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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Schroder European Real Estate Investment Trust Plc | LSE:SERE | London | Ordinary Share | GB00BY7R8K77 | ORD GBP0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.60 | 4.23% | 64.00 | 61.80 | 63.80 | 63.00 | 61.00 | 61.00 | 38,329 | 16:35:14 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 19.67M | -9.38M | -0.0702 | -8.80 | 82.65M |
From Apr 2019 to Apr 2024
TIDMSERE
RNS Number : 0375R
Schroder Eur Real Est Inv Trust PLC
12 June 2018
12 June 2018
SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC
HALF YEAR REPORT AND ACCOUNTS
HALF YEAR RESULTS FOR THE PERIODED 31 MARCH 2018
PROFIT INCREASES BY 157% AS PORTFOLIO IS FULLY INVESTED IN WINNING EUROPEAN CITIES
Schroder European Real Estate Investment Trust plc ("SEREIT" or the "Company"), the company investing in European growth cities, today announces its half year results for the period ended 31 March 2018 as required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2.
Financial Highlights for six months ending 31 March 2018:
-- Profit for the six months increased 157% to EUR10.8 million (31 March 2017: EUR4.2 million), driven by uplift in portfolio values and growth in net income
Hot Features
Premium
-- Net asset value ('NAV') total return of 6.1% (31 March 2017: 2.5%)
-- 4.9% increase in NAV to EUR187.1 million, or 139.9 cps (deducting the interim dividend declared in December 2017 and paid in April 2018, the NAV would have been EUR184.6 million (138.1 cps) as at 31 March 2018)
-- EPRA earnings of EUR6.5 million (31 March 2017: EUR2.6 million), reflecting the growth in rental income from acquisitions and receipt of EUR2.4 million of the surrender premium for the Hamburg asset
-- Dividend for quarter ended 31 March 2018 of 1.85 cps fully covered from income
-- Annualised dividend rate of 5.5% based on the euro equivalent of the issue price as at admission, achieving the target dividend stated at IPO. Total interim dividends declared to date relating to the year ending 30 September 2018 of 3.7 cps, representing a 68% increase over the same period in respect of the year ended 30 September 2017
-- Loan to value ('LTV') of 28% (30 September 2017: 22%). The debt has a weighted average total interest rate of 1.3%, is either fixed cost or capped and has a long duration of 6.4 years on average
Operational highlights
-- Company fully invested
-- Acquisition of a data centre and office premises in the Netherlands, secured on a long lease to a strong tenant, for a price of EUR19.8 million, reflecting a net initial yield of 10%
-- Continued focus on winning cities and regions with 100% of the portfolio by value located in the faster GDP growth locations in Europe (source: Oxford Economics)
-- Lease surrender agreement at Hamburg office in return for a premium of EUR3.9 million. Provides the opportunity to re-let space in the strong Hamburg market
-- Contracted sale of two Casino supermarkets in France at a 10% premium to December 2017 independent valuation
-- Portfolio valued at EUR237.3 million, reflecting an uplift of approximately 9.5% on the combined purchase price
-- Successful execution of asset management initiatives across the portfolio, including six new lettings and re-gears across approximately 5,000 sqm
-- Portfolio occupancy of 97% and an unexpired lease term of 6.7 years to expiry.
Market Outlook
-- Eurozone growth continues to drive a strong occupational market
-- Low vacancy rates supporting favourable rental growth across the majority of markets the Company is invested in.
Commenting, Sir Julian Berney Bt., Chairman of the Board, said:
"This has been an active period for the Company, during which we have delivered growth in NAV, net income and shareholder dividends. We have executed on the strategy outlined at IPO, constructing a high quality real estate portfolio, across the growth cities of western continental Europe. Leveraging its local expertise, Schroders is working on a number of asset management initiatives across the portfolio to grow income and value and coupled with the positive economic backdrop in our target markets, we believe the Company is well positioned for the next stage of growth."
Jeff O'Dwyer, of Schroder Real Estate Investment Management Limited, added:
"Our portfolio of assets across winning cities such as Berlin, Hamburg, Stuttgart, Frankfurt and Paris continues to benefit from improving occupational demand and strong investment markets. Combined with the active asset management initiatives that we have been driving, this has generated positive performance.
"Our immediate priority is to invest the capital that we are receiving from the profitable sale of the two Casino supermarket investments and we are in negotiations on a number of new opportunities in both new and existing sectors. As previously stated, our aspirations are to grow the portfolio through a disciplined and consistent approach centred on enhancing income and shareholder returns."
For further information:
Schroder Real Estate Investment Management
Duncan Owen / Jeff O'Dwyer 020 7658 6000
Ria Vavakis
Schroder Investment Management Limited 020 7658 2371
==============
FTI Consulting
Dido Laurimore / Ellie Sweeney / Richard
Gotla 020 3727 1000
==============
A presentation for analysts and investors will be held at 08.45 a.m. BST today at the offices of Schroders plc, 31 Gresham Street, London EC2V 7QA. If you would like to attend, please contact James Lowe at Schroders on +44 (0)20 7658 2083 or james.lowe@Schroders.com
The Half Year Report is also being published in hard copy format and an electronic copy of that document will shortly be available to download from the Company's website www.schroders.co.uk/its. Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/0375R_1-2018-6-11.pdf
The Company has submitted a pdf of the hard copy format of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.
A further announcement will be made in due course to confirm the full timetable of the second interim dividend.
Chairman's Statement
Overview
During the period the Company has achieved two significant milestones: full investment, following acquisition of an office and data centre in the Netherlands; and growing the dividend to the target level set at IPO. The dividend yield is 5.5% p.a. against the euro equivalent of the issue price as at admission and, based on the Euro:GBP exchange rate as at 31 March 2018, the dividend represents 6.5% p.a. against GBP1 invested at IPO.
The acquisition in the Netherlands has taken the real estate portfolio to 10 assets, located in growth cities and regions of continental Europe. These markets are benefiting from the continued favourable Eurozone economic outlook and mega-themes such as urbanisation and improving infrastructure.
In February the Company announced the sale of its interest in the two Casino supermarkets, representing a 10% premium to the 31 December 2017 valuation. Leveraging its extensive European local presence, the Investment Manager is pursuing new investment opportunities for the redeployment of the proceeds that will be received in July. There are also a number of other value and income-enhancing asset management initiatives underway across the portfolio which will maximise performance. Further detail on these matters is set out in the Investment Manager's Review.
Results
The Company's net asset value ("NAV") at 31 March 2018, excluding non-controlling interests, was EUR187.1 million or 139.9 euro cents per share (GBP164.4 million or 123.0 pence per share). Including dividends, the NAV total return over the period was 6.1%.
Including the recognition of the interim dividend declared in December 2017, which went ex-dividend in March 2018 and was paid on 13 April 2018 from income, the Company's NAV would have reduced to EUR184.6m or 138.1 euro cents per share (GBP162.2 million or 121.3 pence per share).
The profit for the six month period to 31 March 2018 was EUR10.8 million and the EPRA earnings were EUR6.5 million.
Strategy
The investment strategy is based on targeting high quality assets in winning cities and regions in Continental Europe. The current portfolio demonstrates this, with all of the assets located in cities with GDP growth forecasts in the top two quartiles of all European regions (Source: Oxford Economics).
Our target markets in Europe are benefiting from a broad-based economic recovery, with positive growth forecasts, declining unemployment and inflation under control. Rental growth is returning to most parts of the market as occupier demand for good quality, well-located assets remains healthy and development activity is reasonably subdued. This will be positive for the Company's portfolio and supports our growth ambitions for the Company.
The Investment Manager's in-house research and local teams, which totals 145 people across eight key target markets in Europe, provide a market-leading platform to identify assets fitting the investment strategy. The focus is on locations that are benefiting from supply/demand imbalances, infrastructure improvements and competing land uses. These assets are actively managed by the local teams, with the objective of improving rental income and delivering long-term capital growth.
