. 13. Dividends Accounting
policy
Interim dividends are recognised as a liability of the Company
when the Board of Directors resolves to pay the dividend and the
shareholders have been notified in accordance with the Company's
Articles of Association. Final dividends of the Company are
recognised as a liability when they have been approved by the
Company's shareholders at the AGM.
Financial year Financial year
ended ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Interim dividend for the financial year ended 31 March 2021 of 2.0 cent per share (March 13,234 11,982
2020: 1.75 cent per share)
Proposed final dividend for the financial year ended 31 March 2021 of 3.4 cent per share 22,502 20,543
1 (March 2020: 3.0 cent per share)
Total 35,736 32,525
1. Based on shares in issue at close of business at 25 May 2021
of 661.8m.
The Board has proposed a final dividend of 3.4 cent per share
(March 2020: 3.0 cent) which is subject to approval by shareholders
at the Annual General Meeting to be held on 27 July 2021 and has
therefore not been included as a liability in these consolidated
financial statements. This dividend is expected to be paid on 30
July 2021 to shareholders on the register at 2 July 2021. All of
this proposed final dividend of 3.4 cent per share will be a
Property Income Distribution in respect of the Group's property
rental business (March 2020: 3.0 cent). The total dividend, interim
paid and final proposed for the financial year ended 31 March 2021
is 5.4 cent per share (March 2020: 4.75 cent per share) or EUR35.7m
(March 2020: EUR32.5m).
Under the REIT regime, the Company is required to distribute a
minimum of 85% of the Group's property rental business profits
annually and the Group's dividend policy is to pay out 85-90% of
its property rental business profits annually. The Company has
complied with this requirement; the total dividends for the year
ended March 2021 equate to 87% of property rental income (March
2020: 85%). 14. Earnings per share
There are no convertible instruments, options, or warrants on
ordinary shares in issue as at 31 March 2021, other than those
dealt with under note 10 above, 'Share-based payments'. The Company
has established a reserve of EUR3.0m (March 2020: EUR2.1m) which is
mainly for the issue of ordinary shares relating to the payment of
share-based payments. It is estimated that approximately 3.4m
ordinary shares (March 2020: 2.4m shares) will be issued in total,
2.3m of which are provided for at 31 March 2021 and a further 1.1m
of which will be recognised over the next three years. The dilutive
effect of these shares is disclosed below.
The calculations are as follows: Weighted average number of
shares
Financial year ended 31 Financial year ended 31
March 2021 March 2020
Notes '000 '000
Issued share capital at beginning of financial year 684,657 697,589
Shares purchased and cancelled during the financial year (23,125) (17,573)
Shares issued during the financial year 125 4,641
Shares in issue at financial year end 21 661,657 684,657
Weighted average number of shares 673,618 688,759
Number of shares to be issued under share-based schemes 3,372 2,375
Diluted number of shares 676,990 691,134
Financial year ended 31 Financial year ended 31
March 2021 March 2020
'000 '000
Number of shares due to issue under share-based schemes 10 2,298 1,490
recognised at financial year end
Number of shares due to issue under share-based schemes not 1,074 885
recognised at financial year end1
Number of shares to be issued under share-based schemes 3,372 2,375 1. Included here are all amounts from share-based payments described in note 10 which are either granted at the
year-end or shortly after and which have not been recognised at
year-end but will be recognised over the next two
to three years Basic and diluted earnings per share (IFRS)
Financial year
Financial year ended 31 March ended
2021
31 March 2020
EUR'000 EUR'000
(Loss)/profit for the financial year attributable to the owners
(25,213) 61,043
of the parent
'000 '000
Weighted average number of ordinary shares (basic) 673,618 688,759
Weighted average number of ordinary shares (diluted)1 673,618 691,134
Basic earnings per share (cent) (3.7) 8.9
Diluted earnings per share (cent) (3.7) 8.8
1. In a loss making scenario, potential shares are only applied dilutive if they increase the losses under IAS 33.
Financial year ended 31 Financial year ended
March 2021
EPRA earnings Note 31 March 2020
'000
'000
Group (loss)/profit for the financial year (25,213) 61,043
Less:
Gains and (losses) on investment property 16 67,581 (22,856)
Gain on other assets (69) -
Deferred tax in respect of EPRA adjustments 12 (188) (152)
Changes in fair value of financial instruments and 112 58
associated close-out costs
EPRA earnings 42,223 38,093
EPRA earnings per share and diluted EPRA earnings
'000 '000
per share
Weighted average number of ordinary shares (basic) 673,618 688,759
Weighted average number of ordinary shares (diluted) 676,990 691,134
EPRA earnings per share (cent) 6.3 5.5
Diluted EPRA earnings per share (cent) 6.2 5.5
1. EPRA earnings and EPRA earnings per share are alternative
performance measures and are calculated in accordance with the EPRA
Best Practices Recommendations Guidelines October 2019. EPRA
earnings, earnings from operational activities, are presented as
they are a key measure of the Group's underlying operating result
and an indication of the extent to which current dividend payments
are supported by earnings. Unrealised changes in valuation, gains
or losses on disposals of properties and certain other items are
excluded as they are not considered to be part of the core activity
of an investment property company. 15. IFRS NAV, EPRA NTA per share
and Total Accounting Return ("TAR")
The IFRS NAV is calculated as the value of the Group's assets
less the value of its liabilities based on IFRS measures and is
equal to total equity.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
IFRS net assets at end of financial year 1,148,638 1,231,149
Ordinary shares in issue ('000) 661,657 684,657
IFRS NAV per share (cent) 173.6 179.8
Note '000 '000
Ordinary shares in issue 661,657 684,657
Number of shares to be issued under share-based schemes 14 3,372 2,375
Diluted number of shares 665,029 687,032
Diluted IFRS NAV per share (cent) 172.7 179.2
EPRA NTA1
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
IFRS NAV 1,148,638 1,231,149
Include:
Revaluation of other non-current investments - -
Diluted NAV at fair value 1,148,638 1,231,149
Exclude:
Fair value of financial instruments (442) 234
NTA 1,148,196 1,231,383
Diluted number of shares at financial year end 665,029 687,032
NTA per share at financial year end (cent) 172.7 179.2 1. EPRA Net Tangible Assets ("EPRA NTA") (which is an APM) is calculated in accordance with EPRA Best Practices
Recommendations Guidelines October 2019. The underlying
assumption behind the EPRA NTA calculation assumes entities
buy and sell assets, thereby crystallising certain levels of
deferred tax liability.
Total Accounting Return ("TAR")
Total Accounting Return, a key performance indicator and APM, is
calculated as the increase in EPRA Net Tangible Assets ("NTA") per
share for the period over the previous period-end EPRA NTA per
share and adding back dividends per share paid during the period,
expressed as a percentage of opening EPRA NTA per share.
As at 31 March 2021 As at 31 March 20201
Opening EPRA NTA per share 179.2c 173.3c
Closing EPRA NTA per share 172.7c 179.3c
(Decrease)/Increase in EPRA NTA per share (6.5)c 6.0c
Dividends per share paid in financial year 5.0c 3.8c
Total return (1.5)c 9.8c
Total Accounting Return ("TAR") (0.9)% 5.7% 1. The TAR calculation was based on EPRA NAV in the financial year ended 31 March 2020 under the EPRA 2016 guidelines. 2. TAR is an APM.
Section III - Tangible assets
This section contains information on the Group's investment
properties and other tangible assets. All investment properties are
fully owned by the Group. The Group's investment properties are
carried at fair value and its other tangible assets at depreciated
cost, except for land and buildings which are adjusted to fair
value. 16. Investment property Accounting policy
Investment properties are properties held to earn rental income
and/or for capital appreciation (including property under
construction for such purposes). Properties are treated as acquired
at the point at which the Group assumes the significant risks and
rewards of ownership. This occurs when:
1. It is probable that the future economic benefits that are
associated with the investment property will flow to the Group;
2. There are no material conditions which could affect
completion of the acquisition; and
3. The cost of the investment property can be measured
reliably.
Investment properties are measured initially at cost, including
transaction costs. After initial recognition, investment properties
are measured at fair value. Gains and losses arising from changes
in the fair value of investment properties are included in the
consolidated income statement in the period in which they
arise.
Investment properties and properties under development are
professionally valued on a twice-yearly basis, or as required, by
qualified external valuers using inputs that are observable either
directly or indirectly for the asset in addition to unobservable
inputs and are therefore classified at Level 3. The valuation of
investment properties is further discussed above under notes 2.f
and 2.g.
The valuations of investment properties and investment
properties under development are prepared in accordance with the
appropriate sections of the Professional Standards, the Valuation
Technical and Performance Standards ("VPS") and the Valuation
Applications ("VPGA") contained within the RICS Valuation - Global
Standards 2019 (the "Red Book"). It follows that the valuations are
compliant with the International Valuation Standards. When the
Group begins to redevelop an existing investment property, or
property acquired as an investment property, for future use as an
investment property the property remains an investment property and
is accounted for as such. Expenditure on investment properties is
capitalised only when it increases the future economic benefits
associated with the property. All other expenditure is charged to
the consolidated income statement. Interest and other outgoings,
less any income, on properties under development are capitalised.
Borrowing costs, that is interest and other costs incurred in
connection with borrowing funds, are recognised as part of the
costs of an investment property where directly attributable to the
purchase or construction of that property. Borrowing costs are
capitalised in accordance with the policy described in note 11.
In accordance with the Group's policy on revenue recognition
(note 5), the value of accrued income in relation to the
recognition of lease incentives under operating leases over the
term of the lease is adjusted in the fair value assessment of the
investment property to which the accrual relates.
Where amounts are received from departing tenants in respect of
dilapidations, i.e. compensation for works that the tenant was
expected to carry out at the termination of a lease but the tenant,
in agreement with the Group, pays a compensatory sum in lieu of
carrying out this work, the Group applies these amounts to the cost
of the property. The value of the work to be done is therefore
reflected in the fair value assessment of the property when it is
assessed at the end of the period.
An investment property is derecognised on disposal, i.e. when
the significant risks and rewards of ownership are transferred
outside the Group's control, or when the investment property is
permanently removed from use and no future economic benefits are
anticipated from the disposal. Any gain or loss arising on
derecognition of the property (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is
included in the consolidated income statement in the period in
which the property is derecognised. At 31 March 2021
Office development Residential Industrial/other Total
Office assets assets assets assets
Fair value category Level 3 Level 3
EUR'000 Level 3 Level 3 Level 3 EUR'000
EUR'000 EUR'000 EUR'000
Carrying value at 1 April 2020 1,196,925 47,999 159,459 60,800 1,465,183
Additions:
Property purchases 6,900 - 366 3,833 11,099
Development and refurbishment expenditure 2,9331 14,973 203 - 18,109
Transferred between segments2 (2,500) 2,500 - - -
Transferred from other assets3 - - 550 53 603
Revaluations included in income statement (65,439) (3,466) 7,132 (5,808) (67,581)
Carrying value at 31 March 2021 1,138,819 62,006 167,710 58,8784 1,427,413 1. This includes capital expenditure on previously completed developments after their transfer to the office segment. 2. 50 City Quay is undergoing redevelopment and has been recognised as a development property from 30 September 2020. 3. Three assets remaining from a historical portfolio purchase have been recognised at fair value as investment
property at 31 March 2021 (see note 4 in relation to the change
in operating segments). 4. On 9 November 2018 the Group agreed to
acquire 92.5 acres adjacent to its holdings in Newlands from the
Irish Rugby
Football Union (the "IRFU") for an initial consideration of
EUR27m. If rezoning is achieved before November 2028 the
IRFU will be due additional consideration equating to 44% of the
value of Hibernia's total land interests of 143.7
acres in the Newlands site at rezoning, less the initial
consideration. At 31 March 2020
Office Residential Industrial/
Office assets development assets other Total
Fair value category Level 3 assets assets
EUR'000 Level 3 Level 3
Level 3 EUR'000 Level 3 EUR'000
EUR'000 EUR'000
Carrying value at 1 April 2019 1,173,140 16,199 153,079 53,000 1,395,418
Additions:
Property purchases 8,741 - 694 13,385 22,8201
Development and refurbishment expenditure 9,0972 13,557 825 157 23,636
Revaluations included in income statement 5,494 18,243 4,861 (5,742) 22,856
Transferred from property, plant and equipment 6,210 - - - 6,210
3
Transferred to property, plant and equipment3 (5,757) - - - (5,757)
Carrying value at 31 March 2020 1,196,925 47,999 159,459 60,8004 1,465,183
1. A VAT refund of EUR0.5m was accounted for during the
financial year arising as a result of the grant of VAT inclusive
leases within a redeveloped property in 2DC, following its
refurbishment. Gross acquisitions in the financial year were
therefore EUR23.3m.
2. This includes capital expenditure on 1WML, SJRQ and 2WML
after their transfer to the office segment.
3. The Group moved to a new head office in 1WML in late 2019.
The space previously occupied by the Group in South Dock House has
been leased to a tenant during the financial year and was
transferred to investment property at fair value on the date on
which it changed in use.
4. On 9 November 2018 the Group agreed to acquire 92.5 acres
adjacent to its holdings in Newlands from the Irish Rugby Football
Union (the "IRFU") for an initial consideration of EUR27m. If
rezoning is achieved before November 2028 the IRFU will be due
additional consideration equating to 44% of the value of Hibernia's
total land interests of 143.7 acres in the Newlands site at
rezoning, less the initial consideration.
There were no transfers between fair value levels during the
financial year. Approximately EUR0.3m of financing costs were
capitalised at an effective interest rate of 2.1% in relation to
the Group's developments and major refurbishments (March 2020:
EUR0.1m). No other operating expenses were capitalised during the
financial year. Valuations as at 31 March 2021
The valuations used to determine fair value for the investment
properties in the consolidated financial statements are determined
by the Group's Valuer and are in accordance with the provisions of
IFRS 13. C&W has agreed to the use of its valuations for this
purpose. As discussed in notes 2.f and 2.g, property valuations are
inherently subjective as they are made on the basis of assumptions
made by the Valuer and therefore are classified as Level 3.
