TIDMIMPT
RNS Number : 7296X
Industrial Multi Property Trust PLC
24 February 2017
INDUSTRIAL MULTI PROPERTY TRUST PLC
(the "Company" or together with its subsidiaries the
"Group")
ANNUAL RESULTS
FOR THE YEARED 31 DECEMBER 2016
Highlights
-- Net asset value ("NAV") per ordinary share increased 17.9% -
298.5 pence as at 31 December 2016 (253.2 pence as at 31 December
2015).
-- Adjusted net asset value ("Adjusted NAV") per ordinary share
increased 18.0% - 307.4 pence as at 31 December 2016 (260.6 pence
as at 31 December 2015).
-- Earnings per ordinary share improved - profit of 45.3 pence
for the year ended 31 December 2016 (profit of 42.8 pence for the
year ended 31 December 2015).
-- Adjusted earnings per ordinary share improved - loss of 11.3
pence for the year ended 31 December 2016 (loss of 18.1 pence for
the year ended 31 December 2015).
-- Occupancy improved - the occupancy level measured by
estimated rental value stood at 91.8% as at 31 December 2016
compared with 89.3% as at 31 December 2015.
-- Four light industrial units were sold above valuation - Four
units were sold for a total of GBP1.3 million before sales costs;
51% above the most recent valuation.
-- Portfolio valuation increased - the Group's property
portfolio was valued at GBP85.3 million as at 31 December 2016
(GBP81.6 million as at 31 December 2015), an increase of GBP3.7
million (4.5%) during the year (5.6% on a like for like basis).
-- New lettings achieved - 53 new lettings and 28 lease renewals
achieved during 2016 (representing 17.4% of the estimated rental
value ("ERV") of the total portfolio, based on the final achievable
annual rent including stepped rent).
-- Additional contracted rent - GBP0.16 million per annum of
additional passing rent is contracted to start during 2017,
directly benefiting cash flow.
91.8%
Occupancy rate, an increase of 2.5% during the year
18.0%
Adjusted NAV increased by 18.0%
307.4p
Adjusted NAV of 307.4 pence per share
an increase of 46.8 pence per share during the year
GBP1.3 million
Three sales (comprising four buildings) at 51% above
the most recent valuation
GBP85.3 million
Portfolio valuation increase of 4.5% to GBP85.3 million
5.6% increase
Excluding sold properties, on a like for like basis,
the portfolio valuation increased by GBP4.6 million (5.6%)
Contact:
Jonathan Clague
Chairman, Industrial Multi Property Trust plc
01624 681250
Tom Pissarro
Investment Adviser and Manager, Alpha Real Capital LLP
020 7391 4700
For more information on the Company please visit
www.alphamultipropertytrust.com
For more information on the Company's Investment Adviser and
Manager please visit www.alpharealcapital.com
FORWARD-LOOKING STATEMENTS
These results contain forward-looking statements which are
inherently subject to risks and uncertainties because they relate
to events and depend upon circumstances that will occur in the
future. There are a number of factors that could cause actual
results to differ materially from those expressed or implied by
such forward-looking statements. Forward-looking statements are
based on the Board's current view and information known to them at
the date of this Statement. The Board does not make any undertaking
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Nothing in
these results should be construed as a profit forecast.
Company summary and objectives
Objectives
Industrial Multi Property Trust plc ("the Company") was
incorporated in the Isle of Man on 10 June 2002 as a closed-ended
investment company. The Company and its subsidiaries (together "the
Group") invest in higher yielding UK commercial property. The key
objectives are:
-- Increase earnings and cash flow - increase occupancy in the portfolio and reduce expenses.
-- Protect and enhance asset values - prudent capital
expenditure and investment in selected portfolio properties.
-- Strengthen the balance sheet - reduce bank borrowings
progressively, consistent with the investment programme for the
property portfolio.
Dividends
The Company paid no dividends during the year and no dividend is
currently proposed (2015: GBPnil).
Listing
The Company is a closed-ended Isle of Man registered investment
company which has been declared under the relevant legislation to
be a closed-ended Collective Investment Scheme. Since 27 October
2014, its shares have traded on the Specialist Fund Segment of the
London Stock Exchange, an EU regulated market, following a transfer
of the shares from a listing on the Official List of the UK Listing
Authority. The shares have been traded on the London Stock Exchange
since 4 April 2003. Following shareholders' approval at the
Extraordinary General Meeting, on 26 September 2014 of the new
Articles, the Company's continuation vote has been removed. At an
Extraordinary General Meeting held on 27 January 2017, a resolution
was passed that the Company be required to obtain shareholder
approval for a disposal of more than fifty percent of the Company's
assets.
Management
The Company's Investment Adviser and Manager is Alpha Real
Capital LLP ("Alpha"). Control of the Company rests with the
non-executive Isle of Man based Board of Directors.
ISA/SIPP status
The Company's shares are eligible for Individual Savings
Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).
Website
www.industrialmultipropertytrust.com
Financial highlights
Year ended Year ended
31 December 31 December
2016 2015
NAV (GBP'000) 25,101 21,291
Adjusted NAV (GBP'000) (1) 25,853 21,916
NAV per ordinary share (pence) 298.5 253.2
Adjusted NAV per ordinary share
(pence) (1) 307.4 260.6
Earnings per ordinary share (pence)
(basic and diluted) 45.3 42.8
Adjusted earnings per ordinary
share (pence)(2) (11.3) (18.1)
(1) The adjusted net assets are presented to provide what the
Board believes is a more relevant assessment of the Group's net
asset position over the longer term, when certain fair value and
accounting adjustments may not be realisable (see note 15).
(2) The adjusted earnings are presented to provide what the
Board believes is a more appropriate assessment of the operational
income accruing to the Group's activities. Hence the Board adjusts
basic earnings for income and costs which are not of a recurrent
nature or which may be more of a capital nature (see note 14).
Chairman's Statement
I am pleased to present the Annual Report and the consolidated
financial statements of Industrial Multi Property Trust plc for the
year ended 31 December 2016.
Property performance
The active asset management initiatives within the portfolio
have assisted in the retention of tenants and the letting of vacant
units. The Group has achieved 53 new lettings and 28 lease renewals
increasing the occupancy level across the Group by 2.5%, to 91.8%
(by ERV) as at 31 December 2016 compared with 89.3% as at 31
December 2015, enhancing the Group's income. Further details on
asset management progress appear in the Investment Adviser and
Manager's report.
On a like-for-like basis taking into account sales in the year,
the property valuation increased by GBP4.6 million to GBP85.3
million at 31 December 2016 (GBP80.7 million at 31 December 2015).
This represents an increase of 5.6%. An evaluation of the Group's
property portfolio performance can be found in the Investment
Adviser and Manager's report.
Financial performance
The NAV per ordinary share at 31 December 2016 is 298.5 pence
(31 December 2015: 253.2 pence) and the adjusted NAV is 307.4 pence
(2015: 260.6 pence). The increase in the NAVs is attributable
mainly to the 5.6% increase in the property portfolio valuation
(excluding property sales in the year).
The adjusted NAV excludes the mark-to-market of the interest
rate swap hedging derivative; this liability would arise on a break
of the swap during the term of the financing or is otherwise
recognised through a higher interest rate expense over the
remaining life of the financing assuming market rates remain lower
than the fixed swap rate. More details are included in notes 15 and
19 of the consolidated financial statements.
The results for the year show an adjusted EPS loss of 11.3 pence
(31 December 2015: loss of 18.1 pence). The continuing adjusted
loss results from the high level of finance costs during the
year.
Bank borrowings and financing
The Group entered into its current financing agreements on 5
December 2013. These loan facilities expire in December 2018. A
hedging arrangement was entered into on 27 January 2014, which has
the effect of fixing the Group's interest rate exposure on GBP25.1
million of debt until 4 December 2018. Following the sale of
properties the Group has repaid GBP0.3m (2015: GBP2.5m) of its
borrowings during the year. During the year the Group was compliant
with the lenders' covenants.
Further details on the Group's long term borrowings are provided
in note 22 and within the Investment Adviser and Manager's
report.
Going concern
The Board has concluded that the Company and the Group is
considered to be a going concern and as a result of this the
consolidated financial statements for the year ended 31 December
2016 have been prepared on the going concern basis. Further details
on the basis of preparation is provided in note 2 to the financial
statements.
Subsequent events
As announced on 14 November 2016, Alpha Real Trust Limited
("ART") who hold 18.7% of the Company's share capital requisitioned
an extraordinary general meeting at which proposals were made to
remove two of the Company's Independent Directors (the
"Requisitioned EGM"). At the Requisitioned EGM, those shareholders
independent of ART (and independent of Antler Investment Holdings
Limited, a related party to Alpha Real Capital LLP) voted
overwhelmingly to support the continued appointment of the two
Independent Directors in a ratio of over 6 to 1. At the
Requisitioned EGM, the Independent Directors also included a
resolution to amend the investment objectives of the Company to
allow for the sale of the portfolio provided certain conditions
were met. This resolution was passed.
Chairman's Statement (continued)
Subsequent events (continued)
ART subsequently requisitioned a second extraordinary general
meeting which was held on 27 January 2017 at which a resolution,
requiring the Directors to obtain shareholder approval to dispose
of more than 50% of the assets, was passed.
As a result of the publicity arising from the Requisitioned
EGM's, the Company received a number of unsolicited proposals
regarding ways to improve shareholder value and on 17 February
2017, announced a cash offer from Hansteen Holdings Plc to acquire
all the share capital of the Company for 300 pence per share. The
Independent Directors have evaluated this offer and believe it
gives shareholders a good opportunity to realise their shares for
cash at a significant premium to the recent share price.
Copies of all announcements can be found on the Company's
website: www.industrialmultipropertytrust.com
The Board will continue to keep shareholders updated via the
website and regulatory announcements.
Jonathan Clague
Chairman
23 February 2017
Investment Adviser and Manager's report
The Investment Adviser and Manager's strategy to deliver
shareholder value will continue to focus on the following
objectives:
-- To enhance net rental income - the marketing strategy for
vacant units will aim to meet tenant requirements for good quality
affordable accommodation on flexible lease terms.
-- To selectively deploy capital expenditure when 'value add'
opportunities are identified - a rolling programme of maintenance
will continue to be undertaken. However priority will be given to
refurbishments where a property can be significantly enhanced to
attract additional tenant demand. The Investment Adviser and
Manager is also looking to identify opportunities to extend leases
and or remove tenant breaks where appropriate value can be
unlocked.
-- To reduce borrowings through rental surplus and to reduce the
loan-to-value ("LTV") ratio. Limited strategic sales or disposals
will be considered where it is believed that this will benefit
shareholder returns.
-- To actively review the potential refinancing options at an
optimum time to reduce the combined loan facilities' high interest
charge.
-- To actively review the potential to resume payment of dividends.
-- To actively review alternative ways to improve shareholders' value.
The strategy to concentrate on active asset management
initiatives within the portfolio offers tangible opportunities to
generate a strong positive cash flow and an enhanced NAV per share
in the future.
Portfolio overview
Portfolio by region Total as Total as
a percentage a percentage
of Market of Market
Value Value
December December
2016 2015
% %
Midlands 29 30
East of England 21 20
North East 2 2
North West 6 7
South East 11 11
South West 21 20
Wales 1 1
Yorkshire & Humberside 9 9
Total 100 100
Portfolio by sector Total as Total as
a percentage a percentage
of Market of Market
Value Value
December December
2016 2015
% %
Light Industrial Properties 86 86
Office Properties 14 14
Total 100 100
Portfolio overview (continued)
The portfolio predominantly comprises a well-diversified
portfolio of fifty-one multi-let properties offering 481 leasable
units with a total floor area of approximately 154,400 square
metres (approximately 1.7 million square feet) all of which are
located in the UK. The properties offer attractively priced
accommodation for local and regional occupiers.
Of the total portfolio, approximately 86% is invested in light
industrial properties and 14% is invested in offices.
Tenants have continued to favour shorter term flexible leases
however the weighted average lease length was extended during the
year; 4.20 years to expiry (3.83 years as at 31 December 2015) and
2.57 years (2.28 years as at 31 December 2015) to the earlier of
the next tenant break or expiry.
Asset management review
The occupational market continues to show signs of improving,
and the Group's flexible approach to meeting tenant demand has been
successful in reducing the number of vacant units: 53 new lettings
and 28 lease renewals were completed during the year, with a
further 8 units under offer as at 31 December 2016. Many of the
leases incorporate stepped increases in rents and there is an
additional GBP0.16 million per annum of contracted rent due to
start during the next twelve months which will benefit the cash
flow.
Whilst not all leases have rent review provisions a further sign
of an improving occupational market is that a greater number of
rent increases have been achieved at rent review. Eleven rent
reviews were activated during 2016 resulting in approximately
GBP63,000 per annum increase in rent.
Against this background, the number of new lettings is
encouraging and notable progress has been made in increasing
occupancy. Based on ERV, the occupancy level stood at 91.8% as at
31 December 2016 compared to 89.3% as at 31 December 2015.
Activity Number Rent GBP'000 As % of Estimated
of Tenants p.a. Rental Value
Tenant lease breaks
exercised 4 95 1.1
Tenant vacated
at lease end 25 279 3.1
Tenant insolvency 7 75 0.8
New letting completed 53 736* 8.2
Tenant leases renewed 28 831* 9.2
*Final achievable annual rent including stepped rents.
Based on the current total portfolio ERV, there is also the
potential for additional rent of GBP1.1 million per annum assuming
the portfolio were to become fully let and income producing.
Property Sales
In keeping with the Board's strategy to undertake limited
strategic sales, the portfolio continues to be reviewed to identify
potential disposals where it is believed that this will benefit
shareholder returns. Three separate sales transactions completed
during the year. Four light industrial units were sold at a
combined sale price of GBP1.3 million, before sales costs, 51%
above the most recent valuation.
Valuation
The Group's property portfolio was valued at 31 December 2016 by
Cushman & Wakefield Debenham Tie Leung Limited trading as
Cushman & Wakefield at GBP85.3 million (GBP81.6 million as at
31 December 2015) an increase of GBP3.7 million (4.5%) during the
12 month period. The average capital value of the portfolio is
GBP552 per square metre (GBP51 per square foot). Excluding the
sales outlined above, on a like for like basis, the valuation of
the portfolio increased by GBP4.6 million (+5.6%).
Financing
As previously reported the Group entered into financing
agreements on 5 December 2013 as follows:
-- A GBP33.5 million (loan balance GBP32.3m as at 31 December
2016) senior facility with a five-year term expiring in December
2018 and an initial margin of 3% per annum over 3 month LIBOR, with
Royal Bank of Scotland ("RBS").
-- A GBP20.0 million (loan balance GBP19.9m as at 31 December
2016) mezzanine loan facility with a five-year term expiring in
December 2018 and a coupon of 11% per annum, with Europa Mezzanine
Finance Sàrl ("Europa").