Execution of this investment strategy has underpinned the delivery of shareholder returns. The Company is keen to build on this by growing in a disciplined way that continues to improve earnings and value and brings additional benefits such as improved share liquidity.
Debt
During the period the Company completed a new EUR13m debt facility secured against the Saint-Cloud office building in Paris. This loan takes the Company's total third party debt as at 31 March 2018 to EUR73.4 million, representing a Loan to Value ("LTV") of approximately 28% against the overall gross asset value of the Company.
The Company is focused on maintaining a robust balance sheet and overall leverage is capped at 35% at the time of drawing debt. The debt strategy tailors gearing against those assets most suitable for debt financing. The Company has five debt facilities in place with an average weighted total interest rate of 1.30%. All interest rates are either fixed or capped. Given the positive yield spread it is likely the Company will draw further debt facilities against future acquisitions and target overall gearing at around the capped level.
Dividend
The Company has declared a second interim dividend in respect of the year ending 30 September 2018 of 1.85 euro cents per share payable on 20 July 2018 to shareholders on the register on 6 July 2018. The first and second interim dividends in respect of the year ending 30 September 2018 amount to 3.7 euro cents per share, representing a 68% increase compared to dividends declared over the same period in respect of the year ended 30 September 2017.
The dividend is approximately 100% covered from recurring income from the portfolio. This excludes the positive impact of the receipt of EUR2.4 million in respect of the first payment for the Hamburg lease surrender. Including the Hamburg surrender premium receipt, the dividend cover is 172%.
The latest declared dividend represents an annualised rate of 5.5% based on the euro equivalent of the issue price at admission, achieving the target dividend stated at IPO. Based on the Euro: GBP exchange rate as at 31 March 2018, this equates to an annualised rate of 6.5% on the GBP issue price at IPO of 100 pence per share.
The Company will continue to pursue a progressive dividend policy, which is sustainable from recurring income.
Outlook
Having delivered on the strategy outlined at IPO, the Company is well-positioned for the next phase of its growth. The high quality real estate portfolio across the growth cities of continental Europe provides a strong platform for the Company. It generates an attractive level of stable income which covers the dividend and provides opportunities to grow income and values over the long term.
Occupier demand and rental growth in the target markets of Western Europe is increasing, underpinned by the continued economic growth. This presents an opportunity for the Company and we look forward to working with the Investment Manager to progress the strategy.
Sir Julian Berney Bt.
Chairman
11 June 2018
Investment Manager's Report
Results
The Company's net asset value ("NAV") as at 31 March 2018 stood at EUR187.1 million (GBP164.4m), or 139.9 euro cents (123.0 pence) per share, achieving a NAV total return for the first six months of the financial year of 6.1%.
The table below provides an analysis of the movement in NAV during the reporting period as well as a corresponding reconciliation in the movement in the NAV cents per share:
% change per cps(3)
NAV movement EUR million(1) Cps(2)
Brought forward as at 1 October 2017 178.3 133.3 -
================= ========= ====================
Transaction costs of investments made during the period (1.3) (1.0) (0.8)
================= ========= ====================
Capital expenditure (0.1) (0.1) (0.1)
================= ========= ====================
Unrealised gain in valuation of the real estate portfolio 6.2 4.7 3.5
================= ========= ====================
EPRA earnings 6.5 4.9 3.7
================= ========= ====================
Non-cash items (0.5) (0.4) (0.3)
================= ========= ====================
Dividend paid(4) (2.0) (1.5) (1.1)
================= ========= ====================
Carried forward as at 31 March 2018 187.1 139.9 4.9
================= ========= ====================
(1) Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures quoted in this table include the Company's share of joint ventures on a line-by-line basis and exclude non-controlling interests in the Company's subsidiaries
(2) Based on 133,734,686 shares
(3) Percentage change based on the starting NAV as at 1 October 2017
(4) This represents the fourth interim dividend for the year ended 30 September 2017 which was paid in January 2018. The first interim dividend for the year ending 30 September 2018 was paid to investors from prior income on 13 April 2018 and is not included as a NAV movement during the period
Market overview
The Eurozone has enjoyed its strongest period of growth during the last 10 years with Schroders forecasting that Eurozone GDP will grow by 2-2.5% through 2018-2019. Investment is increasing, while unemployment continues to fall with consumer spending increases. The acceleration in world trade means that external demand in the form of exports should continue to grow. While stronger growth will feed through to higher inflation, Schroders expects it to remain at around 1.5% p.a. over the next couple of years, with the result that the ECB is unlikely to raise interest rates before 2019. The main downside risk is a trade war which would hurt the export-orientated Eurozone.
Offices
The economic momentum continues to drive strong demand in most European office markets and vacancy, particularly for modern space in central locations, continues to erode. At the same time, the supply pipeline for the next two years remains muted and new supply is often pre-let. This in turn continues to filter through to broad-based rental growth not just in CBD locations, but also in other established and well-connected office locations.
Retail
While consumer spending is rising, much of the growth is generated online with varying effects on the various physical retail formats and sectors. The food sector remains resilient to online sales and the trend away from big hypermarkets to smaller supermarkets, convenience stores and organic food stores continues. Retail warehouses that sell bulky goods or DIY products seem also relatively immune. On the other hand, fashion sees the biggest pressure from online sales. Several smaller chains have fallen into insolvency and major retailers such as H&M and Inditex are closing stores and investing heavily in their websites and logistics. Yet for these brands prime high street unit shops, or a presence in dominant shopping centres, is key for branding and marketing.
Logistics/warehousing
In many respects the industrial sector resembles the office market. Logistics take-up in continental Europe hit a new record in 2017, reflecting the cyclical recovery in demand from manufacturers and third party logistics firms (3PLs) and the rapid structural growth in online retail. Although development is increasing, the vast majority of schemes are being built on a pre-let "build to suit" basis and vacancy in most locations remains low. Prime logistics rents increased by 3% on average last year (source: CBRE).
Investment market
Retail was the one sector where liquidity declined last year. The value of retail investment deals in Continental Europe was 16% lower in 2017 than 2016 (source: RCA). Conversely, office and industrial deals increased while, in the search for yield, investment alternatives such as hotels increased, too. Looking forward, the investment market is likely to remain highly competitive in 2018. While the gap between prime real estate and government bond yields has narrowed since 2015 to around 3.0%, it still looks attractive given the favourable outlook for rental and income growth in most sectors.
Investment progress
Over the six months since 1 October 2017, the Company completed the following three significant transactions:
- Purchase completed: The Company acquired a long-term fully leased, three storey office building and data centre in Apeldoorn, The Netherlands for an all-in cost of EUR21.1 million and generating a net income yield of approximately 10%.
- Lease surrender completed: The Company agreed terms for City BKK to surrender its lease at the Hamburg office asset in Germany in return for a cash payment to the Company of EUR3.9 million (of which EUR2.4 million was received during this period). This EUR3.9 million cash payment represents 4.7 years of annual rental income from City BKK. Negotiating a surrender with City BKK was a key initiative within the acquisition strategy. The agreement gives the Company the opportunity to reposition the property and re-lease the space into a strengthening office sub-market which will also diversify the property's income profile.
- Sale committed: The Casino Group has exercised a buy-back option for the Company's 70% interest in two Casino supermarkets in Biarritz and Rennes. The combined sale value for the 70% share is EUR44.8 million, representing a 10% premium to the 31 December 2017 valuation. The sale will complete on 31 July 2018. The Company will continue to receive rental income from the properties until the sale completes.
The Company has invested EUR232 million since IPO and as of today is fully deployed. The sale of the Casino supermarkets in Rennes and Biarritz will provide the Company with investment capacity of approximately EUR45m-EUR50m (including further gearing). The Investment Manager is reviewing, and in exclusivity, on a number of new investment opportunities that could be suitable for redeployment of this capital when it is received later in the year.