Valuations are completed on the Group's investment property
portfolio on at least a half-yearly basis and, in accordance with
the appropriate sections of the Professional Standards, the
Valuation Technical and Performance Standards ("VPS") and the
Valuation Practice Applications ("VPGA") contained within the RICS
Valuation - Global Standards 2019 (the "Red Book"). It follows that
the valuations are compliant with the International Valuation
Standards. Fair value under IFRS 13 is "the price that would be
received to sell an asset, or paid to transfer a liability, in an
orderly transaction between market participants at the measurement
date". The Red Book confirms that the references in IFRS 13 to
market participants and a sale make it clear that for most
practical purposes fair value is consistent with market value.
The method that is applied for fair value measurements
categorised within Level 3 of the fair value hierarchy is the yield
methodology using market rental values capitalised with a market
capitalisation rate or yield or other applicable valuation
technique. Using this approach for the Group's investment
properties, values of investment properties are arrived at by
discounting forecasted net cash flows at market derived
capitalisation rates. This approach includes future estimated costs
associated with refurbishment or development, together with the
impact of rental incentives allowed to tenants. Thus development
properties are assessed using a residual method in which the
completed development property is valued using income and yield
assumptions and deductions are made for the estimated costs to
complete, including finance costs and developers' profit, to arrive
at the current valuation estimate. In effect, this values the
development as a proportion of the completed property.
In the financial year ended 31 March 2021, for most properties
the highest and best use is the current use except as discussed in
note 2.f. In these instances, the Group may need to achieve vacant
possession before redevelopment or refurbishment may take place and
the valuation of the property takes account of any remaining
occupancy period on existing leases. The table below summarises the
methods applied for each investment property segment and highlights
properties where the approach has been varied in this financial
year.
Description Fair value of Changes in the
of investment the investment fair value
property property Narrative description of the techniques used technique during
asset class the financial
EUR'm year
Yield methodology using market rental values capitalised with a market
capitalisation rate.
Exceptions to this:
? Harcourt Square is valued on an investment basis until the end of No change in
Office assets 1,139 the current lease (2022) and on a residual basis thereafter. valuation
? Marine House and Clanwilliam Court Blocks 1, 2 and 5 are valued on technique.
an investment basis until the end of the current leases (which
expire over the period 2021 to 2022) and on a residual basis
thereafter.
? The Forum is planned for refurbishment and the valuation
methodology is on an investment basis with outstanding capital
expenditure recognised within the valuation.
Residual method, i.e. Gross Development Value less Total Development
Cost less Profit equals Fair Value
? Gross Development Value ("GDV"): the fair value of the completed
proposed development (arrived at by capitalising the market rent or
estimated rental value ("ERV") with an appropriate yield,
allowances for purchasers' costs, assumptions for voids and/or rent No change in
Office free periods). The appropriate yield is based on the Valuer's valuation
development 62 opinion of the most likely tenant covenant achievable for the technique.
assets property and the most likely lease terms.
? Total Development Cost ("TDC"): this includes, but is not limited
to, construction costs, land acquisition costs, professional fees,
levies, marketing costs and finance costs.
? Developer's profit which is measured as a percentage of the TDC
(including the site value). It also takes account of letting risk.
For developments close to completion the investment yield methodology
with outstanding capital expenditure recognised is usually applied.
Residential Yield methodology using rental values capitalised with a market No change in
assets 168 capitalisation rate. Alternatively, the comparable sales method of valuation
valuation is used to value some residential assets. technique.
Yield methodology using market rental values capitalised with a market
capitalisation rate.
? The Newlands site, including the Gateway industrial park, is valued
as an early stage development site on a price per acre basis. No change in
Industrial/ 58 ? Properties in Dublin Industrial Estate and Malahide Road Industrial valuation
other assets Estate are valued using market rental values capitalised with a technique.
market capitalisation rate. The values are benchmarked to capital
values per sq. ft. to take account of their current condition and
development potential.
? A disused building is valued on a residual basis with reference to
city centre land values per acre. EPRA capital expenditure
Capital expenditure ("capex") during the financial year is
analysed below according to the EPRA Best Practices Recommendation
Guidelines. All amounts are from the IFRS financial statements of
the Group without adjustment and are reconciled below. 1.
Acquisitions: amounts spent for the purchase of investment
properties including purchase costs capitalised. 2. Development:
amounts spent on investment properties under construction or
recently completed and related project
costs capitalised, including internal costs allocated. 3.
'In-place' investment properties: amounts spent on the completed
operational portfolio including:
a. Incremental lettable area: amounts spent to add additional
lettable space to 'in-place' investment property;
b. No incremental lettable space: amounts spent to enhance the
property without increasing lettable areas; and
c. Tenant incentives: any amounts spent on the investment
property as incentive for tenants. 4. Capitalised interest:
capitalised finance costs which are added to the carrying value of
investment properties.
The Group has no joint ventures; all of its properties are
located in the Dublin area. Expenditure is therefore analysed into
portfolio property type only.
As at 31 March 2021
Industrial
Office assets Office development Residential Total
EUR'000 assets assets /other EUR'000
EUR'000 EUR'000 assets
EUR'000
Acquisitions 6,900 - 366 3,833 11,099
Development1 1,808 14,721 - - 16,529
'In-place' investment properties
Incremental lettable space - - - - -
No incremental lettable space2 98 - 203 - 301
Tenant incentives - - - - -
Expenditure on properties due for
1,027 - - - 1,027
re-development/refurbishment
Other material non-allocated types of expenditure - - - - -
9,833 14,721 569 3,833 28,956
Capitalised interest3 - 252 - - 252
Total capex 9,833 14,973 569 3,833 29,208
Conversion from accrual to cash basis (1,844) 821 113 (4) (914)
Total capex on cash basis 7,989 15,794 682 3,829 28,294
1. Capex relating to mainly development/refurbishment of 2 Cumberland Place and 50 City Quay. 2. Amounts are stated after taking account of dilapidation payments received from vacating tenants. 3. Financing expenses capitalised and expenditure on existing properties in relation to future planning for redevelopment.
As at 31 March 2020
Office assets Office development Residential Industrial/other Total
EUR'000 assets assets assets EUR'000
EUR'000 EUR'000 EUR'000
Acquisitions 8,741 - 694 13,385 22,8201
Development2 7,787 13,416 - - 21,203
'In-place' investment properties
Incremental lettable space - - - - -
No incremental lettable space (446)3 - 825 - 379
Tenant incentives - - - - -
Expenditure on properties due for
1,756 - - 157 1,913
re-development/refurbishment
Other material non-allocated types of - - - - -
expenditure
17,838 13,416 1,519 13,542 46,315
Capitalised interest4 - 141 - - 141
Total capex 17,838 13,557 1,519 13,542 46,456
Conversion from accrual to cash basis (173) 2,001 (220) (123) 1,485
Total capex on cash basis 17,665 15,558 1,299 13,419 47,941 1. A VAT refund of EUR0.5m was accounted for during the financial year arising as a result of the grant of VAT inclusive
leases within a redeveloped property in 2DC, following its
refurbishment. Gross acquisitions in the financial year
were therefore EUR23.3m. 2. Capex relating to development or
major refurbishment of 1SJRQ, 1&2WML, and 2 Cumberland Place.
3. Amounts are stated after taking account of dilapidation payments
received from vacating tenants. 4. Financing expenses capitalised
and expenditure on existing properties in relation to future
planning for
redevelopment.
Reconciliation of the Valuer's valuation report amount to the
carrying value of investment property in the consolidated statement
of financial position:
As at 31 March 2021 As at 31 March 2020
Note EUR'000 EUR'000
Valuation per Valuer's certificate 1,442,788 1,480,360
Owner-occupied 17 (6,647) (7,089)
Income recognition adjustment1 (8,728) (8,088)
Investment property balance at end of financial year 1,427,413 1,465,183 1. Income recognition adjustment: this relates to the difference in valuation that arises as a result of property
valuations using a cash flow based approach while income
recognition for accounting purposes spreads tenant
incentives and lease related costs over the lease term.
Information about fair value measurements using unobservable inputs
(Level 3)
The valuation techniques used in determining the fair value for
each of the categories of assets is market value as defined by VPS
4 of the Red Book, being the estimated amount for which an asset or
liability should exchange on the valuation date between a willing
buyer and a willing seller in an arm's length transaction after
proper marketing wherein the parties had acted knowledgeably,
prudently and without compulsion, and is in accordance with IFRS
13. Included in the inputs for the valuations above are future
development costs, where applicable, and sensitivity data is
provided on these.
As outlined above, the main inputs in using a market-based
capitalisation approach are the ERV and equivalent yields. ERVs,
apart from in multi-family residential properties, are not
generally directly observable and therefore classified as Level 3.
Yields depend on the Valuer's assessment of market capitalisation
rates and are therefore Level 3 inputs. The tables below summarise
the key unobservable inputs used in the valuation of the Group's
investment properties at 31 March 2021. There are
interrelationships between these inputs as they are both determined
by market conditions and the valuation result in any one period
depends on the balance between them. The Group's residential
properties are mainly multi-family units and therefore ERVs are
based on current market rents observed for units rented within the
property. ERV is included in the below table for completeness. Key
unobservable inputs used in the valuation of the Group's investment
property
31 March 2021
Market value Estimated rental value Equivalent
yield
EUR'000 Low High Low High
Office 1,138,819 EUR25.00psf EUR62.50psf 3.99% 7.17%
Office development 62,006 EUR40.00psf EUR60.75psf 4.46% 5.60%
Residential1 167,710 EUR13,896pa EUR31,200pa 3.55% 5.19%
Industrial/land 58,578 EUR5.25psf EUR9.00psf 6.27% 8.38% 1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting
operating expenses.
31 March 2020
Market value Estimated rental value Equivalent yield
EUR'000 Low High Low High
Office 1,196,925 EUR25.00psf EUR62.50psf 3.99% 6.65%
Office development 47,999 EUR30.00psf EUR62.00psf 4.42% 4.42%
Residential1 159,459 EUR25,200pa EUR32,400pa 3.70% 5.06%
Industrial/land 60,800 EUR5.00psf EUR9.00psf 7.65% 7.94% 1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting
operating expenses. Sensitivity data
The sensitivities below illustrate the impact of movements in
key unobservable inputs on the fair value of investment properties.
These are ERV, equivalent yields and development construction costs
(residual appraisals). To calculate these impacts only the movement
in one unobservable input is changed as if there is no impact on
the other. In reality there may be some impact on yields from an
ERV shift and vice versa. However, this gives an assessment of the
maximum impact of shifts in each variable. The tables illustrate
the impacts from a 5% or 10% ERV and a 25bp or 50bp shift in
equivalent yield on the valuations as included in the consolidated
financial statements at 31 March 2021 and 31 March 2020. ERV and
equivalent yields
31 March 2021
Impact on market value of a Impact on market value of a Impact on market value of Impact on market value of
5% change in the estimated 10% change in the estimated a 25bp change in the a 50bp change in the
rental value rental value equivalent yield equivalent yield
Sensitivities Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm
Office 52.4 (52.4) 104.6 (104.6) (72.8) 81.6 (138.1) 173.4
Office 2.6 (2.6) 5.1 (5.1) (3.6) 3.9 (6.7) 8.3
development
Residential 8.3 (8.3) 16.4 (16.4) (10.6) 12.3 (19.8) 26.3
Industrial/ 0.6 (0.6) 1.4 (1.4) (0.7) 0.7 (1.4) 1.5
other
Total 63.9 (63.9) 127.5 (127.5) (87.7) 98.5 (166.0) 209.5
31 March 2020
Impact on market value of a Impact on market value of a Impact on market value of Impact on market value of
5% change in the estimated 10% change in the estimated a 25bp change in the a 50bp change in the
rental value rental value equivalent yield equivalent yield
Sensitivities Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm Increase EUR'm Decrease EUR'm
Office 58.6 (58.6) 116.9 (116.9) (83.4) 93.2 (158.3) 198.7
Office 2.8 (2.8) 5.7 (5.7) (3.8) 4.3 (7.3) 9.2
development
Residential 8.0 (8.0) 15.8 (15.8) (9.9) 11.2 (18.6) 24.1
Industrial/ 0.3 (0.3) 0.6 (0.6) (0.3) 0.3 (0.5) 0.6
other
Total 69.7 (69.7) 139.0 (139.0) (97.4) 109.0 (184.7) 232.6 Development construction costs
A 5% decrease or increase in construction costs would result in
a decrease or increase in the total value of the portfolio of
EUR10m as at 31 March 2021 (March 2020: EUR10m). Development
construction costs are an unobservable input to residual appraisals
which are used in valuing those properties that are pipeline
development assets. 17. Property, plant and equipment Accounting
policy
Owned property which is occupied by the Group for its own
purposes is derecognised as investment property at the date
occupation commenced and recognised as owner-occupied property
within property, plant and equipment at its fair value at that
date. Similarly, property which ceases to be occupied by the Group
is derecognised as property, plant and equipment and recognised as
investment property at fair value on the date of change of use.
Property used for administration purposes is stated in the
consolidated statement of financial position at its revalued
amount. Revaluations are performed with sufficient regularity such
that the carrying amounts do not differ materially from those that
would be determined using fair values at the end of each accounting
period.
Any revaluation increase from this property is recognised in
other comprehensive income and accumulated in equity, except to the
extent that it reverses a revaluation decrease for the same asset
previously recognised in profit or loss, in which case the increase
is credited to profit or loss to the extent of the decrease
previously expensed. A decrease in the carrying amount of this
property arising on revaluation is recognised in profit or loss to
the extent that it exceeds the balance, if any, held in the
property's revaluation reserve relating to a previous revaluation
of that asset. On derecognition, the accumulated reserve for that
property remains in reserves until the asset is either sold or
decommissioned, at which date the accumulated reserve relating to
that asset is released directly to revenue reserves.