-- An GBP11.5 million (loan balance GBP10.0m as at 31 December
2016) unsecured subordinated loan facility with a five-year term
expiring in December 2018 and a coupon of 15% per annum with Alpha
Real Trust Limited ("ART").
On 27 January 2014, the Group entered into an interest rate swap
for the amount of GBP25.1 million with RBS. The interest rate swap
has the effect of fixing the Group's interest rate exposure on
GBP25.1 million of these borrowings from 27 January 2014 until 4
December 2018 at 2.0225% per annum, before the margin of 3% per
annum.
A proportion of the net sales proceeds generated during 2016
were allocated to amortise the loans with RBS and Europa at the
agreed proportion of 65%/35% respectively.
The overall LTV ratio on total borrowings was 72.9% as at 31
December 2016 (76.3% on total borrowings as at 31 December
2015).
UK Economy
According to the Office for National Statistics (ONS), the gross
domestic product (GDP) of the UK was estimated to have remained at
0.6% in the third quarter of 2016 (July to September) compared with
the second quarter of 2016 (April to June).
On an annual basis, the UK's GDP was 2.2% higher in the third
quarter of 2016 compared with the same quarter a year ago.
The ONS also reported that annual inflation as measured by the
Consumer Prices Index (CPI) reached 1.8% in January 2017, up from
1.6% in the year to December 2016 and compared with a 1.0% rise in
the year to September 2016. It is the fourth consecutive month that
the rate has risen and inflation is at its highest rate since June
2014.
As at the end of October, the unemployment rate was 4.8%, down
from 5.2% for a year earlier. The last time it was lower was in
September 2005.
Property Commentary
The UK commercial property market has stabilised after the
uncertainty triggered by the Brexit referendum and lack of activity
over the summer months. Annualised 3 month capital values for all
sectors grew by 4.7% in the fourth quarter of 2016, a significant
increase from negative 15.2% in the third quarter of 2016. Investor
interest from abroad has increased by further falls in Sterling
which has decreased 17.8% against the dollar and 13.2% against the
Euro since the EU Referendum.
Activity in the industrial sector held up strongly in the third
and fourth quarters of 2016. There has been little evidence of
deals collapsing due to Brexit and despite some renegotiations
occurring there are still robust levels of occupier and investor
demand across most regional locations. Overseas investors continue
to compete with domestic buyers for the limited opportunities in
prime locations. Activity in second-tier and the best secondary
markets is steady with a broad range of buyers targeting these
markets and taking advantage of higher yield profiles.
Rental value growth as at December 2016 in the industrial market
remains strong at 3.1% per annum, down from 5.0% in the previous
year.
Conclusion
The 18.0% increase in adjusted net asset value for the twelve
months to 31 December 2016 is encouraging. This increase has been
achieved through a combination of improved valuations, property
sales at a 51% premium to the most recent valuation, increased
occupancy and lower void costs.
The Investment Adviser and Manager will continue to seek ways to
improve value for shareholders. For the property portfolio the goal
continues to be to increase the level of rent and occupancy
throughout the portfolio and to build on the asset management
success delivered during the previous twelve months.
Tom Pissarro
Alpha Real Capital LLP
Investment Adviser and Manager
23 February 2017
Directors
Jonathan Clague, Chairman
Jonathan Clague is a resident of the Isle of Man. He is the
non-executive chairman of Heron & Brearley, a leading Manx
brewer and public house operator and previously, was a
non-executive director of Diamond Circle Capital Plc, Isle of Man
Bank, NatWest Offshore Limited, Sun Alliance (IOM) Limited and PFI
Infrastructure Company.
Geoffrey Black, Director
Geoffrey Black is a resident of the Isle of Man. He is a Fellow
of the Royal Institution of Chartered Surveyors and is a senior
partner of Black Grace Cowley, a leading firm of commercial
property agents on the Isle of Man. Geoffrey has more than 35
years' experience in both the commercial and residential property
markets and has acted for major UK institutions, such as Zurich
Financial Services, Royal Bank of Scotland International, and for
the Isle of Man Government.
Donald Lake, Director
Donald Lake is a resident of the Isle of Man. He is a Fellow of
the Royal Institution of Chartered Surveyors and has many years'
experience of the UK commercial property market both as an adviser
to investment funds and as a principal. He is Chairman of UCP Plc.
He is also a director of other companies active in the UK and
elsewhere, and advises private clients on the Isle of Man and in
the UK.
Philip Scales, Director - Chairman of the Audit Committee
Philip Scales is a resident of the Isle of Man. He is a Fellow
of the Institute of Chartered Secretaries and Administrators and
the managing director of the Company's Administrator, FIM Capital
Limited (formerly IOMA Fund and Investment Management Limited).
Philip was previously the managing director of Barings (Isle of
Man) Limited, which was acquired by Northern Trust in 2005. Philip
has more than 37 years' experience in corporate and mutual fund
administration and is currently on the boards of a number of listed
companies.
Mark Rattigan, Director
Mark Rattigan holds a Bachelor of Civil Engineering (Honours)
from the University of Sydney and an Investment Management
Certificate from the UK Society of Investment Professionals.
He has previously been Chief Operating Officer and Director -
Finance and Operations at RREEF (Deutsche Bank's real estate funds
management group) based in London. He has over 30 years' experience
in real estate, funds management and investment banking. His
experience includes 13 years in real estate investment banking with
Deutsche Bank, HSBC Investment Bank and Macquarie Bank in both
London and Sydney and 5 years as a property development manager at
Lend Lease.
Mark Rattigan is currently Chief Operating Officer of the
Company's Investment Adviser and Manager, Alpha Real Capital
LLP.
Directors' report
The Directors present herewith the Annual Report and
consolidated financial statements of the Group for the year ended
31 December 2016. The Corporate Governance Statement set out on
pages 12 to 17 forms part of this Directors' report by
reference.
The Company
The Company is an Isle of Man closed-ended investment company
and was incorporated on 10 June 2002. Its principal activity is
that of investment in UK commercial property. Since 27 October
2014, its shares have traded on the Specialist Fund Segment of the
London Stock Exchange, an EU regulated market, following a transfer
from a listing on the Official List of the UK Listing Authority.
The shares have been traded on the London Stock Exchange since 4
April 2003.
The Directors confirm that:
-- no single property represents more than 15% of the gross assets of the Group;
-- income receivable from any one tenant, or tenants within the
same Group, in any one financial year does not exceed 20% of the
total rental income of the Group; and
-- the proportion of the Group's property portfolio which is
unoccupied or not producing income or which is in the course of
substantial redevelopment or refurbishment does not exceed 25% of
the value of the portfolio.
Business review
A review of the business during the year is contained in the
Chairman's statement on page 3.
Results and dividends
The results for the year are set out in the consolidated
financial statements.
Commentary on the net asset value and performance is given in
the Chairman's Statement and Investment Adviser and Manager's
Report which are incorporated into this Directors' report by
reference.
The Company paid no dividends during the year and no dividend is
currently proposed (2015: nil).
Corporate governance
The information fulfilling the requirements of the Corporate
Governance Statement can be found in this Directors' report and on
pages 12 to 17, which are incorporated into this Directors' report
by reference.
Directors
Biographical details of the Directors of the Company who served
during the year are given on page 9. Their interests in the share
capital of the Company are shown below:
Directors Shareholding 31 December 31 December
2016 2015
Number Number
of Ordinary of Ordinary
shares shares
held held
Jonathan David Clague 15,500 15,500
Geoffrey Paul Raineri Black 7,000 7,000
Donald Lake 47,900 47,900
Philip Peter Scales - -
Mark Rattigan - -
Financial instruments
Information about the use of financial instruments by the Group
is given in note 19 to the consolidated financial statements.
Directors' report (continued)
Post balance sheet events
Details of significant events since the balance sheet date are
contained in note 27 to the consolidated financial statements.
Substantial shareholdings
Shareholders holding 3% or more Number % of share
of the Ordinary Shares of the Company of Ordinary capital
as at 31 December 2016 shares held
held '000
---------------------------------------- ------------- -----------
Alpha Real Trust Limited* 1,573 18.7
---------------------------------------- ------------- -----------
Antler Investment Holdings Limited* 532 6.3
---------------------------------------- ------------- -----------
Armstrong Investments Limited 330 3.9
---------------------------------------- ------------- -----------
Under chapter 5 of the Disclosure and Transparency Rules, during
the period between 31 December 2016 and 23 February 2017 the
Company received the following notifications:
-- Antler Investment Holdings Limited increased its shareholding
in the Company to 7.63% on 24 January 2017.
-- As at 22 February 2017, Hansteen Holdings Plc ("Hansteen")
held 1,297,316 shares in the Company. These shares were acquired
between 17 February 2017 and 22 February 2017 and represent
approximately 15.43% of the entire issued share capital of the
Company. Together with the receipt of irrevocable undertakings from
the Independent Directors of the Company, who hold 70,400 shares
(0.84%), Hansteen held 1,367,716 shares in the Company in aggregate
as at 22 February 2017. This represents 16.26% of the entire issued
share capital of the Company.
*Please refer to note 26 for further details on related
parties.
Directors' indemnities
On 4 October 2016, a third party indemnity (Director and Officer
insurance) was given by the Company to the Directors in terms which
comply with Company law and remains in force at the date of this
report.
Company Secretary
Martin Katz served as Secretary throughout the year.
Going concern
The Directors have concluded that the Company and the Group is
considered to be a going concern and as a result of this the
consolidated financial statements for the year ended 31 December
2016 have been prepared on the going concern basis. Further detail
on the basis of preparation of the consolidated financial
statements is provided in note 2.
Philip Scales
Director
23 February 2017
Corporate governance statement
The Board of Directors is accountable to the Company's
shareholders for the management and control of the Company's
activities and is committed to appropriate standards of corporate
governance. The statement below explains how the Company applies
the principles set out in the UK Corporate Governance code ("the
Code") published by the Financial Reporting Council and contains
the information required by chapter 7 of the Disclosure and
Transparency Rules. The UK Corporate Governance code can be viewed
at www.frc.org.uk.
Statement of compliance
The Company has, other than where stated below, complied fully
with the provisions set out in the Code during the year ended 31
December 2016:-
-- As matters relating to remuneration and nominations are dealt
with at regular board meetings, no separate Remuneration and
Nomination committees have been established.
The Directors consider this structure to be a practical solution
bearing in mind the Company's size and needs.
Further explanation of how the principles and the supporting
principles have been applied is set out below and in the Audit
Committee report.
Role of the Board
The Board has determined that its role is to consider and
determine the following principal matters which it considers are of
strategic importance to the Company:
1) review the overall objectives for the Company and set the
Company's strategy for fulfilling those objectives within an
appropriate risk framework;
2) consider any shifts in strategy that it considers may be
appropriate in light of market conditions;
3) review the capital structure of the Company including
consideration of any appropriate use of gearing for
the Company;
4) appoint the Investment Adviser and Manager, Administrator and
other appropriately skilled service providers and monitor their
effectiveness through regular reports and meetings; and
5) review key elements of the Company's performance including
the net asset value, earnings per share, adjusted net asset value
per share, adjusted earnings per share and payment of
dividends.
The Board has adopted a schedule of matters reserved for its
decisions and a schedule of matters delegated to the Investment
Adviser and Manager, both of which are reviewed at least annually.
The Board reserves approval for all significant or strategic
decisions including property acquisitions, disposals, significant
capital expenditure and financing transactions. The Directors are
entitled to take independent professional advice as and when
necessary. The Board ensures that all strategic matters are
considered and resolved at Board Meetings.
Board Meetings
The Board meets at least quarterly and as required from time to
time to consider specific issues reserved for decisions by the
Board including all potential acquisitions and disposals,
significant capital expenditure and leasing matters and decisions
relating to the Company's financial gearing, the purpose of which
is to ensure the long-term success of the Company for its
shareholders.
Certain matters relating to the implementation of the Company's
strategy are delegated either to the Investment Adviser and Manager
or the Administrator but the performance of such delegation by
these independent agents is regularly monitored by the Board.
Corporate governance statement (continued)
Board Meetings (continued)
At the Board's quarterly meetings, it considers papers
circulated in advance including reports provided by the Investment
Adviser and Manager. The Investment Adviser and Manager's report
comments on:
-- The UK property markets, including recommendations for any
changes in strategy that the Investment Adviser and Manager
considers may be appropriate
-- Performance of the Group's portfolio and key asset management initiatives
-- Transactional activity undertaken over the previous quarter
and being contemplated for the future
-- The Group's financial position including relationships with bankers and lenders
The Administrator provides a quarterly compliance, company
secretarial and regulatory report.
The reports enable the Board to assess the success with which
the Group's property strategy and other associated matters are
being implemented and to consider any relevant risks as well as to
consider how they should be properly managed.
The Board also considers reports provided from time to time by
its various service providers reviewing their internal
controls.
In between its regular quarterly meetings, the Board has also
met on two additional occasions during the year to approve property
transactions and for other matters.
The Independent Directors held three additional meetings during
the year.
The table below shows the attendance at the Board meetings and
meetings of the Independent Directors during the year to 31
December 2016:
Director Board meetings Independent
attended Directors'
meetings
attended
------------------------------- --------------- ------------
Jonathan David Clague 6 3
------------------------------- --------------- ------------
Geoffrey Paul Raineri Black 6 3
------------------------------- --------------- ------------
Donald Lake 6 3
------------------------------- --------------- ------------
Philip Peter Scales 6 3
------------------------------- --------------- ------------
Mark Rattigan 5 n/a
------------------------------- --------------- ------------
Number of meetings during the
year 6 3
------------------------------- --------------- ------------
Messrs Clague, Black, Lake and Scales are non-executive
Directors and are considered to be independent. Mr Rattigan is a
non-executive Director of the Company but is also Chief Operating
Officer of Alpha Real Capital LLP, the Investment Adviser and
Manager and is not considered to be independent.
The terms and conditions of appointment of non-executive
Directors are available for inspection by any person at the
Company's registered office and at the Annual General Meeting.
The Board has undertaken an annual evaluation of its own
performance and that of its committees and Directors. All Directors
are subject to an annual performance evaluation, which is an
on-going exercise. Evaluation of the Board considers the balance of
skills, experience, independence and knowledge of the Company on
the Board, its diversity, including gender, how the Board works
together as a unit, and other factors relevant to its
effectiveness.
Corporate governance statement (continued)
Statement of Directors' responsibility
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union and applicable law and
have elected to prepare the Parent Company financial statements on
the same basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period. In preparing each of the
Group and Parent Company financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed subject to any material departures disclosed and explained
in the Group's financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and of the Group and enable them
to ensure that the consolidated financial statements comply with
the Companies Acts 1931 to 2004. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report and Corporate
Governance Statement that complies with that law and those
regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the consolidated financial statements, prepared in accordance
with IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and the
undertakings included in the consolidation taken as a whole;
and
-- the Directors' report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report and consolidated financial
statements, taken as a whole, are fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group's position and performance, business model and
strategy.