Real estate portfolio
The portfolio comprises 10 institutional grade properties, c.97% let, across winning cities and regions in France, Germany, Spain and the Netherlands. All investments are owned 100% except for the Rennes and Biarritz supermarkets (70% interest) and the Metromar shopping centre, Seville (50% interest).
The redeployment of the Casino sale proceeds will be focused on acquiring assets that complement the existing portfolio and maintain good asset diversity, a stable income base and the opportunity for long-term capital growth through active asset management. The Investment Manager has an identified pipeline of acquisitions spanning a number of sectors, including light industrial and logistic investments, and is confident of deploying the capital in the near term.
The table below gives an overview of the portfolio:
Property Country Sector Contracted rents Value
EURm % total EUR0-EUR20m EUR20m-EUR40m EUR40m-EUR60m >EUR60m
======= ========== =========== ============= ============= =======
Paris (B-B) France Office 2.4 14.8% X
============ ======== ======= ========== =========== ============= ============= =======
Paris (SC) France Office 3.5 21.7% X
============ ======== ======= ========== =========== ============= ============= =======
Berlin Germany Retail 1.6 10.0% X
============ ======== ======= ========== =========== ============= ============= =======
Seville Spain Retail 2.0 12.2% X
============ ======== ======= ========== =========== ============= ============= =======
Casino Supermarket,
Biarritz* France Retail 1.3 7.8% X
============ ======== ======= ========== =========== ============= ============= =======
Apeldoorn Netherlands Mixed 2.4 14.9% X
============ ======== ======= ========== =========== ============= ============= =======
Casino Supermarket,
Rennes* France Retail 0.9 5.9% X
============ ======== ======= ========== =========== ============= ============= =======
Hamburg Germany Office 0.5 3.4% X
============ ======== ======= ========== =========== ============= ============= =======
Stuttgart Germany Office 0.8 5.0% X
============ ======== ======= ========== =========== ============= ============= =======
Frankfurt Germany Retail 0.7 4.3% X
============ ======== ======= ========== =========== ============= ============= =======
Portfolio at 31/03/2018* 16.1 100.0 237.3
======= ========== ==================================================
Biarritz &
Rennes* France Retail 2.2 13.8%
============ ======== ======= ========== =========== ============= ============= =======
Portfolio excluding Casino
supermarkets 13.9 86.2% 192.5
======= ========== ==================================================
* The value assigned to the Casino supermarkets in this table reflects the option price exercised by the Casino Group. The Casino buy-back prices are at a 10% premium to the 31 December 2017 valuation.
The portfolio's country and sector allocations, pre and post the Casino supermarket sales, are specified below:
Portfolio Portfolio
excluding Casino excluding Casino
Country allocation Portfolio at supermarkets Sector Portfolio at supermarkets
(% contracted 31/03/2018 allocation 31/03/2018
rent) (% contracted
rent)
France 50.2% 42.1% Office 44.8% 51.9%
================= ================= ================== ================== =================
Germany 22.7% 26.4% Retail 40.3% 30.8%
================= ================= ================== ================== =================
Spain 12.2% 14.2% Mixed 14.9% 17.3%
================= ================= ================== ================== =================
Netherlands 14.9% 17.3% Other 0.0% 0.0%
================= ================= ================== ================== =================
Total 100.0% 100.0% Total 100.0% 100.0%
================= ================= ================== ================== =================
Lease expiry profile
The 10 asset portfolio is 97% let generating EUR16.1 million p.a. in contracted income. The rent on all leases is indexed to inflation and individual asset business plans are being implemented to improve future earnings and capital growth potential.
The average unexpired lease term is 4.6 years to first break and 6.7 years to expiry. Excluding the Casino supermarkets, the contracted rents are EUR13.9m with average unexpired lease terms to first break and expiry of 4.7 years and 6.1 years.
The lease expiry profile to earliest break is shown below. The near-term lease expiries provide asset management opportunities to renegotiate leases, extend weighted average unexpired lease terms, improve income security and generate rental growth. In turn, this activity benefits NAV total return.
Top 10 tenants
The top 10 tenants comprise a wide range of occupiers from different industry segments as shown below:
Contracted Unexpired
rent (EURm Contracted lease term
Tenant Property Tenant risk p.a.) rent (% (years)
(1) ) (2) (3)
1 KPN Apeldoorn Low 2.4 15% 8.8
============== ================== ============== ============ ============= ============
2 Alten Paris (B-B) Low 2.3 14% 3.0
============== ================== ============== ============ ============= ============
3 Casino Rennes & Biarritz Low 1.9 12% 4.2
============== ================== ============== ============ ============= ============
4 Hornbach Berlin Low 1.6 10% 7.8
============== ================== ============== ============ ============= ============
5 Filassistance Paris (SC) Low 0.9 5% 1.3
============== ================== ============== ============ ============= ============
6 LandBW Stuttgart Low 0.7 4% 7.9
============== ================== ============== ============ ============= ============
7 Thesee Paris (SC) Medium 0.6 4% 1.4
============== ================== ============== ============ ============= ============
8 Ethypharm Paris (SC) Low 0.5 3% 3.2
============== ================== ============== ============ ============= ============
9 Moody's Paris (SC) Low 0.4 2% 1.3
============== ================== ============== ============ ============= ============
10 Outscale Paris (SC) Low 0.4 2% 2.1
============== ================== ============== ============ ============= ============
Total top 10 tenants 11.7 71% 5.0
============ ============= ============
Remaining tenants 4.4 29% 3.3
============ ============= ============
Total 16.1 100% 4.6
============ ============= ============
(1) Regular tenant risk assessments are undertaken for the largest tenants. Among other considerations, the Investment Manager's risk assessments are based on Dun & Bradstreet ratings and failure scores
(2) Percentage based on total contracted rent as at financial period end
(3) Unexpired lease term until earliest termination in years as at 31 March 2018 weighted by contracted rent
Valuation
The current portfolio value of EUR237.3 million reflects an increase of 9.5% (EUR20.5 million) compared to the combined purchase price of the 10 asset portfolio. Transaction costs have already been fully recovered through valuation uplifts since acquisition.
The portfolio valuation has increased by 2.8% for the six months to 31 March 2018. Valuation uplift is positive for most assets. The Hamburg office asset was the notable exception as the property had a value decline of -4.2%, reflecting EUR0.7 million. The main reason for this is the surrender agreed with City BKK for its lease at the Hamburg asset in return for a cash payment to the Company of EUR3.9 million to be received in two instalments: EUR2.4 million in 2018 and another EUR1.5 million to be received in 2019.
A fall in the Seville valuation has been offset by a corresponding reduction in the initial purchase price as a result of certain purchase conditions being met. The Seville valuation remains above initial purchase price by 1.9%. Including the purchase price reduction, Seville valuation performance was positive for the six months since 1 October 2017.
With regard to the assets which saw their values increase, the valuation uplift was particularly strong for the properties in Paris Saint-Cloud (+3.8%/EUR1.3 million), Stuttgart (+2.3%/EUR0.4 million) and Paris B-B (+1.4%/EUR0.6 million), all benefiting from strong rental and investment markets.
The external valuation of the Casino supermarkets remained flat over the six month period. However, the sale price of the buy-back option exercised by the Casino Group is at a 10% premium (EUR4.1 million) to the current external valuation. Therefore these properties are held at a value reflecting the sale price.
The newly acquired property in Apeldoorn witnessed a valuation uplift against its purchase price (+2.0%/EUR0.4 million).
Asset management
We manage each asset around an identified business plan, constructed by our local real estate professionals and approved by the Investment Manager's investment committee. Our asset management expertise assists in de-risking assets, enhancing income profiles and positioning investments to benefit from occupier demand and ultimately growth, all positively contributing to the delivery of the Company's return performance.
