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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Yew Grove Reit Plc | LSE:YEW | London | Ordinary Share | IE00BDT5KP12 | ORD SHS EUR0.01 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMYEW
RNS Number : 5190F
Yew Grove REIT PLC
10 March 2020
10 March 2020
Yew Grove REIT plc
(the "Company" or "Yew Grove")
Preliminary results for the year ended 31 December 2019
Yew Grove REIT plc, the AIM and Euronext Growth listed regional Irish commercial property investor, today announces its preliminary unaudited results for the year ended 31 December 2019.
Hot Features
Premium
31/12/2019 31/12/2018 Change from
prior period
Portfolio valuation (EUR
million) 115.79 77.92 +49%
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Contracted rent (EUR million) 8.91 6.30 +41%
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Reversionary rent (EUR million) 10.09 6.80 +48%
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Occupancy 92.5% 97% -5%
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WAULT to expiry (years) 8.1 7.4 +0.7
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WAULT to break (years) 4.6 4.9 -0.3
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Net rental income (EUR million) 9.42 2.56 +267%
----------- ----------- --------------
IFRS NAV (EUR million) 109.92 75.13 +46%
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Profit after Tax (EUR million) 5.06 2.33 +117%
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EPRA earnings (EUR million) 5.70 0.72 +687%
----------- ----------- --------------
IFRS NAV per share (EUR
cents) 98.52 100.18 -1.7%
----------- ----------- --------------
EPRA NAV per share (EUR
cents) 98.52 100.18 -1.7%
----------- ----------- --------------
Basic EPS (EUR cents) 6.24 4.08 +53%
----------- ----------- --------------
EPRA EPS (EUR cents) 7.03 1.23 +472%
----------- ----------- --------------
DPS (EUR million) 5.58 0.72 +672%
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DPS per share (EUR cents) 6.75 0.96 +603%
----------- ----------- --------------
EPRA EPS paid as dividends 97.9% 99.8% -2%
----------- ----------- --------------
Financial highlights
-- Net rental income increased 267% from prior period, EPRA
earnings increased by 687%. Expenditure excluding financing
remained below 2018 run rate.
-- Total dividends of 6.75c per share fully covered by EPRA
earnings.
-- 100 million share issuance programme opened, EUR35.8 million
proceeds raised across two equity issuance tranches with
strong support from new and existing holders.
-- EUR39.5 million deployed on new property purchases in
the period, increasing portfolio value by 49%. Equity
proceeds raised in the year were committed within two
weeks of receipt by the Company.
-- EUR9.1 million debt facility increase. Modest period end
LTV of 18%, EUR8.3 million of facilities undrawn at period
end.
-- EPRA NAV was impacted by purchase and share issuance costs
through period of significant portfolio growth, and as
a result of commercial property stamp duty changes announced
in H2 2019. Like for like property value increased by
5.3%.
Operational highlights
-- Property portfolio grew from EUR77.9 million to EUR115.8
million.
-- Contracted rent grew by 41% and reversionary rent by
48% enhancing current and future rental income
-- Occupancy remains strong at 92.5%, the Company continues
to focus on high credit quality tenants. Revenue exceeded
contracted rent due to lease surrender proceeds of EUR2
million.
-- WAULT to expiry extended to 8.1 years and WAULT to break
shortened to 4.6 years so the Company can take advantage
of earlier rent reviews and breaks on reversionary properties
to capture upside.
-- Exit 2019 with an acquisition pipeline of c. EUR120,
with target assets in line with the Company's investment
policy
Post year end highlights
-- Company's revolving debt facility increased by EUR20
million.
-- Purchase of six office buildings at Millennium Park for
a total consideration of EUR27.4 million completed at
a blended NIY of 5.8%.
-- Contracted rent rose to EUR10.6 million and portfolio
value to EUR141.1 million.
Jonathan Laredo, Chief Executive Officer, commented:
"Since our IPO less than two years ago we have successfully built a strong portfolio of diversified and differentiated Irish commercial property offering attractive yields. In 2019 we continued to raise and deploy capital judiciously, using our early mover advantage to selectively acquire a mix of individual assets and portfolios that fit with our investment strategy. Our reversionary portfolio and asset management efforts will seek to capture further income and value from our existing portfolio while our target market continues to offer opportunities for us to further expand our footprint outside the Dublin CBD at below replacement cost. We have a strong pipeline of attractive acquisition opportunities and we continue to review further investments.
"The Company is considering its funding options for financing its pipeline of acquisition opportunities, which could include using its existing share issuance programme later this year, together with debt finance where appropriate.
"We remain confident in the fundamentals of our business and its continued success in 2020. The current negotiations about Irish government formation have created some political uncertainty which is expected to be resolved in the second quarter of the year. The Irish economy again performed strongly in 2019 and the outlook for 2020 looks positive. Despite this we acknowledge the seriousness of the Covid-19 outbreaks and will continue to monitor the situation closely."
Enquiries:
Yew Grove REIT plc +353 1 485 3950
Jonathan Laredo, Chief Executive Officer
----------------------------------
Charles Peach, Chief Financial Officer
----------------------------------
Michael Gibbons, Chief Investment Officer
----------------------------------
Goodbody Stockbrokers UC +353 1 667 0400
----------------------------------
Joint Broker & Euronext Growth Advisor
----------------------------------
David Kearney, John Flynn, Edel O'Reilly,
Ronan Bransfield
----------------------------------
Liberum Capital Limited
----------------------------------
Joint Broker & Nomad +44 20 3100 2000
----------------------------------
Richard Crawley, Jamie Richards, Jonathan
Wilkes-Green
----------------------------------
IFC Advisory +44 203 934 6630
----------------------------------
Financial PR yewgrovereit@investor-focus.co.uk
----------------------------------
Tim Metcalfe, Graham Herring
----------------------------------
Forward-looking Statements
Certain information contained in this announcement may constitute forward looking information. This information relates to future events or occurrences or the Company's future performance. All information other than information of historical fact is forward looking information. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "predict" and "potential" and similar expressions are intended to identify forward looking information. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given that this information will prove to be correct and such forward looking information included in this announcement should not be relied upon. Forward-looking information speaks only as of the date of this announcement. The forward-looking information included in this announcement is expressly qualified by this cautionary statement and is made as of the date of this announcement. The Company and its Group does not undertake any obligation to publicly update or revise any forward
looking information except as required by applicable securities laws.
Notes to editors
Yew Grove REIT plc, quoted on the London Stock Exchange's AIM market and on the Euronext Growth Market in Dublin, is an Irish commercial real estate company invested in a diversified portfolio of Irish commercial property. Yew Grove has a particular focus on well-tenanted commercial real estate assets comprising of office and industrial assets outside of Dublin's Central Business District.
Yew Grove's highly experienced team has a proven track record in commercial property investment and asset management in Ireland and internationally, and is focused on delivering results. Its investment approach is strategic, not speculative, principally on assets that are let, pre-let or to be let after refurbishment. Shareholders are provided with stable, long-term income from a diverse portfolio of commercial property comprising well-tenanted real estate in strategic centres let to Irish government entities and other state bodies, IDA Ireland supported and other FDI companies, and larger corporates.
Chair's Statement
Activity
2019 was another busy year for the Company. Having invested all of the equity capital raised at the Company's initial public offering in 2018, Yew Grove invested the proceeds of the debt facility raised from Allied Irish Banks, p.l.c. ("AIB") in the first half of the year in Waterford and Cork Airport Business Park and in the development of a car park in Athlone. In July we received approval from our shareholders for a 100 million share issuance programme. Just over 36.6 million shares have been issued under the programme and the proceeds invested in four buildings in Athlone and a portfolio of six buildings in Millennium Park in Naas soon after the year end.
The Company also began the process of selling the smaller non-core properties acquired from the Yew Tree Investment Fund on IPO. The first of those disposals realised a gain on book value and it is hoped that the remaining four properties will also sell well in the near future. Once again we reached the year end with the Company almost fully invested, the quality of tenant improved and the rent roll increased by over 41% year on year.
Our activity reflects the Company's continued commitment to building a portfolio of institutionally attractive commercial properties in Ireland, outside of Dublin's central business district ('CBD'). The addition of institutional quality buildings leased or attractive to predominantly government or foreign direct investment tenants is evidence of the Company's progress in generating a secure and growing rent roll, with reversionary potential to support a sustainable and growing dividend.
Not only did the Company expand its portfolio (almost doubling in size if one includes the Millennium portfolio on which we had exchanged contracts prior to year-end and completed post year-end) but a we began a number of asset management projects which should bear fruit in 2020 .
As flagged last year the Company declared its inaugural dividend in February 2019. A quarterly dividend was instituted, the final quarter's dividend being declared in 2020. The first three quarter's dividends totalled 5.71 cents per share and despite the dilution of the final quarter payment (because the 26.6 million shares issued in December qualified for the dividend and increased our shares in issue by over 31%) a dividend of 1.04 cents per share was declared, giving 6.75 cents per share for the year.
One of our key strategic focuses for 2020 is enacting our Environmental, Social and Governance ("ESG") policy and rolling out the strategy for achieving this through out the business. There is more on our plans in our Annual Report but I welcome this engagement as one of the key issues of our time and look forward to overseeing an active and productive year.
Board
During the year the Board devoted considerable time to the Company's post-flotation organisation, acquisitions and to our strategic plans for the development of the business. I would like to thank each member of the Board for their commitment during the year and I look forward to working with them for the benefit of the Company and its shareholders. The Board are responsible for creating and maintaining the Company's strong culture and collegiate values and ensuring these are understood and shared by all employees and with all of our business relationships.
Management and employees
On behalf of the Board, I would like to thank the management team and employees of the Company for their continued hard work and energy over the past year. It has been a busy and demanding year and continues to be as the Company grows in 2020. Our success will be driven by the dedication and commitment of this team.
On behalf of the Board I would like to thank our shareholders who have continued to support the growth of our business.
CEO's Statement
I am pleased to report the results for the Company for the year ended 31 December 2019.
As 2020 opened we completed the acquisition of a portfolio of six office buildings in the Millennium Park in Naas, Co. Kildare and are again close to fully invested. This purchase has taken our property portfolio from c.EUR116 million to c.EUR141 million in value with a rent roll of EUR10.6 million. The share issue in December 2019 took our issued shares to over EUR110 million, and I fully expect us to grow significantly again in 2020.
Having instituted a quarterly dividend strategy in 2019 I look forward to the regularity of that dividend becoming an important constituent in the total equity return for shareholders.
Results
Pre-tax profits for the year were EUR5.06 million after accounting for a gain on sale of a property of EUR0.12 million and a revaluation loss of EUR0.77 million. The gains and losses are analysed further in the valuation section below, however the existing portfolio grew in value and the majority of the loss reflects the EUR2.8 million acquisition costs on properties bought during 2019. 98% of our European Public Real Estate ("EPRA") earnings of EUR5.7 million were distributed by way of dividend.
As a result of the financial performance and the costs of raising additional equity during the year, the EPRA Net Asset Value ("NAV") per share fell to 98.52 cents at 31 December 2019 from 100.76 cents (excluding declared but unpaid dividend) at 30 June 2019 and 100.18 cents at 31 December 2018. The Company's growth costs, including equity issuance costs of EUR1.0 million and the costs of buying new properties of EUR2.8 million contributed to this NAV per share fall. Underlying like for like property values increased by 5.3% over the period. I am confident that as our asset management activities begin to bear fruit in 2020 and beyond, we will see the value reflected in increased rental income.
The Company was a prudent and active user of its revolving finance facility with AIB during 2019. As the portfolio grew in size we increased the facility, enabling the Company to execute transactions as and when appropriate.
The contracted rent roll at 31 December 2019 was EUR8.9 million and following the completion of the Millennium portfolio has increased to EUR10.6 million. The gross yield at fair value (the return that the Company earns from its contracted rent at current valuation) was 7.7% at year end and following the purchase of the Millennium portfolio will fall to 7.5% at Millennium Park's June 2019 valuation. The Millennium portfolio purchase improves the Company's reversionary rent roll which will underpin future distributions to shareholders. The reversionary rent roll (which is achieved through letting vacancy, rent reviews and other events which allow for the properties to be let at what our third party valuer considers current market rent) was EUR10.1 million at 31 December 2019 and has increased to EUR12.8 million following the Millennium acquisition. This represents a gross reversionary yield of 8.7% at the year end and 9.1% following the Millennium portfolio acquisition.
Dividends
As set out in last year's annual report the Company instituted a quarterly dividend strategy in 2019. The dividends for the first three quarters of the year (including the special dividend paid in June to distribute the income element of the Cork Airport lease surrender premium) totalled 5.71 cents per share. The dividend for the final quarter was announced in February 2020 and brought the annual dividend per share to 6.75 cents, fully covered by EPRA earnings. Because the number of shares in issue increased from 85 million to 111.6 million in late December 2019, the per share value of that final dividend was necessarily diluted and would otherwise have exceeded 7 cents per share. However, I am pleased that the Company managed to meet expectations and paid a significant dividend secured on good quality covenants even in a year of rapid growth. The Company will continue to reward shareholders by distributing as much of a dividend as is sustainable and I look forward to another good year in this regard.