Risk management and internal control
The Board recognises its ultimate responsibility for the Group's
system of internal control. The Board understands its
responsibility for ensuring that there are sufficient, appropriate
and effective systems, procedures, policies and processes for
internal control of financial, operational, compliance and risk
management matters in place in order to manage the risks which are
an inherent part of the business. The process for significant risks
is in accordance with Financial Reporting Council's guidance on
Internal Control, Risk Management and Related Financial and
Business Reporting.
Corporate governance statement (continued)
The Board attaches considerable importance to the Group's
systems of internal control and risk management by establishing a
continuous process for identifying, evaluating and managing the
risks which the Group faces.
During 2016, the exposures to risk, including the changing
environments within the property sector and potential adverse
consequences of global economic conditions, and refinancing risks
were closely monitored by the Directors.
The Audit Committee, along with the Board, has responsibility
for monitoring the work carried out under contractual arrangements,
and delegated authorities as appropriate, by the Investment Adviser
and Manager, the Administrator, the Property Manager and Property
Valuer. This, combined with frequent communication with the
external auditors ensures that sufficient controls for managing
risks are in place in line with the Code.
Risk management covers operations, security, compliance,
finance, legal and strategy. The Board monitors these areas closely
and matters are reviewed at meetings of the Audit Committee. The
principal risks the Group is exposed to are market risk, credit
risk and liquidity risk. These risks and details of how they are
mitigated are described within note 24.
However, internal controls are designed to manage rather than
eliminate the risk of failure to achieve business objectives, and
the Board recognises that any system can only provide reasonable
and not absolute assurance against material misstatement or
loss.
Directors confirm that they have carried out a robust assessment
of the principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or
liquidity.
The Directors consider that the most significant risks facing
the Group are real estate risk and interest rate risk. The Group's
exposure to real estate risk is mainly derived from movements in
the value of the Group's investments in property. The Group's
exposure to interest rate risk primarily relates to the Group's
debt obligations. Further details about these risks are contained
in note 24.
Internal audit
The Group has no employees and therefore the Board is reliant
upon the systems and procedures employed by the Investment Adviser
and Manager and the Administrator which are regularly reviewed and
are considered to be sufficient to provide it with the required
degree of comfort. Resulting from this, the Board continues to
believe that there is no need for an internal audit function,
although it continues to monitor such need on an annual basis.
Investment Adviser's and Management Agreement
The Company has an Investment Adviser's and Management Agreement
with the Investment Adviser and Manager. This sets out the
Investment Adviser and Manager's key responsibilities which include
proposing a property investment strategy to the Board, The
Investment Adviser and Manager is also accountable to the Board for
all issues relating to property asset management.
Remuneration report
During the year the Directors received the following
remuneration in the form of fees from the Company:
Directors Fees 31 December 31 December
2016 2015
GBP GBP
Jonathan David Clague 20,000 20,000
Geoffrey Paul Raineri Black 15,000 15,000
Donald Lake 15,000 15,000
Philip Peter Scales 15,000 15,000
Mark Rattigan 15,000 15,000
Corporate governance statement (continued)
Going concern
The Directors have concluded that the Company and the Group is
considered to be a going concern and as a result of this the
consolidated financial statements for the year ended 31 December
2016 have been prepared on the going concern basis. Further detail
on the basis of preparation of the consolidated financial
statements is provided in note 2.
Financial viability statement
The Directors' have assessed the Group's viability over a
two-year period to December 2018. This is based on a two year
strategic plan and in line with the length of the Group's existing
finance facilities.
In making their assessment, the Directors took account of the
Group's current financial and operation positions, existing leases
and all its long term financing arrangements. We have also assessed
the potential financial and operational impacts; in severe but
plausible scenarios, of the principal risks and uncertainties set
out in note 24 and the likely degree of effectiveness of current
and available mitigating actions.
Based on this assessment, the Directors have a reasonable
expectation that the Group will be able to continue in operation
and meet all their liabilities as they fall due up to December
2018.
In making this statement, the Directors have also made the
following key assumptions:
-- funding in the form of senior and junior or mezzanine
financing will be available in all plausible market conditions;
-- the refinancing of the existing junior and mezzanine
facilities can be made in all plausible market conditions at or
before their maturity in December 2018;
-- any significant decrease in its commercial property values
will be temporary and part of the normal property cycle;
-- the portfolio will maintain its significant diversification of tenants.
Offer from Hansteen Holdings Plc
On 17 February the Independent Directors of the Company
announced a recommended cash offer ("Offer") by Hansteen for the
entire issued ordinary share capital of IMPT.
Under the terms of the Offer, IMPT shareholders would receive
300 pence in cash for each IMPT share held.
It is intended that the Offer will be implemented by way of a
takeover offer under Chapter 1 of Part 28 of the Companies Act
2006. However, Hansteen reserves the right, subject to the prior
consent of the Takeover Panel, to effect the proposed transaction
by way of a Scheme of Arrangement.
If Hansteen receives acceptances under the Offer in respect of,
and/or otherwise acquires, 90 per cent. or more of the IMPT shares
to which the Offer relates and the Offer becomes or is declared
unconditional in all respects, Hansteen intends to exercise its
rights pursuant to the provisions of section 154 of the Isle of Man
Companies Act 1931 to acquire compulsorily all remaining IMPT
Shares on the same terms as the Offer.
Assuming the Offer becomes or is declared unconditional in all
respects, Hansteen also intends (as soon as it is appropriate and
possible to do so) to procure that IMPT applies to the London Stock
Exchange for the cancellation of trading in IMPT Shares on the
Specialist Fund Segment of the London Stock Exchange's Main Market.
It is anticipated that such cancellation will take effect no
earlier than 20 Business Days after the Offer becomes or is
declared unconditional in all respects. This would significantly
reduce the liquidity and marketability of any IMPT Shares not
assented to the Offer.
Corporate governance statement (continued)
Financial viability statement (continued)
If the Offer were not to become effective, The Board would
continue, as previously announced, to target a refinancing of the
portfolio at an optimum time and if a refinancing is not possible
it will continue to review alternative ways to improve shareholder
value.
Philip Scales
Director
23 February 2017
Audit Committee Report
This report details the key activities of the Committee during
the year, alongside our principal responsibilities.
Composition of the Committee
The Committee consists of a Chairman (Philip Scales) and other
Non-Executive Directors (Geoffrey Black and Donald Lake). All are
independent Directors with significant financial experience, as
detailed in the biographies on page 9. Meetings of the Audit
Committee are attended by members of the Investment Adviser and
Manager's finance team and the external auditors, KPMG Audit
LLC.
The Committee meets regularly during the year in alignment with
the financial reporting timetable and during the financial year
ended 31 December 2016 they met on three occasions with attendance
as detailed below.
Director Audit
Committee
meetings
attended
Geoffrey Paul Raineri Black 3
Donald Lake 3
Philip Peter Scales 3
Number of meetings during the year 3
Role and responsibilities
The purpose of the Committee is to assist the Board in its
responsibilities for monitoring the integrity of the Group's
financial statements, assessing the effectiveness of the Group's
system of internal controls and monitoring the effectiveness,
independence, and objectivity of the external auditors.
While the Board as a whole has a duty to act in the best
interests of the Company, the Committee has a particular role,
acting independently of management, to ensure that the interests of
the shareholders are properly protected in relation to financial
reporting and the effectiveness of the Group's systems of financial
internal controls. The key responsibilities of the Committee are
to:
-- Monitor the integrity of the Group's financial statements and
formal announcements on the Group's financial performance;
-- Report to the board on the appropriateness of accounting policies and practices;
-- Assess the effectiveness of the Group's system of internal
controls and risk-management systems, including reviewing the
process for identifying, assessing and reporting all key risks
-- Review the scope, effectiveness, independence and objectivity of the audit process;
-- Make recommendations to the Board on the appointment,
reappointment, remuneration and terms of engagement of the external
auditor;
-- Develop and implement policy on the engagement of the
external auditor to supply non-audit services, taking into account
relevant ethical guidance regarding the provision of non-audit
services by the external audit rm, and to report to the Board,
identifying any matters in respect of which it considers that
action or improvement is needed and making recommendations as to
the steps to be taken;
-- Report to the Board on how it has discharged its responsibilities; and
-- Oversee the whistleblowing provisions of the Group and to
ensure they are operating effectively.
Audit Committee Report (continued)
Activities of the committee
Key areas formally discussed and reviewed by the Committee
during 2016 include:
-- Annual, semi annual and quarterly results, including the related formal announcements.
-- Key accounting policies and issues, including property valuation.
-- Impact of future financial reporting standards and changes to
Corporate Governance Code, Disclosure and Transparency Rules and
Listing Rules.
-- Significant accounting, reporting and judgement matters.
-- Internal controls and risk management process.
-- Semi annual and annual auditor reports on planning and final
opinion containing observations leading to recommendations for
control or financial reporting improvement.
-- Group's whistleblowing policy to satisfy themselves that this
has met FCA rules and good standards of corporate governance.
Significant areas
The signi cant areas considered by the Committee and discussed
with the external auditors during the year were:
Valuation of investment properties and investment property held
for sale
In conjunction with the Investment Adviser and Manager the
Committee has reviewed the independent valuation report and
underlying assumptions and is satisfied that the valuations are
appropriate and in accordance with the current RICS Appraisal and
Valuation Standards.
Revenue Recognition
The Committee considered the risk of fraud within revenue
recognition and was satisfied that there were no issues
arising.
Going concern - compliance with long term loan facilities
In December 2013, the Group entered into new long term loan
facilities and the Committee considered whether the Group could
service this debt. At the year end, the Committee has reviewed a
two year forecast and is satisfied that the terms of the loan
facilities can be satisfied.
External audit
The Group's external auditor is KPMG Audit LLC. The Committee is
responsible for reviewing the independence and objectivity of the
external auditors, and ensuring this is safeguarded notwithstanding
any provision of any other services to the Group.
Audit Committee Report (continued)
External audit (continued)
The Board recognises the importance of safeguarding auditor
objectivity and has taken the following steps to ensure that
auditor independence is not compromised:
-- The Committee annually evaluates the external auditor as to
its complete independence from the Group and relevant of cers of
the Group in all material respects and that it is adequately
resourced and technically capable to deliver an objective audit to
shareholders. Based on this review the Committee recommends to the
Board each year the continuation, or removal and replacement, of
the external auditor;
-- The external auditors provide audit related services such as
regulatory and statutory reporting as well as formalities relating
to shareholders and other circulars;
-- The Committee regularly reviews all fees paid for audit, and
all consultancy fees, with a view to assessing reasonableness of
fees, value of delivery, and any independence issues that may have
arisen or may potentially arise in the future;
-- The external auditors' report to the Directors and the
Committee confirming their independence in accordance with auditing
standards. In addition to the steps taken by the Board to safeguard
auditor objectivity, KPMG Audit LLC rotates audit partners every
five years.
In addition, the Committee oversaw the tender of the external
audit in line with The Code requirements. The successful firm KPMG
Audit LLC performed its first external audit for the year ended 31
December 2014.
The appointment of the external auditor is subject to
shareholder approval each year at the Annual General Meeting,
giving shareholders the opportunity to accept or reject the Board's
recommendation.
The Committee has adopted a policy for the provision of
non-audit services and reviews and approves all material non-audit
related services in accordance with the need to ensure the
independence and objectivity of the external auditors, at the
regular Committee meetings.
Total fees payable to KPMG Audit LLC for audit services relating
to the current financial year amounted to GBP58,933 and no fees in
respect of non-audit services were paid during the year.
KPMG Audit LLC, being eligible, have expressed their willingness
to continue in office, in accordance with section 12 (2) of the
Companies Act 1982 and a resolution proposing their reappointment
will be submitted at the Annual General Meeting.
Directors' statement pursuant to the Disclosure and Transparency
Rules
Each of the Directors, whose names and functions are listed in
the Directors' Report confirm that, to the best of each person's
knowledge and belief:
-- The Group and Company financial statements, which have been
prepared, in accordance with IFRS as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group and Company, and
-- The Chairman's Statement, Investment Adviser and Manager's
report and Director's report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board,
Jonathan Clague Philip Scales
Chairman Director
Report of the Independent Auditors, KPMG Audit LLC, to the
shareholders of Industrial Multi Property Trust plc ONLY
Opinions and conclusions arising from our audit
1. Our opinion on the consolidated financial statements is unmodified
We have audited the consolidated financial statements of
Industrial Multi Property Trust plc for the year ended 31 December
2016 which comprise the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated and
Company statement of changes in equity, the consolidated statement
of cash flows, the Company balance sheet, the Company statement of
cash flows and the related notes.
In our opinion the consolidated financial statements:
-- Give a true and fair view of the state of the Group's and
Company's affairs as at 31 December 2016 and of the Group's profit
for the year then ended;
-- Have been properly prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union;
and
-- Have been properly prepared in accordance with the provisions
of the Companies Acts 1931 to 2004.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the consolidated
financial statements, the risks of material misstatement that had
the greatest effect on our audit were as follows:
Carrying value of investment properties and investment property
held for sale (GBP85.3 million)
Refer to page 18 (Audit Committee Report), note 2 (Accounting
policy for investment properties) and note 17 (Investment
properties and investment property held for sale).
The risk: The Group's investment property portfolio makes up 94%
of total assets (by value) and is considered to be the key driver
of the Group's capital and revenue performance. The investment
properties held by the Group are primarily UK based secondary
industrial multi-tenant sites. The property values are inherently
estimates, driven by tenant occupation levels and terms, comparable
transactions, as well as market sentiment.
Our response: Our procedures over the valuation of the Group's
investment property portfolio included, among others:
-- understanding and critically assessing the processes in place
to record investment transactions and to value the portfolio;
-- agreeing the valuation of 100% of investment properties held
to valuation reports prepared by an external expert appointed by
the Directors;
-- considering the terms of engagement and basis of preparation
of externally prepared property valuation reports, and assessing
the competence and capability of the appointed expert;
-- for a sample of properties, selected by value, we have
identified areas of risk associated with real estate issues to
which the selected properties may be exposed. We have engaged a
KPMG UK property specialist to consider the assumptions and the
methodology of the valuations in line with the RICS Appraisal and
Valuation Manual "the Red Book"; and
-- assessing the adequacy of disclosures with regard to the
investment property portfolio held.
Going concern: debt service and covenant compliance (Borrowings:
GBP61.3m)
Refer to page 18 (Audit Committee Report), note 2 (accounting
policy for basis of preparation) and note 22 (Long term
borrowings).
The risk: The Group's investment property portfolio is funded by
a number of loans secured against the Group's assets. These loans
require minimum covenant thresholds, primarily loan to investment
property value and interest cover ratios, to be complied with on an
on-going basis in order to ensure that the facilities are not at
risk of withdrawal from the financing providers. The withdrawal of
financing could mean that the Group may be forced to sell the
properties to repay borrowings or risk asset seizures, and
ultimately affect the going concern nature of the Group. The
Directors have concluded that, in view of the forecasts provided
for the period to 2018, the degree of uncertainty attached to
whether the going concern basis is appropriate is not material. As
this assessment involves consideration of future events, there is a
risk that the judgement is inappropriate and that the uncertainty
should have been assessed as material, in which case additional
disclosures would have been required.