Fauststraat 1, Apeldoorn, the Netherlands
-- Acquired in February 2018 for a purchase price of EUR19.8 million -- Valuation at 31 March 2018: EUR20.2 million -- Lettable area: c.23,700 sq.m -- Investment rationale:
ü Attractive nine year income stream from a strong tenant;
ü Established and strategic location c.1 hour from Amsterdam;
ü Longer term alternative use potential;
ü Mixed-use asset comprising data centre/office use; and
ü The technology (ICT) influence provides additional portfolio
diversification into a growth sector
Due to the core, long-term lease profile asset management initiatives are limited in the short term. In the longer term we continue to explore alternative use potential.
Boulevard Jean Jaurès, Boulogne-Billancourt (Paris) 92100, France
-- Acquired in March 2016 for a purchase price of EUR37.5 million -- Valuation at 31 March 2018: EUR42.1 million -- Lettable area: c.6,900 sq.m -- Investment rationale:
ü Mixed-use area with a high incidence of competing uses;
ü Affordable and sustainable rents;
ü Supply-constrained location; and
ü Modest capital value per sq.m
Asset management over the period centred on the investigation of alternative use potential and liaising with the tenant to advance longer term occupational intentions.
Großbeerenstraße, 12107 Berlin, Germany
-- Acquired in March 2016 for a purchase price of EUR24.3 million -- Valuation at 31 March 2018: EUR26.0 million -- Lettable area: c.16,800 sq.m -- Investment rationale:
ü Above average population growth;
ü Supply-constrained location;
ü Mixed-use area with a high incidence of competing uses; and
ü Large site area of 4 hectares
Due to the core, long-term lease profile, asset management initiatives are limited in the short-term. We continue to explore ways to utilise the site to a greater density and income potential.
Neckarstraße, 70190, Stuttgart, Germany
-- Acquired in April 2016 for a purchase price of EUR14.4million -- Valuation at 31 March 2018: EUR15.6 million -- Lettable area: c.5,800 sq.m -- Investment rationale:
ü Supply-constrained location;
ü Mixed-use area with a high incidence of competing uses;
ü Affordable/sustainable rents; and
ü Improving infrastructure driven by the neighbouring "Stuttgarter 21" redevelopment
Asset management over the period has centred on improving neighbouring fire certification conformance.
Hammerbrookstraße, 20097, Hamburg, Germany
-- Acquired in April 2016 for a purchase price of EUR14.4 million -- Valuation at 31 March 2018: EUR16.0 million -- Lettable area: c.7,000 sq.m -- Investment rationale:
ü Modest capital value per sq.m;
ü Mixed-use area with a high incidence of competing uses;
ü The City-Sud sub-market is one stop from the city centre and is evolving as a destination where people want to live, work and socialise;
ü Affordable/sustainable rents that represent approximately a third of the prime city centre; and
ü Location has medium to longer term growth potential
Asset management over the period included the negotiation of the EUR3.9 million lease surrender premium with City BKK. With vacancy rates in the sub-market falling substantially, we felt now was the right time to take on leasing risk and utilise our asset management expertise to de-risk.
Lorscher Straße, 60489, Frankfurt - Rodelheim, Germany
-- Acquired in May 2016 for a purchase price of EUR11.1 million -- Valuation at 31 March 2018: EUR11.5 million -- Lettable area: c.4,500 sq.m -- Investment rationale:
ü Supermarket anchored convenience retail centre servicing a growing urban catchment;
ü Larger than standard supermarket size allowing for a broader grocery offer relative to local competition;
ü Mixed-use area with a dense residential population; and
ü Above average provision of parking
Asset management over the period has included the prolongation of the beverage store lease on a short-term basis and review of the building's fire safety regulations.
Le Directoire, Saint-Cloud (Paris), France
-- Acquired in February 2017 for a purchase price of EUR30.0 million -- Valuation at 31 March 2018: EUR35.2 million -- Lettable area: c.15,800 sq.m -- Investment rationale:
ü Supply-constrained location;
ü Leased on affordable/sustainable rents;
ü Attractive capital value per sq.m substantially less than replacement cost;
ü Benefits from future infrastructure improvements; and
ü Mixed-use area with strong competition from multiple uses
Asset management over the period included:
- Re-gearing of c.25% of the office area with the merging of Fila Assistance and Garantie Assistance. Revised lease is on a 4/6/9 year term at an annual rent 13% above ERV;
- A new six year lease agreement with Ethypharm, a pharmaceutical company, for 2,450 sq.m;
- Progression of a long-term lease with a local governmental body, for c.270 sq.m of vacant storage accommodation; and
- Commencement of the renovation of lift lobbies, with completion in H2 2018, demonstrating to tenants our commitment to the premises
Metromar Shopping Centre, Seville, Spain
*Values refer to 50% interest
-- Acquired in May 2017 for a purchase price of EUR26.2 million
which has been subsequently adjusted to EUR25.5 million
-- Valuation at 30 September 2017: EUR26.0 million -- Lettable area: c.23,000 sq.m -- Investment rationale:
ü Dominant retail offer for the local urban catchment;
ü Anchored by grocery and leisure, both relatively immune to e-commerce;
ü Attractive capital value per sq.m substantially less than replacement cost; and
ü Local region is undergoing strong population growth driven by infrastructure improvements
Asset management over the period included:
- Signing of a new lease with leisure specialist Urban Planet for c.1,200 sq.m to an historically non-income-producing space. This addition will complement the centre's existing leisure offering and is expected to significantly drive customer footfall and dwell time;
- Removed underperforming restaurant and added a new burger specialist, strengthening the restaurant offer for consumers;
- Progressed design initiatives to improve brand, signage, wayfaring, lighting and general vibrancy; and
- Progressed discussions concerning the leasing of the former Massimo Dutti space
The Casino supermarket properties have been excluded from this asset management overview due to their pending sale to the Casino Group. The sale's price represents a 10% premium to last quarter's independent valuation.
Finance
As at 31 March 2018, the Company's total debt was EUR73.4 million across five loan facilities. This represents a loan to value of 28% against the Company's gross asset value.
The loans drawn are secured against the four German properties in Berlin, Frankfurt, Stuttgart and Hamburg, the Spanish asset in Seville and three French assets in Paris Saint-Cloud, Biarritz and Rennes.
The current blended all-in interest rate is 1.3%, significantly below the portfolio yield of 5.8% p.a.
The average unexpired loan term is 6.4 years.
As part of the sale of the Casino supermarkets the Company's share of the debt associated with that investment will be transferred to the buyer.
Maturity Outstanding
Lender Property date principal Interest rate
(1)
Deutsche Pfandbriefbank Berlin/Frankfurt 30/06/2026 16,500,000 1.31%
===================== ============ ============ ================
Stuttgart/Hamburg 30/06/2023 14,000,000 0.85%
===================== =============================================== ============ ================
Credit Agricole(1) Casino supermarkets 30/07/2023 18,200,000 3M Euribor +
1.35%
===================== ============ ============ ================
BRED Banque Populaire Paris (SC) 15/12/2024 13,000,000 3M Euribor +
1.30%
===================== ============ ============ ================
Münchener Hypothekenbank(1) Seville 22/05/2024 11,678,750 1.76%
===================== ============ ============ ================
Total 73,378,750
============ ================
(1) All statistics in the Investment Manager's report reflect a 50% ownership share of Seville and a 70% ownership share of the Casino supermarket investments. As a result, debt allocations for those investments in the table above are similarly proportioned.
The German and Spanish loans are fixed rate for the duration of the loan term.
The French loans are based on a margin above 3 month Euribor and the Company has acquired an interest rate cap to limit future potential interest costs if Euribor were to increase. The strike rate on the caps are 1.25% p.a. The market value of the interest caps are positive at EUR0.4 million as at the end of March 2018.