Depreciation on revalued property is recognised in profit or
loss. On the subsequent sale or retirement of a revalued property,
the attributable revaluation reserve is transferred directly to
retained earnings.
Fixtures and fittings are stated at cost less accumulated
depreciation and impairment losses.
Depreciation is recognised to write off the cost or value of
assets less their residual value over their useful lives. The
estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of
any changes in estimate accounted for on a prospective basis.
The estimated useful lives for the main asset categories
are:
Land and buildings 50 years
Fixtures and fittings/leasehold improvements 5 years
Office and computer equipment 3 years
As at 31 March 2021
Land and Office and computer Leasehold improvements and fixtures Total
buildings equipment and fittings
EUR'000 EUR'000 EUR'000 EUR'000
Cost or valuation
At 1 April 2020 7,155 171 1,647 8,973
Additions - 22 19 41
Revaluation recognised in other (304) - - (304)
comprehensive income
At 31 March 2021 6,851 193 1,666 8,710
Depreciation
At 1 April 2020 (66) (100) (176) (342)
Charge for the financial year (138) (39) (333) (510)
At 31 March 2021 (204) (139) (509) (852)
Carrying amount at 31 March 2021 6,647 54 1,157 7,858
At 31 March 2020
Land and Office and computer Leasehold improvements and fixtures Total
buildings equipment and fittings
EUR'000 EUR'000 EUR'000 EUR'000
Cost or valuation
At 1 April 2019 5,942 207 596 6,745
Additions:
Purchases 366 71 1,649 2,086
Transferred from investment property1 5,757 - - 5,757
Disposals:
Sales2 - (107) (598) (705)
Transferred to investment property1 (6,568) - - (6,568)
Revaluation recognised in other 1,658 - - 1,658
comprehensive income
At 31 March 2020 7,155 171 1,647 8,973
Depreciation
At 1 April 2019 (299) (152) (392) (843)
Charge for the financial year (125) (35) (360) (520)
Disposals - 87 576 663
Transferred to investment property1 358 - - 358
At 31 March 2020 (66) (100) (176) (342)
Carrying amount at 31 March 2020 7,089 71 1,471 8,631 1. The Group relocated its head office from South Dock House to 1WML during the financial year. South Dock House has
now been leased to a tenant and so is recognised in investment
property. The space in 1WML now occupied by the
Group has now been recognised in land and buildings as
owner-occupied property. 2. Disposals relate to furniture and
fittings in South Dock House.
Land and buildings: The Group's head office at 1WML was revalued
by the Group's Valuer in accordance with the valuation approach
described under note 16. It was measured at fair value at the
financial year end using a yield methodology using market rental
values capitalised with a market capitalisation rate. These fair
value measurements use significant unobservable inputs. The inputs
used are disclosed in the table below.
Valuation inputs 31 March 2021 31 March 2020
ERV per sq. ft. EUR51.0 EUR55.0
Equivalent yield 4.20% 4.25%
Section IV - Financing including equity and working capital
This section focuses on the financing of the Group's activities,
including the equity capital, bank borrowings and working capital.
It also covers financial risk management. Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability of another
entity. The Group has identified financial assets and liabilities
in its financial position and the accounting policy for these is
summarised in this note. Financial instruments may be further
analysed between current and non-current depending on whether these
will fall due within 12 months after the balance sheet date or
beyond.
Financial assets: This classification depends on the business
model and the contractual terms of the cash flows. Financial assets
that are held to collect contractual cash flows where those cash
flows represent solely payments of principal or interest are
measured at amortised cost. At initial recognition the Group
measures the financial assets at fair value plus (except for those
at fair value through profit or loss) transaction costs. The
difference between the recognition value and the redemption value
is recognised in the income statement over the contractual terms
using the effective interest rate method.
On initial recognition the Group classifies its financial assets
in the following measurement categories: ? Those to be measured
subsequently at fair value (either through other comprehensive
income or through profit or
loss). ? Those to be measured subsequently at amortised
cost.
The Group de-recognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the
Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the
financial asset. On de-recognition of a financial asset, the
difference between the carrying amount of the asset and the sum of
(i) the consideration received (including any new asset obtained
less any new liability assumed) and (ii) any cumulative gain or
loss that had been recognised in other comprehensive income is
recognised in profit or loss. Relevant costs incurred with the
disposal of a financial asset are deducted in computing the gain or
loss on disposal.
The Group's financial assets comprise cash and cash equivalents
at bank, trade and other receivables, and derivative
instruments.
Financial liabilities: These are initially recognised at the
fair value of the considerations received less directly
attributable transaction costs. Subsequent to initial recognition,
financial liabilities are recognised at amortised cost. The
difference between the recognition value and the redemption value
is recognised in the income statement over the contractual terms
using the effective interest rate method. This category includes
trade and other payables and borrowings. Financial liabilities are
derecognised in full when the Group is discharged from its
obligation, they expire, or they are replaced by a new liability
with substantially modified terms.
The Group's non-equity financing is all unsecured and comprises
a revolving credit facility and private placement notes. The
majority of this debt is fixed rate or hedged through derivatives
to protect against major rises in interest rates.
The Group's financial assets and liabilities and the methods
used to calculate fair value are listed in note 29.b.
Effective interest method: The Group uses the effective interest
method of calculating the amortised cost of a debt instrument and
of allocating interest income and expense over the relevant period.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or 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 asset or liability, or,
where appropriate, a shorter period, to the gross carrying amount
of a financial asset or the amortised cost of a financial
liability.
Impairment of financial assets: The Group recognises a loss
allowance for expected credit losses on debt instruments, trade
receivables and other financial assets. The amount of expected
credit loss ("ECL") is updated at each reporting date to reflect
changes in credit risk since initial recognition of the respective
financial instrument. IFRS 9 allows entities to apply a 'simplified
approach' for trade receivables, contract assets and lease
receivables. The simplified approach must be used for trade
receivables with no significant financing approach and the Group
has chosen to apply this to all trade receivables as only some
minor receivables have a financing component. The simplified
approach allows the recognition of lifetime ECL on all these assets
without the need to identify significant increases in credit risk
(see note 20). Lifetime ECL represents the ECL that will result
from all possible default events over the expected life of a
financial instrument. The Group uses a provision matrix to
calculate these ECL.
In order to perform this assessment, the Group classifies its
assessment into three stages: ? Step 1: Group trade receivables:
The Group has chosen to use a tenant risk assessment which is based
on the
tenant's industry, its knowledge of its payment history and
other factors as relevant to group financial assets
into credit risk categories. ? Steps 2 to 4: The Group uses the
period since inception to gather loss data. As only minor losses
have occurred,
the Group has used forward looking economic factors to determine
appropriate loss rates to apply to each sub-group
determined in step 1 as divided into past due categories, thus
creating a matrix for provision of ECL. ? Stage 5: The ECL for each
sub-group determined in step 1 is calculated by multiplying the
loss rate calculated in
steps 2 to 4 to the balance of each age-band for the receivables
in each group. Once ECL of each age-band for the
receivables has been calculated, total ECL of the portfolio is
provided.
A financial asset is considered to be credit-impaired where
payments are past due and there is no engagement with the Group to
make arrangements to bring the payment schedule up to date. A
financial asset is considered to be in default if the debtor has
failed to pay all rent and other charges due for a period of three
months, has failed to agree payment terms for the clearance of the
balance and there are no legal grounds for suspended payment or the
debtor has failed to engage or has moved out of the property and is
considered a high-risk debtor. Each circumstance is individual and
Management may use discretion when deciding if such amounts are
recoverable. Rent continues to be recognised in rental income, with
the appropriate ECL being recognised, until the financial asset is
considered to be in default. Once in default, these amounts are
still due but not recognised in profit or loss. Amounts considered
to be in default are fully impaired. When legal proceedings are
instigated to recover the debt, the costs of these are charged to
profit or loss. 18. Cash and cash equivalents
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Cash and cash equivalents 31,634 28,454
Cash and cash equivalents includes cash at bank in current
accounts and deposits held on call with banks. EUR8.4m is held in
accounts for service charges prepaid, sinking fund contributions
and rent deposits from tenants. The management of cash and cash
equivalents is discussed in note 29. Please also refer to note 24.b
on the net debt calculations. In addition, the Company holds funds
in excess of its regulatory minimum capital requirement at all
times. 19. Other financial assets Accounting policy
Derivatives: The Group utilises derivative financial instruments
to hedge interest rate risks on its borrowings. Derivatives
designated as hedges against interest rate risks are accounted for
as cash flow hedges. Hedge relationships are documented at
inception. This documentation identifies the hedge, the item being
hedged, the nature of the risks being hedged and how the
effectiveness is measured during its duration. Hedges are measured
for effectiveness at each accounting date and the accounting
treatment of changes in fair value revised accordingly. The Group's
cash flow hedges are against variability in interest costs and the
effective portion is recognised in equity in the hedging reserve,
with the ineffective portion being recognised in profit or loss
within finance expenses.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Opening balance 34 34
Purchases of financial derivatives 561 -
Amortised to profit and loss (299) -
Net fair value gain on hedging instruments
676 -
entered into for cash flow hedges
Closing balance at financial year end 972 34
Cash flow hedges are the Group's hedging instruments on its
borrowings. The Group has a policy of having the majority of its
interest rate exposure on its debt hedged or fixed. As at 31 March
2021, as well as having EUR75m of fixed coupon private placement
notes, it has hedged the interest rate exposure on EUR325m of its
revolving credit facility (March 2020: EUR125m) using a combination
of caps and swaptions to limit the EURIBOR element of interest
payable to 0.75% on EUR125m of notional debt and 0.25% on EUR200m
of notional debt. This means that at 31 March 2021 all of the
Group's drawn debt is either fixed or hedged (March 2020: 76%). 20.
Trade and other receivables Accounting policy
Trade and other receivables are initially recognised when they
are originated. Trade and other receivables that do not contain
significant financing components, which is assessed at initial
recognition, are measured at the transaction price. Trade and other
receivables which do contain a significant financing component are
recognised at fair value at the recognition date and subsequently
measured at amortised cost using the effective interest rate
method.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Non-current
Property income receivables 8,876 9,590
Recoverable capital expenditure 364 661
Expected credit loss allowance (30) (36)
Balance at end of financial year - non-current 9,210 10,215
Current
Property income receivables 3,447 1,955
Recoverable capital expenditure 369 460
Expected credit loss allowance (489) (61)
3,327 2,354
Receivable from investment property sales - 136
Prepayments 484 985
Income tax refund due - 2
VAT refundable 159 274
Balance at end of financial year - current 3,970 3,751
Balance at end of financial year - total 13,180 13,966
Of which are classified as financial assets 1,265 1,591
The non-current balance is mainly non-financial in nature;
EUR0.4m (March 2020: EUR0.7m) relates to amounts receivable from
tenants in relation to capital expenditure funded initially by the
Group to be recovered over the relevant lease term, with the
balance consisting of deferred income and expenditure amounts
relating to the lease incentives and deferred lease costs. These
amounts, as they are receivable over the term of the lease, have a
financing element. The Group has chosen to apply the simplified ECL
model to these. The Group introduced an internal rating system for
tenants in the 2020 financial year in order to ensure proactive
management of amounts due. Tenants that are potentially at risk are
discussed on a weekly basis. The Group has a diverse range of
tenants, many of which are large multinational companies, and our
rent collection statistics have remained strong (note 2.e).The
current balance of trade and other receivables has no concentration
of credit risk as it comprises mainly prepayments (note 29.d). The
ECL allowance is calculated according to the provision matrix and
totals EUR519k (March 2020: EUR97k). In addition, ECL of EURnil
(March 2020: EUR50k) were realised in the year. 21. Issued capital
and share premium Accounting policy
The equity of the Company consists of ordinary shares issued.
Shares issued are recorded at the date of issuance. The par value
of the issued shares is recorded in the share capital account. The
excess of proceeds received over the par value is recorded in the
share premium account. Direct issue costs in respect of the issue
of shares are accounted for in the retained earnings reserve, net
of any related tax deduction.
At 31 March 2021
No. of shares in Share Share premium Capital redemption Total Company
issue capital reserve reserve capital
'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at beginning of 684,657 68,466 630,276 1,757 700,499
financial year
Shares cancelled during (23,125) (2,313) - 2,313 -
financial year
Capital reorganisation (note - - (50,000) - (50,000)
23)
Shares issued during the 125 13 168 - 181
financial year
Balance at end of financial 661,657 66,166 580,444 4,070 650,680
year
At 31 March 2020
No. of Share Capital redemption Total
shares Share capital premium fund Company
in issue capital
'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at beginning of financial year 697,589 69,759 624,483 - 694,242
Shares cancelled during the financial year (17,573) (1,757) - 1,757 -
Shares issued during the financial year 4,641 464 5,793 - 6,257
Balance at end of financial year 684,657 68,466 630,276 1,757 700,499 Shares issued during the financial year
0.1m ordinary shares with a nominal value of EUR0.10 were issued
on 23 April 2020 in settlement of share-based payments relating to
remuneration (see further details below). 4.6m ordinary shares were
issued in the financial year ended 31 March 2020 in settlement of
share-based payments totalling EUR6.2m. Shares cancelled during the
financial year ? share buyback programme
On 7 August 2020, the Company commenced a EUR25m share buyback
programme which completed on 16 November 2020. This EUR25m share
buyback was accretive to net asset value per share and earnings per
share and completed the return to shareholders of the proceeds from
the sale of 77 Sir John Rogerson's Quay, which started with the
EUR25m share buyback programme undertaken in the 2020 financial
year. In total, 23.1m shares were acquired and cancelled in this
financial year at an average price of EUR1.08 per share. In the
financial year ended 31 March 2020, 17.5m shares were acquired and
cancelled at an average price of EUR1.42 per share. Share-based
payments
The Group's remuneration scheme includes awards which are made
in shares or nil-cost share options and which are payable to
employees only after fulfilling service and/or performance
conditions. Amounts provided for at 31 March 2021 were 2.3m shares
and a maximum of a further 1.1m potential shares remain to be
accrued as at the financial year end. Amounts due at 31 March 2020
were 1.5m shares and a further 0.9m potential shares remained to be
accrued.