Our response: Our procedures over the compliance of the Group
with debt service and covenant requirements included the
following:
-- agreement to source funding documentation for covenant
requirements to which the Group is subject;
-- obtaining independent confirmation from financing providers of amounts due;
-- agreement of key inputs and recalculation of all financing
covenants to which the Group is subject;
-- assessing key financing debt service and repayment terms, and
the ability of the Group to meet these requirements for at least 18
months post period end (including assessment of compliance to
cashflow sensitivities). We have agreed key inputs to the forecast
financial information to supporting documentation and recalculation
of key computations; and
-- consideration of the appropriateness of the Group's
disclosures with regard to financing facilities and associated
terms and requirements.
3. Our application of materiality and an overview of the scope of our audit
The materiality for the consolidated financial statements as a
whole was set at GBP360,000. This has been determined with
reference to a benchmark of the Group's net assets (of which it
represents 1.5%). Net assets, which is primarily dependent upon the
value of the Group's investment property portfolio, is considered
to be the key driver of the Group's capital and revenue performance
and, as such, we consider it to be one of the principal
considerations for members of the Company in assessing the
financial performance and position of the Group.
We report to the Audit Committee any corrected and uncorrected
identified misstatements we identified exceeding GBP18,000, in
addition to other identified misstatements below that threshold
that warranted reporting on qualitative grounds.
The Group audit team performed the audit of the Group as if it
was a single aggregated set of financial information. The audit was
performed using the materiality levels set out above and covered
100% of total Group revenue, Group profit before taxation, and
total Group assets. Our work was performed at the head office of
the Investment Adviser and Manager, Alpha Real Capital LLP, in
London and Administrator, FIM Capital Limited, in the Isle of
Man.
4. We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
-- the Directors' statement of long-term viability statement on
pages 16 to 17 concerning the principal risks, their management,
and, based on that, the Directors' assessment and expectations of
the Group continuing in operation over the two-year period to 2018;
or
-- the disclosures in note 2 of the consolidated financial
statements concerning the use of the going concern basis of
accounting.
5. We have nothing to report in respect of the matters on which
we are required to report by exception
Under International Standards on Auditing ("ISAs") (UK and
Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other
information in the Annual Report that contains a material
inconsistency with either that knowledge or the consolidated
financial statements, a material misstatement of fact, or that is
otherwise misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors' statement
that they consider that the Annual Report and consolidated
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group's performance, business model and
strategy; or
-- the Audit Committee Report does not appropriately address
matters communicated by us to the Audit Committee.
Under the Isle of Man Companies Acts 1931 to 2004 we are
required to report to you if, in our opinion:
-- proper books of account have not been kept by the Parent
Company and proper returns adequate for our audit have not been
received from branches not visited by us; or
-- the Parent Company's balance sheet and income statement are
not in agreement with the books of account and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
-- the statements, set out on pages 3 to 4, and 10 to 20, in
relation to going concern and longer-term viability; and
-- the Corporate Governance Statement on pages 12 to 17 relating
to the Company's compliance with the eleven provisions of the 2014
UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 14, the Directors are responsible for the
preparation of the consolidated financial statements that give a
true and fair view. Our responsibility is to audit, and express an
opinion on, the consolidated financial statements in accordance
with applicable law and ISAs (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board's Ethical
Standards for Auditors.
Scope of an audit of consolidated financial statements performed
in accordance with ISAs (UK and Ireland)
An audit in accordance with ISAs (UK and Ireland) involves
obtaining evidence about the amounts and disclosures in the
consolidated financial statements sufficient to give reasonable
assurance that the consolidated financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's and Company's circumstances and have
been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the consolidated
financial statements. In addition we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited consolidated financial statements
and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
The risks of material misstatement detailed in the section of
our report titled "Our assessment of risks of material
misstatement", are those risks that we have deemed, in our
professional judgement, had the greatest effect on: the overall
audit strategy; the allocation of resources in our audit; and
directing the efforts of the engagement team. Our audit procedures
relating to these risks were designed in the context of our audit
of the consolidated financial statements as a whole. Our opinion on
the consolidated financial statements is not modified with respect
to any of these risks, and we do not express an opinion on these
individual risks.
Materiality is a term used to describe the acceptable level of
precision in the consolidated financial statements. We identify a
monetary amount of 'materiality for the consolidated financial
statements as a whole' based on our judgement as to the
quantitative amount of a misstatement or an omission that could
reasonably be expected to influence the economic decisions of users
taken on the basis of the consolidated financial statements. The
concept of materiality is applied both in planning and performing
the audit, and in evaluating the effect of identified misstatements
on the audit and of uncorrected misstatements, if any, on the
consolidated financial statements and in forming the opinion in our
report.
When planning and performing the audit, materiality is used in
evaluating the risk of material misstatement for each consolidated
financial statement caption, and therefore the extent and
persuasiveness of audit evidence required by us. In turn,
materiality will also define the level of precision applied to
individual audit procedures.
Materiality is also used in the calculation of the quantitative
level below which individual misstatements are considered to be
clearly trivial and do not need to be reported to those charged
with governance or corrected. If, in the specific circumstances of
the entity, there is one or more particular classes of transaction,
account balances or disclosures for which misstatements of lesser
amounts than materiality for the consolidated financial statements
as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the consolidated financial
statements, we also determine the materiality level or levels to be
applied to those particular classes of transaction, account
balances or disclosures.
When evaluating the effect of identified misstatements on the
audit, and of uncorrected misstatements on the consolidated
financial statements, we request that misstatements are corrected
and then apply judgement in identifying whether an uncorrected
misstatement or omission is material. To do so we make reference to
the monetary amount of 'materiality for the consolidated financial
statements as a whole' determined when planning the audit. The
materiality determined when planning the audit does not necessarily
establish an amount below which uncorrected misstatements,
individually or in the aggregate, will always be evaluated as
immaterial. We also consider the impact of misstatements on
individual account balances or classes of transaction.
Scope of an audit of consolidated financial statements performed
in accordance with ISAs (UK and Ireland) (continued)
Furthermore, the qualitative circumstances related to some
misstatements may cause us to evaluate them as material even if
they are below the relevant quantitative materiality level.
Similarly, the circumstances related to some misstatements (for
instance those relating to classification or presentation) may
cause us to evaluate them as not material to the consolidated
financial statements as a whole even if they are above the relevant
quantitative materiality level.
Whilst an audit conducted in accordance with ISAs (UK and
Ireland) is designed to provide reasonable assurance of identifying
material misstatements or omissions it is not guaranteed to do so.
Rather the Auditor plans the audit to determine the extent of
testing needed to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the consolidated
financial statements as a whole. This testing requires us to
conduct significant audit work on a broad range of assets,
liabilities, income and expense as well as devoting significant
time of the most experienced members of the audit team, in
particular the engagement partner responsible for the audit, to
subjective areas of accounting and reporting.
The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Section 15 of the Companies Act 1982. Our audit
work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an
Auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Simon Nicholas
Responsible Individual
For and on behalf of KPMG Audit LLC
Statutory Auditor
23 February 2017
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
Consolidated statement of comprehensive income
For the year For the year
ended 31 ended 31
December December
2016 2015
Notes GBP'000 GBP'000
Income
Rental income from investment
properties 5,6 7,817 7,542
Other income 6 17 131
7,834 7,673
Expenditure
Investment Adviser and Manager's
fee 7 (1,121) (1,164)
Property expenses 7 (1,422) (1,708)
Other expenses 7 (532) (368)
(3,075) (3,240)
Gains/(losses) from investments
Unrealised gains on revaluation
of investment properties 17 4,471 3,910
Realised gains on sale of
investment properties 17 416 1,037
Operating profit for the
year before finance costs 9,646 9,380
Finance income 8,9 2 5
(Loss)/gain on interest rate
derivative instrument 8,10 (127) 178
Finance costs 11 (5,711) (5,960)
Profit before taxation from
continuing operations 3,810 3,603
Taxation on ordinary activities 12 - -
Profit for the year attributable
to members of the Company 3,810 3,603
Total comprehensive profit
for the year attributable
to members of the Company 3,810 3,603
Earnings per share (pence)
Profit for the year attributable
to ordinary equity holders
of the parent (pence per
share) (basic and diluted) 14 45.3 42.8
Adjusted loss per share (pence)
(basic and diluted) 14 (11.3) (18.1)
All results are considered to derive from continuing operations.
There are no other items that require disclosure in the
consolidated statement of comprehensive income.
The accompanying notes on pages 33 to 61 are an integral part of
these consolidated financial statements.
Consolidated balance 31 December 31 December
sheet 2016 2015
Notes GBP'000 GBP'000
Assets
Non-current assets
Investment properties 17 84,915 81,630
84,915 81,630
Current assets
Investment property
held for sale 17 390 -
Trade and other receivables 2,18,22 2,713 1,666
Cash and cash equivalents 1,179 2,165
Restricted cash 22 1,564 1,608
5,846 5,439
Total assets 90,761 87,069
Current liabilities
Interest rate derivative
instrument 19 752 625
Trade and other payables 20,22 3,523 4,074
4,275 4,699
Non-current liabilities
Long term borrowings 22 61,385 61,079
Total liabilities 65,660 65,778
Net assets 25,101 21,291
Equity
Share capital 23 841 841
Distributable capital
reserve 23 93,623 93,623
Capital redemption reserve 23 254 254
Revenue reserves (69,617) (73,427)
Total equity 25,101 21,291
Net asset value per
ordinary share (pence) 15 298.5 253.2
Adjusted net asset value
per ordinary share (pence) 15 307.4 260.6
These consolidated financial statements were approved by the
Board of Directors on 23 February 2017 and signed on its behalf
by:
Jonathan Clague Philip Scales
Chairman Director
The accompanying notes on pages 33 to 61 are an integral part of
these consolidated financial statements.
Consolidated and Company statement of changes in equity
Share Distributable Capital Retained Total
Capital Capital Redemption loss
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1
January 2015 841 93,623 254 (77,030) 17,688
Total comprehensive
profit for the
year - - - 3,603 3,603
As at 31 December
2015 841 93,623 254 (73,427) 21,291
Balance as at 1
January 2016 841 93,623 254 (73,427) 21,291
Total comprehensive
profit for the
year - - - 3,810 3,810
As at 31 December
2016 841 93,623 254 (69,617) 25,101
See note 23 for further details.
The accompanying notes on pages 33 to 61 are an integral part of
these consolidated financial statements.
Consolidated statement of cash flows
For For
the year the year
ended ended
31 December 31 December
2016 2015
Notes GBP'000 GBP'000
Operating activities
Profit for the year 3,810 3,603
Adjustment to reconcile
profit before tax to net
cash flows
Unrealised gains on revaluation
of investment properties (4,471) (3,910)
Realised gains on sale of
investment properties (416) (1,037)
Other income - (131)
Finance income (2) (5)
Finance costs 5,711 5,960
Loss/(gain) on interest
rate derivative instrument 127 (178)
Operating cash flows before
movements in working capital 4,759 4,302
Movements in working capital:
Increase in trade and other
receivables (1,117) (207)
(Increase)/decrease in trade
and other payables (574) 268
Net cash flows from operating
activities 3,068 4,363
Investing activities
Interest received 2 5
Capital expenditure on investment
properties 17 6 -
Sale proceeds from the disposal
of investment properties 17 1,289 3,262
Net cash flows from investing
activities 1,297 3,267
Financing activities
Interest paid (5,076) (5,196)
Repayment of Alpha Real
Trust Limited loan - (1,500)
Repayment of RBS & Europa
loans 22 (319) (1,049)
Exit fee paid - (30)
Net cash flows used in financing
activities (5,395) (7,775)
Net decrease in cash and
cash equivalents (1,030) (145)
Cash and cash equivalents
at 1 January 3,773 3,918
Cash and cash equivalents
at 31 December 2,743 3,773
Disclosed on the balance sheet as:
Cash and cash equivalents 1,179 2,165
Restricted cash 1,564 1,608
Cash and cash equivalents 2,743 3,773
The accompanying notes on pages 33 to 61 are an integral part of
these consolidated financial statements.
Company balance sheet
31 December 31 December
2016 2015
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments in subsidiaries 16 - -
- -
Current assets
Trade and other receivables 18 35,515 31,917
Cash and cash equivalents 160 188
35,675 32,105
Total assets 35,675 32,105
Current liabilities
Trade and other payables 20 574 814
574 814
Non-current liabilities
Alpha Real Trust Limited
loan 22 10,000 10,000
10,000 10,000
Total liabilities 10,574 10,814
Net assets 25,101 21,291
Equity
Share capital 23 841 841
Distributable capital
reserve 23 93,623 93,623
Capital redemption reserve 23 254 254
Revenue reserves (69,617) (73,427)
Total equity 25,101 21,291
Net asset value per
ordinary share (pence) 15 298.5 253.2
Adjusted net asset value
per ordinary share (pence) 15 307.4 260.6
These financial statements were approved by the Board of
Directors on 23 February 2017 and signed on its behalf by:
Jonathan Clague Philip Scales
Chairman Director
The accompanying notes on pages 33 to 61 are an integral part of
these financial statements.
Company statement of cash flows
For the year For the year
ended ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Operating activities
Profit for the year 3,810 3,604
Adjustment to reconcile
profit before tax to net
cash flows
Decrease in provision for
intercompany loans (4,100) (3,720)
Finance income (1,488) (1,723)
Finance costs 1,504 1,734
Operating cash flows before
movements in working capital (274) (105)
Movements in working capital:
Decrease/(increase) in trade
and other receivables 503 (1,187)
Decrease in trade and other
payables (239) (327)
Net cash flows used in operating
activities (10) (1,619)
Investing activities
Interest received 1,509 1,730
Net cash flows from investing
activities 1,509 1,730
Financing activities
Interest paid (1,527) (1,744)
Loans and exit fees repaid
by Group companies - 1,530
Alpha Real Trust Limited
loan and exit fee repaid - (1,530)
Net cash flows used in financing
activities (1,527) (1,744)
Net decrease in cash and
cash equivalents (28) (1,633)
Cash and cash equivalents
at 1 January 188 1,821
Cash and cash equivalents
at 31 December 160 188
The accompanying notes on pages 33 to 61 are an integral part of
these financial statements.
Notes to the consolidated financial statements
For the year ended 31 December 2016
1 General information
The Company
The Company was incorporated in the Isle of Man on 10 June 2002.
It is a closed-ended investment company and was formed primarily
for investment in UK commercial property. The registered office of
the Company is IOMA House, Hope Street, Douglas, Isle of Man, IM1
1AP. The aim of the Company and its subsidiaries (together "the
Group") is to seek to improve income, reduce debt and provide the
prospect of long-term capital growth. The Group has no
employees.
Consolidated balance sheet presentation
The format of the consolidated balance sheet has continued to be
presented on the same basis as the last annual consolidated
financial statements.