Review of activity
In 2019 the Company bought six buildings, in Waterford, Cork and Athlone, and sold one in Heather Road in Dublin. Just before year end we exchanged on a further six buildings on the Millennium Park in Naas.
In February, the Company acquired a building on the Cork Airport Business Park for EUR7.5 million (plus costs). In May, the Company acquired an office building on the Waterford IDA Park for EUR4 million (plus costs). In June we negotiated a reverse premium for the Cork property in return for allowing the tenant, Clearstream, to break their lease and vacate the building in July 2019.
Also in July, following the approval of a 100 million share issuance programme at the Company's EGM, we issued 10 million shares under the programme and together with debt from the AIB facility acquired three buildings on the Athlone IDA Technology Park for a combined price of EUR13 million plus costs.
In November the Company sold the first of the five buildings we had targeted for sale. These buildings are smaller, non-institutional properties some of which have exposure to retail. The first sale (of the property in Heather Road, Dublin) achieved a price of over 13% above the June 2019 valuation.
In December following an issue of 26.6 million further shares, the Company acquired the Teleflex office building on the Athlone IDA Technology Park for EUR12 million plus costs and exchanged contracts for the purchase of six office buildings on the Millennium Park in Naas for a purchase price of EUR25.3 million. The Millennium Park acquisition was completed in February 2020. The various costs referred to above are detailed in note 14 to the accounts.
At the year end the Company had an undrawn facility with AIB of EUR8.3 million, allowing it some leeway to continue to pursue and close transactions.
A major focus for the property market generally and for the Company in particular was the growing focus on sustainability, particularly through its measurement by way of ESG criteria. As a small company only recently floated on the public markets Yew Grove is not yet able to join the Global Real Estate Sustainability Benchmark and had not at our last year end published a policy and strategy for sustainability. That has been rectified with our policy, strategy and initial targets all set out in the section on engagement in the Annual Report. Moreover, despite our size, we believe in engaging with local communities and our suppliers to further that strategy and our shared objectives and our activities in that regard are also set out in that engagement section. Finally, Yew Grove is an equal opportunity employer and as we grow, we continue to invest in our staff as well as our buildings and the communities in which we operate.
Post balance sheet events
On 23 January 2020 the Company appointed Liberum Capital Limited as joint corporate broker and Nominated Adviser, Goodbody Stockbrokers UC was appointed as Euronext Growth Adviser and continues as joint corporate broker.
On 31 January 2020 the Company increased its facility with AIB to EUR39 million by adding the buildings acquired in the second half of 2019 to the security package. Most of that increased facility was used to complete the purchase of a portfolio of properties at Millennium Park in Naas which completed on 6 February 2020. This acquisition of six buildings and a greenfield site on the Millennium Park estate for EUR25.3 million plus costs represented a yield of 5.8% after costs. The portfolio's six office properties have 140,000 sq. ft of lettable space and 773 car parking spaces. Five of the buildings are fully tenanted and one, a high quality HQ space, is vacant. The tenanted buildings have a weighted average unexpired lease term ("WAULT") of approximately 2.5 years with a lease to final maturity of approximately 5 years. The Millennium portfolio is under rented and together with vacant space will enable the Company to achieve a reversion in excess of 9%.
On 13 February 2020 the Company announced its interim dividend for Q4 2019. The dividend (1.04 cents per share) brought the full 2019 dividend to 6.75 cents per share.
On 3 March 2020 the Company further increased its facility with AIB by EUR10.1 million, providing the Company flexibility to acquire further properties.
The Company is considering its funding options for financing its pipeline of acquisition opportunities, which could include using its existing share issuance programme later this year, together with debt finance where appropriate.
Property Valuation
Lisney as the external valuer valued the Company's property portfolio at EUR115.79 million at 31 December 2019. There are three key aspects to this valuation. The like for like portfolio (in other words the properties owned throughout the year) grew in value by EUR4.1 million (+5.3%) after accounting for capital expenditure; the properties acquired in 2019 fell in value by EUR1.8 million (-4.8%) and the company incurred acquisition costs of EUR2.8 million.
The change from 6% to 7.5% in stamp duty on sales of commercial property announced in the November budget effectively reduced the valuations of all properties by 1.65% and this explains much of the fall in value of properties acquired in 2019. The balance of that value fall is a temporary one. Having bought a building on the Cork Airport Business Park in February 2019, we agreed a lease surrender with the tenant and received a premium for that surrender. The year-end valuation of the now vacant property is some EUR1.3 million below our purchase cost (and even after accounting for EUR1 million surrender premium that was received in lieu of dilapidations) which created a fair value loss. We are actively marketing the building and once re-let, the value of the building will rise substantially.
A closer look at our like for like portfolio shows the best performing parts of our portfolio were our industrial buildings, which showed like for like growth of over 15% for the year. The growth of our like for like office portfolio was more muted at 4%, but some of this can be explained by the difficulty in sourcing sufficient ERV data in some of our regional locations to demonstrate to valuers that they should rerate valuations. As transactions occur we are confident that they will feed through and we will see increases but it does mean that the office portfolio is, in our view, currently valued conservatively.
As at 31 December 2019, the portfolio had a contracted rent roll of EUR8.9 million, representing a gross yield at fair value of 7.7%. The rent roll at the reversionary yield (assuming the vacancy in the portfolio has been let and the balance of the portfolio is let at the valuer's estimated rental values) would be EUR10.1 million representing a gross reversionary yield of 8.7%.
The portfolio has an unexpired lease term of 4.6 years to break and 8.1 years to final maturity. In our target geographic market vacancy rates are falling (and in many cases are at multi year lows). Moreover, the vacancy rates on buildings of the sort we own are lower than the average. In general, take up is rising, and the net effect is that rent levels are rising. This can be seen in Cork and Limerick and is, in our view, beginning to happen in Galway, where new construction has begun. The Company is therefore happy with a shorter WAULT to break as it allows the Company to capture reversion more quickly in this cycle.
Finance
The AIB facility at 31 December 2019 stood at EUR29 million with EUR8.3 million undrawn. Total debt to equity gearing and loan to value ("LTV") at 31 December 2019 were 18.9% and 18.0% respectively, having been 8.3% and 8.0% as at 31 December 2018. Details of the drawings on the facility can be seen at note 20 to the financial statements.
In January 2020 the facility was increased by EUR9.9 million before the acquisition of the Millennium portfolio, the majority of the increased facility has been drawn to complete the purchase. Following the Millennium portfolio purchase the facility was further increased by EUR10.1m.
Irish Commercial Real Estate Market
2019 was a record year for Irish commercial real estate with total transactions of EUR7.2 billion reported by CBRE. Part of the reason for this volume of overall market activity was the increase in private rented sector ("PRS") activity, but notwithstanding that, office transactions remained the largest sub sector of the market. The Irish market is becoming increasingly international with 2019 seeing a large increase in Asian investors, principally Korean, alongside European and US institutions. The prevailing mood at the larger real estate advisory firms is that the macroeconomic back drop for Irish property remains good, with continuing low interest rates driving demand for real estate as an asset class and Ireland's continued economic strength and the relative cheapness of its property market versus those in mainland Europe creating a positive sentiment from institutional investors that outweighs short term concerns. The Irish story, despite the relatively small size of the market and the relatively small lot sizes of individual transactions, has become increasingly attractive as the resilience and performance of its economy continues to impress. While the moves by the Irish Government last year to introduce higher stamp duty and amend some aspects of the tax treatment of REITs are unwelcome, particularly in the context of regional investment and development, we are encouraged by continued strong levels of investment activity.
From the Company's perspective the most positive changes in the landscape arose from two different directions: in the office space growing demand from occupiers meant vacancy rates, especially vacancy rates in larger floorplate modern and Grade A offices, fell to multi year lows. This is unsurprising given that the economy is largely driven by foreign direct investment ("FDI") and increasingly that investment results in business and jobs outside Dublin. This demand has driven prime rental growth to the point at which new development has begun in the three biggest regional cities, Cork, Limerick and Galway. That shift has not gone unnoticed in the investment market and there has been increased interest in these markets from the international institutional community. It is only the beginnings of a shift in the market, but it provides a welcome change in temperature. As CBRE note the next stage of market development will need to see the local infrastructure for employees (apartments, better local transport links etc.) reflect the growth of occupier demand and developer supply. Outside of the regional cities new buildings are still only possible on a forward funded basis, but increasingly tenants require more space and more modern space. We see this as a major opportunity for the Company in the years ahead.
At the same time the maturation of the Dublin central business district ("CBD") market has led to a gradual expansion of the CBD into Dublin 1,3,7 and 8 and eastwards through Dublin 2 ("Core+"). The effect is that whilst rents in the traditional Dublin CBD have remained and are expected to remain relatively stable, there has been a marked shift in rents in what were traditionally seen as fringe or Core+ areas of the city. This is partly driven by the larger tech tenants looking for space in what have heretofore been fringe areas (and in particular Dublin 8 has seen the benefits of this growth), but also as the Government is priced out of the city centre or needs to improve the quality of its estate at prices it can meet, it too is looking outside of its traditional locations. The demand led shifts are driving a rapid rental growth in these areas and that is also slowly spilling over into the suburbs. The Company has c.42% of its portfolio in Core+ and suburban locations and this should help to increase ERVs in and provide a welcome tailwind to the value of those properties.
The industrial market continues to reflect an imbalanced supply and demand market for high quality, larger buildings. Rents in the Dublin catchment area are now above the level at which speculative development is justified and increasingly buildings are going up, not to fill a specific demand but speculatively. The same thing has also happened on a more limited scale in Cork and again the buildings have been occupied almost at completion. The demand has also fed through into older, larger buildings that can be easily repurposed for modern use with scope to rebuild at the end of their useful lives. The investment market continues to be thin as little trading activity is evidenced but because Irish investment properties trade at a discount to comparable mainland European properties they are still popular with institutional investors.
ESG
In the Irish real estate market sustainability is the watchword for 2020. ESG investing has caught the imagination of the institutional investment market and its application to the property world is inescapable. The introduction in Europe of the NZEB (Near Zero Energy Building) regulation in November cemented the importance of the topic for those businesses that had previously not considered their carbon footprint to be of prime importance in assessing environmental building quality. For the Company the point is especially important. Our tenant roster is fundamentally made up of governmental bodies and large corporates, the very tenants that are expected to comply with (and largely want to live by) the newer, more environmentally responsible standards. Our property portfolio is also, because of the lack of development in the regions and suburbs, comprised of older buildings which are not as energy efficient or as environmentally friendly as is now required for new buildings under law. To that end we have instituted an ESG policy and strategy that puts the improvement of our estate, the fair treatment and development of our employees and suppliers and a positive interaction with the communities in which we invest, at the centre of our business. We are a small, young company, but I expect this policy and strategy to develop and grow with us over the next few years and I look forward to reflecting on a positive change over the next 12 months and beyond.
Outlook
We remain confident in the fundamentals of our business and its continued success in 2020. The current negotiations about Irish government formation have created some political uncertainty which is expected to be resolved in the second quarter of the year. The Irish economy again performed strongly in 2019 and the outlook for 2020 looks positive. Despite this we acknowledge the seriousness of the Covid-19 outbreaks and will continue to monitor the situation closely.
I would like to join the Board in thanking our shareholders who have continued to support the growth of our business.
Financial Review
In the context of a rapidly growing company our results for the year were positive. Our issued shares grew by 49%, debt facility by 46% and property portfolio by 49%. Group net assets grew from EUR75.1 million to EUR109.9 million at year end, net rental income grew from EUR2.6 million to EUR9.4 million and administrative costs remained controlled at EUR3.0 million when compared with EUR1.8 million in 6.5 months of 2018. Our total expense ratio ("TER") fell from 4.3% in 2018 to 3.7% in the year.
Net Asset Value
The net assets of the Group increased by EUR34.8 million, a rise of 46% over the year. The Company raised equity capital of EUR35.8 million, and further debt capital of EUR9.1 million, which was deployed on a further EUR39.5 million of property assets. Valuation falls on the Group's portfolio over the period were EUR0.8 million, while its accretive strategy cost EUR2.8 million in property purchase costs (including an increase in commercial property stamp tax rates of 1.5% late in the period) and share issuance costs of EUR1.0 million. The vast majority of the net rental income was distributed to shareholders as property income distributions.
Income statement
Net rental income for the year was EUR9.4 million, with the contracted rent roll rising by EUR2.6 million. A comparison of contracted rent roll for properties owned on 31 December 2018 with 31 December 2019 shows an increase of 41%, while contracted rent roll on properties bought during the period fell by EUR0.6 million, the majority of which was due to the lease surrender on the Cork Airport Business Park asset. As mentioned in the property review section, there were lease events which increased the income from some of the Company's properties, and with our reversionary portfolio we expect further increases over the coming years.