On 29 July 2020 conditional awards of the Company's ordinary
shares of EUR0.10 cent each ("LTIP Shares") under the LTIP were
granted to Executive Directors and other key management personnel
totalling 2.4m shares. These vest after three years subject to
performance and service conditions. Share capital
Ordinary shares of EUR0.10 each:
Financial year ended Financial year ended
31 March 2021 31 March 2020
'000 of shares '000 of shares
Authorised 1,000,000 1,000,000
Allotted, called up and fully paid 661,657 684,657
In issue at end of financial year 661,657 684,657
There are no shares issued which are not fully paid. 22. Other
reserves
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Property revaluation 3,243 3,547
Cash flow hedging 442 (234)
Share-based payment reserve 2,953 2,066
Balance at end of financial year 6,638 5,379 22.a Property revaluation reserve
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year 3,547 1,889
(Decrease)/increase arising on revaluation of properties (304) 1,658
Balance at end of financial year 3,243 3,547
The Group's head office is carried at fair value and the
remeasurement of this property is made through other comprehensive
income or loss (note 17). If disposed of, the property revaluation
reserve relating to the premises sold will be transferred directly
to retained earnings. 22.b Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative
effective portion of gains or losses arising on changes in fair
value of hedging instruments entered into for cash flow hedges. The
cumulative gain or loss arising on changes in fair value of the
hedging instruments that are recognised and accumulated under the
heading of cash flow hedging reserve is reclassified to profit or
loss when the hedged transaction affects the profit or loss
consistent with the Group's accounting policy.
No income tax arises on this item.
Cumulative gains or losses arising on changes in fair value of
hedging instruments that have been tested as ineffective and
reclassified from equity into profit or loss during the financial
year are included in the following line items:
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year (234) (288)
Gain arising on fair value of hedging instruments entered into for cash flow 676 54
hedges
Balance at end of financial year 442 (234) 22.c Share-based payment reserve
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year 2,066 7,556
Performance-related payments provided 1,455 1,252
Settlement of performance-related payments (568) (6,742)
Balance at end of financial year 2,953 2,066
The share-based payment reserve comprises amounts reserved for
the issue of shares in respect of variable remuneration. These are
discussed further in note 10. 23. Retained earnings, distributable
reserves, and dividends on equity instruments Retained earnings
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year 525,271 515,140
(Loss)/profit for financial year (25,213) 61,043
Share issuance costs (14) (10)
Capital reorganisation 50,000 -
Share buyback (25,035) (25,036)
Other 88 -
Dividends paid (33,777) (25,866)
Balance at end of financial year 491,320 525,271
The following table is included to show the amount of retained
earnings available for distribution to the owners of the parent
company at the end of the financial year. Distributable reserves -
Company only
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Retained earnings at end of financial year (Company only) 409,725 444,029
Deduct: unrealised gains and losses1 (348,927) (408,513)
Distributable reserves 60,798 35,516 1. Unrealised intercompany profits arising on the transfer of investment properties to subsidiaries of the Company
have been eliminated for the purpose of the above
calculation
In August 2020, a final dividend of 3.0 cent per share
(EUR20.5m) and in January 2021 an interim dividend of 2.0 cent per
share (EUR13.2m) were paid to the holders of fully paid ordinary
shares. A final dividend for the financial year ended 31 March 2021
of 3.4 cent per share (c. EUR22.5m) has been proposed (March 2020:
3.0 cent per share or EUR20.5m) (note 13).
On 9 April 2020, EUR50m in share premium was converted to
distributable reserves on foot of a capital reorganisation which
took place during the financial year.
The Directors confirm that the Company continues to comply with
the dividend payment obligations contained within the Irish REIT
legislation. 24. Financial liabilities Accounting policy
A financial instrument is classified as a financial liability
where it contains an obligation to repay. These are accounted for
at amortised cost. Financial liabilities that are classified as
amortised cost are initially measured at fair value minus any
transaction costs. Accounting at amortised cost means that any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised in profit or loss or capitalised
into investment property over the period of the borrowings using
the effective interest method (see Section IV: introduction). 24.a
Borrowings
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Non-current
Unsecured bank borrowings 225,317 185,109
Unsecured private placement notes 74,639 74,582
Total non-current borrowings 299,956 259,691
Current
Unsecured bank borrowings 132 159
Unsecured private placement notes 353 358
Total current borrowings 485 517
Total borrowings 300,441 260,208
The maturity of non-current borrowings is as follows: As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Less than one year 485 517
Between one and two years - -
Between two and five years 262,637 185,109
Over five years 37,319 74,582
Total 300,441 260,208
Movements in borrowings during the financial year:
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year 260,208 231,555
Bank finance drawn 42,100 57,945
Bank finance repaid (2,500) (29,968)
Interest payable 633 676
Balance at end of financial year 300,441 260,208
The Group has a stated policy of not incurring debt above 40% of
the market value of its property assets and has a through-cycle
leverage target of 20-30% loan to value ("LTV"). Under the Irish
REIT rules the LTV ratio must remain under 50%.
The Group has an unsecured revolving credit facility ("RCF") of
EUR320m provided by Bank of Ireland, Wells Fargo, Barclays Bank
Ireland and Allied Irish Banks. This facility, which expires in
December 2023, is denominated in euro and is subject to a margin of
2.0% over three-month EURIBOR. The Group has entered into
derivative instruments so EUR200m of its EURIBOR exposure is capped
at 0.25% and the balance at 0.75% as at the financial year end, in
accordance with the Group's hedging policy (note 29.d.ii).
The Group also has EUR75m of private placement notes with an
average maturity of 6.3 years as at 31 March 2021 (March 2020: 7.3
years) which are held by two institutional investors. Coupons of
2.525% are fixed so long as the Group's credit rating remains
investment grade. An additional EUR125m in 10- and 12-year senior
private placement will be issued on 23 July 2021 bringing the
average maturity of fixed debt to 9.3 years as at that date. These
new notes will also be unsecured, with an average fixed coupon of
1.9%.
Where debt is drawn to finance material refurbishments and
developments that take a substantial period of time to take into
use, the interest cost of this debt is capitalised. Approximately
EUR252k of financing costs were capitalised at an effective
interest rate of 2.1% in relation to the Group's developments and
major refurbishments during the financial year (March 2020:
EUR141k).
All costs related to financing arrangements are amortised using
the effective interest rate. The Directors confirm that all
covenants have been complied with and are kept under review. There
is significant headroom on the financial covenants (note 2.e). 24.b
Net debt reconciliation and LTV
Net debt and LTV are key metrics in the Group. Net debt is
redemption value of borrowings as adjusted by cash available for
use. LTV is the ratio of net debt to investment property value at
the measurement date.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Cash and cash equivalents 31,634 28,454
Cash reserved1 (8,442) (7,457)
Gross debt - fixed interest rates (75,000) (75,000)
Gross debt - variable interest rates (226,990) (187,390)
Net debt at financial year end (278,798) (241,393)
Investment property at financial year end 1,427,413 1,465,183
Loan to value ratio 19.5% 16.5% 1. Cash is reduced by the amounts held in relation to rent deposits, sinking funds and similar arrangements as these
balances are not viewed as available funds for the purposes of
the above calculation.
Reconciliation of opening to closing net debt:
Assets Liabilities Total
Private
Unreserved cash and cash Unsecured placement Net debt
equivalents borrowings
notes
EUR'000 EUR'000 EUR'000 EUR'000
As at 1 April 2019 17,322 (159,413) (75,000) (217,091)
Loan drawdowns - (57,945) - (57,945)
Loan repayments - 29,968 - 29,968
Increase in cash and cash 6,082 - - 6,082
equivalents
Decrease in cash reserved 1 (2,407) - - (2,407)
As at 31 March 2020 20,997 (187,390) (75,000) (241,393)
Loan drawdowns - (42,100) - (42,100)
Loan repayments - 2,500 - 2,500
Increase in cash and cash 3,180 - - 3,180
equivalents
(Increase) in cash reserved 1 (985) - - (985)
As at 31 March 2021 23,192 (226,990) (75,000) (278,798)
1. Cash is reduced by the amounts held in relation to rent
deposits, sinking funds and similar arrangements as these balances
are not viewed as available funds for the purposes of the above
calculation. 25. Deferred tax liabilities Accounting policy
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax assets are only recognised where it is
probable that the amounts will be recoverable.
The Group is not generally liable for direct corporate taxes as
it has REIT status (see note 12). Where it is anticipated that
certain assets may not qualify as assets of the property rental
business (defined in legislation) or where tax may be due on assets
of the property rental business, deferred tax liabilities may be
recognised on unrealised gains recognised on these assets as future
taxes may be payable on these gains. There were no unrecognised
deferred tax assets in the financial year that might be available
to offset against these liabilities.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
The balance comprises temporary differences attributable to:
Unrealised gains on residual business 206 395 26. Trade and other payables Accounting policy
Trade payables are initially measured at fair value and
subsequently measured at amortised cost using the effective
interest rate method.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Current
Purchase of investment property 3,121 -
Investment property payable 1,830 4,037
Rent prepaid 12,850 8,631
Rent deposits and other amounts due to tenants 3,438 2,543
Sinking funds 2,091 1,975
Trade and other payables 4,464 4,470
PAYE/PRSI payable 203 217
Balance at end of financial year 27,997 21,873
Of which are classified as financial instruments 5,220 2,240
Cash is held against balances due for service charges prepaid
and sinking fund contributions, EUR5.8m (March 2020: EUR3.7m), and
rental deposits from tenants, EUR2.7m (March 2020: EUR2.5m).
Sinking funds are monies put aside from annual service charges
collected from tenants as contributions towards expenditure on
larger maintenance items that occur at irregular intervals in
buildings managed by Hibernia. Trade and other payables are
interest free and have settlement dates within one year. The
Directors consider that the carrying value of the trade and other
payables approximates to their fair value. 27. Contract liabilities
Accounting policy
Contract liabilities arise as a result of service charge
contracts, the accounting for which is discussed in note 5.
Contract liabilities arise from service charge payables. Service
charge arrangements form a single performance obligation under
which the Group purchases services for multi-let buildings and
recharges them to tenants. The movements for the purchase of
services and income relating to these activities are presented
below.
Contract liabilities
EUR'000
Contract liabilities at 1 April 2019 2,008
(Revenue)/expense recognised during the financial year (133)
Amounts received from customers under contracts 6,661
Amounts paid to suppliers (5,359)
Contract liabilities at 31 March 2020 3,177
(Revenue)/expense recognised during the financial year (233)
Amounts received from customers under contracts 7,157
Amounts paid to suppliers (6,326)
Contract liabilities at 31 March 2021 3,775
Service charge arrangements are typically managed over a
calendar year. Tenants are issued budgets in advance of each year
and charged quarterly in advance with their lease rental payments.
This performance obligation is met on an ongoing basis by the
provision of services under the agreements and the payment of
suppliers, for the most part, on a monthly basis for which funds
are in place quarterly in advance from the occupiers. Any excess
funds received are held in service charge accounts until they are
used or refunded. At the end of each year, service charge accounts
are independently audited and any under or over expenditure for
that year is refunded or charged to the tenant. Service charge
amounts typically cover operating expenses for the multi-let
buildings. 28. Cash flow information 28.a Purchase of investment
property
Financial year ended Financial year ended
31 March 2021 31 March 2020
Notes EUR'000 EUR'000
Property purchases 16 11,099 22,820
Deposit paid on investment property - (145)
Purchase of investment property outstanding (3,121) -
Cash purchases of investment properties 7,978 22,675 28.b Cash expenditure on investment property
Financial year ended Financial year ended
31 March 2021 31 March 2020
Notes EUR'000 EUR'000
Development and refurbishment expenditure 16 18,109 23,636
Decrease in investment property costs payable 2,207 1,630
Cash expenditure on investment property 20,316 25,266 29. Financial instruments and risk management 29.a Financial risk management objectives and policy
The Group takes calculated risks to realise its strategic goals
and this exposes the Group to a variety of financial risks. These
include, but are not limited to, market risk (including interest
and price risk), liquidity risks and credit risk. These financial
risks are managed in an overall risk framework by the Board, in
particular by the Chief Financial Officer, and monitored and
reported on by the Risk & Compliance Officer. The Group
monitors market conditions with a view to minimising the volatility
of the funding costs of the Group. The Group uses derivative
financial instruments such as interest rate caps and swaptions to
manage some of the financial risks associated with the underlying
business activities of the Group. 29.b Financial assets and
financial liabilities
The following table shows the Group's financial assets and
liabilities and the methods used to calculate fair value.
Asset/ Carrying Fair value
liability value Level calculation Assumptions
technique
Trade and Amortised Discounted Most trade receivables are very short-term, the majority less than one
other cost 3 cash flow month, and therefore face value approximated fair value on a discounted
receivables basis.
Financial Amortised Discounted The fair value of financial liabilities held at amortised cost has been
liabilities cost 3 cash flow calculated by discounting the expected cash flows at prevailing interest
rates.
Derivative Fair Calculated The fair value of derivative financial instruments is calculated using
financial value 2 fair value pricing based on observable inputs from financial markets.
instruments price
Trade and Amortised Discounted All trade and other payables that could be classified as financial
other cost 3 cash flow instruments are very short-term, the majority less than one month, and
payables therefore face value approximated fair value on a discounted basis.
Contract Amortised Discounted All contract liabilities classified as financial instruments are very
liabilities cost 3 cash flow short-term, the majority less than one month, and therefore face value
approximated fair value on a discounted basis. 29.c Fair value hierarchy
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
For financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: valuation techniques for which the lowest level of
inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly.
Level 3: valuation techniques for which the lowest level of
inputs that have a significant effect on the recorded fair value
are not based on observable market data.