Adjusted earnings per share and adjusted net asset value
The adjusted earnings per share and adjusted net asset value are
presented in the annual consolidated financial statements to
provide what the Company believes is a more relevant assessment of
the Group's earnings and net asset value position.
2 Summary of significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on a
historical cost basis, except for investment properties and
derivative financial instruments that have been measured at fair
value.
The consolidated financial statements are presented in pounds
sterling and rounded to the nearest thousand unless otherwise
stated. The functional and presentational currency of the Group is
pounds sterling and there are no foreign exchange transactions. The
Group's financial performance does not suffer materially from
seasonal fluctuations.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union and also to comply with relevant Isle
of Man company law.
On 5 December 2013, the Company and Group entered into financing
agreements which will expire in December 2018, as follows:
-- a GBP33.5 million senior loan facility with a five-year term
expiring in December 2018 at an initial margin of 3% per annum over
LIBOR, with Royal Bank of Scotland PLC ("RBS"); and
-- a GBP20.0 million mezzanine loan facility with a five-year
term expiring in December 2018 at a coupon of 11% per annum, with
Europa Mezzanine Finance Sàrl ("Europa").
-- an GBP11.5 million unsecured loan facility with a five-year
term expiring in December 2018 at a coupon of 15% per annum, with
Alpha Real Trust Limited ("ART").
On 27 January 2014, the Group entered into an interest rate swap
agreement to fix the interest rate on GBP25.1 million of the debt
at 2.0225% per annum before the margin of 3% per annum until 4
December 2018.
These long-term borrowings have given the Group the time to
continue the asset management initiatives, which improve
shareholder value in the Company.
2 Summary of significant accounting policies (continued)
In forming their view on whether it is appropriate to adopt the
going concern basis in preparing the consolidated financial
statements, the Board have reviewed cash flow projections to
December 2018 to assess whether they continue to be able to meet
its liabilities as they fall due and also meet the covenant terms
of its loans. The projections include the following key
assumptions:
-- rental income based on contracted rental income from tenants
secured as at 31 December 2016.
-- rental income from some of the void properties becoming
occupied based on historic and anticipated vacancy periods.
-- void costs and non-recoverable costs based on the expected occupancy rate.
-- default rates based on expected and historic patterns.
-- interest charges and arrangement fees have been based on new loan terms.
-- current property valuations apply, and there is no valuation
change assumed from occupancy or market movement. No cash inflows
from property sales are included.
The assessment of the cash flow projections shows that the Group
is able to meet its liabilities as they fall due and comply with
the covenants of its loan facilities.
Along with the above assessment of the cash flow projections,
and that its loan facilities are not due for repayment until
December 2018, the Board considers it appropriate to prepare the
Group and Company financial statements on a going concern
basis.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
each year. Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date when such control
ceases. The financial statements of the subsidiaries are prepared
for the same reporting period as the Parent Company, using
consistent accounting policies.
All intra-group balances, transactions and unrealised gains and
losses resulting from intra-group transactions are eliminated in
full.
Company statement of comprehensive income
In accordance with section 3(5) (b) (ii) of the Companies Act
1982, the Company is exempt from the requirement to present its own
statement of comprehensive income. The Company made a profit of
GBP3.8 million (2015: GBP3.6 million) on ordinary activities after
taxation.
Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured as the fair value of the
consideration received, excluding discounts, rebates, sales taxes
and duty. Specific income is recognised as follows:
-- Rental income receivable under operating leases is recognised
on a straight-line basis over the term of the lease.
-- Lease incentives granted are recognised as an integral part
of the net consideration for the use of the property and are
therefore also recognised on the same straight line basis.
-- Interest income is recognised as it accrues using the effective interest rate method.
-- A property is regarded as sold when the significant risks and
returns have been transferred to the buyer, which is normally on
unconditional exchange of contracts. For conditional exchanges,
sales are recognised only when all the significant conditions are
satisfied.
2 Summary of significant accounting policies (continued)
Expenses
All expenses are calculated on an accruals basis. The Group's
policy is to expense all property investment advisory fees. All
other expenses are charged to the consolidated statement of
comprehensive income.
Taxation
The Group is a resident in the Isle of Man for income tax
purposes. The standard rate of tax on company profits in the Isle
of Man is 0% except where profits are derived from banking business
or retail activities, where the standard rate is 10% and where
profits are derived from Isle of Man land and property, the
standard rate is 20%. The Group is subject to Isle of Man Income
Tax at a rate of 0% on its profits.
CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited,
CHIP (Four) Limited and CHIP (Five) Limited are subject to UK
non-resident landlord tax at a rate of 20% on their rental
profits.
Investment properties
Investment properties are measured initially at cost including
transaction costs. Transaction costs include stamp duty,
professional fees and legal services incurred to bring the
properties to the condition necessary for them to be capable of
operating. Lease incentive receivables are treated as a component
of the carrying value of investment properties.
Subsequent to initial recognition, investment properties are
stated at fair value. Gains or losses arising from changes in fair
values are included in the consolidated statement of comprehensive
income in the year in which they arise.
Investment properties are derecognised when they have been
disposed of or permanently withdrawn from use and no future
economic benefit is expected from their disposal. Any gains or
losses on the retirement or disposal of investment properties are
recognised in the consolidated statement of comprehensive income in
the year of retirement or disposal.
Gains or losses on the disposal of investment properties are
determined as the difference between net disposal proceeds received
and the latest valuation of the investment properties.
Non-current assets held for sale
Non-current assets (or disposal groups) are classified as assets
held for sale when their carrying amount is to be recovered
principally through a sale transaction rather than from continuing
use and a sale is considered highly probable. They are stated at
the lower of carrying amount and fair value less costs to sell
unless the assets are investment properties measured at fair value
or financial assets within the scope of IAS 39 in which case they
are measured in accordance with those standards.
Rent and other receivables
Rent and other receivables are recognised and carried at the
lower of their original invoiced value and recoverable amount.
Where the time value of money is material, receivables are carried
at amortised cost. Provision is made when there is objective
evidence that the Group will not be able to recover balances in
full. Balances are written off when the probability of recovery is
assessed as being remote.
Cash and cash equivalents
Cash and short term deposits in the consolidated and Company
balance sheets comprise cash at bank and short term deposits with
an original maturity of three months or less. For the purposes of
the consolidated and Company statements of cash flows, cash and
cash equivalents consist of cash and short term deposits as defined
above, net of outstanding bank overdrafts.
Restricted Cash
Where cash is in the Group's bank accounts, but not under the
Group's sole control at the balance sheet date, these amounts are
disclosed as restricted cash.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value
less directly attributable transaction costs. After initial
recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method.
Bank arrangement fees incurred are initially capitalised and are
then amortised over the term of the loan.
2 Summary of significant accounting policies (continued)
Tenant deposits
Tenant deposit liabilities are initially recognised at fair
value and subsequently measured at amortised cost where material.
Any difference between the initial fair value and the nominal
amount is included as a component of operating lease income and
recognised on a straight line basis over the lease term.
Investment in subsidiaries
The Company's investments in its subsidiaries are designated at
fair value through profit or loss. These investments are stated at
fair value, derived from the net assets of the subsidiary companies
at the reporting date, with any surplus or deficit arising on
revaluation being recognised in the statement of comprehensive
income of the Company.
Segmental reporting
The Directors are of the opinion that the Group is engaged in
two operating sectors, split into industrial and office properties
which are carried out in eight geographical locations, as detailed
in note 5.
Derivatives and hedging
The Group may use interest rate hedging instruments to hedge its
risks associated with interest rates. It is not the Group's policy
to trade in derivative financial instruments. Such derivative
financial instruments are initially recognised at fair value on the
date on which a derivative contract is entered into and are
subsequently re-measured at fair value. Derivatives are carried as
assets when the fair value is positive and as liabilities when the
fair value is negative. The Directors have elected not to apply
hedge accounting rules under IAS 39 on the hedging arrangements.
Any gains or losses in the value of these derivatives are
recognised immediately in the consolidated statement of
comprehensive income.
Deferred taxation
Deferred tax is provided for using the liability method on all
temporary differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for financial
reporting purposes. Deferred tax assets are recognised only to the
extent that it is probable that taxable profit will be available
against which deductible temporary differences, carried forward tax
credits or tax losses can be utilised. Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantially enacted at the balance sheet date.
3 Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected.
The key assumptions concerning the future and other key sources
of estimation or uncertainty, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Valuation of investment properties and investment property held
for sale
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. The Group ensures the
use of suitable qualified external valuers to value the investment
properties and determine their fair value.
Investment properties are initially recognised at purchase cost
plus directly attributable acquisition expenses. Investment
properties are carried at a revalued amount which is stated at
their fair value as determined on an open market basis as at the
reporting date. The fair values of investment properties are based
on valuation by an independent valuer who holds a recognised and
relevant professional qualification and who has recent experience
of the location and category of the investment properties being
valued.
Going concern
The Group's borrowing facilities with RBS, Europa and ART
terminate on 4 December 2018. Based on the assumption, current
occupancy level and the removal of shareholders' continuation vote,
the Board is confident that the loan covenants will be met up to
the maturity of the existing long term borrowings.
3 Significant accounting judgements, estimates and assumptions (continued)
The fair value of investment properties generally involves
consideration of:
-- Market evidence on comparable transactions for similar properties;
-- The actual current market for that type of property in that
type of location at the reporting
date and current market expectations;
-- Rental income from leases and market expectations regarding possible future lease terms;
-- Hypothetical sellers and buyers, who are reasonably informed about the current market
and who are motivated, but not compelled, to transact in that
market on an arm's length
basis; and
-- Investor expectations on matters such as future enhancement of rental income or market
conditions.
Incentive fees
Incentive fees are provided for when it is deemed likely a fee
will become payable based on the likelihood of the Company
achieving the target level of return. Further details can be found
in note 21.
Operating leases
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
an evaluation of the terms and conditions of the arrangement, that
it retains all of the risks and rewards of ownership of these
properties and accounts for the contracts as operating leases.
4 Changes and future changes in accounting standards
(a) New standards, interpretations and amendments thereof, adopted by the Group
The accounting policies adopted are consistent with those of the
previous year.
Annual improvements to certain standards apply for the first
time in 2016. However, they do not impact the annual consolidated
financial statements of the Group;
IAS 27 Separate financial statements - permission for use of
equity method for separate financial statements;
IAS 1 Presentation of financial statements - improvement of
financial statement disclosures;
IAS 16 Property, plant and equipment and IAS 38 Intangible
assets - acceptable methods of depreciation and amortisation;
(b) Standards issued but not yet effective
Standards issued but not yet effective up to the date of
issuance of the Group's financial statements are
listed below. This listing of standards and interpretations
issued are those that the Group reasonably expects to have an
impact on disclosures, financial position or performance when
applied at a future date. The Group intends to adopt these
standards when they become effective.
IAS 7 Statement of cash flows - requirements for additional
disclosures;
IAS 12 Income taxes - Recognition of deferred tax assets for
unrealised losses;
IFRS 12 Disclosure of interests in other entities - disclosure
requirements of interests in other entities extended to include
interests that are classified as held for sale or distribution;
IFRS 2 Share-based payment - Classification and measurement of
share-based payment transactions;
IAS 40 Investment property - Transfers of property assets to, or
from, investment property;
IFRIC 22 Foreign currency transactions and advance consideration
- clarification of the use of transaction date to determine the
exchange rate;
4 Changes and future changes in accounting standards (continued)
(b) Standards issued but not yet effective (continued)
IFRS 9 Financial Instruments: Classification and Measurement
First chapters of new standards on accounting for financial
instruments which will replace IAS 39 Financial Instruments:
Recognition and Measurement.
The standard contains two primary measurement categories for
financial assets:
-- amortised cost; and
-- fair value.
Financial assets are classified into one of these categories on
initial recognition.
A financial asset is measured at amortised cost if the following
conditions are met:
-- it is held within a business model whose objective is to hold
assets in order to collect contractual cash flows, and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal outstanding.
All other financial assets are measured at fair value.
IFRS 9 Financial Instruments (Hedge accounting and Amendments to
IFRS 9, IFRS 7 and IAS 39) issued November 2013:
-- new hedge accounting chapter added;
-- improvements to the reporting of changes in the fair value of
an entity's own debt contained in IFRS 9 made more readily
available; and
-- removal of the mandatory effective date of IFRS 9.
Subsequently, the IASB has tentatively set the effective date of
IFRS 9 as periods beginning on or after 1 January 2018.
IFRS 15 Revenue from Contracts with Customers
The standard replaces IAS 11 Construction Contracts, IAS 18
Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements
for the Construction of Real Estate, IFRIC 18 Transfer of Assets
from Customers and SIC-31 Revenue -Barter Transactions Involving
Advertising Services.
It applies to contracts with customers but does not apply to
insurance contracts, financial instruments or lease contracts,
which fall in the scope of other IFRSs. It also does not apply if
two companies in the same line of business exchange non-monetary
assets to facilitate sales to other parties.
The standard introduces a new revenue recognition model that
recognises revenue either at a point in time or over time. The
model features a contract-based five-step analysis of transactions
to determine whether, how much and when revenue is recognised.
IFRS 16 Leases
The standard replaces IAS 17 Leases, IFRIC 4 Determining whether
an arrangement contains a lease, SIC-15 Operating leases -
Incentives and SIC-27 Evaluating the substance of transactions
involving the legal form of a lease.
It introduces a single, on-balance lease sheet accounting model
for lessees. A lessee recognises a right-of-use asset representing
its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. Lessor
accounting remains similar - i.e. lessors continue to classify
leases as finance or operating leases.
The standard is effective for annual periods beginning on or
after 1 January 2019.
5 Segmental analysis
Rental income - segmental analysis*
Sector 2016 2015
GBP'000 GBP'000
Industrial properties 6,785 6,332
Office properties 1,137 1,144
Adjustments* (105) 66
Total rental income 7,817 7,542
Region 2016 2015
GBP'000 GBP'000
Midlands 2,287 2,282
East of England 1,711 1,241
North East 158 144
North West 574 589
South East 907 995
South West 1,446 1,432
Wales 72 97
Yorkshire & Humberside 767 696
Adjustments* (105) 66
Total 7,817 7,542
* The rental information presented to the Board is in the form
of the annual rent passing at the year end rather than being the
rent spread on a straight line basis over the term of the lease in
the way prescribed by IAS 17. Consequently the rent passing
information presented to the Board is adjusted here to agree with
the rental income in the consolidated statement of comprehensive
income.
5 Segmental analysis (continued)
Property valuation - segmental analysis
Sector 2016 2015
GBP'000 GBP'000
Industrial properties 73,620 70,425
Office properties* 11,685 11,205
Total property valuation 85,305 81,630
Region 2016 2015
GBP'000 GBP'000
Midlands 24,910 24,735
East of England 17,930 16,145
North East 1,675 1,620
North West* 5,445 5,365
South East 9,705 9,040
South West 17,370 16,580
Wales 810 770
Yorkshire & Humberside 7,460 7,375
Total 85,305 81,630
*Includes the property at Oldham, which is classified as held
for sale for the sum of GBP390,000 (see note 17).