Administrative expenses over the year were EUR3.0 million. Excluding performance-based remuneration these were EUR2.4 million, comparing favourably with EUR1.8 million for the 6.5 months from Admission to 31 December 2018 while the Company's shares in issue increased by 49%. One additional hire was made in order to internalise the Company's finance function, which was previously provided by an external administrator. The internalisation was completed this year, and the Company will look at internalising other roles over the coming year if they offer control and cost benefits.
Dividends
Following last year's capital reduction and the filing of initial accounts in February, dividends for the year were 6.75c per share, an increase of seven times on the dividend declared for 2018 and fully covered by EPRA earnings, The Company has had a quarterly dividend schedule in place since March 2019 and continues to target distributing its net rental income to shareholders in this manner if prudent.
Investment properties
The property portfolio value was EUR115.8 million as at 31 December 2019, up from EUR77.9 million a year previously. Realised and unrealised losses on the property portfolio were -EUR0.6 million for the year, reflecting the costs of property purchases in an accretive period and the increase in stamp tax of 1.5% towards the end of the year as well as the gain on sale on one of our smaller properties. capital expenditure not recharged to tenants was EUR0.8 million. As at 31 December 2019 the portfolio had 23 properties, with an average value of EUR5.0 million. The smaller legacy properties that were a part of the IPO seed portfolio will be marketed over the coming year and the proceeds may be redeployed in more institutional properties with greater growth prospects.
Borrowings
Over the year the Company increased its revolving debt facility with AIB from EUR20 million to EUR29.1 million in July, and the drawn amount from EUR6.2 million to EUR20.8 million. As at 31 December 2019 the Company had undrawn facilities of EUR8.3 million. The Loan to Value ratio increased from 8% to 18% over the period and is expected to rise again as pipeline assets are purchased. The Company remained fully compliant with its facility covenants throughout the year.
Share capital
The Company received agreement from its shareholders in July for a one year, 100 million share issuance programme, which was accessed twice in the following five months. Initially EUR10 million was raised to purchase a portfolio of properties on an IDA Ireland industrial estate in July, and in December the Company raised a further EUR25.8 million which was committed to the purchase of a portfolio of office buildings within 2 weeks of receipt of funds. Shares in issuance increased from 75.0 million to 111.6 million, an increase of 49%.
Portfolio Report
Year End 2019 Portfolio at a glance;
Ø Contracted rent roll: EUR8.9m
Ø Portfolio Value: EUR115.8m
Ø Gross yield at fair value : 7.7%. Gross reversionary yield 8.7%.
Ø Number of buildings: 23*
Ø Income security with WAULT at 4.6 years to break and 8.1 years to expiry.
Ø Portfolio increase via acquisitions from EUR77.9m to EUR115.8m at 31(st) Dec 2019: a 49% increase.
Ø Contracts exchanged on a further EUR25.3m of property.
Ø Contracted rental roll has increased from EUR6.3m in 2018 to EUR8.9m in 2019: 41% increase.
Ø Portfolio Location: 42% of contracted rent roll generated by buildings within the Dublin catchment area.
Ø Portfolio Quality: 96% of contracted rent roll secured by Government, FDI and Large Enterprise tenants.
Ø Sectoral Exposure: 67% contracted rent roll generated from office, 26% from industrial and 7% from mixed use and retail buildings
* Letterkenny is treated as a single asset and tenant in the table below but has three leases over three co-located buildings.
Building Type Location Value Contracted Gross Reversionary Gross WAULT WAULT Portfolio
(EUR'000) rent roll Yield Rent Roll Reversionary to to vacancy
(EUR'000) at (EUR'000) Yield lease lease
Fair break end
Value (years) (years)
-----------
1 One Gateway Office Dublin 19,000 1,306 6.9% 1,491 7.8% 2.0 4.2 0.0%
North
2 Letterkenny Office West 15,755 1,437 9.1% 1,458 9.3% 8.3 8.3 0.0%
Three
3 Gateway Office Dublin 14,460 913 6.3% 1,188 8.2% 2.0 2.0 0.0%
4 Teleflex Office Midlands 11,610 948 8.2% 851 7.3% 8.8 11.7 0.0%
IDA Athlone
5 Block B Industrial Midlands 6,175 530 8.6% 530 8.6% 3.2 13.2 0.0%
Unit 2600,
Cork
6 Airport Office Cork 6,200 0 0.0% 633 10.2% 0.0 0.0 100.0%
Ashtown
Gate Block
7 C Office Dublin 5,140 391 7.6% 401 7.8% 4.2 5.9 0.0%
IDA Athlone
8 Unit B2 Industrial Midlands 5,050 483 9.6% 483 9.6% 3.7 14.7 0.0%
Ashtown
Gate Block
9 B Office Dublin 4,915 393 8.0% 380 7.7% 3.0 9.5 0.0%
IDA
Waterford South
10 Block A Office East 4,100 353 8.6% 424 10.3% 4.2 15.0 0.0%
IDA Athlone
11 Block A Industrial Midlands 3,500 250 7.1% 312 8.9% 1.2 11.1 0.0%
IDA Athlone
12 Block C Industrial Midlands 3,150 280 8.9% 253 8.0% 4.8 9.8 0.0%
Blackwater
13 House Office Cork 2,750 233 8.5% 313 11.4% 1.4 4.5 29.7%
Airways
14 Unit 7 Industrial Dublin 2,470 160 6.5% 248 10.0% 5.5 10.5 0.0%
Airways
15 Unit 8 Industrial Dublin 2,740 150 5.5% 280 10.2% 6.1 11.1 0.0%
Bridge
16 Centre Retail Midlands 1,840 229 12.5% 181 9.8% 1.4 2.0 13.8%
Holly
17 Avenue Industrial Dublin 1,835 170 9.3% 187 10.2% 1.1 8.1 0.0%
Unit L2 Dublin
18 Toughers Industrial Catchment 1,815 170 9.4% 201 11.1% 3.1 3.1 0.0%
Old Mill South
19 Lane Mixed Use West 1,500 302 20.1% 176 11.7% 6.9 8.7 0.0%
20 Canal House Mixed Use Midlands 930 107 11.5% 53 5.7% 7.0 7.0 0.0%
Centre
21 Point Industrial Dublin 855 110 12.9% 51 6.0% 6.7 6.7 0.0%
----------- ---------- -------- -------- ----------
Total 115,790 8,915 7.7% 10,092 8.7% 4.6 8.1 7.4%
------------ ---------- -------- -------- ----------
At year end, December 2019, the Company's property portfolio has 23 buildings spread throughout Ireland. Independently valued by Lisney, the capital value of this portfolio stands at EUR115.8m, reflecting a gross yield at fair value of 7.7% and gross reversionary yield of 8.7%.
Company Portfolio Objectives
Yew Grove's investment strategy is to pursue and invest in a diversified portfolio of industrial and office property assets in its target geographical area securing high quality income from quality tenant covenants.
The investment objectives of quality income from quality covenants are constrained by the following risk limits;
(i) No single property shall exceed 25% capital value of the total assets within the company;
(ii) Income receivable from one tenant group (except Government) not exceeding 35% of the total rental income;
(iii) At least 90% of the company's assets will be invested in the office and industrial sector. The REIT does not invest in solely residential, retail, or service sector buildings
(iv) No more than 20% of the total assets of the company may be invested in properties outside its geographic target market.
(v) The company will not engage in speculative development however will consider financing construction against pre-lets and/or agreements to lease to meet current tenants' expansionary plans.
Investment Activity 2019
The company closed four acquisitions in 2019 and exchanged conditional contracts on a fifth acquisition. In February 2020 these conditions were satisfied and it was completed as detailed in Note 30 to the financial statements.
Unit 2600, Cork Airport Business Park, Cork
In Q1, the Company acquired its first Cork property, Unit 2600 in the Cork Airport Business Park. The Park sits next to Cork Airport and is one of the prime sites in the Cork suburbs for FDIs and business services companies based in Cork. Built in 1999, the building has high grade office space for FDI tenants.
The building has c. 40,827 sq. ft of open plan space with 162 car parking spaces and was bought for EUR7.5 million which was a purchase yield to the Company of 7.85% after accounting for purchase costs . The tenant, Clearstream Global Securities Service Ltd had five years left to run on their lease. As part of its expansion plan, the tenant negotiated a lease surrender in June, resulting in a payment to the Company of EUR3m and the tenant vacated the building in July. The Company has completed a refurbishment on the building for a potential new tenant and is currently discussing terms with a number of interested parties.
Block A, IDA Waterford Business and Technology Park, Waterford
In Q1, the company completed the acquisition of Block A, IDA Waterford Business and Technology Park, Butlerstown, Waterford for EUR4.0 million. The modern office block has 36,845 sq. ft. of open plan space arranged over three storeys and completed to a high standard. The purchase yield to the Company was 8.56% after accounting for purchase costs. The building is tenanted by Tech Mahindra Business Services Ltd under a 20-year lease with a break in 5 years and SE2 Information Services Ireland Ltd under a five-year lease (with an exercised option to extend by a further five years).
Three properties in the IDA Business and Technology Park, Athlone
In July 2019, the company acquired a portfolio of three high quality industrial buildings in the IDA Business and Technology Park, Garrycastle, Athlone for a purchase price of EUR13.0 million, which represents a purchase yield to the company of 7.60% after accounting for purchase costs. The portfolio should enjoy a potential reversionary yield in excess of 8.0%.
The portfolio has 114,498 sq. ft. of modern high-tech space in three buildings with associated carparking and is leased to PPD Development Ireland Ltd, KCI Manufacturing and Signature Ortho Europe Ltd. The combined leases had a WAULT at time of purchase to break of 3.9 years and to lease expiry of 12.5 years. The combined current rent roll for the portfolio is EUR1.06 million.
The building occupied by KCI Manufacturing inter-connects with the company's existing Athlone property and brings the total size of the Company's property leased to KCI to 101,230 sq. ft. The addition of the three new buildings bring the Company's total industrial footprint in the park to c.161,370 sq. ft. with an aggregate rent roll of c.EUR1.54 million.
A further property on the IDA Business and Technology Park, Athlone
In December the Company completed the purchase of an office building also situated within the IDA Business and Technology Park, Garrycastle, Athlone. The purchase price was EUR12.0 million, which represented a purchase yield to the Company yield of 7.2% after purchase costs, the lease has rent reviews linked to CPI.
The building, constructed in 2016, has 45,144 sq. ft. of modern office space with a 245 space car park. It is leased to Teleflex Medical Europe Ltd and has a WAULT to break of 8.8 years and to lease expiry of 11. years. The current rent roll for the building is EUR0.95 million per annum.
This acquisition brings the company's total footprint in this IDA Ireland park to c.206,500 sq. ft. in five buildings with an aggregate annual rent roll of c.EUR2.49 million from four highly rated FDI tenants.
Portfolio of six buildings at Millennium Park, Naas
In late December 2019, the Company announced that it had exchanged conditional contracts for the purchase of a portfolio of six office buildings at Millennium Park, Naas, County Kildare. The purchase price for the portfolio was EUR25.3 million, which represents a purchase yield to the company of 5.8% after accounting for purchase costs. The conditions were satisfied and acquisition completed post year end in February 2020. The portfolio is expected to have near-term reversionary potential in excess of 9%.
The portfolio has 140,000 sq. ft. of modern offices over six buildings, as well as 773 carparking spaces and a six-acre greenfield site. Five of the office buildings are tenanted by FDI and large Irish enterprises, with one of the buildings being vacant. The combined leases have a WAULT to break of c.2.5 years and to lease expiry of c.5.0 years. The current annual rent roll for the portfolio is approximately EUR1.6 million.
The portfolio is a part of the Millennium Park, Naas development which is situated approximately 40 minutes' drive from Dublin City Centre and Dublin Airport. It is expected to benefit from a recent upgrade of the M7 motorway and significantly improved access from the new M7 interchange at Millennium Park.
Once the Millennium Park acquisition has completed, the Company's portfolio will have 27 properties with a proforma gross asset value of c. EUR141m and an annual contracted rent roll of EUR10.6m.
Portfolio Structure
The portfolio, which focuses on the industrial and office sector, has a tenant base providing stable income from higher yielding assets with strong tenant covenants.
The portfolio at 31 December 2019 has 707,100 sq. ft of total space. The office sector represents 51.1% of the portfolio floor space (361,491 sq. ft), of which approx. 35.4% (127,858 sq. ft) is within the Dublin catchment area.
The industrial sector represents 43.3% of the portfolio floor space (306,429 sq. ft) of which approx. 47.3% (145,060 sq. ft) is within the Dublin catchment area. The balance (161,370 sq. ft) is within the IDA Business & Technology Park, Athlone.