The following tables present the classification of financial
assets and liabilities within the fair value hierarchy and the
changes in fair values measurements at Level 3 estimated for the
purposes of making the above disclosure. As at 31 March 2021
Of which are assessed as Measured at Measured at Total financial Fair value
Level Total financial instruments fair value amortised cost instruments financial
instruments
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Trade and other 3 13,180 1,265 - 1,265 1,265 1,265
receivables
Derivatives at 2 972 972 972 - 972 972
fair value
Borrowings 3 (300,441) (300,441) - (300,441) (300,441) (310,341)
Trade and other 3 (27,997) 5,220 - 5,220 5,220 5,220
payables
Contract 3 (3,775) (3,775) - (3,775) (3,775) (3,775)
liabilities
(318,061) (296,759) 972 (297,731) (296,759) (306,659) As at 31 March 2020
Of which are assessed as Measured at Measured at Total financial Fair value
Level Total financial instruments fair value amortised cost instruments financial
instruments
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Trade and other 3 13,966 1,591 - 1,591 1,591 1,591
receivables
Derivatives at 2 34 34 34 - 34 34
fair value
Borrowings 3 (260,208) (260,208) - (260,208) (260,208) (266,559)
Trade and other 3 (21,873) (2,240) - (2,240) (2,240) (2,240)
payables
Contract 3 (3,177) (3,177) - (3,177) (3,177) (3,177)
liabilities
(271,258) (264,000) 34 (264,034) (264,000) (270,351)
Movements of assets measured at fair value in Level 3
This reconciliation includes investment property measured at
fair value. Measurement of these assets is described in note 16
'Investment property' and in the table at the start of this
note.
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Balance at beginning of financial year 1,465,183 1,395,418
Transfers out of level 3 - -
Purchases, sales, issues and settlement
Purchases1 29,208 46,456
Transfer from other assets 603 -
Transfer to/from property, plant and equipment - 453
Fair value movement (67,581) 22,856
Balance at end of financial year 1,427,413 1,465,183
1. Includes development, refurbishment and remedial expenditure.
29.d Financial risk management
This note explains the Group's exposure to financial risks and
how these risks could affect the Group's future financial
performance.
Risk Exposure arising from Measurement Management
Market risk - Derivative products - cap
interest rate Long-term borrowings at variable rates Sensitivity analysis /swaption arrangements
risk
Cash investment policy
Cash and cash equivalents, trade Ageing analysis, credit ratings with minimum ratings
Credit risk receivables, derivative financial where applicable
instruments Diversification of
deposits where merited
Liquidity risk Borrowings and other liabilities Cash flow forecasts are completed Availability of borrowing
as part of budgeting process facilities
The policies for managing each of these and the principal
effects of these policies on the results for the financial year are
summarised below: i. Risk management framework
The Group's Board has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Audit Committee is responsible for developing and
monitoring the Group's risk management policies. Risk management
policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls and to
monitor risks and adherence to limits. All of these policies are
regularly reviewed in order to reflect changes in the market
conditions and the Group's activities. The Audit Committee is
assisted in its work by internal audit, conducted by PwC Ireland,
which undertakes periodic reviews of different elements of risk
management controls and procedures. ii. Market risk
Market risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. Market risk reflects interest rate risk, currency risk and
other price risks. The Group has no financial assets or liabilities
denominated in foreign currencies. The Group's financial assets
mainly comprise cash and cash equivalents, and trade receivables.
Financial liabilities comprise short-term payables, private
placement notes and bank borrowings. Therefore the primary market
risk is interest rate risk.
Interest rate risk: The Group's policy is to ensure the majority
of the interest rate risk on its drawn debt is fixed or hedged.
Only eligible hedging instruments (external interest rate swaptions
and caps) are used against eligible hedged items (interest rates
payable on financial liabilities that are reliably measurable).
There is a formal designation and documentation in place for the
hedging relationship and the risk management objective and this is
reviewed on an at least annual basis.
The Group has both fixed and variable rate borrowings. Variable
rate borrowings consist of an unsecured revolving credit facility
which is referenced to EURIBOR and the Group has hedged against
increases in EURIBOR by entering into interest rate caps and
swaptions to restrict EURIBOR on EUR200m of notional debt to 0.25%
and on a further EUR125m of notional debt to 0.75%. The following
therefore illustrates the potential impact on profit and loss for
the financial year of a 1% or 2% increase in EURIBOR. The table
below illustrates the hedges in place and their impact under a 1%
and 2% increase in EURIBOR based on variable rate drawn balances at
the financial year end.
As at 31 March 2021
Principal Impact on profit +1% EURIBOR Impact on profit +2% EURIBOR
Increase Increase
EUR'000 EUR'000 EUR'000
Amount drawn (226,990) (2,270) (4,540)
Hedging (caps)
EUR200m cap expires December 2025: strike 200,000 1,500 3,500
0.25%
EUR125m cap expires December 2021: strike 125,000 67 337
0.75%1
Impact on profit after hedging (703) (703)
1. Assumes the most favourable hedge is utilised first - so the balance is against the hedge expiring in December
2021. As at 31 March 2020
Principal Impact on profit +1% EURIBOR Impact on profit +2% EURIBOR
Increase Increase
EUR'000 EUR'000 EUR'000
Amount drawn (187,390) (1,874) (3,748)
Hedging (caps)
EUR125m expires December 2021: strike 125,000 313 1,563
0.75%
Impact on profit after hedging (1,561) (2,185)
Exposure to interest rates is limited to the exposure of the
Group's interest expense from borrowings. Variable rate borrowings
were EUR227m (March 2020: EUR187m) and gross debt was EUR302m in
total at the financial year end of which EUR75m was fixed rate
private placement notes (March 2020: EUR262m of which EUR75m was
fixed). The Group's drawings under its facilities were based on a
EURIBOR rate of 0% throughout the financial year. iii. Credit
risk
Credit risk is the risk of loss of principal or loss of a
financial reward stemming from a counterparty's failure to repay a
loan or otherwise meet a contractual obligation. Credit risk is
therefore, for the Group and Company, the risk that the
counterparties underlying its assets default.
The Group has the following types of financial assets and cash
that are subject to credit risk:
Cash and cash equivalents: These are held with major Irish and
European institutions. The Board has established a cash management
policy for these funds which it monitors regularly. This policy
includes ratings restrictions, BB or better, and related investment
thresholds, maximum balances of EUR25-50m with individual
institutions dependent on rating, to avoid concentration risks with
any one counterparty. The Group has also engaged the services of a
Depository to ensure the security of the cash assets.
Trade and other receivables: Rents are generally received in
advance from tenants and therefore there tends to be a low level of
credit risk associated with this asset class. As part of the
Group's response to the COVID-19 pandemic, a credit rating system
was introduced for tenants. This is used, together with an analysis
of past loss patterns and future expectations of economic impacts,
to create a matrix for the calculation and provision of ECL (note
20). Included in trade receivables is a net amount of EUR0.7m
relating to expenditure on fit-outs that is recoverable from
tenants over the duration of the lease (March 2020: EUR1.0m). This
amount is monitored closely in the current economic environment due
to its long-term nature. Otherwise, the Group has small balances in
trade receivables which are immaterial in the context of credit
risk.
Trade receivables are managed under a 'held-to-collect' business
model as described in note 20. ECL on financial and contract assets
recognised during the financial year were EUR423k (March 2020:
EUR147k). Details on the Group's policy on providing ECL can be
found in the introduction to Section IV. The Group has a diverse
range of tenants, many of which are large multinational companies,
(57% of its contracted rent is from the technology sector and state
entities), and to date our rent collection statistics have remained
strong (note 2.e).
The maximum amount of credit exposure is therefore:
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Other financial assets 972 34
Trade and other receivables 13,180 13,966
Cash and cash equivalents 31,634 28,454
Balance at end of financial year 45,786 42,454 iv. Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group ensures
that it has sufficient available funds to meet obligations as they
fall due. Net current assets, a measure of the Group's ability to
meet its current liabilities, at the financial year end were:
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Net current assets at the financial year 3,347 6,638
end
The nature of the Group's activities means that the management
of cash is particularly important and is managed over a four-year
period. The budget and forecasting process includes cash
forecasting, capital and operational expenditure projections, cash
inflows and dividend payments on a quarterly basis over the
four-year horizon. This allows the Group to monitor the adequacy of
its financial arrangements.
In addition to a cash balance of EUR23m (excludes cash from
sinking funds and tenant deposits) (March 2020: EUR21m), the Group
had access at 31 March 2021 to EUR93m (March 2020: EUR133m) in
undrawn amounts under its revolving credit facility (note 24.a),
which matures in December 2023. In July 2021, the Group will
receive an additional EUR125m from the issue of US private
placement debt (note 34.3)
Exposure to liquidity risk
Listed below are the contractual cash flows of the Group's
financial liabilities. This includes contractual maturity in
relation to borrowings which is also the earliest maturity of the
facilities assuming that covenants are not breached. Covenants are
reviewed quarterly and scenario analyses performed as to the
circumstances under which these covenants could be breached in
order to monitor going concern and viability (see also note 2.e).
Only trade and other payables relating to cash expenditure are
included; the balance relates either to non-cash items or deferred
income. These include interest margins payable and contracted
repayments. EURIBOR is assumed at 0% throughout the financial
year.
At 31 March 2021
Carrying amount Contractual cash flows 6 months or less 6-12 months 1-2 years 2-5 years >5 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Non-derivatives
Borrowings 300,441 324,473 3,217 3,217 6,434 271,247 40,358
Trade payables 27,997 27,997 27,997 - - - -
Contract liabilities 3,775 3,775 3,775 - - - -
Total 332,213 356,245 34,989 3,217 6,434 271,247 40,358
At 31 March 2020
Carrying amount Contractual 6 months 6-12 1-2 2-5 >5
cash flows or less months years years years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Non-derivatives
Borrowings 260,208 285,517 2,821 2,821 5,642 194,629 79,604
Trade payables 2,240 2,240 2,240 - - - -
Contract liabilities 3,177 3,177 3,177 - - - -
Total 265,625 290,934 8,238 2,821 5,642 194,629 79,604 v. Capital management
The Group's objectives when managing capital are to: ? safeguard
its ability to continue as a going concern, so that it can continue
to provide returns for shareholders
and benefits for other stakeholders; and ? maintain an optimal
capital structure to minimise the cost of its capital,
In order to manage its capital, the Group may adjust the amount
of dividends paid to shareholders (while ensuring it remains
compliant with the dividend distribution requirements of the Irish
REIT regime), return capital to shareholders, issue new shares or
sell assets to reduce debt. On 7 August 2020, the Company commenced
a EUR25m share buyback programme which completed on 16 November
2020 (note 21). The Group is also obliged to distribute at least
85% of its property rental income annually via dividends under the
REIT regime regulations.
Capital comprises share capital, retained earnings and other
reserves, as disclosed in the consolidated statement of changes in
equity. At 31 March 2021 the total capital of the Group was
EUR1,148m (March 2020: EUR1,231m).
The key performance indicators used in evaluating the
achievement of strategic objectives, and as performance
measurements for remuneration, are as follows: ? Total Property
Return ("TPR") %: Measures the relative performance of the
Company's investment property portfolio
versus the Irish property market, as calculated by MSCI. ? Total
Accounting Return ("TAR") %: Measures the absolute growth in the
Group's EPRA NTA per share plus any ordinary
dividends paid during the financial year. ? EPRA earnings per
share (cent): Measures the profit after tax excluding revaluations
and gains and losses on
disposals and associated taxation (if any) on a per share basis.
For property companies it is a key measure of a
company's operational performance and capacity to pay dividends.
? Total Shareholder Return ("TSR") %: Measures growth in share
value over a period assuming dividends are reinvested
in the purchase of shares. Allows comparison of performance
against other companies in the Group's listed peer
group.
The Group seeks to leverage its equity capital in order to
enhance returns (note 24.a). The loan to value ratio ("LTV") is
expressed as net debt (note 24.b) divided by total investment
property value (as shown in the balance sheet). The Group's policy
is to maintain an LTV ratio of 20-30% on a through cycle basis and
not to incur debt above an LTV ratio of 40% (see note 24.b). Key
loan covenants
Under the terms of the major borrowing facilities, the Group is
required to comply with the following key financial covenants: ?
The LTV ratio must not exceed 50% ? Interest cover must be greater
than 1.5 times on both a 12-month historical and forward basis ?
The net worth (Net Asset Value) of the Group must exceed EUR400m at
all times
The Group has complied with these key covenants throughout the
reporting period. Other
In addition, the LTV ratio must remain under 50% under the rules
of the Irish REIT regime.
The Company's share capital is publicly traded on Euronext
Dublin and the London Stock Exchange.
As the Company is authorised under the Alternative Investment
Fund regulations it is required to maintain a minimum of 25% of its
annual fixed overheads as capital. This is managed through the
Company's risk management process. The limit was monitored
throughout the financial year and no breaches occurred.
Section V ? Other
This section contains notes that do not belong in any of the
previous categories. 30. Operating lease receivables
Future aggregate minimum rentals receivable (to the next break
date) under non-cancellable operating leases are:
As at 31 March 2021 As at 31 March 2020
EUR'000 EUR'000
Operating lease receivables due in:
Less than one year 65,552 64,206
Between two and five years 169,348 178,678
Greater than five years 117,043 142,282
Total 351,943 385,166
The Group leases its investment properties under operating
leases. The weighted average unexpired lease term based ("WAULT")
of the office portfolio at 31 March 2021, based on the earlier of
lease break or expiry date was 5.8 years (March 2020: 6.4
years).
These calculations are based on all leases in place at 31 March
2021, i.e. including leases that are in place but have not yet
commenced. 31. Capital commitments
The Group has entered into a number of development contracts to
develop buildings in its portfolio. The total capital expenditure
commitment in relation to these is approximately EUR3m (March 2020:
EUR18m). 32. Contingent liabilities Accounting policy
Contingent liabilities are possible obligations depending on
whether some uncertain future event occurs, or present obligations
where payment is not probable, or the amount cannot be measured
reliably. Contingent liabilities are not recognised but are
disclosed unless the possibility of an outflow of economic
resources is remote.