The Board considers the sector and region analysis above to be
the significant segmental basis for the Group. The Board believes
that the information is presented more clearly to investors in
respect of the key segmental information.
Expenses are reviewed on a total basis split between property
expenses and other expenses. The Board of Directors do not believe
it is cost beneficial for the Group to consider the allocation of
these costs between the operating segments mentioned above.
Trade and other receivables and trade and other payables are
reviewed on a total basis. Long term borrowings are reviewed on a
facility basis as per note 22. The Board of Directors do not
believe it is cost effective for the Group to consider the
allocation of these assets and liabilities between the operating
segments mentioned above.
6 Income
Rental Income
The Group leases out all of its investment properties under
operating leases. Leases are typically for terms of 3 to 5 years.
At the balance sheet date, the Group had contracted with tenants
for the following future minimum lease payments:
2016 2015
GBP'000 GBP'000
Within one year 7,387 5,363
In the second to fifth years
inclusive 19,510 12,035
After five years 5,632 3,693
Total 32,529 21,091
Other income
Other income relates to commissions received by the Group.
7 Expenditure
2016 2015
GBP'000 GBP'000
Investment Adviser and Manager's
fee 1,121 1,164
The Group pays a quarterly fee of 1.25% per annum
of gross asset value to the Investment Adviser
and Manager.
Property expenses
2016 2015
GBP'000 GBP'000
Void rates and void service charges 579 510
Repairs, maintenance and utilities 415 676
Property insurance costs 47 48
Bad debt expense/(recovery) 34 (29)
Lease renewal and other costs 347 503
Total property expenses 1,422 1,708
Other expenses
2016 2015
GBP'000 GBP'000
Administration fees 90 86
Audit fees 66 65
Directors' fees 80 80
Other 296 137
Total other expenses 532 368
8 Finance income
2016 2015
GBP'000 GBP'000
Bank interest income (note 9 & note
11) 2 5
Net (loss)/profit on financial assets
and liabilities held at fair value
through profit or loss (note 10) (127) 178
Total (125) 183
The above interest income arises from financial assets
classified as loans and receivables (including cash and cash
equivalents) and has been calculated using the effective interest
rate method.
9 Net gains and losses on loans and receivables
2016 2015
GBP'000 GBP'000
Bank interest income (note 8) 2 5
Bad debt expense/(recovery) (note
7) (34) 29
Total (32) 34
10 Net gains and losses on financial assets and liabilities at
fair value through profit and loss
2016 2015
GBP'000 GBP'000
Net change in unrealised gains and
losses on financial assets and liabilities
held at fair value through profit
or loss
Interest rate swaps (note 19) (127) 178
Net realised gains and losses on
financial assets and liabilities
held at fair value through profit
or loss
Interest rate swaps - interest receivable 135 144
Interest rate swaps - interest payable (510) (508)
Net expense of interest rate swaps (375) (364)
Net loss on financial assets and
liabilities held at fair value through
profit or loss (502) (186)
Disclosed as:
Finance costs (note 11) (375) (364)
Finance income (note 8) (127) 178
Net loss on financial assets and
liabilities held at fair value through
profit or loss (502) (186)
11 Total interest income and total interest expense on financial
assets and financial liabilities
2016 2015
GBP'000 GBP'000
Interest on long term borrowings (3,366) (3,368)
ART loan interest (1,504) (1,734)
SWAP interest expense (note 10) (375) (364)
Loan fee amortisation (465) (494)
Other charges (1) -
Total finance costs (5,711) (5,960)
Bank interest income (note 8) 2 5
Net interest expense (5,709) (5,955)
The above interest costs on borrowings arise on financial
liabilities measured at amortised cost using the effective interest
rate method. No other losses have been recognised in respect of
financial liabilities at amortised cost other than those disclosed
above.
12 Taxation
The Group's tax expense for the year comprises:
2016 2015
Current taxation GBP'000 GBP'000
Profit before taxation from continuing
operations 3,810 3,603
Tax at the applicable rate of 20%
(2015: 20%) 762 721
Effects of:
Non-taxable unrealised gains (894) (782)
Non-taxable realised gains (83) (207)
Effects of lower tax rate 57 23
Expenses not deductible for tax
purposes 281 41
(Utilised)/unutilised losses (123) 204
Taxation on ordinary activities - -
The applicable tax rate is the aggregate of the Isle of Man tax
rate of 0% (2015: 0%) and the UK non resident landlord tax rate of
20% (2015: 20%).
Current taxation
The Group is resident in the Isle of Man for income tax
purposes. The standard rate of tax on company profits in the Isle
of Man is 0% except where profits are derived from banking business
or retail activities, where the standard rate is 10% and where
profits are derived from Isle of Man land and property, the
standard rate is 20%. The Group is subject to Isle of Man Income
Tax at a rate of 0% on its profits.
The Group's subsidiary companies are subject to UK non-resident
landlord tax at a rate of 20% on their rental profits from UK
property. The Group calculates its tax in respect of UK non
resident landlord tax on a subsidiary by subsidiary basis; no group
reliefs are available for non-resident landlords. As at 31 December
2016, the Group has unused UK tax losses and capital allowances of
GBP10.5 million (2015: 11.1 million).
Deferred taxation
The Group has not recognised a deferred tax asset in relation to
the UK losses carried forward due to the uncertain nature of future
taxable profits.
13 Dividends
The Company paid no dividends during the year (2015:
GBPnil).
14 Earnings per share
15
The calculation of the basic and diluted earnings per share is
based on the following data:
2016 2015
GBP'000 GBP'000
Continuing operations
Profit after tax from continuing
operations 3,810 3,603
Profit per share (pence) (basic
and diluted) 45.3 42.8
Adjusted earnings
Profit after tax 3,810 3,603
Unrealised gains on revaluation
of investment properties (4,471) (3,910)
Net loss/(gain) on interest
rate hedging instruments (note
8) 127 (178)
Realised gain on sale of investment
properties (416) (1,037)
Total adjusted loss (950) (1,522)
Total adjusted loss per share
pence (basic and diluted) (11.3) (18.1)
Weighted average number of ordinary
shares ('000) 8,410 8,410
The adjusted earnings are presented to provide what the Board
believes is a more appropriate assessment of the operational income
accruing to the Group's activities. Hence, the Board adjusts basic
earnings for income and costs which are not of a recurrent nature
or which may be more of a capital nature.
The mark-to-market movement of the interest rate hedging
instruments are adjusted where the hedged facilities are currently
in compliance of their banking covenants and are therefore unlikely
to break prior to the expiry of the instruments.
15 Net asset value per share
31 December 31 December
2016 2015
GBP'000 GBP'000
Net asset value 25,101 21,291
Net asset value per share (pence) 298.5 253.2
Adjusted net asset value
Net asset value 25,101 21,291
Fair value of interest rate swaps
(note 19) 752 625
Adjusted net asset value 25,853 21,916
Adjusted net asset value per
share (pence) 307.4 260.6
Number of ordinary shares ('000) 8,410 8,410
The adjusted net assets are presented to provide what the Board
believes is a more relevant assessment of the Group's net asset
position over the longer term, when certain fair value and
accounting adjustments may not be realisable.
16 Investments in subsidiaries
All of the subsidiary companies are incorporated in the Isle of
Man, are wholly owned by Industrial Multi Property Trust plc and
are all property holding companies.
2016 2015
GBP'000 GBP'000
Cost of subsidiaries at start
of the year 14,829 14,829
Cost of subsidiaries at end of
the year 14,829 14,829
Unrealised loss on revaluation
of subsidiaries (14,829) (14,829)
Fair value of subsidiaries at - -
year end
All the subsidiary companies as at 31 December 2016 and 2015 had
net liabilities, therefore the original cost of the investment held
in the Parent Company has been fully impaired.
As at 31 December 2016, the Company's subsidiaries are CHIP
(One) Limited, CHIP (Two) Limited, CHIP (Three) Limited and its
subsidiaries, CHIP (Four) Limited and CHIP (Five) Limited.
17 Investment properties and investment property held for sale
31 December 31 December
2016 2015
GBP'000 GBP'000
Fair value of properties
at 1 January 81,630 79,925
Additions 6 -
Disposal of properties (873) (2,224)
Movement in lease incentives 71 19
Change in fair value 4,471 3,910
Fair value of properties
at 31 December 85,305 81,630
31 December 31 December
2016 2015
GBP'000 GBP'000
Sale proceeds from the disposal
of investment properties 1,289 3,262
Fair value of disposed properties (873) (2,224)
Realised gains on sale of
investment properties 416 1,037
IFRS 13 defines fair value as 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 fair value of the Group's investment properties (including
investment property held for sale) at 31 December 2016 and 31
December 2015 has been arrived at on the basis of valuation carried
out at that date by Cushman & Wakefield Debenham Tie Leung
Limited trading as Cushman and Wakefield, independent valuers not
connected with the Group. The valuation, which was carried out in
accordance with the Royal Institution of Chartered Surveyors ("The
Red Book") Appraisal and Valuation Standards (9th Edition 6 January
2014), was arrived at by reference to market evidence of
transaction prices for similar properties, together with valuation
techniques consistent with those used in the 31 December 2015
valuation. The valuation model is based on comparable market
evidence derived from observable market data, derived from an
active and transparent market adjusted with certain unobservable
inputs as disclosed below. The properties were valued individually.
These valuation models are consistent with the principles in IFRS
13.
At the year end, the property at Oldham was classified as a
non-current asset held for sale at a fair value of GBP390,000. The
property was sold on 3 February 2017 for GBP0.39 million. The
amount of unrealised gains and losses recognised in the
consolidated statement of comprehensive income is a loss of
GBP60,000 (note 27).
Valuations are based on what is determined to be the highest and
best use. When considering the highest and best use a valuer will
consider, on a property by property basis, the highest value which
will include its
17 Investment properties and investment property held for sale (continued)
actual and potential uses given current market conditions. Where
the highest and best use differs from the existing use, the valuer
will consider the cost and the likelihood of achieving and
implementing this change in arriving at its valuation.
The table below presents the sensitivity of the valuation to
changes in the most significant assumptions underlying the
valuation on completed investment properties:
2016 2015
GBP'000 GBP'000
Increase in underlying property
yield of 25bps (2,265) (2,151)
Decrease in rental rates of 5% (4,265) (4,082)
Fair value is based on active market information, adjusted for
any difference related to the nature, location and condition of the
specific asset. Where information is not available, alternative
valuation methods are used, such as recent prices of similar
properties in less active markets, with adjustments to reflect any
changes in economic conditions since the date of the transactions
that occurred at those prices, or discounted cash flow projections.
The principal assumptions underlying the estimation of fair value
are those related to the receipt of contracted rental income,
expected future market rental income, void periods, lease
incentives, maintenance requirements and appropriate
yields/discount rates of previous quarters.
These valuations are regularly compared to actual market yield
data and actual transactions by the Group and those reported by the
market. The valuer looks at each individual property on its
merits.
The valuation reports produced by the valuers are based on
information provided by the Group such as current rents, terms and
conditions of lease agreements, service charges and capital
expenditure. In addition, the valuation reports are based on
assumptions and valuation models used by the valuers. The
assumptions are typically market related, such as yields and
discount rates, and are based on their professional judgment and
market observation.
Valuation process
The Investment Adviser and Manager verifies all major inputs to
the valuation reports, assesses the individual property valuation
changes from the prior valuation report and holds discussions with
the valuers. When this process is complete, the valuation report is
communicated to the Board, which considers it as part of its
overall responsibilities.
In categorising which level of the fair value hierarchy applies
to the Group's investment properties, consideration is given to the
inputs used by the Group's valuer in determining the fair value. As
mentioned above observable market data such as transactions
involving similar properties and the information provided by the
Group is used in determining the fair value. In addition there are
also a number of unobservable inputs including the estimated rental
value, net initial yield, net reversionary yield, state and
condition, void periods and the related void rate charges, letting
incentives and related letting charges such as marketing and legal
costs which are considered by the valuer.
Properties pledged as security
The Group has pledged investment properties valued at GBP85.3
million at 31 December 2016 (31 December 2015: GBP81.6 million) to
secure borrowings (note 22).
Impact on fair value to changes in significant unobservable
inputs
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
of the Group's property portfolio, together with the impact of
significant movements in these inputs on the fair value
measurement, are shown below:
Unobservable input Impact on fair value
of increase in input
Estimated rental value Increase
Net initial yield Decrease
Net reversionary yield Decrease
17 Investment properties and investment property held for sale (continued)
The tables below show the observable inputs of weighted average
passing rent per square foot and weighted average lease length plus
the quantifiable unobservable inputs of weighted average estimated
rental value per square foot, weighted average net initial yield
and weighted average reversionary yield which have been split based
on the appropriate sector and region:
2016 Weighted Weighted Weighted Weighted Weighted
average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%) (years)
(GBP) market
rent per
sq ft
(GBP)
Light
industrial 4.4 5.0 8.7 10.4 4.3
Office 8.5 10.3 9.2 11.8 4.0
2015 Weighted Weighted Weighted Weighted Weighted
average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%) (years)
(GBP) market
rent per
sq ft
(GBP)
Light
industrial 4.1 4.9 8.5 11.7 3.4
Office 8.4 10.1 9.7 11.4 3.9
2016 Weighted Weighted Weighted Weighted Weighted
average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%) (years)
(GBP) market
rent per
sq ft
(GBP)
Midlands 5.1 5.7 8.7 10.2 4.7
East of
England 4.6 4.8 9.0 9.9 4.5
North
East 4.0 4.7 8.9 11.1 3.0
North
West 4.3 5.6 10.0 13.8 3.3
South
East 6.6 6.9 8.8 9.7 3.4
South
West 4.2 5.5 7.9 10.9 4.9
Wales 3.2 4.3 8.5 11.9 2.7
Yorkshire
& Humberside 4.5 4.9 9.7 11.2 2.7
2015 Weighted Weighted Weighted Weighted Weighted
average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%) (years)
(GBP) market
rent per
sq ft
(GBP)
Midlands 4.9 5.7 8.7 10.6 4.5
East of
England 3.3 4.2 7.9 10.7 4.2
North
East 3.6 4.3 8.4 10.7 3.9
North
West 3.9 5.6 9.2 13.8 3.3
South
East 7.5 7.0 9.1 10.5 3.8
South
West 4.2 5.4 8.2 11.1 2.9
Wales 4.3 4.0 11.8 11.6 4.4
Yorkshire
& Humberside 4.5 4.8 9.9 11.2 3.1
18 Trade and other receivables
Group 31 December 31 December
2016 2015
GBP'000 GBP'000
Rental income receivable
(note 24) 720 657
Other debtors receivable 1,993 1,009
2,713 1,666
Payment terms for rental debtors are typically quarterly in
advance.