Mixed use (including retail space) represents 39,179 sq. ft or 5.5% of the floor space and these units are in mixed-use buildings where retail is ancillary to the anchor tenants which are government agencies occupying office space and also in the Tullamore Bridge Centre (anchored by An Post). All of these buildings will be marketed for sale during 2020.
Overall, the vacancy rate of the portfolio at 31 December 2019 currently stands at 7.14% or 50,118 sq. ft, the majority of which is at Unit 2600 at Cork Airport and Blackwater House.
Reversionary and Rental Potential
A key activity for the management team is the capture of potential reversionary rent and achieving rental growth in the portfolio, which will increase the Company's future revenues.
In 2019, the Company completed three new leases/licence and four rent reviews bringing an additional EUR376,000 to the annual rent roll. In addition, as tenants exercise their lease/licence extension options or pass on lease breaks, the WAULT of the portfolio has remained broadly in line with the previous year.
The portfolio tenants are high quality and include government bodies (such as Irish Water, ESB and the Office of Public Works) accounting for 27.6% of the total rent roll, while FDI and Corporates (such as KCI, Optum, Teleflex) account for 68.34%.
The external valuer's 31 December 2019 report shows that approximately 70% of the core portfolio by building has reversionary upside which could bring the yield on the portfolio to 8.72%.
Asset management of the company's portfolio is a key driver to increasing rental income, WAULT, and ultimately capital value of our properties. The highlights of 2019 include, the company achieving rental and licence increases of 33.0% on a lease at Ashtown Gate, 36.0% on a lease at Holly Avenue and 94.0% on a lease at Gateway One.
In addition, the company forward funded the development of a purpose-built surface carpark at an industrial unit located within the IDA Technology & Business Park, Athlone. This was leased to KCI Manufacturing in March 2019 at rent of EUR48,000 per annum for an additional 70 car parking spaces.
At the Gateway One property, a new lease to Mott McDonald completed the full occupancy of the property for the first time in 2019.
The portfolio has numerous ongoing projects that are to be completed within the year. Where the management team believe it will enhance future income generation and capital values, the Company may from time to time, undertake planning, intensification, unit consolidation, unit division, modernisations and redevelopments in respect of properties.
A complete review of all assets in the portfolio by way of a Building Investment Fund survey report began in 2019. The purpose is to ensure that existing sinking funds for each of the buildings are appropriately funded given the needs to replace and upgrade their mechanical and engineering systems. The Company plans to further develop this with a particular focus on enhancing the environmental and sustainability aspects of each building in line with the company's ESG policy.
Acquisitions & Disposals Policy
The Company's target geographic market is focused on a) the Dublin catchment area b) major regional cities and towns (especially those identified as hubs for industrial development under Project Ireland 2040) and c) in IDA Ireland Business and Technology Parks.
Outside Dublin, the Company has targeted and secured assets within the major regional cities and towns. It has specifically sought assets within IDA Ireland Business and Technology Parks on a national level, ranging from Letterkenny in the north to Waterford in the south. These parks are occupied by government and IDA Ireland backed tenants who are usually situated in a particular park for geographically specific reasons (such as the existence of an industrial supply chain in an industry sector, the quality and specificity of graduates from the local Institute of Technology or other educational and research establishments or the clustering effect from a number of companies in an industrial sector).
The investment focus of the management team is on assets with strong, stable and growing income. To that end, the Company looks for properties that are well situated and tenants with strong credit profiles. Ideally the buildings are in areas sought by similar tenants and should therefore provide a strong reversionary income as rents rise. Post-acquisition, the portfolio the Company seeks to develop close relationships with its tenants to facilitate better engagement with the tenants to understand their requirements, meet their needs and to improve visibility of potential opportunities but also alleviate or avoid potential problems. As an active landlord that is willing and able to facilitate a tenant's growth plans, the strategy has already borne fruit, and several have already confirmed that they are planning to expand their footprint within the Company's existing properties.
The Company's acquisition policy for 2020 will continue along the same path and focus on high quality buildings with secure, strong and growing income.
In 2020, the target acquisition lot size for industrial properties will be in a EUR5m and EUR15m range per property and for offices will be in a EUR10m and EUR30m range per property. The mixture of assets located within our target market remains strong. The Company's business model and relationships afford it the opportunity to explore a wider range of prospects and therefore diversification within the portfolio. The Company expects to see a robust pipeline of assets in 2020 coming from a number of different sources, including Investment firms, private equity firms and construction/development firms. The pipeline of assets coming forward in 2020 comes from asset and capital recycling, portfolio reconfiguration, market consolidation and broader more transparent pricing.
With the primary focus on strong but good quality and growing income returns, the Company anticipates generating capital growth as rents increase and through active asset management.
In order to maintain a higher quality and more balanced weighting of capital values within the portfolio, the management team intend to dispose of several of the smaller mixed use and retail assets during 2020.
The first of these disposals was Heather Road for EUR1.1m which represented a 15.1% annualised return to the company since IPO. Three other assets have been prepared for market, and one further asset is subject to a lease negotiation in preparation for sale.
Top Five Portfolio Assets
1. One Gateway, East Wall Road, Dublin 3
Investment Non-CBD Dublin Tenant Govt/FDI/Corp
Region
Asset One Gateway WAULT (expiry/break) 4.2/2.0
---------------- ---------------------- --------------
Sector Office Acquisition Price EUR16.31m
----------------- --------------------- --------------
51,497 sq. ft
Area GIA Valuation EUR19.00m
----------------- --------------------- --------------
Gross yield at
Age of Building 12 years fair value 6.9%
----------------- --------------------- --------------
Gross Reversionary
Building Design Multi-tenanted Yield 7.8%
----------------- --------------------- --------------
2. IDA Letterkenny Office Park, Letterkenny, Co. Donegal
Investment Region North- West Tenant FDI
Asset Optum 1, 2 WAULT (expiry/break) 8.3/8.3
& 3
------------------ ---------------------- ----------
Sector Office Acquisition Price EUR16.00m
------------------- --------------------- ----------
90, 548 sq.
Area ft GIA Valuation EUR15.76m
------------------- --------------------- ----------
Gross yield at
Age of Buildings 13-21 years fair value 9.1%
------------------- --------------------- ----------
Gross Reversionary
Building Design Single- tenanted Yield 9.3%
------------------- --------------------- ----------
3. Three Gateway, East Wall Road, Dublin 3
Investment Non-CBD Dublin Tenant Government
Region
Asset Three Gateway WAULT (expiry/break) 2.0/2.0
---------------- ---------------------- -----------
Sector Office Acquisition Price EUR12.69m
----------------- --------------------- -----------
43,212 sq. ft
Area GIA Valuation EUR14.46m
----------------- --------------------- -----------
Gross yield at
Age of Building 12 years fair value 6.3%
----------------- --------------------- -----------
Gross Reversionary
Building Design Single Tenant Yield 8.2%
----------------- --------------------- -----------
4. Teleflex, IDA Business & Technology Park, Athlone, Co. Westmeath
Investment Region Midlands Tenant FDI
Asset Teleflex Building WAULT (expiry/break) 11.7/8.8
------------------- ---------------------- ----------
Sector Office Acquisition Price EUR12.00m
-------------------- --------------------- ----------
45,144 GIA sq.
Area ft Valuation EUR11.61m
-------------------- --------------------- ----------
Gross yield at
Age of Building 4 years fair value 8.2%
-------------------- --------------------- ----------
Gross Reversionary
Building Design Single Tenant Yield 7.3%
-------------------- --------------------- ----------
5. Block B, IDA Business & Technology Park, Athlone, Co. Westmeath
Investment Midlands Tenant FDI
Region
Asset Block B WAULT (expiry/break) 13.2/3.2
--------------- ---------------------- ---------
Sector Industrial Acquisition Price EUR6.22m
---------------- --------------------- ---------
Area 54,358sq. ft Valuation EUR6.18m
---------------- --------------------- ---------
Gross yield at
Age of Building 11 years fair value 8.6%
---------------- --------------------- ---------
Gross Reversionary
Building Design Single tenant Yield 8.6%
---------------- --------------------- ---------
Principal Risks and Uncertainties
The Company's Board has overall responsibility for the establishment and oversight of the Company's risk management framework to ensure that its strategy can be successfully implemented. The Audit Committee is responsible for developing and monitoring the Company's risk management policies, as set out in the governance statement. Risk management policies are established to identify and analyse the risks and emerging risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. All of these policies are regularly reviewed in order to reflect changes in the market conditions and the Company's activities.
The Company's risk register, reviewed by the Audit Committee, records key risks and emerging risks across the Company's current and future investment, operations, IT, governance, economic and strategic areas of activity. The register assesses the likelihood and impact of risks as well as their direction in order to monitor progress in managing and mitigating them. A register of errors and breaches is also maintained and no material breaches were noted during the financial period.
The Board
The Board has overall responsibility for maintaining and monitoring the Group's systems for risk management and internal control. The Board reviews and approves the risk appetite of the Company.
The Audit Committee
The Board has charged the Audit Committee with reviewing the adequacy and effectiveness of the Company's internal control (including financial control) and risk management systems. The Audit Committee assesses management's risk measurement and control.
Executive Management
Executive management have day to day responsibility for ensuring the Board's strategy with regards to risk management, measurement and reporting is implemented. In addition, they identify and provide assessment of current and future risks the Company may face for the Board's review.
Internal Audit
The Audit Committee considers the nature, scale, complexity and range of operations of the Company, including its external administrator structure for the first ten months of the period in relation to financial reporting.
During the period the company internalised the finance function that had previously been provided by the Administrator. As part of this process, the required internal controls and segregation of duties were put in place. In order to reduce the risks surrounding the transfer of the finance function to the internal finance team the company ran parallel accounting records with the Administrator for the months of August, September and October 2019. Reviews were completed during this period to ensure that the internal finance team have the capabilities to maintain the accounting records of the company, following which the Administrator resigned on 31 October 2019. The internal finance team have assumed the Administrator's role and now ensures that reporting to the Audit Committee and the Board is adequate, accurate, and timely.
The internal finance team maintains internal control processes, disaster recover processes and a business continuity programme which is reviewed on a regular basis. Based on the Committee's assessment of the foregoing controls within the Company, combined with the current size of the Company, the Audit Committee has recommended to the Board that it does not believe it is necessary to establish an internal audit function at this time. The Board concurs with the Audit Committee's recommendation not to establish an internal audit function for the Company at this time. The Audit Committee will continue to review this position annually and make appropriate recommendations to the Board.
The Company's assets are primarily office and industrial commercial properties in the Republic of Ireland. The principal risks it therefore faces are related to the Irish commercial property market in general, the Company's operating environment and individual properties and tenants. The Board has carried out a robust assessment of the principal risks and sets out below the principal risks and uncertainties that the Company is exposed to and that may impact performance in the coming financial year. The Company proactively identifies, assesses, monitors and manages these risks. Some risks are not yet known and some that are not currently deemed material may turn out to be material in the future. The material risks and uncertainties identified, along with their strategic impact on the business and mitigating factors, have been outlined.
Identified Impact on the Company/Property Mitigating activities Momentum
Risk market
Key Macro
economic risks
---------------------------------------------------------------------------------------------------
Brexit Weakening Irish The key risk areas Increasing
economy puts pressure by sector (agriculture,
on rents and tenants, food manufacture)
in the event of are avoided in the
a hard Brexit there REIT portfolio. Tenants
is the possibility are assessed on the
that the border volume of their sales
between the Republic to the UK or supplies
of Ireland and Northern from the UK at rental
Ireland becomes or acquisition. Targeted
a hard border properties are majority
tenanted by stronger
tenants.
------------------------------- -------------------------------- -----------
Weakening Weakening global The REIT assets are Stable
economy and/or national judged on the quality
economy puts pressure and local grounding
on rents and tenants. of tenants and prospective
Fall in availability tenants. Targeted
of debt financing. properties are majority
Fewer buyers for tenanted by stronger
the REIT's properties tenants with demand
and businesses not
just dependant on
the local economy.
Tenant behaviour following
the economic downturn
after of 2007/8 is
reviewed to indicate
correlation with macroeconomic
weakness
------------------------------- -------------------------------- -----------
Weak Foreign Risk of falling The Company's acquisition Stable
Direct Investment demand from Foreign policy requires alternative
demand due Direct Investment use planning. The
to macro-economic tenants Company monitors and
factors aims to understand
Foreign Direct Investment
trends in advance.
------------------------------- -------------------------------- -----------
Interest rate Debt facility costs The Company will seek Stable
risk - rising based on Euribor to mitigate the impact
rates may increase with of interest rate rises
an adverse effect on any future debt
on dividend payments. facility. The Company's
finance manual includes
mitigating policies
for hedging interest
rate risk.