Outlook
Having reached full investment, the current focus is centred on maximising performance from the portfolio. The disposal and reinvestment of the Casino supermarket sale proceeds, and value-enhancing asset management initiatives such as the surrender and re-letting of space in the Company's Hamburg asset, are good examples of how we are actively pursuing this strategy.
We have identified new investments which are in various stages of exclusivity for the redeployment of the profitable Casino sale. We will continue to take a disciplined approach to growth to enhance shareholder returns and the aspirations are to grow the portfolio in an accretive way in order to deliver investors with further diversification, cost economies of scale and ultimately enhanced liquidity.
Schroder Real Estate Investment Management Limited
11 June 2018
Regulatory Information
Principal risks and uncertainties
The principal risks and uncertainties with the Company's business fall into the following risk categories: strategic; investment management; custody; gearing and leverage; accounting, legal and regulatory; and service provider. A detailed explanation of the risks and uncertainties in each of these categories can be found on pages 31 and 32 of the Company's published Annual Report and Accounts for the year ended 30 September 2017. The Company is aware of potential changes to tax legislation, one retrospective, which, if implemented, may impact the Company. The Company is monitoring these matters closely. Otherwise, these risks and uncertainties have not materially changed during the six months ended 31 March 2018 and are not expected to change during the remaining six months of the financial year.
Going concern
Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as set out on page 32 of the published Annual Report and Accounts for the year ended 30 September 2017, the Directors consider it appropriate to adopt the going concern basis in preparing the accounts.
Related party transactions
There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 31 March 2018.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated set of half year interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; and
-- the Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.
Sir Julian Berney Bt.
Chairman
11 June 2018
Condensed Consolidated Interim Statement of Comprehensive Income
Six months to Six months Year to
to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
Rental and service charge income 10,347 7,416 17,296
Other income 2 2,400 - -
Property operating expenses (3,899) (2,011) (5,527)
Net rental and related income 8,848 5,405 11,769
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Net valuation gain on investment property 4 6,359 1,588 4,284
Realised gain/(loss) on foreign exchange 1 (6) (4)
Net fair value (loss)/gain of financial instruments at fair
value through profit or loss (39) 158 72
Expenses
Investment management fee (849) (962) (1,849)
Valuers' and other professional fees (309) (418) (666)
Administrators and accounting fee (147) (146) (306)
Auditors' remuneration (134) (148) (280)
Directors' fees (62) (64) (120)
Other expenses (119) (155) (291)
Total expenses (1,620) (1,893) (3,512)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Operating profit before net finance costs 13,549 5,252 12,609
Finance income 378 5 174
Finance costs (502) (471) (918)
Net finance costs (124) (466) (744)
Share of profit/(loss) of joint venture 5 292 - (185)
Profit before taxation 13,717 4,786 11,680
Taxation (815) (158) (505)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Profit after taxation 12,902 4,628 11,175
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Attributable to:
Owners of the parent 10,798 4,211 10,288
Non-controlling interests 2,104 417 887
----------------------------------------------------------------- ----- ---------------- ------------- -----------
12,902 4,628 11,175
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Basic and diluted earnings per share attributable to owners of
the parent 3 8.1c 3.2c 7.7c
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Profit after taxation 12,902 4,628 11,175
Other comprehensive profit/(loss) items that may be
subsequently reclassified to profit or loss:
Currency translation differences - 35 (3)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total other comprehensive profit/(loss) - 35 (3)
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total comprehensive profit for the period 12,902 4,663 11,172
----------------------------------------------------------------- ----- ---------------- ------------- -----------
Total comprehensive profit attributable to:
Owners of the parent 10,798 4,246 10,285
Non-controlling interests 2,104 417 887
----------------------------------------------------------------- ----- ---------------- ------------- -----------
12,902 4,663 11,172
----------------------------------------------------------------- ----- ---------------- ------------- -----------
All items in the above statement are derived from continuing operations. The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Financial Position
31/03/2018 30/09/2017 31/03/2017
Assets Notes EUR000 EUR000 EUR000
Non-current assets (unaudited) (audited) (unaudited)
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Investment property 4 166,173 202,563 199,881
Investment in joint ventures 5 6,582 6,290 -
Loans to joint ventures 10,035 10,035 -
Non-current assets 182,790 218,888 199,881
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Trade and other receivables 850 2,063 3,542
Interest rate derivative contracts 7 232 273 359
Cash and cash equivalents 21,268 28,521 42,977
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current assets 22,350 30,857 46,878
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Assets of disposal group held for sale 6 70,389 - -
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total assets 275,529 249,745 246,759
==================================================== ====== ============ =========== ============ ===
Equity
Share capital 8 15,215 15,167 15,751
Share premium 30,310 30,215 31,379
Retained earnings 9,442 650 (1,817)
Other reserves 132,151 132,294 130,597
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Issued capital and reserves attributable to owners 187,118 178,326 175,910
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Non-controlling interest 9,795 7,691 7,221
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total equity 196,913 186,017 183,131
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 9 43,079 58,772 58,707
Deferred tax 883 473 141
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Non-current liabilities 43,962 59,245 58,848
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current liabilities
Trade and other payables 3,980 4,483 4,729
Current income tax liabilities 114 - 51
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Current liabilities 4,094 4,483 4,780
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Liabilities of disposal group held for sale 30,560 - -
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total liabilities 78,616 63,728 63,628
---------------------------------------------------- ------ ------------ ----------- ------------ ---
Total equity and liabilities 275,529 249,745 246,759
==================================================== ====== ============ =========== ============ ===
Net Asset Value per ordinary share 10 139.9c 133.3c 131.5c
---------------------------------------------------- ------ ------------ ----------- ------------ ---
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Changes in Equity
Non-controlling
Share Share Retained Other Owners interests Total
Note capital premium earnings reserves of the equity
parent
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2017 15,167 30,215 650 132,294 178,326 7,691 186,017
Total
comprehensive
income - - 10,798 - 10,798 2,104 12,902
Dividends paid 11 - - (2,006) - (2,006) - (2,006)
Unrealised
foreign
exchange 48 95 - (143) - - -
Balance as at
31 March
2018
(unaudited) 15,215 30,310 9,442 132,151 187,118 9,795 196,913
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Non-controlling
Share Share Retained Other interests Total
Note capital premium earnings reserves Sub-total equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR'000 EUR'000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Profit for the
year - - 10,288 - 10,288 887 11,175
Other
comprehensive
loss for the
year - - - (3) (3) - (3)
Dividends paid 11 - - (6,152) - (6,152) - (6,152)
New equity
issuance 1,390 15,288 - (245) 16,433 - 16,433
Unrealised
foreign
exchange (217) 45 - 172 - - -
Balance as at
30 September
2017
(audited) 15,167 30,215 650 132,294 178,326 7,691 186,017
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- -----------
Non-controlling
Share Share Retained Other Owners interests Total
Note capital premium earnings reserves of the equity
parent
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
Balance as at
1 October
2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Total
comprehensive
income - - 4,211 35 4,246 417 4,663
Dividends paid 11 - - (2,542) - (2,542) - (2,542)
New equity
issuance 1,390 15,288 - (232) 16,446 - 16,446
Unrealised
foreign
exchange 367 1,209 - (1,576) - - -
Balance as at
31 March
2017
(unaudited) 15,751 31,379 (1,817) 130,597 175,910 7,221 183,131
--------------- ------ --------- --------- ---------- ---------- ----------- ----------------- --------
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Cash Flows
Six months Six months Year to
to to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
------------------------------ ---- ----- ------------- ------------- -----------
Operating activities
Profit before tax for
the period/year 13,717 4,786 11,680
Adjustments for:
Net valuation gain on
investment property 4 (6,359) (1,588) (4,284)
Share of (profit)/loss
of joint venture (292) - 185
Realised foreign exchange
(gains)/losses (1) 6 4