As at 31 December 2016 receivables of GBP0.1 million (2015:
GBP0.1 million) were impaired and fully provided. During 2016,
GBPnil was written off in the year (2015: GBPnil).
Other debtors receivable includes GBP0.5 million (2015: GBP0.5
million) in a covenant cure account over which Europa has sole
signing rights (see note 22), GBP0.1 million (2015: GBP0.1 million)
of non-recoverable prepaid insurance costs and outstanding
recharged insurance costs, GBP1.3 million (2015: GBP0.2 million) of
cash held by the property agents on behalf of the Group and GBP0.1
million (2015: GBP0.2 million) of miscellaneous debtors
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. Note 24
provides an ageing of trade receivables along with details of the
provision against receivables during the year.
Company 31 December 31 December
2016 2015
GBP'000 GBP'000
Inter-company balances
receivable 34,588 31,244
Other debtors receivable 927 673
35,515 31,917
The Company impairs its intercompany balances receivable where
its subsidiaries have net liabilities. As at the 31 December 2016,
intercompany balances receivable with a value of GBP45.7 million
(2015: GBP49.8 million) were impaired and fully provided for.
During 2016, GBP4.1million of provisions were written back to the
income statement (2015: GBP3.7 million written back). There is no
fixed date for the repayment of inter-company loans and interest
arising.
19 Interest rate derivative instruments
The Group used interest rate hedging arrangements to mitigate
its exposure to interest rate changes.
The Directors have elected not to apply hedge accounting rules
under IAS 39 on the hedging arrangements. Any gains or losses in
the fair value of these derivatives are recognised immediately in
the consolidated statement of comprehensive income.
Interest rate swap agreements 31 December 31 December
2016 2015
GBP'000 GBP'000
Fair value at 1 January (625) (803)
Unrealised (loss)/gain on interest
rate swaps (127) 178
Fair value at 31 December (752) (625)
19 Interest rate hedging instruments (continued)
The exposure of the Group to movements in interest rates was
mitigated by the Group's subsidiaries entering into interest rate
swaps as detailed below.
The Royal Bank of Scotland
On 27 Jan 2014, CHIP (One) Limited (on behalf of CHIP (Two)
Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five)
Limited) entered into an interest rate swap for the amount of
GBP25.1 million with The Royal Bank of Scotland. The interest rate
swap has the effect of fixing the Group's costs of these borrowings
from 27 January 2014 until 4 December 2018 at 2.0225% per annum,
before the margin of 3% per annum.
20 Trade and other payables
Group 2016 2015
GBP'000 GBP'000
Rental income in advance 1,789 1,613
Creditors and accruals 1,734 2,461
3,523 4,074
Company 2016 2015
GBP'000 GBP'000
Creditors and accruals 574 814
574 814
Trade payables are non-interest bearing and are settled within
normal business terms.
21 Investment Adviser and Manager's incentive fee
No incentive arrangement is currently in place and therefore no
incentive fee is provided for at 31 December 2016 (31 December
2015: GBPnil).
22 Long term borrowings
2016 2015
GBP'000 GBP'000
Borrowings at 1 January 61,079 63,006
Europa PIK interest 200 199
Amortisation of fees during the
year 425 423
Repayment of long term borrowings (319) (2,549)
Long term borrowings at 31 December 61,385 61,079
Long term borrowings 62,201 62,319
Unamortised arrangement fees (816) (1,240)
Long term borrowings at 31 December 61,385 61,079
Current - -
Non-current 61,385 61,079
Long term borrowings at 31 December 61,385 61,079
22 Long term borrowings (continued)
Royal Europa Alpha Total
Bank of Mezzanine Real
Scotland Finance Trust
Sàrl Limited
GBP'000 GBP'000 GBP'000 GBP'000
Long term borrowings
at the beginning of
the year 32,002 19,404 9,673 61,079
Component of Europa
interest payment capitalised - 200 - 200
Repayment of long term
borrowings (207) (112) - (319)
Amortisation of financing
fees during the year 134 133 158 425
Long term borrowings
at 31 December 2016 31,929 19,625 9,831 61,385
Royal Europa Alpha Total
Bank of Mezzanine Real Trust
Scotland Finance Limited
Sàrl
GBP'000 GBP'000 GBP'000 GBP'000
Long term borrowings
at the beginning of
the year 32,550 19,440 11,016 63,006
Component of Europa
interest payment capitalised - 199 - 199
Repayment of long term
borrowings (682) (367) (1,500) (2,549)
Amortisation of financing
fees during the year 134 132 157 423
Long term borrowings
at 31 December 2015 32,002 19,404 9,673 61,079
a) The Royal Bank of Scotland loans
The facility agreement is between the bank and subsidiaries,
CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and
its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for
an amount of GBP33.5 million.
Interest is payable at a rate equal to 3 month LIBOR plus a
margin of 3% per annum. The facility is repayable on 4 December
2018. An event of default (as defined in the facility agreement) is
triggered, if, inter alia, the amount of the loan facility exceeds
65% before 4 December 2016 and 60% thereafter of the value of the
properties over which The Royal Bank of Scotland has security by
reference to the bank's own valuation, performed at the time of
financing. For the purpose of the test the valuation, which at the
bank's discretion can be requested annually at the Group's cost or
at any time at the bank's expense, will explicitly exclude the
Wareham property and any properties subsequently sold.
Additional covenants dictate that: the minimum net rent should
not be less than GBP4.5 million per annum and the net rental income
of the secured properties shall not be lower than 225% of the
interest for any test period, net rental income from any single
tenant shall not exceed 12.5% of the total net rental income of all
properties and at no time shall a single property constitute more
than 20% of the aggregate market value of the properties. During
the year ended 31 December 2016 the Group was compliant with these
covenants.
22 Long term borrowings (continued)
An early repayment greater than GBP5 million on the RBS
facility, would incur for the Group a variable penalty depending on
when the repayment is made. The penalty rates are as follows: if a
repayment is made 12-24 months after the facility agreement date
(December 2013), 1.0%; 24-36 months, 0.75%; 36-48 months, 0.5%. At
31 December 2016 the penalty would have been GBP142,500. There is
no current intention to incur this penalty.
The facility is secured by a debenture over all the assets and
legal charge over the property assets of CHIP (One) Limited, CHIP
(Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP
(Four) Limited and CHIP (Five) Limited. In addition CHIP (One)
Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its
subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited were
required to open a rent account with The Royal Bank of Scotland.
The cash paid into the rent accounts is restricted until the
periodic interest payment date. At 31 December 2016 GBP0.6 million
was held within the rent account, which was released at the
subsequent interest payment date (31 December 2015: GBP1.6
million). At the year end, GBP0.97 million remains in a blocked
account with The Royal Bank of Scotland.
b) Europa Mezzanine Finance Sàrl ("Europa")
The facility is between Europa and subsidiaries, CHIP (One)
Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its
subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for an
amount of GBP20 million.
Interest is payable at a rate equal to 10.0% per annum to be
paid in cash plus 1.0% that may be cash paid or accrued. The
facility is repayable on 4 December 2018. An event of default (as
defined in the facility agreement) is triggered, if, inter alia,
the amount of The Royal Bank of Scotland and Europa loan facilities
exceed 85% of the value of the properties (based currently on same
the valuation used by Europa in the covenant referred to
previously). For the purpose of the test, Europa, at their
discretion, can request a valuation annually at the Group's cost or
at any time at Europa's expense. At the time of finance Europa and
The Royal Bank of Scotland used the same valuer and valuations.
Other financial covenants require that the net rental income of
the secured properties shall not be lower than 110% of the interest
(being the total interest charged by Royal Bank of Scotland and
Europa) for any test period. In addition, net rental income from
any single tenant shall not exceed 12.5% of the total net rental
income of all properties and at no time shall a single property
constitute more than 20% of the aggregate market value of the
properties.
In addition, Europa required the Group to deposit GBP0.5 million
in a covenant cure account over which Europa has sole signing
rights. The funds placed in this account have been included under
"trade and other receivables" in the consolidated balance
sheet.
During the year ended 31 December 2016 the Group was compliant
with these covenants.
Any early loan repayments by the Group greater than GBP2
million, within the first three years of the facility will incur a
break penalty equal to the interest which would have been earned on
the principal from that early repayment date to the third year
anniversary of the facility. The Group will no longer incur a break
penalty for early loan repayments on this facility.
c) Alpha Real Trust Limited loan
On 5 December 2013, the Company entered into a loan agreement in
which Alpha Real Trust Limited provided an unsecured loan to the
Company for GBP11.5 million for a period of five years to 4
December 2018. The coupon of the loan agreement is 15% per annum,
compounded quarterly. No covenant tests apply and Alpha Real Trust
Limited has no security over the assets of the Company or the
Group.
An exit fee of 2% is payable on repayment of the entire loan
amount. This amount is being accrued over the five year life of the
loan.
Additionally any early loan repayments by the Group greater than
GBP2 million of the original principal, within the first three
years of the facility will incur a break penalty equal to the
interest which would have been earned on the principal from that
early repayment date to the third year anniversary of the facility.
The Group will no longer incur a break penalty for early loan
repayments on this facility.
23 Share capital and related reserves
Authorised share capital: 2016 2015
GBP'000 GBP'000
13,400,000 Ordinary Shares of
GBP0.10 each 1,340 1,340
66,000,000,000 Deferred Shares
of GBP0.00001 each 660 660
2,000 2,000
Issued share capital: 2016 2015
GBP'000 GBP'000
8,409,520 Ordinary Shares of GBP0.10
each fully paid 841 841
841 841
Ordinary Deferred Total
shares shares
of GBP0.10 of GBP0.00001
each each
Number Number Number
of shares of shares of shares
'000 '000 '000
As at 1 January
2016 8,410 - 8,410
As at 31 December
2016 8,410 - 8,410
Ordinary Deferred Total
shares shares
of GBP0.10 of GBP0.00001
each each
Number Number Number
of shares of shares of shares
'000 '000 '000
As at 1 January
2015 8,410 - 8,410
As at 31 December
2015 8,410 - 8,410
Voting and other rights
Holders of Ordinary shares are entitled to one vote for each
share held.
Dividends
Holders of Ordinary shares are entitled to receive dividends as
and when declared by the Company.
Winding up
On a winding-up, the surplus assets remaining after payment of
all creditors, including payment of bank borrowings, shall be
divided pari passu among the holders of Ordinary shares in
proportion to the capital paid up on the shares held at the
commencement of the winding-up.
Distributable capital reserve
This is a distributable reserve out of which distributions can
be made to the shareholders and arose on the cancellation of the
share premium account.
Capital redemption reserve
This is a non-distributable reserve that is required under Isle
of Man Companies Act 1931 and arises on cancellation of issued
share capital.
24 Financial risk management objectives and policies
The Group's principal financial instruments, other than
derivatives, are loans and borrowings, the main purpose of which is
to raise finance for the acquisition and development of the Group's
property portfolio. The Group has trade and other receivables,
trade and other payables and cash and short-term deposits that
arise directly from its operations.
The Group is exposed to market risk, credit risk and liquidity
risk. The Board of Directors reviews and agrees the policies for
managing these risks to ensure that the Group's financial
risk-taking activities are governed by appropriate policies and
procedures and that financial risks are identified, measured and
managed in accordance with Group policies for risk. All derivative
activities for risk management purposes are carried out by
specialist third parties that have the appropriate skills,
experience and supervision.
Market risk includes interest rate risk, foreign currency risk,
and real estate risk. The policies for managing each of these risks
are summarised below:
Market risk
i) Interest rate risk
The Group's exposure to interest rate risk relates primarily to
the Group's debt obligations. The Group's policy was to manage its
interest cost using interest rate swaps in which the Group had
agreed to exchange the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional
principal amount. The swap was designed to fix the interest payable
on part of the bank loans.
On 27 January 2014, CHIP (One) Limited (on behalf of CHIP (Two)
Limited, CHIP (Three) Limited and its subsidiaries, CHIP (Four)
Limited and CHIP (Five) Limited entered into a swap for the amount
of GBP25.1 million. The interest swap has the effect of fixing the
Group's costs of these borrowings from 27 January 2014 to 4
December 2018 at a rate of 2.0225% per annum (before the margin of
3% per annum is applied). As at 31 December 2016 the swap liability
was GBP0.8 million (31 December 2015: GBP0.6m).
The interest rate profile of the Group at 31 December 2016 was
as follows:
Financial Total Fixed Variable Non interest Weighted
Assets as per rate rate bearing average
consolidated interest
balance rate
sheet
GBP'000 GBP'000 GBP'000 GBP'000 %
Cash & cash
equivalents 1,179 - 1,179 - 0.10
Restricted
cash 1,564 - 1,564 - -
Trade & other
receivables 2,713 - - 2,713 -
5,456 - 2,743 2,713
24 Financial risk management objectives and policies (continued)
i) Interest rate risk (continued)
Financial Total Fixed Variable Non interest Weighted Weighted
Liabilities as per rate rate bearing average period
consolidated interest
balance rate
sheet
GBP'000 GBP'000 GBP'000 GBP'000 % Years
Trade & other
payables 3,523 - - 3,523 - -
Interest rate
derivative
instrument 752 - 752 - - 2.00
Long term
borrowings 61,385 29,944 32,257 (816) 7.55 2.00
65,660 29,944 33,009 2,707 -
The interest rate profile of the Group at 31 December 2015 was
as follows:
Financial Total Fixed Variable Non interest Weighted
Assets as per rate rate bearing average
consolidated interest
balance rate
sheet
GBP'000 GBP'000 GBP'000 GBP'000 %
Cash & cash
equivalents 2,165 - 2,165 - 0.16
Restricted
Cash 1,608 - 1,608 - -
Trade & other
receivables 1,666 - - 1,666 -
5,439 - 3,773 1,666
Financial Total Fixed Variable Non interest Weighted Weighted
Liabilities as per rate rate bearing average period
consolidated interest
balance rate
sheet
GBP'000 GBP'000 GBP'000 GBP'000 % Years
Trade & other
payables 4,074 - - 4,074 - -
Interest rate
derivative
instruments 625 - 625 - - 3.00
Long term
borrowings 61,079 29,855 32,464 (1,240) 8.30 3.00
65,778 29,855 33,089 2,834 -
The following table illustrates the sensitivity of the profit
after taxation for the year and the net asset value to an increase
or decrease of 100 basis points in interest rates in regards to the
Group's monetary financial assets and financial liabilities. This
level of change is considered to be reasonably possible based on
observation of current market conditions. The sensitivity analysis
is based on the Group's monetary financial instruments held at each
balance sheet date, with all other variables held constant.
24 Financial risk management objectives and policies (continued)
i) Interest rate risk (continued)
2016 2016 2015 2015
Increase Decrease Increase Decrease
in rate in rate in rate in rate
GBP'000 GBP'000 GBP'000 GBP'000
Change in total profit/(loss)
after taxation for
the year (586) 586 (573) 573
Change in net asset
value at 31 December (586) 586 (573) 573
% change in net asset
value (2.3%) 2.3% (2.7%) 2.7%
ii) Foreign currency risk
There is no foreign currency risk as the assets and liabilities
of the Group are maintained in pounds sterling.