------------------------------- -------------------------------- -----------
Key Property
related risks
-------------------------------------------------------------------------------------------------
Valuation Property assets The Company has a Decreasing
of Company outside the Dublin separate Valuation
Assets Central Business Committee to ensure
District may lack the most capable valuers
recent comparable are used. The Valuation
transactions or Committee can change
benchmarks for an the valuer and use
external valuer more than one valuer
to use in valuation. for the portfolio.
The property team
keep a record of comparables
from acquisition to
share with the valuer.
--------------------------- ------------------------------ -----------
Property concentration Aggregation of property The Company's investment Stable
location, tenant, committee reviews
building use and each asset individually
tenant sectors may and against the aggregated
expose the Company portfolio on purchase
to increased risk or later significant
capital expenditure.
The Company seeks
to maintain a suitably
diverse portfolio
of properties and
tenants, paying regard
to the tenant's credit
quality. Significant
purchases, lease amendments
or capital expenditure
are matters reserved
for the Board.
--------------------------- ------------------------------ -----------
Tenant payment Risk that the Company's Tenants' covenant Stable
behaviour current or future strength and prior
tenants fail to rental performance
make payments due is reviewed at purchase,
in a full or timely the property management
manner, which could group conduct regular
affect the Company's tenant meetings and
dividends. tenant financial reviews.
--------------------------- ------------------------------ -----------
Tightening Risk the Company The Company's owned Stable
of rental will not be able assets would reflect
yields to invest capital this tightening to
at its expected help achieve NAV price
rental yields targets. The Company's
current portfolio
is reversionary, which
would be expected
to support the company's
rental income. The
Company seeks to raise
capital against identified
assets to minimise
the impact of lower
rental yields on new
investments.
--------------------------- ------------------------------ -----------
Refurbishment Failing contractors The Company does not Stable
- contractor may delay or increase expect to undertake
failure and the cost of refurbishment substantial refurbishment
cost and then only with
Board approval. The
Chief Investment Officer's
team would require
competing bids, pre-set
timelines and budgets
to identify failings
and replace contractors
earlier.
--------------------------- ------------------------------ -----------
Ineffective Risk that the Company's The Property management Stable
Asset Management assets become less group establish early,
attractive to current on-going relationships
and target tenants. with tenants to understand
their accommodation
needs. Each property
has an asset management
plan to ensure the
tenant and Company
work together in this
regard. Asset management
is reported weekly
on all properties
to the Executive Directors
--------------------------- ------------------------------ -----------
Key Operational
Risks
--------------------------------------------------------------------------------------------------
Inability Risk the Company The Company has leverage Stable
to raise further will not be able below the REIT ceiling.
debt or equity to fund unexpected The Company has and
capital major capital expenditure. will remain in contact
Risk the Company with leverage providers
will not be able to ensure leverage
to achieve its growth is available at attractive
strategy levels. The Investor
relations policy has
a calendar for capital
raising ensuring the
Company is regularly
appraised of Investor
interest and can target
investors well in
advance of the Company's
immediate needs. The
Company has raised
equity capital twice
in 2019, increasing
the shares in issue
by 49%, and debt capital
once, increasing debt
facility by 46%
---------------------------- ------------------------------- -----------
Loss of key Risk of Executive The Company has Executive Stable
staff management resignation, management with significant
illness or death personal investment
in the Company with
lock-ups expiring
in June 2020, and
a specifically judged
remuneration scheme
and Long Term Incentive
Plan to encourage
retention. Executive
management and other
key staff have non-compete
clauses.
---------------------------- ------------------------------- -----------
Regulatory, Risk of changing The Company has a Increasing
political, operating environment strong Board with
legislative, hurting returns a mix of capital markets,
tax, environmental and amending strategy property and audit
or planning experience to better
changes be aware of and react
to these changes.
The Executive management
have experience of
managing through legislative
and tax changes and
relationships with
suitable professionals
for Company advice.
---------------------------- ------------------------------- -----------
Taxation planning Emerging risk the The Company has established Stable
Company may attract a plan to ensure it
a tax charge if is listed on a recognised
not listed on a exchange in advance
recognised exchange of the required date.
within 3 years of Counterparties and
IPO (May 2021) advisers have been
selected, draft timings
and actions have been
reviewed and agreed
by the Board, who
are updated by executive
management.
---------------------------- ------------------------------- -----------
Environmental Emerging risk that The Company has established Increasing
change the Company's assets a Sustainability Policy
and operating or and Sustainability
economic model may Committee to ensure
be adversely affected environmental risks
by climate change are identified and
mitigated. The Company
measures and manages
its properties' environmental
impact directly.
---------------------------- ------------------------------- -----------
Corona virus Emerging risk that The Company's employees Increasing
spread Covid-19 adversely can be quickly isolated.
affects the Company's The Company's tenants
tenants, employees are monitored for
and other stakeholders impact of the disease
by the property management
group.
---------------------------- ------------------------------- -----------
Business interruption Risk one or more The Company has a Stable
environmental or robust business continuity
other disturbances plan. The Company's
adversely affect assets are geographically
the Company's physical dispersed and diversified
operating environment by tenant, type and
use. All employees
have the ability to
work remotely.
---------------------------- ------------------------------- -----------
Consolidated Statement of Financial Position
2019 2018
As at 31 December 2019 Notes EUR EUR
Non-current assets
Investment properties 14 115,790,000 77,915,000
Computer equipment 15 4,717 -
Interest in joint venture 16 3,473 3,473
--------------- --------------
115,798,190 77,918,473
Current assets
Trade and other receivables 17 3,527,754 565,100
Cash and cash equivalents 18 14,577,461 4,823,734
Total current assets 18,105,215 5,388,834
Total assets 133,903,405 83,307,307
Current liabilities
Trade and other payables 19 (3,577,657) (2,333,729)
Non-current liabilities
Borrowings 20 (20,403,207) (5,840,398)
--------------- --------------
Total liabilities (23,980,864) (8,174,127)
--------------- --------------
Net assets 109,922,541 75,133,180
=============== ==============
Equity
Share capital 21 1,115,722 750,000
Share premium 22 39,409,322 4,000,000
Other reserves 22 125,222 -
Retained earnings 22 69,272,275 70,383,180
--------------- --------------
1
Total equity 109,922,541 75,133,180
=============== ==============
IFRS Net asset value per ordinary
share (cents) 13 98.52 100.18
EPRA Net asset value per ordinary 13 98.52 100.18
share (cents)
13 98.41 100.18
Diluted IFRS asset value per
ordinary share (cents)
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2019
Year ended 5 April 2018
31 December to
2019 31 December
2018
EUR EUR
Notes
Total Rental and related income
Rental income 3 9,946,724 2,764,695
Property expenses 4 (527,948) (204,351)
-------------- --------------
Net Rental and related income 9,418,776 2,560,344
Fair value (loss)/gains on investment
properties 5 (768,283) 1,609,126
Realised gain on disposal of
Investment properties 5 123,174 -
-------------- --------------
Total income after revaluation
gains and losses 8,773,667 4,169,470
Expenditure
AIFM fees 6 (95,833) (70,378)
Goodwill 7 - (180,011)
Finance costs 8 (669,384) (15,412)
Administration expenses 9 (2,949,241) (1,568,725)
-------------- --------------
Total expenditure (3,714,458) (1,834,526)
Share of result from joint venture 16 - 3,473
Profit before taxation 5,059,209 2,338,417
Income tax 11 - (4,538)
Profit for the financial period 22 5,059,209 2,333,879
-------------- --------------
Total comprehensive income for
the financial period attributable
to the owners of the Group 5,059,209 2,333,879
============== ==============
Basic earnings per share (cent) 12 6.24 4.08
Diluted earnings per share (cent) 12 6.23 4.08
Consolidated Statement of Changes in Equity
For the financial year ended to 31 December 2019
Share capital Share Retained Other Total
Notes account premium earnings Reserves equity
-------------------
EUR EUR EUR EUR EUR
------------------- ------------- ------------------- ------------------- -------------- ---------- ------------
As at 1 January
2019 750,000 4,000,000 70,383,180 - 75,133,180
Total
comprehensive
income - - 5,059,209 - 5,059,209
Ordinary share
capital
issued 21 365,722 35,409,322 - - 35,775,044
Share issue costs 22 - - (1,026,614) - (1,026,614)
Share based
payments
expense 25 - - - 125,222 125,222
Equity Dividends
paid 23 - - (5,143,500) - (5,143,500)
------------------- ------------------- -------------- ---------- ------------
As at 31 December
2019 1,115,722 39,409,322 69,272,275 125,222 109,922,541
=================== =================== ============== ========== ============
For the financial period from 5 April 2018 (date of incorporation) to 31 December 2018
Share capital Share Retained Other Total
Notes account premium earnings Reserves equity
-------------------
EUR EUR EUR EUR EUR
------------------- ------------- ------------------- ------------------- -------------- ---------- ------------
Total
comprehensive
income
for the period: - - 2,333,879 - 2,333,879
Transactions with
owners
recognised in
equity:
Issue of ordinary
share capital
Transfer to 21 750,000 74,250,000 - - 75,000,000
retained
earnings 22 - (70,250,000) 70,250,000 - -
Issue costs 22 - - (2,200,699) - (2,200,699)
------------------- ------------------- -------------- ---------- ------------
As at 31 December
2018 750,000 4,000,000 70,383,180 - 75,133,180
=================== =================== ============== ========== ============
Consolidated Statement of Cash Flow
Notes Year ended 5 April 2018
31 December to
2019 31 December
2018
------------- -------------
Cash flows from operating activities
Profit before taxation 5,059,209 2,338,417
Adjustments for:
Depreciation 858 -
Fair value losses/(gains) on investment
properties 5 1,552,378 (1,609,126)
Gain on disposal of investment property 5 (123,174) -
Share of profit in joint venture 16 - (3,473)
Finance costs 8 669,384 15,412
Goodwill 7 - 180,011
Increase in trade and other receivables (2,962,651) (147,502)
Decrease in trade and other payables 1,069,370 974,402
Equity share based payments 25 125,222 -
Corporation Tax paid - (6,606)
------------- -------------
Net cash inflow from operating activities 5,390,596 1,741,535
Cash flows from investing activities
Purchase of investment properties
and development expenses 14 (39,546,096) (50,395,874)
Development
Proceeds on disposal of investment
property 14 (831,283) -
Purchase of computer equipment 14 1,073,174 -
15 (5,575) -
------------- -------------
Net cash outflow from investing
activities (39,309,780) (50,395,874)
Cash flows from financing activities
Proceeds from the issue of ordinary
share capital 21/22 35,775,044 75,000,000
Redemption of Class A shares in
Yew Tree Investment Fund(1) - (23,064,484)
Issue costs (3) 22 (1,026,614) (2,200,699)
Proceeds from loans and borrowings 20 14,591,200 6,199,540
Loan repayment (2) 20 (523,219) (8,329,422)
Equity dividends paid 23 (5,143,500)
Net cash acquired from subsidiary
undertaking - 5,873,138
------------- -------------
Net cash inflow from financing activities 43,672,911 53,478,073
Net increase in cash and cash equivalents 9,753,727 4,823,734
Cash and cash equivalents at beginning
of year 4,823,734 -
------------- -------------
Cash and cash equivalents at the
end of the period 18 14,577,461 4,823,734
============= =============
For the financial year ended 31 December 2019
(1) On 8 June 2018 all of the Yew Tree Investment Fund (in Members Voluntary Liquidation) Class A shares were redeemed.
(2) On 8 June 2018 the Company subscribed to 8,329,422 EUR1 B ordinary shares for EUR8,329,422, the EUR8,329,422 proceeds were used to fully repay the Yew Tree Investment Fund's (in Members Voluntary Liquidation) outstanding loan subsequent to acquisition. The current year balance relates to repayment of company borrowings.
(3) Issue costs represent the Company's contribution to costs of issuing ordinary share capital for the financial period.
Company Statement of Financial Position
As at 31 December 2019
2019 2018
EUR EUR
Notes
Non-current assets
Investment properties 14 115,790,000 77,915,000
Computer equipment 15 4,717 -
--------------- --------------
115,794,717 77,915,000
Current assets
Trade and other receivables 17 3,232,119 562,976
Cash and cash equivalents 18 14,086,632 4,364,045
Total current assets 17,318,751 4,927,021
Total assets 133,113,468 82,842021
Current liabilities
Trade and other payables 19 (3,044,870) (2,099,951)
Non-current liabilities
Borrowings 20 (20,403,207) (5,840,398)
--------------- --------------
Total liabilities (23,448,077) (7,940,349)
--------------- --------------
Net assets 109,665,391 74,901,672
=============== ==============
Equity
Share capital 21 1,115,722 750,000
Share premium 22 39,409,322 4,000,000
Other reserves 22 125,222 -
Retained earnings 22 69,015,125 70,151,672
--------------- --------------
Total equity 109,665,391 74,901,672
=============== ==============
IFRS Net asset value per ordinary 98.29 100.18
share (cents)
EPRA Net asset value per ordinary 98.29 100.18
share (cents)
Diluted IFRS asset value per 98.18 100.18
ordinary share (cents)
The Company reported a profit of EUR5,033,567 (2018: EUR2,102,371) for the year ended 31 December 2019.