Finance income (378) (5) (174)
Finance expense 502 471 918
Net fair value (loss)/gain
of financial instruments
at fair value through
profit or loss 39 (158) (72)
Operating cash generated
before changes in working
capital 7,228 3,512 8,257
Decrease/(increase) in
trade and other receivables (113) (1,614) 434
Increase in trade and
other payables 816 2,288 1,647
------------------------------------ ----- ------------- ------------- -----------
Cash generated from/(used
in) operations 7,931 4186 10,338
Finance costs paid (664) (424) (751)
Interest received 381 5 9
Tax paid (224) (12) (145)
Net cash generated from
operating activities 7,424 3,755 9,451
------------------------------------ ----- ------------- ------------- -----------
Investing Activities
Acquisition of investment
property (21,070) (33,182) (33,159)
Additions (123) (3) (12)
Investment in joint ventures - - (16,510)
Net cash used in investing
activities (21,193) (33,185) (49,681)
------------------------------------ ----- ------------- ------------- -----------
Financing Activities
New bank loan advance 13,000 - -
Interest rate cap purchased (227) - -
Share issue net proceeds - 16,446 16,434
Dividends paid 11 (2,006) (2,542) (6,152)
------------------------------------ ----- ------------- ------------- -----------
Net cash generated from
financing activities 10,767 13,904 10,282
------------------------------------ ----- ------------- ------------- -----------
Net decrease in cash and
cash equivalents for the
year (3,002) (15,526) (29,948)
------------------------------------ ----- ------------- ------------- -----------
Opening cash and cash
equivalents 28,521 58,476 58,476
------------------------------------ ----- ------------- ------------- -----------
Foreign exchange losses 1 27 (7)
------------------------------------ ----- ------------- ------------- -----------
Transfer to disposal group
held for sale 6 (4,252) - -
------------------------------------ ----- ------------- ------------- -----------
Closing cash and cash
equivalents 21,268 42,977 28,521
------------------------------------ ----- ------------- ------------- -----------
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements
Notes to the financial statements
1. Significant accounting policies
The Company is a closed-ended investment company incorporated in England and Wales. The condensed interim financial statements of the Company for the period ended 31 March 2018 comprise those of the Company and its subsidiaries (together referred to as the "Group"). The shares of the Company are listed on the London Stock Exchange (Primary listing) and the Johannesburg Stock Exchange (Secondary listing). The registered office of the Company is 31 Gresham Street, London, EC2V 7QA.
These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2017 were approved by the Board of Directors on 5 December 2017 and were delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
These condensed interim financial statements have been reviewed and not audited.
Statement of compliance
The condensed interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom Financial Conduct Authority and IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 September 2017. The condensed interim financial statements have been prepared on the basis of the accounting policies set out in the Group's annual financial statements for the year ended 30 September 2017. The financial statements for the year ended 30 September 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Group's annual financial statements refer to new Standards and Interpretations none of which had a material impact on the financial statements.
Basis of preparation
The financial statements are presented in euros rounded to the nearest thousand. They are prepared on a going concern basis, applying the historical cost convention except for the measurement of investment property and derivative financial instruments that have been measured at fair value.
The accounting policies have been consistently applied to the results, assets, liabilities and cash flow of the entities included in the consolidated financial statements and are consistent with those of the year end financial report.
Going concern
The Directors have examined significant areas of possible financial risk including cash and cash requirements and the debt covenants. The Directors have not identified any material uncertainties which would cast significant doubt on the Group's ability to continue as a going concern for a period of not less than twelve months from the date of the approval of the financial statements. The Directors have satisfied themselves that the Group has adequate resources to continue in operational existence for the foreseeable future.
Use of estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The most significant estimates made in preparing these financial statements are the same as that applied in the consolidated financial statements for the year ended 30 September 2017.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one geographical area, Continental Europe. The chief operating decision-maker is considered to be the Board of Directors who are provided with consolidated IFRS information on a quarterly basis.
Financial risk factors
The Directors are of the opinion that there have been no significant changes to the financial risk profile of the Group since the end of the last annual financial reporting period for the year ended 30 September 2017 of which they are aware.
The main risks arising from the Group's financial instruments and properties are: market price risk, currency risk, credit risk, liquidity risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks.
2. Other income
Other income relates to a lease surrender premium agreement at the Company's Hamburg office asset in Germany, part of the principal of which was received during the period.
3. Basic and diluted earnings per share
The basic and diluted earnings per share for the Group is based on the net profit for the period, excluding non-controlling interests and currency translation differences, of EUR10,798,000 (31 March 2017: EUR4,211,000, 30 September 2017: EUR10,288,000) and the weighted average number of ordinary shares in issue during the period of 133,734,686 (31 March 17: 131,811,609, 30 September 2017: 132,775,782).
EPRA (1) earnings reconciliation
Six months to Six months to Year to 30/09/2017
31/03/2018 31/03/2017
EUR000 EUR000 EUR000
----------------------------------------------------------- -------------- -------------- -------------------
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate EPRA earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Exchange differences on monetary items (unrealised) - (35) 3
Share of joint venture (gain)/loss on investment property (156) - 429
Minority interest's net revenue (378) (370) (744)
Deferred tax 410 111 443
Finance costs/(income): interest rate cap 39 (158) (72)
EPRA profit 6,458 2,623 6,947
----------------------------------------------------------- -------------- -------------- -------------------
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
IFRS earnings per share (cents per share) 8.1 3.2 7.7
EPRA earnings per share (cents per share) 4.8 2.0 5.2
(1) European Public Real Estate Association ('EPRA') earnings per share reflects the underlying performance of the company calculated in accordance with the EPRA guidelines.
Headline (2) earnings reconciliation
Six months to Six months to Year to 30/09/2017
31/03/2018 31/03/2017
EUR000 EUR000 EUR000
--------------------------------------------------------------- -------------- -------------- -------------------
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate headline earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Share of joint venture (gain)/ loss on investment property (156) - 429
Minority Interests net revenue (378) (370) (744)
Deferred tax 410 - 443
Finance costs: interest rate cap 39 (158) (72)
Headline earnings 6,458 2,547 6,944
--------------------------------------------------------------- -------------- -------------- -------------------
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
Headline and diluted headline earnings per share (cents per
share) 4.8 1.9 5.2
(2) Headline earnings per share reflects the underlying performance of the company calculated in accordance with the Johannesburg Stock Exchange listing requirements.
4. Investment property
Freehold
-------------------------------------------
EUR000
------------------------------------------- ---------
Fair value as at 30 September 2016 165,365
--------------------------------------------- ---------
Property acquisitions 32,925
Additions 3
Net valuation gain on investment property 1,588
--------------------------------------------- ---------
Fair value as at 31 March 2017 199,881
--------------------------------------------- ---------
Property acquisitions -
Additions (14)
Net valuation gain on investment property 2,696
--------------------------------------------- ---------
Fair value as at 30 September 2017 202,563
--------------------------------------------- ---------
Property acquisitions 21,127
Additions 124
Net valuation gain on investment property 6,359
--------------------------------------------- ---------
230,173
Transfer to disposal group held for sale (64,000)
Fair value as at 31 March 2018 166,173
--------------------------------------------- ---------
The fair value of investment properties, as determined by the valuer, and excluding the Rennes/Anglet Casino supermarket assets held for sale and valued at the option price, totals EUR166,500,000 (30 September 2017: EUR202,700,000) with the valuation amount relating to a hundred per cent ownership share for all the assets in the portfolio.
None of this amount is attributable to trade or other receivables in connection with lease incentives. The fair value of investment properties disclosed above includes a tenant incentive adjustment of EUR327,000 (30 September 2017: EUR137,000).