The Group has not identified any contingent liabilities which
are required to be disclosed in the financial statements. 33.
Related parties 33.a Subsidiaries
All transactions between the Company and its subsidiaries are
eliminated on consolidation.
The following are the major subsidiaries of the Group:
Shareholding
Registered address/ /
Name Directors Company Nature of business
Country of Number of Secretary
incorporation
shares held
Justin Dowling
Hibernia REIT 1WML
Holding Windmill Lane Thomas Edwards-Moss Holding property
Company Dublin D02 F206 100%/1 Sean O'Dwyer interests
Limited Kevin Nowlan
Ireland
Frank O'Neill
Justin Dowling
Hibernia REIT 1WML
Holdco One Windmill Lane 100%/1 Thomas Edwards-Moss Kevin Sean O'Dwyer Holding property
Limited Dublin D02 F206 Nowlan interests
Ireland
Frank O'Neill
1WML Edwina Governey
Hibernia REIT Windmill Lane
Holdco Two Dublin D02 F206 100%/1 Kevin Nowlan Sean O'Dwyer General partner
Limited Ireland
Mark Pollard
Hibernia REIT 1WML Justin Dowling
Holdco Three Windmill Lane 100%/1 Sean O'Dwyer Property development
Limited Dublin D02 F206 Thomas Edwards-Moss Frank
Ireland O'Neill
Hibernia REIT 1WML Justin Dowling
Holdco Four Windmill Lane 100%/1 Sean O'Dwyer Holding property
Limited Dublin D02 F206 Thomas Edwards-Moss Frank interests
Ireland O'Neill
Hibernia REIT Justin Dowling
Building 1WML
Management Windmill Lane 100%/1 Thomas Edwards-Moss Kevin Sean O'Dwyer Property management
Services Dublin D02 F206 Nowlan
Limited Ireland
Frank O'Neill
WK Nowlan REIT 1WML Thomas Edwards-Moss Kevin
Management Windmill Lane 100%/300,000 Nowlan Sean O'Dwyer Investment
Limited Dublin D02 F206 holding company
Ireland Frank O'Neill 33.b Other related party transactions
Thomas Edwards-Moss (CFO) rented an apartment from the Group at
market rent and paid EUR33k in rent during the financial year
(March 2020: EUR14k).
Stewart Harrington (Non-Executive Director) rented an apartment
from the Group for part of the financial year at market rent and
paid EUR17k in rent during the financial year (March 2020: EUR9k).
33.c Key management personnel
In addition to the Executive and Non-Executive Directors, the
following are the key management personnel of the Group:
Justin Dowling Director of Property
Edwina Governey Chief Investment Officer
Sean O'Dwyer Company Secretary and Risk & Compliance
Officer
Frank O'Neill Director of Operations
Gerard Doherty Director of Development
The remuneration of the above key management personnel paid
during the financial year was as follows:
Financial year ended
Financial year ended 31 March 2020
31 March 2021
EUR'000
EUR'000
Short-term benefits 3,751 3,385
Post-employment benefits 288 262
Other long-term benefits - -
Share-based payments 222 367
Total for the financial year 4,261 4,014
The remuneration of Executive Directors and key management is
determined by the Remuneration Committee, having regard to the
performance of individuals, of the Group and market trends. 34.
Events after the financial year end 1. On 22 April 2021, 154,349
ordinary shares were issued pursuant to the settlement of
performance-related
remuneration awards for the year ended 31 March 2019. Following
the transaction, the issued share capital of the
Company is 661,811,141 ordinary shares of EUR0.10 each. 2. The
Directors have proposed a final dividend of 3.4 cent per share that
is subject to approval at the AGM to be
held on 27 July 2021. 3. On 20 May 2021 the Group announced the
issue of EUR125m senior unsecured fixed rate notes which will be
funded on 23
July 2021 in two series as follows:
? EUR62.5m 1.88% due July 2031
? EUR62.5m 1.92% due July 2033
Pro-forma for this debt issuance, the weighted average term of
the Group's debt at 31 March 2021 would have been 5.2 years, up
from 3.4 years excluding the issue.
Supplementary information i. Five-year record
Based on the Group's consolidated financial statements for the
financial years ended 31 March:
Consolidated statement of financial position 2021 2020 2019 2018 2017
EUR'm EUR'm EUR'm EUR'm EUR'm
Investment property 1,427 1,465 1,395 1,309 1,167
Other assets 54 52 77 44 43
Financial liabilities (300) (260) (231) (219) (171)
Other liabilities (32) (26) (23) (22) (25)
Net assets 1,149 1,231 1,218 1,112 1,014
Financed by:
Share capital 650 700 694 687 678
Reserves 499 531 524 425 336
Total equity 1,149 1,231 1,218 1,112 1,014
IFRS NAV per share (cent) 173.6 179.8 174.7 160.6 147.9
EPRA NTA per share (cent)1 172.7 179.2 173.3 159.1 146.3
Consolidated income statement 2021 2020 2019 2018 2017
EUR'm EUR'm EUR'm EUR'm EUR'm
Net rental income 63 59 53 46 40
Gains and (losses) on investment property (67) 23 98 88 104
Other gains and losses - - - - 2
Total operating expenses (13) (14) (19) (21) (21)
Operating profit/(loss) (17) 68 132 113 125
Net finance expense (8) (7) (8) (6) (6)
Profit/(loss) for the financial year (25) 61 124 107 119
Basic earnings per share (cent) (3.7) 8.9 17.8 15.5 17.3
Diluted earnings per share (cent) (3.7) 8.8 17.6 15.4 17.2
EPRA earnings per share (cent) 6.3 5.5 4.0 2.8 2.2
Diluted EPRA earnings per share (cent) 6.2 5.5 3.9 2.8 2.2
Dividend per share (cent) 5.4 4.8 3.5 3.0 2.2 1. For 2019 and prior years EPRA NAV is presented, under the 2016 EPRA BPR. EPRA updated these in October 2019 and we
present EPRA NTA from then onwards (see iii.f EPPRA NAV measures
for more information). There is no material change
between EPRA NAV an EPRA NTA for Hibernia. ii. Alternative
performance measures
The Group has applied the European Securities and Markets
Authority ("ESMA") 'Guidelines on Alternative Performance Measures'
in this document. An alternative performance measure ("APM") is a
measure of financial or future performance, position or cash flows
of the Group which is not a measure defined by International
Financial Reporting Standards ("IFRS"). The main APMs presented are
European Public Real Estate Association ("EPRA") performance
measures as set out in EPRA's Best Practices Recommendations
Guidelines 2019 ("BPR"). These measures are defined by EPRA in
order to encourage comparability with the real estate sector in
Europe (see Section iii).
The following are the APMs used in this report together with
information on their calculation and relevance.
APM Reconciled to IFRS measure: Reference Definition
Contracted rent Contracted rent under the lease agreements, and
roll n/a n/a excluding all incentives or rent abatements, for the
portfolio as at the reporting date.
Calculated using all administrative and operating
EPRA cost ratios IFRS operating expenses iii.c expenses under IFRS, net of service fees. It is
calculated including and excluding direct vacancy costs.
As EPRA earnings is used to measure the operational
IFRS (loss)/profit for the performance of the Group, it excludes all components not
EPRA earnings financial year attributable to iii.a relevant to the underlying net income performance of the
owners of the parent portfolio, such as the change in value of the underlying
investments and any gains or losses from the sales of
investment properties.
EPRA earnings Note 14
per share ("EPRA IFRS earnings per share EPRA earnings on a per share basis.
EPS") iii.a
EPRA Like-for-like rental growth compares the growth of the
like-for-like net rental income of the portfolio that has been
rental growth n/a iii.b consistently in operation, and not under development,
reporting during the two full preceding periods that are
described.
EPRA Net Total assets less total liabilities This assumes that entities never sell assets and aims to
Reinstatement as calculated under IFRS (IFRS NAV) iii.f represent the value required to rebuild the entity.
Value ("NRV")
EPRA Net
Reinstatement Total assets less total liabilities iii.f EPRA NRV calculated on a diluted basis
Value ("NRV") as calculated under IFRS (IFRS NAV)
per share
EPRA Net Total assets less total liabilities Assumes that entities buy and sell assets, thereby
Tangible Assets as calculated under IFRS (IFRS NAV) iii.f crystallising certain levels of unavoidable deferred
("NTA") tax.
EPRA Net
Tangible Assets Total assets less total liabilities iii.f EPRA NTA calculated on a diluted basis.
("NTA") per as calculated under IFRS (IFRS NAV)
share
EPRA Net Represents the shareholders' value under a disposal
Disposal Value Total assets less total liabilities iii.f scenario, where deferred tax, financial instruments and
("NDV") as calculated under IFRS (IFRS NAV) certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
EPRA Net
Disposal Value Total assets less total liabilities iii.f EPRA NDV calculated on a diluted basis.
("NDV") per as calculated under IFRS (IFRS NAV)
share
EPRA Net Initial
Yield n/a iii.e Inherent yield of the completed portfolio using passing
rent at the reporting date.
("EPRA NIY")
EPRA 'topped-up'
Net Initial Inherent yield of the completed portfolio using
Yield ("EPRA n/a iii.e contracted rent at the reporting date.
'topped-up'
NIY")
EPRA vacancy n/a iii.d ERV of the vacant space over the total ERV of the
rate completed portfolio.
Total assets less total liabilities
IFRS net asset as calculated under IFRS
value ("IFRS (equivalent to total equity per the Note 15
NAV") consolidated statement of financial
position)
Loan to value n/a Note 24.b Net debt as a proportion of the value of investment
("LTV") properties.
Final and Number of cent to be distributed to shareholders in
interim dividend Dividend per share Note 13 dividends.
per share
Financial liabilities net of cash balances (as reduced
Net debt Financial liabilities Note 24.b by the amounts collected from tenants for deposits,
sinking funds and similar) available.
Passing rent n/a n/a Annualised gross property rent receivable on a cash
basis as at the reporting date.
Property-related Amounts expended on investment Property-related capital expenditure analysed so as to
capital property, i.e. property purchases Note 16 illustrate the element of such expenditure that is
expenditure and development and refurbishment 'maintenance' rather than investment.
expenditure
Reversionary n/a iii.g.iii Potential rent uplift available from leases with break
potential dates, expiring or review events in future periods.
Indirectly through EPRA NTA per Measures the absolute growth in the Group's EPRA NTA per
Total Accounting share (Calculated through EPRA NAV Note 15 share plus any ordinary dividends paid in the accounting
Return ("TAR") per share in financial year ended period.
31 March 2020)
Total Property TPR is the return for the period of the property
Return ("TPR") n/a n/a portfolio (capital and income) as calculated by MSCI,
the producers of the MSCI Ireland Property Index. iii. European Public Real Estate Association ("EPRA") performance measures
EPRA performance measures presented here and summarised on page
17 of this statement are calculated according to the EPRA BPR. EPRA
performance measures are used in order to enhance transparency and
comparability with other public real estate companies in
Europe.
EPRA earnings, EPRA NTA and EPRA capex measures are also
included within the financial statements, in which they are
audited, as they are important key performance indicators for
variable remuneration. All measures are presented on a consolidated
basis only and, where relevant, are reconciled to IFRS figures as
presented in the consolidated financial statements. iii.a EPRA
earnings
EPRA earnings, earnings from operational activities, are
presented as they are a key measure of the Group's underlying
operating result and an indication of the extent to which current
and proposed dividend payments are supported by earnings.
Unrealised changes in valuation, gains or losses on disposals of
properties and certain other items are excluded as they are not
considered to be part of the core activity of an investment
property company.
Financial year
ended Financial year ended 31 March
2020
31 March 2021
Note EUR'000 EUR'000
(Loss)/profit for the financial year attributable to owners of (25,213) 61,043
the parent
Adjusted for:
(Gains) and losses on investment property 16 67,581 (22,856)
(Gains) on other assets (69) -
Deferred tax in respect of EPRA adjustments (188) (152)
Changes in fair value of financial instruments and associated
112 58
close-out costs
EPRA earnings 42,223 38,093
EPRA earnings per share and diluted EPRA earnings per share '000 '000
Weighted average number of ordinary shares (basic) 14 673,618 688,759
Weighted average number of ordinary shares (diluted) 14 676,990 691,134
EPRA earnings per share (cent) 6.3 5.5
Diluted EPRA earnings per share (cent) 6.2 5.5 iii.b EPRA like-for-like ("L-f-L") rental growth
L-f-L net rental growth compares the growth of the net rental
income of the portfolio that has been consistently in operation by
the Group, and not under development, during the two full preceding
periods that are described. Information on the growth in rental
income, other than from acquisitions and disposals, allows
stakeholders to arrive at an estimate of organic growth. This can
be used to measure whether the reversions feed through as
anticipated, and whether the vacancy rates are changing. This is
presented on a segmented basis by portfolio type. All properties
are in Dublin therefore a geographic spread is not included.
Financial year ended 31 March 2021
Whole portfolio Like-for-like portfolio
Value ? Net rental VALUE L-f-L Net rental income L-f-L Net rental income L-f-L Growth in
Segment all assets income assets assets current year assets prior year net rental
income
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm %
Office assets 1,138.8 55.4 1,125.4 55.3 51.4 3.9 7.5
Residential 167.7 5.8 166.8 5.8 5.9 (0.1) (1.1)
assets
Industrial/other 58.9 2.1 16.3 1.3 1.1 0.1 11.8
assets
Total 'in-place' 1,365.4 63.3 1,308.5 62.4 58.4 3.9 6.7
portfolio
Development 62.0 -
assets
Assets sold - -
Total portfolio 1,427.4 63.3
Buildings excluded from L-f-L as at 31 March 2021
Developments in progress/sites: 2 Cumberland Place, 50 City
Quay, Newlands.
Properties acquired: 2021: Docklands office asset, units in
Dublin Industrial Estate; 2020: Docklands office asset, units in
Dublin Industrial Estate, Industrial unit Malahide Road.