Company Statement of Changes in Equity
For the financial period to 31 December 2019
Share capital Share Retained Other Total
Notes account premium earnings reserves equity
-------------------
EUR EUR EUR EUR EUR
------------------- ------------- ------------------- ------------------- -------------- ---------- ------------
As at 1 January
2019 750,000 4,000,000 70,151,672 - 74,901,672
Total
comprehensive
income - - 5,033,567 - 5,033,567
Ordinary share
capital
issued 22 365,722 35,409,322 - - 35,775,044
Share issue costs 22 - - (1,026,614) - (1,026,614)
Share based
payments
expense 25 - - - 125,222 125,222
Equity Dividends
paid 23 - - (5,143,500) - (5,143,500)
------------------- ------------------- -------------- ---------- ------------
As at 31 December
2019 1,115,722 39,409,322 69,015,125 125,222 109,665,391
=================== =================== ============== ========== ============
Company Statement of Changes in Equity
For the financial period from 5 April 2018 (date of incorporation) to 31 December 2018
Share
capital Share Retained Other Total
Notes account premium earnings reserves equity
-----------------------
EUR EUR EUR EUR EUR
----------------------- ------------- ---------------- ---------------- ---------------- ---------- ------------
Total comprehensive
income
for the period: - - 2,102,371 - 2,102,371
Transactions with
owners
recognised in equity:
Issue of ordinary
share capital 21 750,000 74,250,000 - - 75,000,000
Transfer to retained
earnings 22 - (70,250,000) 70,250,000 - -
Issue costs 22 - - (2,200,699) - (2,200,699)
---------------- ---------------- ---------------- ---------- ------------
As at 31 December
2018 750,000 4,000,000 70,151,672 - 74,901,672
================ ================ ================ ========== ============
Company Statement of Cash Flow
For the year ended 31 December 2019
Year ended 5 April 2018
31 December to
2019 31 December
2018
Notes EUR EUR
-------------- -------------------
Cash flows from operating activities
Profit before taxation 5,033,567 2,102,371
Adjustments for:
Depreciation 858
Fair value losses/(gains) on
investment properties 5 1,552,378 (1,609,126)
Gain on disposal of investment
property 5 (123,174) -
Finance costs 8 669,384 15,412
Increase in trade and other
receivables (2,703,643) (403,622)
Increase in trade and other
payables 770,364 1,725,397
Equity share based payments 25 125,222 -
Net cash inflow from operating
activities 5,324,956 1,830,432
Cash flows from investing activities
Purchase of investment properties
and development expenses 14 (39,546,096) (50,395,874)
Purchase of shares in subsidiary(1) - (26,069,354)
Development 14 (831,283) -
Proceeds on disposal of investment
property 14 1,073,174 -
Purchase of computer equipment 15 (5,575) -
Distribution from Yew Tree Fund 26 34,500 -
-------------- -------------------
Net cash outflow from investing
activities (39,275,280) (76,465,228)
Cash flows from financing activities
Proceeds from the issue of ordinary
share capital 22 35,775,044 75,000,000
Issue costs(2) 22 (1,026,614) (2,200,699)
Proceeds from loans and borrowings 20 14,591,200 6,199,540
Loan repayment 20 (523,219) -
Equity dividends 23 (5,143,500) -
Net cash inflow from financing
activities 43,672,911 78,998,841
Net increase in cash and cash
equivalents 9,722,587 4,364,045
Cash and cash equivalents at
beginning of year 4,364,045 -
-------------- -------------------
Cash and cash equivalents at
the end of the period 18 14,086,632 4,364,045
============== ===================
(1) In relation to the purchase of shares in subsidiary, on 8 June 2018 all of the Yew Tree Investment Fund (in Members Voluntary Liquidation) Class A shares were redeemed following the issue of Class B shares.
(2) Issue costs represent the Company's contribution to costs of issuing ordinary share capital for the financial period.
1. Accounting policies
1.1 General information
Yew Grove REIT plc (the "Company", registered number 623896), together with entities controlled by the Company (its subsidiaries) (together the "Group"), is engaged in investing in a diversified portfolio of Irish commercial property with a view to maximising its shareholder returns.
The Company is a public limited company, incorporated and domiciled in Ireland. The registered address of the Company is 4th Floor, 76 Lower Baggot Street, Dublin 2.
The ordinary shares of the Company are listed on the Euronext Growth market (formerly the Enterprise Securities Market) of Euronext Dublin and the Alternative Investment Market of the London Stock Exchange.
1.2 Trading period
The Consolidated financial statements for the Group shown herein are for the financial year ended 31 December 2019 with comparatives from 5 April 2018 (date of incorporation) to 31 December 2018.
The results are inclusive of the parent company (Yew Grove REIT plc) and its subsidiary companies controlled by the Company.
1.3 Going concern
Based on financial projections which extend beyond twelve months from the date of the approval of these financial statements, the Directors consider that the Company and Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have concluded that they should prepare the consolidated and company financial statements on a going concern basis.
1.4 Basis of preparation
The statements of the Group and Company for the financial year ended 31 December 2019 have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU") and the Companies Act 2014.
The financial statements of the Group and Company have been prepared on the historical cost basis, except for investment properties that are measured at fair value.
The financial statements of the Group and Company are presented in Euro, which is the functional currency.
Standards not affecting the reported results and financial position
IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these Consolidated financial statements:
Amendments to References to the Conceptual Framework 1 January
in IFRS Standards 2020
IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its Associate or Joint 1 January
Venture 2020
Amendments to IFRS 3 - Definition of a business 1 January
2020
Amendments to IAS 1 and IAS 8 - Definition of 1 January
material 2020
IFRS 17 Insurance contracts 1 January
2021
Management are of the view that the initial adoption of any of the above will not materially change the financial performance or the reported position of the Group or Company.
New standards effective for the current accounting period do not have a material impact on the consolidated financial statements of the Group and Company. These are discussed in further detail below.
Standards implemented for the first time on preparation of these financial statements
IFRS 16 Leases
In the current year, the Group and Company adopted IFRS 16 Leases for the first time. The date of initial application of IFRS 16 for the Group and Company was 1 January 2019. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requires the recognition of a right-of-use asset and a lease liability at commencement of all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The Group and Company is not party as a lessee to material property and equipment leases. The Group and Company does act as a lessor. Details of the Group's and Company's accounting policies under IFRS 16 are set out below.
Lease contracts - the Group and Company as lessor
The Group has acquired investment properties which are subject to commercial property leases with tenants. The Group has determined, based on an evaluation of the terms and conditions of these lease arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains substantially all of the risks and rewards incidental to ownership of these leased properties. Income from these leases is recognised on a straight line basis, recognition is from the date on which the company becomes a contractual party to the lease. A Lease is derecognised at the termination of the lease or when the company is no longer a contractual party to the lease.
Lease contracts - the Group as lessee
The Group assesses whether a contract is a lease or contains a lease at inception of the lease contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (less than EUR5,000 per annum). For these short-term leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability of leases other than short term leases is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
-- fixed lease payments (including in substance fixed payments), less any lease incentives;
-- variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
-- the amount expected to be payable by the lessee under residual value guarantees;
-- the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
-- payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
-- the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
-- the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
-- a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the year presented.
Right-of-use assets are amortised over the shorter period of lease term or useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Group does not have any leases that include purchase options or transfer ownership of the underlying asset.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as peppercorn ground leases), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within Expenses in the consolidated statement of comprehensive income. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
Approach to transition
The Group has applied IFRS 16 using the modified retrospective approach, without restatement of the comparative information.
Financial impact
The application of IFRS 16 to leases previously classified as operating leases under IAS 17 did not result in any changes for the recognition of right-of-use assets and lease liabilities. Leases are expensed to the Statement of Comprehensive Income on a straight-line basis.
1.5 Significant accounting judgements, estimates and assumptions
The preparation of the Group's Consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, 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 assets or liabilities affected in future periods.
In the process of applying the Company's and Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the Consolidated financial statements:
a) Significant judgements
The following are the significant judgements, apart from those involving estimations (which are presented separately below), that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Consolidated financial statements.
Operating lease contracts - the Group as lessor
The Group has acquired investment properties which are subject to commercial property leases and licences with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for these leases as operating leases.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows:
i. Fair value hierarchy applied a. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
b. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
c. Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
ii. Property is treated as acquired or disposed of when the significant risks and rewards of ownership have been assumed or relinquished by the Group. This occurs when:
a. it is probable that the future economic benefits that are associated with the property will flow to the Group;
b. there are no material conditions which could affect completion of the acquisition; and c. the cost of the investment property can be measured reliably.
iii. Additions to property consist of construction, re-development, refurbishment and other directly attributable costs such as professional fees and expenses and capitalised interest where applicable.
iv. Property is initially measured at cost including related acquisition costs, and subsequently valued by the Group's Valuers at its respective fair value at each reporting date (30 June and 31 December). The difference between the fair value of a property at the reporting date and its carrying value prior to the external valuation is recognised in the Consolidated Statement of Comprehensive Income as a fair value gain or loss.
v. Share based payment fair value at grant date is estimated using a Monte Carlo simulation pricing model, taking into account the terms and conditions upon which the options are granted.
Control
The IFRS 10 control model focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee, and ability to use its power to affect those returns. In particular, IFRS 10 requires the Group to consolidate investees that it controls on the basis of de facto control. In accordance with IFRS 10, the Group's assessment of control is performed on a continuous basis and the Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of the control model.
b) Analysis of sources of estimation uncertainty
The key future assumptions, and other key sources of estimation uncertainty for the reporting period that may 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.
Fair value of investment property
The market value of investment property ("property") would normally be determined by a real estate valuation expert to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties are valued on an individual basis.
The valuation of the Group's properties as at 31 December 2019 was completed by Lisney Limited ("Lisney") as external independent Valuer. Lisney prepared the valuation on the basis of market value in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Global Standards (June 2017). Their valuation was subsequently reviewed by the Valuation Committee.
The Group's investment properties will next be valued by the Group's Valuers as at 30 June 2020. The valuers will continue to use recognised valuation techniques and the principles of IFRS 13 for the valuation as at 30 June 2020 and 31 December 2020. Refer to note 14 for further disclosure on the recognised valuation techniques.
The Board's Valuation Committee conducts a detailed review of each property valuation, the underlying valuation assumptions and the valuation process used by the valuer to ensure that valuation assumptions are valid and have been applied as set out below. Property valuations are complex and involve data which is not publicity available and a degree of judgement. Each valuation is based upon key assumptions, particularly estimated rental values and market-based yields. The valuation approach to on-going developments and material refurbishments is on a residual basis and factors such as the assumed timescale, the assumed future development costs and an appropriate finance and/or discount rate are used to determine the property value together with market evidence and recent comparable properties where appropriate.
The Directors are satisfied that the valuations of the Group's properties are appropriate for inclusion in the Consolidated and Company financial statements. The fair value of the Group's and Company's properties accurately reflects the valuation provided by Lisney and no changes to Lisney's valuation was made by the valuation committee. The valuation is based on the future cashflows from rental income both for the current lease period and future estimated rental values, adjusted for expected void periods and appropriate discount rates.
Calculation of loss allowance
When measuring expecting credit loss ("ECL") the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
1.6 Rental and related income
The Group's main source of revenue is the leasing and licensing of properties. Lease and licence revenue is recognised over the period of the lease or licence contracts. Rental income is recognised as revenue at the time and amount governed by the lease or licence in place with the customer.
The Group recognise revenue from the following major activities:
-- Operating lease income from the Group's investment properties; -- License income from licencing of the Group's car park spaces;
-- Service charge income from contributions received from tenants relating to property expenses.
Revenue is measured based on the consideration to which the Group's expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties.
Rental income
The Group receives rental income from tenants under leases associated with the Group's properties. Rental income is recognised on a straight line basis over the term of the lease.
Where a rent-free period is included as an incentive in a lease the rental income foregone is allocated evenly over the period from the first day of the lease to the earlier of termination date of the lease or first break option of the lease. Where a lease incentive takes the form of an incentive payment to a tenant the resultant cost is amortised evenly over the remaining life of the lease to its earliest termination date. The sum of unamortised incentives is included in trade and other receivables and is released over the term of the relevant leases. Lease adjustments such as rent reviews are included when the rent review or adjustment has been completed and agreed with the tenant.
License income
License income represents amounts under licences receivable from tenants associated with the licensing of the Group's car park spaces. License income is recognised over the term of the license. License adjustments such as reviews or extensions are included when the licence review, extension or adjustment has been completed and agreed with the tenant.
Service charge income
Service charge income from tenants are recognised as revenue in the period in which the related expenditure is incurred.