The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who are registered independent appraisers. The valuation has been undertaken in accordance with the RICS Valuation - Global Standards 2017, incorporating the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015).
The properties have been valued on the basis of "Fair Value" in accordance with the RICS Valuation - Professional Standards VPS4 (1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of Fair Value used by the International Accounting Standards Board.
The valuation has been undertaken using appropriate valuation methodology and the Valuer's professional judgement. The Valuer's opinion of Fair Value was primarily derived using recent comparable market transactions on arm's length terms, where available, and appropriate valuation techniques (The Investment Method).
The properties have been valued individually and not as part of a portfolio.
All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been any transfers between levels during the period. Investment properties have been classed according to their real estate sector. Information on these significant unobservable inputs per class of investment property is disclosed below:
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 31 March 2018 (unaudited)
Industrial Retail Office Other Total
(including
retail
warehouse)
Fair value EUR276.70m
(EURm) - EUR147.65m EUR129.05m - (3)
----------- ------------ ----------- ------ ---------------
Area ('000
sq m) - 73.330 60.423 - 133.753
----------- ------------ ----------- ------ ---------------
Net passing Range - 94.73 - 65.73 - - 94.73 - 344.78
rent 140.01 344.78
EUR psm Weighted 118.50 198.01 155.58
per annum average (2)
----------------------------- ------------ ----------- ------ ---------------
Gross ERV Range - 97.39 - 79.76 - - 97.39 - 419.91
psm per 193.45 419.91
annum
Weighted 141.34 239.86 187.29
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Net initial Range - 4.62 - 2.61 - - 2.61 - 10.78
yield (1) 5.57 10.78
Weighted 5.27 6.20 5.70
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Equivalent Range - 4.60 - 4.48 - - 4.48 - 9.97
yield 6.06 9.97
Weighted 5.52 6.15 5.81
average (2)
----------------------------- ------------ ------------ ----------- ------ ---------------
Notes:
(1) Yields based on rents receivable after deduction of head
rents and non-recoverables
(2) Weighted by Market Value
(3) This table includes the Joint Venture investment property
and the Held for Sale investment property.
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 30 September 2017 (audited).
Retail (incl. Office Total
retail
warehouse)
Fair value
(EUR000) 148,300 107,300 255,600
--------------- ---------------- ---------------
Area
('000 sq.m) 73.330 35.504 108.834
--------------- ---------------- ---------------
Net passing Range 94.73 - 145.32 131.03 - 344.63 94.73 - 344.63
rent EUR per
sqm per annum
Weighted average 118.92 240.86 170.11
(2)
------------------------------------ --------------- ---------------- ---------------
Gross ERV per Range 97.39 - 185.61 126.12 - 413.10 97.39 - 413.10
sqm per annum
Weighted average 139.03 265.45 192.10
(2)
------------------------------------ --------------- ---------------- ---------------
Net initial Range 4.62 - 5.62 4.59 - 8.96 4.59 - 8.96
yield (1)
Weighted average 5.29 6.43 5.77
(2)
------------------------------------ --------------- ---------------- ---------------
Equivalent Range 4.60 - 5.93 4.47 - 7.25 4.47 - 7.25
yield
Weighted average 5.49 5.46 5.48
(2)
------------------------------------ --------------- ---------------- ---------------
Notes:
(1) Yields based on rents receivable after deduction of head rents and non-recoverables
(2) Weighted by market value
(3) This table includes the Joint Venture investment property valued at EUR52.9 million which is disclosed
within the summarised information within note 12 as part of total assets
Sensitivity of measurement to variations in the significant unobservable inputs
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:
Unobservable input Impact on fair value measurement of Impact on fair value measurement of significant
significant increase in input decrease in input
Passing rent Increase Decrease
----------------------------------------------- ------------------------------------------------
Gross ERV Increase Decrease
----------------------------------------------- ------------------------------------------------
Net initial yield Decrease Increase
----------------------------------------------- ------------------------------------------------
Equivalent yield Decrease Increase
----------------------------------------------- ------------------------------------------------
There are interrelationships between the yields and rental values as they are partially determined by market rate conditions. The sensitivity of the valuation to changes in the most significant inputs per class of investment property is shown below:
Estimated movement in fair value Retail Office Total
of investment properties at 31 EUR'000 EUR'000 EUR'000
March 2018
Increase in ERV by 5% 5,250 5,200 10,450
---------- ---------- ----------
Decrease in ERV by 5% -5,300 -5,500 -10,800
---------- ---------- ----------
Increase in net initial yield by
0.25% -6,650 -6,050 -12,700
---------- ---------- ----------
Decrease in net initial yield by
0.25% 7,300 6,300 13,600
---------- ---------- ----------
Estimated movement in fair value of Retail Office Total
investment properties at 30 September EUR'000 EUR'000 EUR'000
2017
Increase in ERV by 5% 5,200 4,600 9,800
---------- ---------- ----------
Decrease in ERV by 5% -5,200 -4,950 -10,150
---------- ---------- ----------
Increase in net initial yield by 0.25% -6,700 -5,750 -12,450
---------- ---------- ----------
Decrease in net initial yield by 0.25% 7,350 5,900 13,250
---------- ---------- ----------
5. Investment in joint ventures
The Group has a 50% interest in a joint venture called Urban SEREIT
Holdings Spain S.L. The principal place of business of the joint
venture is Calle Velazquez 3, 4th Madrid 28001 Spain.
31/3/2018
EUR000
Balance as at 1 October 2017 6,290
---------------------------------------------------------- --------------
Share of profit/(loss) for the period 442
Dividends (150)
Balance as at 31 March 2018 6,582
---------------------------------------------------------- --------------
30/9/2017
EUR000
Balance as at 1 October 2016 -
------------------------------------------------- -------------- --------------
Purchase of interest in joint venture 6,475
Share of profit/(loss) for the period (185)
Balance as at 30 September 2017 6,290
------------------------------------------------- -------------- --------------
During the period ended 31 March 2017 there
were no interests in joint ventures.
Summarised joint venture financial information: 31/3/2018 30/9/2017
EUR000 EUR000
---------------------------------------------------------------- --------------
Total assets 59,586 59,719
Total liabilities (46,422) (47,139)
Net assets 13,164 12,580
Net asset value attributable to the Group 6,582 6,290
------------------------------------------------- -------------- --------------
Six months Six months
to 31/3/2018 to 31/3/2017
EUR000 EUR000
------------------------------------------------- -------------- --------------
Revenues 2,838 -
Total comprehensive profit 884 -
Total comprehensive profit attributable to the 442 -
Group
------------------------------------------------- -------------- --------------
6. Non-current assets classified as held for sale
The assets and liabilities related to the Group company SCI Rennes Anglet, comprising the Casino supermarkets, were presented as held for sale at 31 March 2018 following the decision by Casino Group to exercise a buy-back option on the Group's 70% share of these assets. Under the option, the repurchase will complete on 31 July 2018. Casino Group will also take over the Group's share of the existing debt facility on the assets.
The two investment properties held for sale are at their respective option price and do not form part of the Knight Frank valuation.
All other assets and liabilities of the disposal group are presented at their carrying amount or fair value as required by IFRS 5.
Net assets of disposal group classified as held for sale
31/03/2018
EUR000
----------------------------- -------------
Investment property 64,000
Derivatives 228
Trade and other receivables 1,909
Cash and cash equivalents 4,252
Total assets 70,389
Interest-bearing loans and
borrowings 28,561
Trade and other payables 1,999
Total liabilities 30,560
Net assets held for sale 39,829
------------------------------- -------------
7. Derivative financial instruments
The group has an interest rate cap in place purchased for EUR260,000 from Credit Agricole Corporate and Investment Bank on 10 August 2016 in connection to a EUR26.0 million loan facility drawn from the same bank with a maturity date of July 2023. The cap interest rate is 1.25% with a floating rate option being Euribor 3 months. In line with IFRS 9 this derivative is reported in the financial statements at its fair value. As at 31 March 2018 the fair value of the interest rate cap was EUR228,000. Transaction costs incurred in obtaining the instrument are being amortised over the extended period of the above mentioned loan. During the period this asset has been reclassified as part of a disposal group held for sale (note 6).