Financial year ended 31 March 2020
Whole portfolio Like-for-like portfolio
Value ? Net rental VALUE L-f-L Net rental income L-f-L Net rental income L-f-L Growth in
Segment all assets income assets assets current year assets prior year net rental
income
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm %
Office assets 1,196.9 51.5 963.2 45.7 44.1 1.6 3.7
Residential 159.5 5.9 147.7 5.9 5.6 0.3 6.0
assets
Industrial/other 60.8 1.2 13.0 0.7 0.7 0.0 (0.9)
assets
Total 'in-place' 1,417.2 58.6 1,123.9 52.3 50.4 1.9 3.9
portfolio
Development 48.0 -
assets
Assets sold - -
Total portfolio 1,465.2 58.6
Buildings excluded from L-f-L as at 31 March 2020
Developments/refurbishments concluded in prior year: 1SJRQ,
2WML, Cannon Place (residential).
Developments in progress/sites: 2 Cumberland Place,
Newlands.
Properties acquired: 2020: Docklands office asset, all units in
Dublin Road Industrial Estate, Industrial unit Malahide Road; 2019:
50 City Quay, 129 Slaney Road Industrial Park, Clanwilliam
Apartments.
Properties sold: 2020: None; 2019: New Century House, 77 Sir
John Rogerson's Quay. iii.c EPRA cost ratios
A key measure to enable meaningful measurement and comparison of
the changes in a company's operating costs.
Financial year ended Financial year ended 31 March 2020
31 March 2021
EUR'000
EUR'000
Total operating expenses under IFRS 13,485 13,393
Property expenses1 3,174 3,051
Net service charge costs/fees (75) 65
EPRA costs including direct vacancy costs 16,584 16,509
Direct vacancy costs (984) (964)
EPRA costs excluding direct vacancy costs 15,600 15,545
Gross rental income1 66,405 61,701
EPRA cost ratio including direct vacancy costs 25.0% 26.8%
EPRA cost ratio excluding direct vacancy costs 23.5% 25.2%
1. Adjusted for costs recovered through rents and, under IFRS, accounted for on a gross basis.
The Group has not capitalised any overheads in the current or
the prior financial year. Property expenses are reduced by the
costs which are reimbursed through rental receipts. iii.d EPRA
vacancy rate
This provides comparable and consistent vacancy data for
investors based on the Valuer's assessment of gross ERV. The EPRA
vacancy rate measures the ERV of vacant space expressed as a
percentage of the total ERV of the completed portfolio.
EPRA vacancy rate: Calculated as recommended excluding current
developments/refurbishments projects underway:
2 Cumberland Place and 50 City Quay.
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Annualised ERV vacant units1 6,143 5,208
Annualised ERV completed portfolio 72,348 75,173
EPRA vacancy rate 8.5% 6.9% 1. The ERV from vacant units includes the vacant units within the Group's residential assets at the financial year
end.
Adjusted EPRA vacancy rate: Calculated as above but also
excluding the Clanwilliam Court properties (Clanwilliam Blocks 1,2
and 5 and Marine House) which are scheduled to move to the
development portfolio segment in the next 12 months and therefore
will be unavailable to rent when the current leases expire:
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'000 EUR'000
Annualised ERV vacant units 4,895 5,208
Annualised ERV completed portfolio 67,311 75,173
EPRA vacancy rate 7.3% 6.9% iii.e EPRA Net Initial Yield ("EPRA NIY") and EPRA 'topped-up' Net Initial Yield
This measures the inherent yield of the portfolio according to
set guidelines to allow investors to compare real estate investment
companies across Europe on a consistent basis, using current cash
passing rent. EPRA 'topped-up' NIY: this measures the yield based
on rents adjusted for the expiration of lease incentives, i.e. on a
contracted rent basis.
At 31 March 2021
Office Residential Industrial/other Total Development Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Investment property at fair value 1,139 168 58 1,365 62 1,427
Less: Development/refurbishment - - (30)1 (30) (62) (92)
Completed property portfolio 1,139 168 28 1,335 - 1,335
Allowance for purchasers' costs2 113 7 3 123
Gross up of completed property portfolio (A) 1,252 175 31 1,458
Annualised cash passing rental income3 58 7 2 67
Property outgoings (1) (1) (1) (3)
Annualised net rents (B) 57 6 1 64
Expiry of lease incentives and fixed uplifts4 - - - -
'Topped-up' annualised net rent (C) 57 6 1 64
EPRA NIY (B/A) 4.5% 3.3% 4.6% 4.4%
EPRA 'Topped-up' NIY (C/A) 4.5% 3.3% 4.6% 4.4%
1. Lands at Newlands are excluded as held for future development
and were undeveloped at 31 March 2021.
2. Purchasers' costs are 9.96% for commercial property and 4.46%
for residential.
3. Cash passing rent includes residential rents gross as
property outgoings are included separately.
4. Expiry of lease incentives and fixed uplifts are mainly
within one year.
At 31 March 2020
Office Residential Industrial/other Total Development Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Investment property at fair value 1,197 159 61 1,417 48 1,465
Less: Development/refurbishment - - (33)1 (33) (48) (81)
Completed property portfolio 1,197 159 28 1,384 - 1,384
Allowance for purchasers' costs2 119 7 3 129
Gross up of completed property portfolio (A) 1,316 166 31 1,513
Annualised cash passing rental income3 55 7 2 64
Property outgoings (1) (1) - (2)
Annualised net rents (B) 54 6 2 62
Expiry of lease incentives and fixed uplifts4 4 - - 4
'Topped-up' annualised net rent (C) 58 6 2 66
EPRA NIY (B/A) 4.2% 3.7% 5.2% 4.1%
EPRA 'Topped-up' NIY (C/A) 4.4% 3.7% 6.1% 4.4%
1. Lands at Newlands are excluded as held for future development
and were undeveloped at 31 March 2020.
2. Purchasers' costs are 9.96% for commercial property and 4.46%
for residential.
3. Cash passing rent includes residential rents gross as
property outgoings are included separately and rents from the
Iconic office arrangement in Clanwilliam.
4. Expiry of lease incentives and fixed uplifts are mainly
within one year. iii.f EPRA NAV measures
Net Asset Value ("NAV") is a key performance measure for real
estate companies. EPRA has introduced a number of measures to
enhance investors' understanding. EPRA has defined three measures
in the 2019 Guidelines as below.
EPRA Net Reinstatement Value ("NRV") highlights the value of net
assets on a long-term basis. This assumes that entities never sell
assets and aims to represent the value required to rebuild the
entity.
EPRA Net Tangible Assets ("NTA") assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value ("NDV") represents the shareholders'
value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax.
Financial year ended 31 March
2021
EPRA NRV EPRA NTA1 EPRA NDV2,5
EUR'000 EUR'000 EUR'000
IFRS NAV 1,148,638 1,148,638 1,148,638
Include:
Revaluation of other non-current investments - - -
Diluted NAV at fair value3
Exclude:
Deferred tax in relation to unrealised gains on investment 206 - -
property
Fair value of financial instruments (442) (442) -
Include:
Fair value of fixed interest rate debt - - (9,900)
Real estate transfer tax4 132,997 - -
NAV performance measure 1,281,399 1,148,196 1,138,738
Diluted number of shares at financial year end 665,029 665,029 665,029
NAV per share at financial year end (cent) 192.7 172.7 171.2
Footnotes: see below 2020 table.
Financial year ended 31 March
2020
EPRA NRV EPRA NTA1 EPRA NDV2,5
EUR'000 EUR'000 EUR'000
IFRS NAV 1,231,149 1,231,149 1,231,149
Include:
Revaluation of other non-current investments - - -
Diluted NAV at fair value3 1,231,149 1,231,149 1,231,149
Exclude:
Deferred tax in relation to unrealised gains on investment 395 - -
property
Fair value of financial instruments 234 234 -
Include:
Fair value of fixed interest rate debt - - (6,380)
Real estate transfer tax4 138,545 - -
NAV performance measure 1,370,323 1,231,383 1,224,769
Diluted number of shares at financial year end 687,032 687,032 687,032
NAV per share at financial year end 199.5 179.2 178.3 1. Following changes to the Irish REIT legislation introduced in October 2019, if a REIT disposes of an asset of its
property rental business and does not (i) distribute the gross
disposal proceeds to shareholders by way of
dividend; (ii) reinvest them into other assets of its property
rental business (whether by acquisition or capital
expenditure) within a three-year window (being one year before
the sale and two years after it); or (iii) use the
disposal proceeds to repay (a) debt specifically used to
acquire, enhance or develop the property sold or (b) other
debt in limited circumstances, then the REIT will be liable to
tax at a rate of 25% on 85% of the gross disposal
proceeds, subject to having sufficient distributable reserves.
For the purposes of EPRA NTA we have assumed any
such sales proceeds are reinvested within the required
three-year window. 2. Deferred tax is assumed as per the IFRS
balance sheet. To the extent that an orderly sale of the Group's
assets was
undertaken over a period of several years, during which time (i)
the Group remained a REIT; (ii) no new assets were
acquired or sales proceeds reinvested; (iii) any developments
completed were held for three years from completion;
and (iv) those assets sold were sold at the financial year end
valuations, the sales proceeds would need to be
distributed to shareholders by way of dividend within the
required timeframe or else a tax liability amounting to
up to 25% of distributable reserves plus current unrealised
revaluation gains could arise for the Group. 3. The Group uses the
fair value option under IAS 40 and has no hybrid instruments or
tenant leases held as finance
leases. 4. The Group has no goodwill or intangibles. This is the
purchasers' costs amount as provided in the valuation
certificate. Purchasers' costs consist of items such as stamp
duty on legal transfer and other purchase fees that
may be incurred, and which are deducted from the gross value in
arriving at the fair value of investment and owner
occupied property for IFRS purposes. Purchasers' costs are in
general estimated at 9.96% (up from 8.46% from
October 2019) for commercial and 4.46% for residential. 5.
Following changes to the Irish REIT legislation introduced in
October 2019, if the Group ceases to be a REIT, as
defined under Irish legislation, within 15 years of it
originally becoming a REIT then a potential tax liability
could arise for the Group. iii.g Portfolio information
Portfolio information can be generally found in the business
review section of this report. Below is further information based
on the guidelines issued by EPRA. i. Additional analysis of rental
income
All rents are denominated in Euro.
Financial year ended Financial year ended
31 March 2021 31 March 2020
EUR'm EUR'm
Properties owned throughout last two last years 66.0 54.8
Acquisitions 0.5 0.8
Disposals - -
Developed/refurbished property1 - 6.2
Gross rental income 66.5 61.8
Less: property operating expenses (3.2) (3.2)
Net rental income 63.3 58.6 1. 2020: 1SJRQ and 2WML
ii. Portfolio statistics ? valuation
Financial year ended 31 March 2021
Market value Valuation movement EPRA NIY EPRA 'topped-up' NIY Reversionary yield
EUR'm EUR'm % % %
Office 1,138 (65) 4.5 4.5 4.8
Development 62 (4) n/a n/a n/a
Residential 168 7 3.3 3.3 4.2
Industrial/other 59 (6) 4.61 4.6 6.6 1
Total 1,427 (68) 4.4 4.4 4.7 1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
Financial year ended 31 March 2020
Market value Valuation movement EPRA NIY EPRA 'topped-up' NIY Reversionary yield
EUR'm EUR'm % % %
Office 1,197 5 4.2 4.4 4.8
Development 48 18 n/a n/a n/a
Residential 159 5 3.7 3.7 4.5
Industrial/other 61 (6) 5.21 6.11 5.51
Total 1,465 22 4.1 4.4 4.7 1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
iii. Reversionary potential
The following data is calculated for the 'in-place' office and
industrial portfolio (exclusive of the Iconic office arrangement)
and based on the earliest of review, break or expiry dates.
Residential data is excluded as reversion to ERV is limited to 4%
in rent-controlled areas where all the residential assets are
based, and all leases roll on average annually. Passing rent is
used to avoid overstating uplifts to ERV as fixed uplifts are
generally in the first year of lease and are accounted for on a
smoothed period over the lease term in the financial data. Further
details on portfolio rent statistics can be found in the business
review.
As at 31 March 2021
Rent subject to rent reviews
Financial year ended 31 March 2022 2023 2024-25 >2025 Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Passing rent 12.7 8.1 15.5 2.6 38.8
Uplift to ERV1 0.7 (0.3) (0.2) 0.1 0.3
Total 13.4 7.8 15.3 2.7 39.1
% increase/(decrease) possible 5% (4)% (1)% 6% 1%
From vacant space 4.4 - - - 4.4
Total 17.8 7.8 15.3 2.7 43.5
Rent subject to break or expiry
Financial year ended 31 March 2022 2023 2024-25 >2025 Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Passing rent 5.3 9.0 5.9 0.1 20.4
Uplift to ERV (0.1) (0.7) (0.2) 0.1 (0.9)
Total 5.2 8.3 5.8 0.2 19.5
% increase/(decrease) possible (2)% (8)% (3)% 44% (5)%
Total reversion from review and break/expiry (excluding vacancy)
Total passing rent 18.0 17.1 21.4 2.7 59.2
Total uplift to ERV 0.6 (1.0) (0.3) 0.2 (0.6)
% increase/(decrease) possible 3% (6)% (2)% 8% (1)%
% increase possible including vacancy 6% 1. ERV uplift includes all 'in-place' office and industrial potential uplifts and excludes the Group's residential
units. The Group may develop some of these properties in the
longer term and therefore these reversions may not be
obtained.