Surrender Premium
Where the Group receives a surrender premium from a tenant for the early termination of a lease, the proceeds, net of any then agreed costs associated with dilapidation and legal costs relating to that lease, is recognised in the accounting period in which the surrender took place.
1.7 Direct lease costs
Direct lease costs incurred in the negotiation and arrangement of new leases to tenants are initially capitalised and are then recognised as an expense over the period from the date of the lease to the earliest termination date of the lease.
1.8 Finance income and finance costs
The Group's finance income and finance costs include interest income, interest expense, commitment fees and related charges. Interest income or expense is recognised using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and costs paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
1.9 Taxation
Current tax
The Company elected for Real Estate Investment Trust ("REIT") status and on 21 May 2018 gave notice to Revenue that it was the principal company of a group REIT following the acquisition of the entire share capital of the Yew Tree Investment Fund (in Members Voluntary Liquidation). An Irish REIT or group REIT will not pay Irish corporation tax on profits and gains from its Property Rental Business. Corporation tax will still apply in the normal way in respect of its Residual Business which may include certain trading activities incidental to letting, letting of administrative property which is temporarily surplus to requirements, and certain income such as dividends from other Irish REITs. Corporation tax may also be payable in respect of profits arising in joint venture or co-investment arrangements where no REIT election has been made (or on the non-REIT proportion of the profits of joint ventures where an Irish REIT election has been made) and also where a member of a group or an interest in an investment vehicle (as opposed to property involved in the Property Rental Business) is sold. Other taxes such as VAT, stamp duty, local property tax and payroll taxes will also still apply in the normal way.
1.10 Financial instruments
Financial assets and liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets or liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction costs attributable to the acquisition of financial assets or liabilities at fair value through profit or loss are recognised immediately in the Consolidated Statement of Comprehensive Income.
i. Cash and cash equivalents
Cash and cash equivalents include cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group and Company in the management of its short-term commitments.
ii. Trade and other receivables and trade and other payables
Trade receivables include amounts due from tenants. Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and other payables include amounts due to third party suppliers and prepaid rent amounts received from tenants in advance.
Trade and other receivables and trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. The Group applies the simplified approach to trade receivables for which expected credit loss uses the lifetime expected credit allowance. The Group has no material exposure to bad debts as the majority of the Group's rental income is from State bodies or FDI entities that have good credit standing. The payment and credit performance of these tenants is closely monitored, therefore the expected credit loss is not material and has not been presented. Where there is evidence of credit loss appropriate allowances are recognised as bad debts in the Statement of Comprehensive income.
iii. Loans and borrowings
Loans are initially recorded at fair value plus transaction costs. They are subsequently accounted for at amortised cost.
1.11 Investment
Investments held as fixed assets are stated at fair value. Income from other investments together with any related taxation is recognised in the Consolidated Statement of Comprehensive Income in the year in which it is receivable.
Basis for consolidation
The Consolidated financial statements include the financial statements of the holding company (Yew Grove REIT plc) and all subsidiary companies as at 31 December 2019. Control is achieved when the Company has the power over the investee, exposure, or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the investor's returns. The results of subsidiaries acquired or disposed of during the financial period are included in the Consolidated Statement of Comprehensive Income from the effective date of control or to the effective date of loss of control as appropriate. All intragroup transactions, assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Upon acquisition of a business, fair values are attributed to the identifiable net assets acquired. The Group's accounting policy in relation to goodwill is set out in note 1.20.
There were no subsidiaries acquired in the current year. Details of the subsidiaries acquired during the prior financial period are outlined below and in Note 26.
Yew Tree Investment Fund plc (in Members Voluntary Liquidation)
The Consolidated financial statements for the period ended 31 December 2018 include the results of Yew Tree Investment Fund (in Members Voluntary Liquidation) from the date of acquisition of 8 June 2018 to the date of loss of control on 27 July 2018 following the appointment of a liquidator. At the Statement of Financial Position date, the liquidation of Yew Tree Investment Fund (in Members Voluntary Liquidation) had yet to be fully completed.
1.12 Property, Plant and Equipment
Office and computer equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is recognised to write off the cost or value of assets less their residual value over their useful lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives for the main asset categories are:
Office and computer equipment: 3 years
1.13 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire. Acquisition-related costs are recognised in the Consolidated Statement of Comprehensive Income as incurred.
1.14 Interest in Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exits only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these Consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5.
An investment in a joint venture is accounted for using the equity method from the date on which the investee becomes a joint venture.
1.15 Foreign currency
Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the Statement of Financial Position date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the rates of exchange ruling at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined. The resulting exchange differences are dealt with in the Consolidated and Company Statement of Comprehensive Income.
1.16 Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (a qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset. All other borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred.
1.17 Pension
Annual contributions payable to the Group's pension scheme are charged to the Company Statement of Comprehensive Income in the period to which they relate.
1.18 Share Based Payments
The long term incentive plan arrangement ("LTIP") between the Company and its Executive Management is accounted for as an equity settled share based payment arrangement. The initial and only outstanding grants under this plan were made on 15 February 2019. On that date the Company estimated the fair value of each granted instrument and the number of equity instruments for which service, market and non-market performance conditions are expected to be satisfied. This initial estimate of the total share-based payment cost is expensed over the vesting period.
Subsequent to this initial recognition and measurement, the estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied will be revised during the vesting period, (the period from 15 February 2019 to 15 February 2022). Ultimately, the share-based payment cost is based on the fair value of the number of equity instruments to be issued on satisfaction of these conditions (see note 25 for further details).
1.19 Share issue cost
Costs directly attributable to issuing new shares are deducted from retained earnings net of any related tax deduction. All other costs are recognised in the Company Statement of Comprehensive Income in the period in which they are incurred.
1.20 Goodwill
Goodwill arising on the acquisition of a subsidiary is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer's previously-held equity interest (if any) in the entity over the net fair value of the identifiable net assets recognised.
Goodwill is not amortised but is reviewed for impairment at least annually. Any impairment loss is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed. Any gain on a bargain purchase is recognised in the statement of comprehensive income immediately.
1.21 Impairment of financial assets
The Group applies a three-stage expected credit loss model ("ECL") in relation to the impairment of its financial assets carried at amortised cost except for trade receivables for which the simplified approach is applied in accordance with IFRS 9. The ECL is used to account for expected credit losses and changes in those ECL at each reporting date to reflect changes in credit risk since initial recognition of the financial assets.
The expected credit loss is charged against the respective financial asset and recognised in the Consolidated Statement of Comprehensive income.
The three stages that determine the amount of impairment to be recognised as expected credit losses at each reporting date are as follows:
i. Stage 1: Credit risk has not increased significantly since initial recognition - recognise 12 months ECL;
ii. Stage 2: Credit risk has increased significantly since initial recognition - recognise lifetime ECL;
iii. Stage 3: Financial asset is credit impaired - recognise lifetime ECL.
The 12 months ECL is calculated by multiplying the probability of a default occurring in the next 12 months by the total (lifetime) ECLs that would result from that default. Lifetime expected credit losses are the present value of expected credit losses that arise if a borrower defaults on its obligation at any point throughout the terms of the financial asset.
1.21 Impairment of financial assets
Definition of default
The Group considers the following as constituting events of default for internal credit risk management purposes as experience indicates that financial assets that meet the following criteria are generally not recoverable:
i. When there is a breach of financial covenants by the debtor; and
ii. Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group).
Write off
The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.
2.Operating Segments
The Group is organised into two business segments, against which the Group reports its segmental information. These are Office Assets (including retail and mixed use buildings) and Industrial Assets. All of the Group's operations are in the Republic of Ireland. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who has been identified as the Board of Directors of the Company.
Unallocated income and expenses are items incurred centrally which are neither directly attributable nor reasonably allocable to individual segments. Unallocated assets are cash and cash equivalents, and certain other assets.
The Group's key measures of performance of a segment are net rental income and the movement in fair value of properties, as these measures illustrate and emphasize that segment's contribution to the reported profits of the Group and the input of that segment to earnings per share. By focusing on these prime performance measures, other key statistical data such as capital expenditure and one off exceptional items are separately highlighted for analysis and attention.
Revenue as stated in the Consolidated Statement of Comprehensive Income relates to rental income from its investment in commercial properties held by the Group, license income from the licensing of the Group's car park spaces and service charges received by its subsidiary management companies.
The reporting segments are new in the current financial year, the change is a result of the size of the portfolio increasing and identification by management of the differing returns between the two identified segments.
Major Customers
Included in gross rental income are rents of EUR4.6m (2018: EUR1.3m) which arise from the Group's three largest tenants, each of which contributed more than 10% of the Group's revenue. No other single tenant contributed more than 10% of the Group's revenue in 2019 and 2018.
Unallocated
Office Industrial expenses
Assets Assets and assets Group Total
2019 2019 Total 2019 2019 2019
EUR EUR EUR EUR EUR
Year ended
31 December
2019
Rental
income and
related
income 8,382,108 1,564,616 9,946,724 - 9,946,724
Property
outgoings (500,365) (27,583) (527,948) - (527,948)
-------------------------------------- ---------------------------- -------------- --------------------- -------------------------
Net rental
income 7,881,743 1,537,033 9,418,776 - 9,418,776
Net
movement
on fair
value of
investment
properties (1,063,004) 294,721 (768,283) - (768,283)
Gain on
Sale of
investment
property - 123,174 123,174 - 123,174
-------------------------------------- ---------------------------- -------------- --------------------- -------------------------
Net fair
value
movement (1,063,004) 417,895 (645,109) - (645,109)
Operating
expenses - - - (3,714,458) (3,714,458)
Profit
before tax 6,818,739 1,954,928 8,773,667 (3,714,458) 5,059,209
-------------------------------------- ---------------------------- -------------- --------------------- -------------------------
As at 31
December
2019
-------------------------------------- ---------------------------- -------------- --------------------- -------------------------
Investment
properties 88,200,000 27,590,000 115,790,000 - 115,790,000
-------------------------------------- ---------------------------- -------------- --------------------- -------------------------
Unallocated
Office Industrial expenses
Assets Assets and assets Group Total
2018 2018 Total 2018 2018 2018
EUR EUR EUR EUR EUR
Year ended
31 December
2018
Rental
income and
related
income 2,328,381 436,314 2,764,695 - 2,764,695
Property
outgoings (179,829) (24,522) (204,351) - (204,351)
---------------------------- ---------------------------- ------------ --------------------- -------------------------
Net rental
income 2,148,552 411,792 2,560,344 - 2,560,344
Net
movement
on fair
value of
investment
properties 617,389 991,737 1,609,126 - 1,609,126
Operating
expenses - - - (1,831,053) (1,831,053)
Profit
before tax 2,765,941 1,403,529 4,169,470 (1,831,053) 2,338,417
---------------------------- ---------------------------- ------------ --------------------- -------------------------
As at 31
December
2018
---------------------------- ---------------------------- ------------ --------------------- -------------------------
Investment
properties 64,185,000 13,730,000 77,915,000 - 77,915,000
---------------------------- ---------------------------- ------------ --------------------- -------------------------
3. Rental and related income
31 December 2019 5 April 2018
EUR to
31 December
2018
EUR
-------------------------- ----------------- -------------
Gross rental income 7,337,846 2,556,944
License income 243,015 56,789
Service charge income 365,863 150,962
Lease surrender premium 2,000,000 -
-------------------------- ----------------- -------------
Net rental income 9,946,724 2,764,695
-------------------------- ----------------- -------------
Gross rental income represents amounts receivable from tenants under leases associated with the Group's property business. License income represents amounts under licences receivable from tenants associated with the licensing of the Group's car park spaces. Service charge income relates to contributions from tenants of the Group's buildings for property expenses of the occupied buildings. Service charge income receivable from tenants is recognised in the period in which the related expenditure is recognised.
During the period the company agreed terms on the surrender of a lease at its property Office Block, Unit 2600, in Cork Airport Business Park. The lease surrender took effect on 30 June 2019. Of the EUR3 million surrender premium agreed, EUR2 million was for lease surrender recognised as part of revenue and EUR1 million for dilapidations recognised as part of the fair value gains. The total expenditure on dilapidations to 31 December 2019 was EUR215,905 leaving a gain of EUR784,095 on dilapidations which is recognised as part of the fair value gains (Note 5).
4. Property expenses
5 April 2018
31 December 2019 to
EUR 31 December
2018
EUR
------------------------- ------------------- -------------
Service charge expenses 329,552 157,581
Direct property costs 172,396 32,100
Car park costs 26,000 14,670
------------------------- ------------------- -------------
Total 527,948 204,351
------------------------- ------------------- -------------
Property expenses include service charges and other costs directly recoverable from tenants, and non-recoverable costs directly attributable to the Group's properties. Service charge expenses typically include security, insurance, maintenance and other costs of managing the buildings due from and recharged to tenants.