During the period the group entered into another interest rate cap purchased for EUR227,000 from BRED Banque Populaire on 20 December 2017 in connection to a EUR13.0 million loan facility drawn from the same bank with a maturity of 15 December 2024. The cap interest rate is 1.25% with a floating rate option being Euribor 3 months. In line with IFRS 9, this derivative is reported in the financial statements at its fair value. As at 31 March 2018 the fair value of the interest rate cap was EUR232,000.
8. Issued capital and reserves
Share capital
As at the date of this report, the Company has 133,734,686 ordinary shares in issue with a par value of 10.00 pence (no shares are held in Treasury). The total number of voting rights of the Company is 133,734,686.
The Sterling value of issued share capital was GBP13,373,000 (30 September 2017: GBP13,373,000, 31 March 2017: GBP13,373,000) and the Euro value at the period end was EUR15,215,000 (30 September 2017: EUR15,167,000, 31 March 2017: EUR15,751,000).
9. Interest-bearing loans and borrowings
Six months
to
31/03/2018
EUR000
---------------------------- ------------
Brought forward 58,772
Drawdown of borrowings 13,000
Capitalisation of finance
costs (204)
Amortisation of finance
costs 72
------------------------------ ------------
71,640
Transfer to disposal group
held for sale (28,561)
Carried forward 43,079
------------------------------ ------------
Year ended
30/09/2017
EUR000
--------------------------- ------------
Brought forward 58,724
Capitalisation of finance
costs (80)
Amortisation of finance
costs 128
----------------------------- ------------
Carried forward 58,772
----------------------------- ------------
Six months
to
31/03/2017
EUR000
--------------------------- ------------
Brought forward 58,724
Capitalisation of finance
costs (81)
Amortisation of finance
costs 64
----------------------------- ------------
Carried forward 58,707
----------------------------- ------------
Bank loan - BRED Banque Populaire
The Group entered into a EUR13.0 million loan facility with BRED Banque Populaire on 18 December 2017.
The facility matures on 15 December 2024 and carries an interest rate of 1.30% plus Euribor 3 months per annum payable quarterly. The facility was subject to a EUR70,000 arrangement fee which is being amortised over the period of the loan. The debt has an LTV covenant of 60% and the interest cover ratio should be above 400%. The loan is collateralised by property assets owned by the Group with a carrying value of EUR35,200,000.
Bank loan - Deutsche Pfandbriefbank AG
On 3 August 2016 the Group entered into two loan facilities totalling EUR30.50 million with Deutsche Pfandbriefbank AG.
Of the total amount drawn EUR14.0 million matures on 30 June 2023 and carries a fixed interest rate of 0.85% payable quarterly; the remaining EUR16.5 million matures on 30 June 2026 and carries a fixed interest rate of 1.31%. The facility was subject to a 0.35% arrangement fee which is being amortised over the period of the loan. The debt has an LTV covenant of 65% and the debt yield must be at least 8.0%.
The lender has a charge over property owned by the Group with a value of EUR69,000,000. A pledge of all shares in the borrowing Group companies is in place.
Bank loan - Credit Agricole Corporate and Investment Bank
The Group entered into a EUR26.0 million loan facility with Credit Agricole Corporate and Investment Bank on 29 July 2016.
The facility matures on 29 July 2023 and carries an interest rate of 1.35% plus Euribor 3 months per annum payable quarterly. The facility was subject to a 0.85% arrangement fee which is being amortised over the period of the loan.
The debt has an LTV covenant of 65% and the interest cover ratio should be above 200%. The loan is collateralised by property assets owned by the Group with a carrying value of EUR64,000,000.
During the period this loan has been reclassified as part of a disposal group held for sale (note 6).
Business partner loan - Casino Group
On 28 June 2016 the Group entered into a EUR10.75 million loan facility with Casino Group, a 30% minority investor in the share capital of SCI Rennes Anglet, a 70% owned subsidiary of the Group. The loan matures on 28 June 2031 and carries an interest rate of 2.08% payable annually. The interest can be capitalised if not paid. On 1 August 2016 EUR7.69 million was repaid leaving a loan balance outstanding as at 31 March 2018 of EUR3.06 million.
During the period this loan has been reclassified as part of a disposal group held for sale (note 6).
10. NAV per ordinary share
The NAV per ordinary share is based on the net assets excluding non-controlling interests of EUR187,118,000 (30 September 2017: EUR178,326,000, 31 March 2017: EUR175,910,000) and 133,734,686 ordinary shares in issue at the Statement of Financial Position reporting date (30 September 2017: 133,734,686, 31 March 2017: 133,734,686).
11. Dividends paid
In respect of the six months ended 31 Number of Rate 31/03/2018
March 2018
ordinary
shares (cents) EUR000
--------------------------------------- ------------ -------- -----------
Interim dividend paid 19 January 2018 133,734,686 1.50 2,006
--------------------------------------- ------------ -------- -----------
A dividend for the quarter ended 31 December 2017 of EUR2,474,000 was paid on 13(th) April 2018.
In respect of the six months ended Number of Rate 31/03/2017
31 March 2017
ordinary shares (cents) EUR000
--------------------------------------------------------- -------- -----------
Interim dividend paid 27 January 2017 133,734,686 0.9 1,205
Interim dividend paid 17 March 2017 133,734,686 1.0 1,337
---------------------------------------- ---------------- -------- -----------
Total 1.9 2,542
---------------------------------------- ---------------- -------- -----------
Notes to the financial statements (continued)
In respect of the year ended 30 September Number of Rate 30/09/2017
2017
ordinary shares (cents) EUR000
------------------------------------------------------------- -------- -----------
Interim dividend paid on 27 January
2017 133,734,686 0.90 1,205
Interim dividend paid on 17 March 2017 133,734,686 1.00 1,337
Interim dividend paid on 7 July 2017 133,734,686 1.20 1,604
Interim dividend paid on 1 September
2017 133,734,686 1.50 2,006
Total interim dividends paid 4.60 6,152
-------------------------------------------- ---------------- -------- -----------
12. Related party transactions
Schroder Real Estate Investment Management Limited is the Group's Investment Manager.
The Investment Manager is entitled to a fee, together with reasonable expenses, incurred in the performance of its duties. The fee is payable monthly in arrears and shall be an amount equal to one twelfth of the aggregate of 1.1% of the EPRA NAV of the Company. The Investment Management Agreement can be terminated by either party on not less than twelve months written notice, such notice not to expire earlier than the third anniversary of admission, or on immediate notice in the event of certain breaches of its terms or the insolvency of either party. The total charge to profit and loss during the period was EUR849,000 (six months ended 31 March 2017: EUR962,000, year ended 30 September 2017: EUR1,849,000). At the period end EUR881,000 was outstanding (six months ended 31 March 2017: EUR480,000, year ended 30 September 2017: EUR125,000).
Directors are the only officers of the Company and there are no other key personnel. The Directors' remuneration for services to the group for the six months ended 31 March 2018 was EUR62,000 (six months ended 31 March 2017: EUR64,000, year ended 30 September 2017: EUR120,000) equivalent to GBP54,055. Each of the three directors owns 10,000 shares in the Company.
13. Capital commitments
At 31 March 2018 the Group had capital commitments of EUR400,000 (30 September 2017: GBPNil, 31 March 2017: GBPNil).
14. Post balance sheet events
There were no post balance sheet events.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LLFITRIILLIT
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June 12, 2018 02:00 ET (06:00 GMT)
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