As at 31 March 2020
Rent subject to rent reviews
Financial year ended 31 March 2021 2022 2023-24 >2024 Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Passing rent 5.3 9.8 11.0 8.7 34.8
Uplift to ERV1 1.1 0.5 - - 1.6
Total 6.4 10.3 11.0 8.7 36.4
% increase/(decrease) possible 21% 5% - 1% 5%
From vacant space 4.7 - - - 4.7
Total 11.1 10.3 11.0 8.7 41.1
Rent subject to break or expiry
Financial year ended 31 March 2021 2022 2023-24 >2024 Total
EUR'm EUR'm EUR'm EUR'm EUR'm
Passing rent 3.6 2.6 12.1 2.7 21.0
Uplift to ERV (0.2) - (0.6) (0.1) (0.9)
Total 3.4 2.6 11.5 2.6 20.1
% increase/(decrease) possible (4)% (2)% (5)% (1)% (4)%
Total reversion from review and break/expiry (excluding vacancy)
Total passing rent 8.9 12.4 23.2 11.3 55.8
Total uplift to ERV 1.0 0.5 (0.6) - 0.9
% increase/(decrease) possible 11% 4% (3)% - 1%
% increase possible including vacancy 9% 1. ERV uplift includes all 'in-place' office and industrial potential uplifts and excludes the Group's residential
units. The Group may develop some of these properties in the
longer term and therefore these reversions may not be
obtained. Property-related capital expenditure ("capex")
Capital expenditure on the investment portfolio analysed to
allow an understanding of the investment in the portfolio during
the period. Analysis of capex is in note 16 to the consolidated
financial statements.
Directors and Other Information
Daniel Kitchen (Chairman)
Colm Barrington (Senior Independent Director)
Roisin Brennan
Thomas Edwards-Moss (CFO)
Margaret Fleming
Directors Stewart Harrington
Grainne Hollywood
Frank Kenny (resigned 29 July 2021)
Kevin Nowlan (CEO)
Terence O'Rourke
Sean O'Dwyer
Company Secretary
Blackglen Corporate Governance Solutions Limited
t/a Corporate Governance Solutions
169 Bracken Hill
Assistant Secretary Sandyford
Dublin D18 R22W
Ireland
1WML
Windmill Lane
Registered office Dublin D02 F206
Ireland
531267
Company number
Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House
Independent Auditor 29 Earlsfort Terrace
Dublin D02 AY28
KPMG
1 Stokes Place
St. Stephen's Green
Tax adviser Dublin D02 DE03
Ireland
Cushman & Wakefield
164 Shelbourne Road
Ballsbridge
Independent Valuer Dublin D04 HH60
Ireland
Bank of Ireland
2 Burlington Plaza
Burlington Road
Principal banker Dublin D04 X738
Ireland
BNP Paribas Securities Services, Dublin Branch
Trinity Point
Depositary 10-11 Leinster Street South
Dublin D02 EF85
Ireland
Link Registrars Limited t/a Link Asset Services
2 Grand Canal Square
Registrar Dublin D02 A342
Ireland
A&L Goodbody
25/28 North Wall Quay
IFSC
Principal legal adviser Dublin D01 H104
Ireland
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
D04 YW83
Ireland
Corporate brokers
Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom
Glossary
AGM is Annual General Meeting.
APM is an alternative performance measure.
BEPS is base erosion and profit shifting. It refers to corporate
tax planning strategies used by multinationals to shift profits
from higher tax jurisdictions to low tax jurisdictions.
Brexit is the UK exit from the EU.
C&W or Cushman & Wakefield or the Valuer is the Group's
external independent Valuer.
Cash passing rent is the gross property rent receivable on a
cash basis as at the reporting date. It includes sundry items such
as car parks rent and estimates of rents in respect of unsettled
rent reviews.
CBD is Central Business District.
CDP (formerly the Carbon Disclosure Project) is a not-for-profit
organisation that runs the global disclosure system for investors,
companies, cities, states and regions to manage their environmental
impacts.
Contracted rent is the annualised rent adjusted for the
inclusion of rent that is subject to a rental incentive such as a
rent free period or reduced rent year.
CSO is the Central Statistics Office.
Developer's profit is the profit on cost estimated by valuers
which is typically a percentage of developer's costs, usually
between 10% and 25%.
Development construction cost is the total costs of construction
to completion, excluding site and financing costs. Finance costs
are usually assumed at a notional 7% per annum by the Valuer.
DoF is the Department of Finance.
DPS is dividend per share.
DRiP or dividend reinvestment plan is a plan offered by the
Group that allows investors to reinvest their cash dividends by
purchasing additional shares on the dividend payment date.
EBIT is earnings before interest and tax.
EBITA is earnings before interest, tax, depreciation and
amortisation.
EPRA is the European Public Real Estate Association, which is
the industry body for European property companies. It produces
guidelines for a number of standardised performance measures (e.g.
EPRA earnings).
EPRA cost ratio (excluding direct vacancy costs) is the same as
below except it excludes direct vacancy costs.
EPRA cost ratio (including direct vacancy costs) is the ratio of
net overheads and operating expenses against gross rental income.
Net overheads and operating expenses relate to all administrative
and operating expenses net of any service fees, recharges or other
income which is specifically intended to cover overhead and
property expenses.
EPRA earnings is the profit after tax excluding revaluations and
gains and losses on disposals and associated taxation (if any).
EPRA EPS is EPRA earnings on a per share basis (diluted).
EPRA net asset value ("EPRA NAV") is defined as the IFRS assets
excluding the mark to market on effective cash flow hedges and
related debt instruments and deferred taxation on revaluations.
EPRA NAV per share is the EPRA NAV divided by the diluted number
of shares at the period end. This measure has now been superseded
by EPRA NRV, NTA and NDV.
EPRA Net Disposal Value ("NDV") represents the shareholders'
value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax.
EPRA Net Initial Yield ("NIY") is the passing rent generated by
the investment portfolio at the balance sheet date, less estimated
recurring irrecoverable property costs, expressed as a percentage
of the portfolio valuation as adjusted. The portfolio valuation is
adjusted by the exclusion of development properties and those under
refurbishment.
EPRA Net Reinstatement Value ("NRV") is NAV calculated on a
basis that assumes entities never sell assets and aims to represent
the value required to rebuild the entity.
EPRA Net Tangible Assets ("NTA") assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA 'topped-up' net initial yield is calculated as the EPRA NIY
but adjusting the passing rent for contractually agreed uplifts,
where these are not in lieu of rental growth.
EPRA vacancy rate is the Estimated Rental Value ("ERV") of
vacant space divided by the ERV of the whole portfolio, excluding
developments and residential property. This is the inverse of the
occupancy rate.
EPS or earnings per share is the profit after taxation divided
by the weighted average number of shares in issue during the
period.
Equivalent yield is the weighted average of the initial yield
and reversionary yield and represents the return that a property
will produce based on the occupancy data of the tenant leases.
ERV or estimated rental value is the Valuer's opinion as to what
the open market rental value of the property is on the valuation
date, and which could reasonably be expected to be the rent
obtainable on a new letting on that property on the valuation
date.
ESRI is the Economic and Social Research Institute.
EU is the European Union.
Fair value movement is the accounting adjustment to change the
book value of the asset or liability to its market value.
FRI lease is a full repairing and insuring lease.
Gale date is the date on which rent is due
GDA is the Greater Dublin Area.
GDV is gross development value.
GRESB is a sustainability benchmark for property assets.
Grey or shadow space is surplus space offered by tenants for
letting by sub-tenants.
Gross rental income is the accounting-based rental income under
IFRS. When the Group provides incentives to its tenants the
incentives are recognised over the lease term on a straight-line
basis in accordance with IFRS. Gross rental income is therefore the
passing rent as adjusted for the spreading of these incentives.
Hibernia is Hibernia REIT plc, the Company or the Group.
IFRS are International Financial Reporting Standards.
'In-place' portfolio is the portfolio of completed properties,
i.e. excluding active development and refurbishment projects and
land.
IPD is the Investment Property Databank Limited which is part of
the MSCI Group and produces an independent benchmark of property
returns (IPD Ireland Index) and which provides the Group with the
performance information required in calculating the
performance-based management fee.
IPMS are the international property measurement standards as
issued by the Royal Institute of Chartered Surveyors.
IPO is the initial public offering, i.e. the first equity
raising of the Company.
Lease incentive is any consideration or expense, borne by the
Group, in order to secure a lease.
LEED ("Leadership in Energy and Environmental Design") is a
Green Building Certification System developed by the US Green
Building Council. Its aim is to be an objective measure of building
sustainability.
Loan to value ("LTV") is the ratio of the Group's net debt to
the value of its investment properties.
Long-term incentive plan ("LTIP") aims to encourage senior
management retention and align their interests with those of the
Group through the payment of rewards based on the Group's long-term
performance through shares in the Company that vest after a future
period of service.
Market abuse regulations are issued by the Central Bank of
Ireland and can be accessed at https://www.centralbank.ie
/regulation/securities-markets/market-abuse/Pages/default.aspx.
MDD is modified domestic demand. It is defined as total domestic
demand net of trade in aircraft by leasing companies and investment
in intellectual property.
MSCI/SCSI Ireland Quarterly Property All Assets Index ("MSCI
Ireland Index") is the index produced by MSCI which measures the
return of the property market in Ireland for all asset classes and
which is calculated by MSCI both including and excluding Hibernia
assets and is used to calculate our KPI 'Total property return' or
TPR.
NAVPS is the NAV in cent per share.
Net development value is the external Valuer's view on the end
value of a development property when the building is fully
completed and let.
Net equivalent yield is the weighted average income return
(after allowing for notional purchaser's costs) a property will
produce based on the timing of the income received. As is normal
practice, the equivalent yields (as determined by the external
Valuer) assumes rent is received annually in arrears.
Net lettable or net internal area ("NIA") is the usable area
within a building measured to the internal face of the perimeter
walls at each floor level.
Net reversionary yield is the expected yield after the rent
reverts to the ERV.
Occupancy rate is the estimated rental value of let units as a
percentage of the total estimated rental value of the portfolio,
excluding development properties.
OECD is the Organisation for Economic Co-operation and
Development.
Over rented is used to describe when the contracted rent is
higher than the ERV.
Passing rent is the annualised gross property rent receivable on
a cash basis as at the reporting date. It includes sundry items
such as car parks rent and estimates of rents in respect of
unsettled rent reviews.
PC is practical completion.
PP are private placement notes, effectively private loan
notes.
Property income distributions ("PIDs") are dividends distributed
by a REIT that are subject to taxation in the hands of the
shareholders. Normal withholding tax still applies in most
cases.
PRS is the private rental sector which refers to residential
properties held for rent.
Psf is per square foot.
RCF is revolving credit facility.
REIT is a Real Estate Investment Trust. Irish REITs follow
section 705E of the Taxes Consolidation Act 1997.
Remuneration Policy is the remuneration policy approved by
shareholders at the 2018 AGM and which took effect from 27 November
2018.
Reversion is the rent uplift where the ERV is higher than the
contracted rent.
Royal Institution of Chartered Surveyors ("RICS") Professional
Standards, RICS Valuation Technical and Performance Standards and
the RICS Valuation Practice Guidance Applications are applications
contained within the RICS Valuation - Global Standards 2019 (the
"Red Book") issued by the Royal Institution of Chartered Surveyors
which provide the standards for preparing valuations on
property.
RTB is the Residential Tenancies Board.
Shadow space is surplus space offered by tenants for letting by
sub-tenants.
Sq. ft. is square feet.
TCFD is the Task Force on Climate-related Financial Disclosures
created by the Financial Stability Board to improve and increase
reporting of climate-related financial information.
Tenant or lease incentives are incentives offered to occupiers
on entering into a new lease and may include a rent free or reduced
rent period, or a cash contribution to fit-out. Under accounting
rules, the value of these incentives is amortised through the
rental income on a straight-line basis over the term of the lease
or the period to the next break point.
Term certain is the lease period to the next break or
expiry.
TMT sector is the technology, media and telecommunications
sector.
Total Accounting Return ("TAR") measures the absolute growth in
the Group's EPRA NAV per share plus any ordinary dividends
paid.
Total Property Return ("TPR") is the return for the period of
the property portfolio (capital and income) as calculated by MSCI,
the producers of the IPD Ireland Index.
Total Shareholder Return ("TSR") is the growth in share value
over a period assuming dividends are reinvested to purchase
additional units of stock.
Transparency regulations enhance the information made available
about issuers whose securities are admitted to trading on a
regulated market and further information is available on
https://www.centralbank.ie/regulation/
securities-markets/transparency/Pages/default.aspx.
Under rented is the term used to describe where contracted rents
are lower than ERV. This implies a positive reversion after expiry
of the current lease contract terms.
Ungeared IRR is the internal rate of return excluding
gearing.
USPP is US private placement notes.
Valuer is the independent valuer appointed by the Group to value
the Group's investment properties at the date of the consolidated
financial statements. From September 2017 the Group has used
Cushman and Wakefield. Previously the Group has used CBRE.
WAULT is weighted average unexpired lease term and is variously
calculated to break, expiry or next review date.
-----------------------------------------------------------------------------------------------------------------------
1. 91% of contracted rent.
2. 9% of contracted rent.
[3]. An alternative performance measure ("APM"). The Group uses
a number of such financial measures, which are not defined under
IFRS. In particular, measures defined by EPRA are an important way
for investors to compare real estate companies. Please see
Supplementary Information at the back of this release for further
details.
4. Like-for-like change (incl. finance costs) on Investment
Property and excluding assets acquired and disposed of during the
period.
[5]. Total Property Return is the return of the property
portfolio (capital and income) as calculated by MSCI.
[6]6. Assessed by current value as at Mar-21. Values for 50 City
Quay and 2 Cumberland Place are Net Development Values
("NDVs").?
[7]7. Based on Mar-21 valuation of all office assets except
Harcourt, Marine, Clanwilliam, 2 Cumberland and 50 City Quay where
NDVs of the completed buildings ?are assumed.
[6] Existing income within this figure represents EUR22 per
buildable square foot
[7] To calculate the net development value standard purchasers'
costs used are 9.96%
[1] 91% of Group contracted rent
[2] 9% of Group contracted rent
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ISIN: IE00BGHQ1986
Category Code: ACS
TIDM: HBRN
LEI Code: 635400MHRA4QVVFTON18
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 107342
EQS News ID: 1200526
End of Announcement EQS News Service
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