Real estate risk
The Group's exposure to market risk is comprised mainly of
movements in the value of the Group's investments in property. The
Group's investment portfolio is managed within the investment
parameters disclosed in its prospectus.
The Group has identified the following risks associated with the
real estate portfolio:
-- A major tenant may become insolvent causing a significant
loss of rental income and a reduction in the value of the
associated property (see also credit risk). To reduce this risk,
the Group reviews the financial status of all prospective tenants
and decides on the appropriate level of security required via
rental deposits or guarantees.
-- The exposure of the fair values of the portfolio to investment and occupier markets.
The following table illustrates the sensitivity of the
profit/loss after taxation for the year end and the net asset value
to an increase or decrease of 10% in the market value of the
investment properties. This level of change is considered
reasonably possible based on observation of current market
conditions.
2016 2016 2015 2015
Increase Decrease Increase Decrease
in fair in fair in fair in fair
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
Change in total profit/(loss)
after taxation for
the year 8,531 (8,531) 8,163 (8,163)
% change in net asset
value at 31 December 34.0% (34.0%) 38.3% (38.3%)
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily from rental income
receivable and recoverable costs from occupational tenants) and
from its financing activities, including deposits with banks and
other financial institutions.
24 Financial risk management objectives and policies (continued)
Credit risks related to receivables: credit risk in relation to
occupational tenants is managed by the Property Manager. The
Property Manager has been appointed by the Investment Adviser and
Manager to monitor the tenants on an ongoing basis. Credit limits
are established for all tenants based on internal rating criteria
and outstanding customer receivables are regularly monitored. At 31
December 2016 the Group's ten largest debtors totalled GBP0.17
million (2015: GBP0.17 million) and accounted for approximately
8.4% (2015: 8.8%) of all receivables owing. There were four (2015:
three) customers with balances greater than GBP20,000 accounting
for 5.8% (2015: 4.2%) of total amounts receivable. The maximum
exposure to credit risk at the reporting date is the carrying value
of financial assets.
The ageing of rental income receivables is as follows:
2016 2015
GBP'000 GBP'000
0 to 90 days 731 615
Over 90 days 52 111
Provision for bad debts (63) (69)
720 657
Provision for impairment of trade 2016 2015
receivables
GBP'000 GBP'000
Accumulated impairment losses
at 1 January 69 175
Movements in impairment losses
during the year 34 (29)
Amounts written off during the
year (43) (77)
Amounts recovered during the year 3 -
Accumulated impairment losses
at 31 December 63 69
In the event of a default by an occupational tenant, the Group
will suffer a rental shortfall and incur additional costs including
legal expenses, in maintaining, insuring and re-letting the
property until it is re-let. The Board monitors credit risk by
reviewing regular reports it receives from the Investment Adviser
and Manager on the concentration of risk and any tenants in
arrears. The Group does not hold collateral as security.
Credit risks related to financial instruments and cash deposits:
credit risk from balances with banks and financial institutions are
reviewed by the Investment Adviser and Manager in accordance with
the Group's policy. Investments of surplus funds are made only with
approved counterparties and within credit limits
assigned to each counter party. The Group has bank accounts with
The Royal Bank of Scotland and Barclays PLC.
Counterparty credit limits are reviewed by the Board on an
annual basis, and may be updated throughout the year. The limits
are set to minimise the concentration of risks and therefore
mitigate financial loss through potential counterparty failure.
24 Financial risk management objectives and policies (continued)
In summary, compared to the amounts included in the consolidated
balance sheet, the maximum exposure to credit risk at 31 December
2016 was as follows:
2016 2016 2015 2015
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
GBP'000 GBP'000 GBP'000 GBP'000
Cash & cash equivalents 1,179 1,179 2,165 2,165
Restricted cash 1,564 1,564 1,608 1,608
Trade & other receivables 2,713 2,713 1,666 1,666
5,456 5,456 5,439 5,439
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet
financial commitments as they fall due. External funding is of
limited maturity. Such concern exposes firms to liquidity risk and
costs associated with the necessity to refinance and rollover the
existing debt at a time when credit is tight. In certain
circumstances, the terms of the Group's bank facility agreement
entitle the lender to demand early repayment (note 22 long term
borrowings) and in such circumstances the Group's ability to
maintain the net asset value attributable to the ordinary shares
could be adversely affected.
The Directors and Investment Adviser and Manager continue to
monitor the financial covenants of each of the loan facilities to
manage the sensitivity of the Group debt obligations. If financial
covenants are breached, the Group could correct these through
negotiation with the lending bank or by use of other assets.
The Group's long term borrowings are with Royal Bank of
Scotland, Europa Mezzanine Finance Sàrl and Alpha Real Trust
Limited.
The following table illustrates the sensitivity of the loan to
value ratio for the year end to an increase or decrease of 10% in
the market value of the investment properties. This level of change
is considered reasonably possible based on observation of current
market conditions. The loan to value ratio on total borrowings as
at 31 December 2016 is 72.9% compared to 76.3% at 31 December
2015.
2016 2016 2015 2015
Increase Decrease Increase Decrease
in fair in fair in fair in fair
value value value value
Loan to property valuation
("LTV") 66.3% 81.0% 69.4% 84.8%
24 Financial risk management objectives and policies (continued)
The remaining contractual maturities of the financial
liabilities at 31 December 2016, based on the earliest date on
which payment of interest and principal can be required were as
follows:
As at 31 December 2016
Financial liabilities Due within Due between Due between Due> Total
3 months 3 and 1 and 5 years
12 months 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade & other
payables 3,523 - - - 3,523
Interest rate
swaps(1) - 376 376 - 752
Long term borrowings
& related costs 1,182 3,610 66,638 - 71,430
Total liabilities 4,705 3,986 67,014 - 75,705
As at 31 December 2015
Financial liabilities Due within Due between Due between Due> Total
3 months 3 and 1 and 5 years
12 months 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade & other
payables 4,074 - - - 4,074
Interest rate
swaps(1) - 208 417 - 625
Long term borrowings
and related
costs 1,193 3,646 76,478 - 81,317
Total Liabilities 5,267 3,854 76,895 - 86,016
(1) The fair value of the interest rate swap has been disclosed
as a current liability within the consolidated balance sheet,
whilst the amounts presented in this note help to achieve a better
understanding as to the timings of the cash flows of payments
due.
Fair values
The carrying amount of the financial assets and liabilities in
the financial statements are equal to their fair values. The fair
values of the financial assets and liabilities are included at an
estimate of the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a
forced or liquidation sale. The following methods and assumptions
were used to estimate the fair values:
-- Cash and short-term deposits, trade receivables, trade
payables, and other current liabilities approximate their carrying
amounts due to the short-term maturities of these instruments.
-- The fair value of the derivative interest rate swap contracts
are estimated by discounting expected future cash flows using
current market interest rates and yield curve over the remaining
term of the instrument.
-- The fair value of tenant deposits is estimated by discounting
the nominal amount received to the expected date of repayment based
on prevailing market interest rates.
-- The fair value of fixed rate borrowings is calculated based
on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date.
The fair value approximates their carrying values gross of
unamortised transaction costs.
24 Financial risk management objectives and policies (continued)
IFRS 13 requires disclosure of the fair value measurement of the
Group's assets and liabilities, the related valuation techniques,
the valuations' recurrence and the inputs used to assess and
develop those measurements.
The Group discloses fair value measurements by level of the
following fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the asset or
liability is categorised is determined on the basis of the lowest
input that is significant to the fair value measurement. Assets and
liabilities are classified in their entirety into one of the three
levels.
Investment properties and interest rate swaps are valued on a
recurring basis: investment properties and interest rate swaps are
both valued quarterly.
The fair value of the derivative interest rate swap contracts is
determined by reference to the mid-point of the yield curves
prevailing on the reporting date and represent the net present
value of the differences between the contracted rate and the
valuation rate when applied to the projected balances to the period
from the reporting date to the contracted expiry date.
Fair values
Assets and liabilities measured
at fair value
--------------------------------------------------------------------------------
Level Level Level Total
1 2 3
--------- --------- -------- ---------
31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- -------- ---------
Assets measured at fair
value
-------------------------------------- --------- --------- -------- ---------
Investment properties* - - 85,305 85,305
-------------------------------------- --------- --------- -------- ---------
Assets for which fair
values are disclosed
d
-------------------------------------- --------- --------- -------- ---------
Trade and other receivables - 2,713 - 2,713
-------------------------------------- --------- --------- -------- ---------
Liabilities measured
at fair value
-------------------------------------- --------- --------- -------- ---------
Interest rate swap - (752) - (752)
-------------------------------------- --------- --------- -------- ---------
Liabilities for which
fair values are ddiscloseddisclosed
-------------------------------------- --------- --------- -------- ---------
disclosed
-------------------------------------- --------- --------- -------- ---------
Current
-------------------------------------- --------- --------- -------- ---------
Trade and other payables - (3,523) - (3,523)
-------------------------------------- --------- --------- -------- ---------
Non-current
-------------------------------------- --------- --------- -------- ---------
Long term borrowings - (61,385) - (61,385)
-------------------------------------- --------- --------- -------- ---------
*Includes the property at Oldham, which is classified as held
for sale for the sum of GBP390,000 (see note 17).
24 Financial risk management objectives and policies (continued)
Assets and liabilities measured
at fair value
Level Level Level Total
1 2 3
31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
Assets measured at fair
value
Investment properties - - 81,630 81,630
Assets for which fair
values are disclosed
Trade and other receivables - 1,666 - 1,666
Liabilities measured
at fair value
Interest rate swap - (625) - (625)
Liabilities for which
fair values are disclosed
disclosed
Current
Trade and other payables - (4,074) - (4,074)
Non-current
Long term borrowings - (61,079) - (61,079)
A reconciliation of the movement in investment properties (level
3 asset) from the prior year is included within note 17.
25 Capital management
The primary objective of the Group's capital management is to
ensure that it maintains healthy capital ratios in order to support
its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to
it, in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may return capital to
shareholders or issue new shares.
The Group monitors the loan to value ratio of its loan
facilities in line with its underlying banking covenants. The
Group's policy is to ensure that the banking covenants (including
the loan to value ratios) are adhered to and not breached.
The following gearing ratios are calculated as net debt divided
by total capital plus net debt:
2016 2015
GBP'000 GBP'000
Interest bearing loans and borrowings 61,385 61,079
Trade and other payables 3,523 4,074
Less cash and short term deposits (1,179) (2,165)
Less restricted cash (1,564) (1,608)
Net debt 62,165 61,380
Total capital 25,101 21,291
Capital and net debt 87,266 82,671
Gearing ratio 71.2% 74.2%
25 Capital management (continued)
The Group includes within net debt, interest bearing loans and
borrowings, trade and other payables, less cash and cash
equivalents. Capital includes equity attributable to the equity
holders of the Parent Company.
26 Related party transactions
Mr Philip Scales, a Director of the Company, is also a Director
of FIM Capital Limited (the Administrator and Registrar). During
the year fees of GBP0.09 million (31 December 2015: GBP0.086
million) were payable to FIM Capital Limited. As at 31 December
2016 a total amount of GBP0.02 million (31 December 2015: GBP0.02
million) was outstanding.
Mr Mark Rattigan, a Director of the Company, is also Chief
Operating Officer and a Member of Alpha Real Capital LLP (the
Investment Adviser and Manager). During the year fees of GBP1.1
million (31 December 2015: GBP1.2 million) were payable to Alpha
Real Capital LLP. As at 31 December 2016 a total amount of GBPNil
(31 December 2015: GBP0.3 million) was outstanding. Alpha Real
Capital LLP is also a major investor in Alpha Real Trust Limited
through its wholly owned subsidiary Alpha Global Property
Securities Fund Pte. Ltd, a company registered in Singapore.
Under IAS 24, Alpha Real Trust Limited is considered a related
party. Alpha Real Capital LLP (the Investment Adviser and Manager
of the Group) is also the Investment Adviser and Manager of Alpha
Real Trust Limited. During the year, interest costs of GBP1.5
million were charged (31 December 2015: GBP1.7million). As at 31
December 2016, a total amount of GBP0.3 million was outstanding (31
December 2015: GBP0.3 million).
Antler Investment Holdings Limited ("AIH") is considered a
related party, under IAS 24, of Rockmount Ventures Limited and
ARRCO Limited both of which are members of Alpha Real Capital LLP
(the Investment Adviser and Manager). At 31 December 2016 AIH held
531,568 shares (31 December 2015: 531,568).
27 Subsequent events
The property at Oldham was sold for GBP0.39 million on 3
February 2017. From the net proceeds of the sale, GBP0.24 million
was used to partially repay the RBS loan and GBP0.13 million was
used to partially repay the Europa loan.
On 17 February 2017, the Company announced a cash offer from
Hansteen Holdings Plc to acquire all of the share capital of the
Company for 300 pence per share (see page 16). The costs in
connection with the Offer are estimated by the Independent
Directors to be GBP0.5 million.
Directors and Advisers
Directors Registered office
Jonathan David Clague (Chairman) IOMA House
Geoffrey Paul Raineri Black Hope Street
Donald Lake Douglas
Philip Peter Scales Isle of Man
Mark Rattigan IM1 1AP
Company secretary Independent auditor
Martin Katz KPMG Audit LLC
Middleton Katz Chartered Heritage Court, 41
Secretaries LLC Athol Street
12 Hope Street Douglas
Douglas Isle of Man
Isle of Man IM1 1LA
IM1 1AQ
Investment Adviser and Taxation adviser
Manager
Alpha Real Capital LLP Mazars LLP
338 Euston Road The Pinnacle
London 160 Midsummer Boulevard
NW1 3BG Milton Keynes
MK9 1FF
Financial adviser and broker Property solicitor
to the Company
Stockdale Securities Limited Pinsent Masons
Beaufort House 1 Park Row
15 St Botolph Street Leeds
London EC3A 7BB LS1 5AB
UK transfer and paying Legal adviser as to
agent Isle of Man Law
Capita Registrars Limited Appleby (Isle of Man)
Northern House LLC
Woodsome Park 33-37 Athol Street
Fenay Bridge Douglas
Huddersfield Isle of Man
HD8 0LA IM1 1LB
Administrator and registrar Legal advisers as
to UK Law
FIM Capital Limited Osborne Clarke LLP
IOMA House 1 London Wall
Hope Street London
Douglas EC2Y 5EB
Isle of Man
IM1 1AP
Principal bankers Fladgate LLP
Royal Bank of Scotland 16 Great Queen Street
3rd floor London
5-10 Great Tower Street WC2B 5DG
London
EC3P 3HX
Independent property
Europa Capital Mezzanine valuer
Limited Cushman and Wakefield
67/68 Grosvenor Street 10 Colmore Row
London Birmingham
W1K 3JN B3 2QD
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEIFWDFWSESE
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February 24, 2017 02:00 ET (07:00 GMT)
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