5. Fair value (Loss) /Gain on investment properties
5 April 2018
31 December 2019 to
EUR 31 December
2018
EUR
------------------------------------------ ------------------- -------------
Fair value (losses)/gains on investment
properties (1) (768,283) 1,609,126
Realised gain on disposal of investment
property 123,174 -
------------------------------------------ ------------------- -------------
Total (645,109) 1,609,126
------------------------------------------ ------------------- -------------
(1) The Fair value (losses)/gains on investment properties includes a gain on lease surrender premium of EUR784,095.
A valuation of the Group's properties as at 31 December 2019 was completed by Lisney Limited ("Lisney") as external independent valuer Lisney prepared the valuation on the basis of market value in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Global Standards (June 2017). Their valuation was subsequently reviewed by the Valuation Committee.
During the year the company agreed terms on the surrender of a lease at its property Office Block, Unit 2600, in Cork Airport Business Park.
6. AIFM Fees
5 April 2018
31 December 2019 to
EUR 31 December
2018
EUR
----------- ------------------- -------------
AIFM Fees 95,833 70,378
----------- ------------------- -------------
Total 95,833 70,378
----------- ------------------- -------------
The Company is required, as a REIT, to have an alternative investment fund manager ("AIFM"). The Company has agreed with Ballybunion Capital, an AIFM authorised by the Central Bank of Ireland, for it to act as the external AIFM of the Group, subject to overall supervision of the AIFM by the Board. The fees above are fees paid to the AIFM in accordance with the service level agreement between the AIFM and the Company.
7. Goodwill
5 April 2018
31 December 2019 to
31 December
2018
EUR EUR
----------------------- ------------------ ------------
Impairment of goodwill - 238,750
Negative goodwill - (58,739)
----------------------- ------------------ ------------
Total - 180,011
----------------------- ------------------ ------------
As referred to in note 26, in the prior period goodwill arose on the acquisition of 100% of the class B ordinary share capital of Yew Tree Investment Fund (in Members Voluntary Liquidation). The fair value of unamortised loan facility costs with a book value of EUR238,750 included in trade receivables was estimated to have a recoverable amount of EURnil at the acquisition date. This gave rise to goodwill of EUR238,750 at the date of acquisition. The goodwill was subsequently reviewed for impairment and an impairment charge was taken to the Statement of Comprehensive Income in the prior period.
Goodwill also arose in the prior period on the acquisition of Gateway Estate Management Company Limited by Guarantee (refer to note 26) as the company was acquired on 2 July 2018 for nil consideration following the acquisition of One and Three Gateway, East Wall Road, Dublin 3. As nil consideration was paid this resulted in negative goodwill of EUR58,739 at the date of acquisition. In line with the Group's accounting policy, n egative goodwill of EUR58,739 was taken directly to the Statement of Comprehensive Income during the prior period.
The carrying value of the Goodwill at the Statement of Financial Position date was nil.
8. Finance costs
31 December 5 April 2018
2019 to
EUR 31 December
2018
EUR
------------------------------------------ -------------- ---------------
Effective interest expense on borrowings 669,384 15,412
------------------------------------------ -------------- ---------------
Total 669,384 15,412
------------------------------------------ -------------- ---------------
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment fees and arrangement fees using the effective interest rate method.
9. Administration expenses
Profit before tax for the financial period has been stated after charging:
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
-------------------------------------- -------------- -------------
Capital reduction costs
Staff costs (Note 10) - 108,667
Independent Non-executive Directors 1,581,426 400,731
(Note 25) 230,000 129,169
Listing expenses 18,859 160,329
Property valuation fees 69,000 53,639
Property management fees 88,842 60,936
Legal and consultancy fees 195,746 87,637
Independent accountant fees 57,912 73,888
Audit and interim review fees 75,000 65,000
Depository fees 57,601 -
Liquidation costs - 119,589
Other costs 574,855 309,140
-------------------------------------- -------------- -------------
Total 2,949,241 1,568,725
-------------------------------------- -------------- -------------
Staff costs represents total remuneration and other benefits paid to all employees and officers for the financial period. Further information on Directors' remuneration can be found in note 25 to the Consolidated financial statements.
Capital reduction costs relate to the Company's application to the Court to reduce the amount standing to the credit of the Company's share premium account by the sum of EUR70,250,000 in the prior year. The Company's application to the Court was approved on 1 November 2018. Refer to note 21 for further details.
Liquidation costs relate to the Yew Tree Fund see Note 26 for further details.
Auditor's remuneration
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------------- -------------- -------------
Company
Audit of entity financial statements 45,000 42,500
Other assurance services 20,000 195,000
Tax advisory services - -
Other non-audit services - -
------------------------------------------- -------------- -------------
Company total 65,000 237,500
------------------------------------------- -------------- -------------
Group
Audit of the Group financial statements 10,000 10,000
Other assurance services - -
Tax advisory services - -
Other non-audit services - -
------------------------------------------- -------------- -------------
Group total 10,000 10,000
------------------------------------------- -------------- -------------
Other assurance services in 2018 include fees paid in respect to the role of reporting accountant at Admission to trading on AIM and the Euronext Growth market, review of the Interim Report, and Report on the Initial Financial Statements. In 2019 the other assurance services was the review of the Interim Report.
10. Employment
The average monthly number of employees (including Directors and excluding Non-Executive Directors) directly employed during the year to 31 December 2019 in the Group and Company was 6. The Company had no employees prior to Admission (8 June 2018) and six as at 31 December 2019.
Total employees and officers at financial
period end:
2019 2018
Number Number
------------------------------------------- ---------------------------- ------------------------------
At financial period end:
Executive Directors 3 3 3
Office staff 4 2
Non-Executive Directors (Note 25) 4
------------------------------------------- ---------------------------- ------------------------------
Total employees and officers 10 9
------------------------------------------- ---------------------------- ------------------------------
T he staff costs for the above employees were:
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------------ -------------- ---------------
Wages and salaries 577,901 421,158
Bonus accrual 633,429 -
Social insurance cost 62,991 23,031
Share based payments and other benefits
(Note 25) 133,321 -
Pension costs - defined contribution
plan 163,445 71,266
Other benefits - Health insurance 10,339 14,445
------------------------------------------ -------------- ---------------
Total staff costs 1,581,426 529,900
------------------------------------------ -------------- ---------------
Independent Non-executive Directors
(Note 25) 230,000 129,169
------------------------------------------ -------------- ---------------
Staff costs are allocated to administration expenses during the financial period.
11. Income tax
Current tax: current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Yew Grove REIT plc has elected for Real Estate Investment Trust ("REIT") status under section 705E Tax Consolidation Act 1997. As a result, the Group does not pay Irish corporation tax on the profits and gains from its qualifying rental business in Ireland provided it meets certain conditions. With certain exceptions, corporation tax is still payable in the normal way in respect of income and gains from a Group's Residual Business, that is its non-property rental business.
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
-------------------------------------- --------------- ---------------
Income tax on residual income - -
Current period charge - 4,538
-------------------------------------- --------------- ---------------
Income tax expense for the financial
period - 4,538 -------------------------------------- --------------- ---------------
Reconciliation of the income tax expense for the financial period
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
-------------------------------------------- -------------- ---------------
Profit before tax 5,059,209 2,338,417
Tax charge on profit at standard rate
of 12.5% 632,401 292,302
Non-taxable revaluation surplus - (201,140)
REIT tax-exempt profits (632,401) (91,162)
Other (charge on subsidiary undertakings) - 4,538
-------------------------------------------- -------------- ---------------
Income tax expense for the financial
period - 4,538
-------------------------------------------- -------------- ---------------
The directors confirm that in their opinion having conducted due enquiries the Group and the Company have remained in full compliance with the Irish REIT rules and regulations up to and including the date of the approval of this report.
12. Earnings per share and EPRA Earnings per share
5 April 2018
WEIGHTED AVERAGE NUMBER OF SHARES 31 December to
2019 31 December
EUR 2 018
EUR
----------------------------------------- -------------- ---------------
Issued share capital at beginning 75,000,000 -
of the financial period
Shares issued during the financial
period 36,772,210 75,000,000
----------------------------------------- -------------- ---------------
Share in issue at financial period
end 111,772,210 75,000,000
----------------------------------------- -------------- ---------------
Weighted average number of shares 81,095,292 57,231,482
----------------------------------------- -------------- ---------------
Share based payments payable - dilutive 125,222 -
effect
----------------------------------------- -------------- ---------------
Diluted number of shares 81,220,514 57,231,482
----------------------------------------- -------------- ---------------
5 April 2018
31 December to
BASIC AND DILUTED EARNINGS PER SHARE 2019 31 December
EUR 2 018
EUR
---------------------------------------------- -------------- ---------------
Profit for the financial period attributable
to the owners of the Group 5,059,209 2,333,879
---------------------------------------------- -------------- ---------------
EUR EUR
---------------------------------------------- -------------- ---------------
Weighted average number of ordinary
shares (basic) 81,095,292 57,231,482
Weighted average number of ordinary
shares (diluted) 81,220,514 57,231,482
Basic earnings per share (cent) 6.24 4.08
---------------------------------------------- -------------- ---------------
Diluted earnings per share (cent) 6.23 4.08
---------------------------------------------- -------------- ---------------
Earnings per share
The basic and diluted earnings per ordinary share of 6.24 and 6.23 cents per share (2018: 4.08) is based on the profit for the financial period of EUR5,059,209 and on 81,095,292 ordinary shares (2018: EUR2,333,879 and on 57,231,482 ordinary shares) being the weighted average number of shares in issue for the year.
EPRA Earnings per share 5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
----------------------------------------- -------------- ---------------
Profit for the financial period 5,059,209 2,333,879
Adjusted for:
Change in the fair value of investment
property 768,283 (1,609,126)
(Gain)/loss on disposal of investment
property (123,174) -
----------------------------------------- -------------- ---------------
Total EPRA earnings 5,704,318 724,753
EPRA EPS (Basic) 7.03 1.26
EPRA EPS (Diluted) 7.02 1.26
----------------------------------------- -------------- ---------------
13. IFRS and EPRA NAV per share
The IFRS NAV is calculated as the value of the Group's assets less the value of its liabilities based on IFRS measures. EPRA NAV is calculated with accordance with the European Real Estate Association ("EPRA") Best Practice Recommendations: November 2016.
EPRA net asset value ("EPRA NAV") is defined as the IFRS assets including properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business.
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------- -------------- ---------------
IFRS net assets at end of financial
period 109,922,541 75,133,180
Ordinary shares in issue 111,772,210 75,000,000
------------------------------------- -------------- ---------------
IFRS NAV per share (cent) 98.52 100.18
------------------------------------- -------------- ---------------
Ordinary shares in issue 111,772,210 75,000,000
------------------------------------- -------------- ---------------
Diluted number of shares 111,697,432 75,000,000
------------------------------------- -------------- ---------------
Diluted IFRS NAV per share (cent) 98.41 100.18
------------------------------------- -------------- ---------------
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------- -------------- ---------------
IFRS net assets at end of financial
period
Net market to market on financial 109,922,541 75,133,180
assets - -
------------------------------------- -------------- ---------------
EPRA NAV 109,922,541 75,133,180
------------------------------------- -------------- ---------------
EPRA NAV per share (cent) 98.52 100.18
------------------------------------- -------------- ---------------
14. Investment properties
a) Group and Company
5 April 2018
31 December 2019 to
EUR 31 December
2 018
EUR
------------------------------------------------------ ---------------
Opening balance 77,915,000 -
Acquired by distribution in specie - 25,910,000
Property purchases 39,546,096 50,147,611
Disposal of property (950,000) -
Development expenditure 831,282 248,263
Lease surrender dilapidations premium (784,095) -
Fair value (loss)/gain on investment
properties (768,283) 1,609,126
----------------------------------------- ------------ ---------------
Closing fair value 115,790,000 77,915,000
----------------------------------------- ------------ ---------------
During the prior financial period the Company acquired 100% of the B ordinary shares in the Yew Tree Investment Fund (in Members Voluntary Liquidation). By this acquisition the Company secured 10 properties with a fair value as at 30 June 2018 of EUR25,910,000. The Company has since received all the properties and the majority of the cash from the Yew Tree Investment Fund (in Members Voluntary Liquidation) through distribution in specie following the Members Voluntary Liquidation of the Fund. In 2018 the Company purchased a total of six buildings comprising two portfolios and one other building for EUR50,147,611 including costs.
In 2019 the Group acquired Office Block A, located in the IDA Waterford Business and Technology Park, Butlerstown, Waterford for EUR4,307,733 (vendor price of EUR4,000,000 and transaction costs of EUR307,733) and Office Block, Unit 2600, located in the Cork Airport Business Park, Cork for EUR8,005,107 (vendor price of EUR7,500,000 and transaction costs of EUR505,107). A portfolio of three industrial buildings at the IDA Business and Technology Park, Garrycastle, Athlone was acquired for EUR13,959,612 (vendor price of EUR13,000,000 and transaction costs of EUR959,612) and an Office building at the IDA Ireland Business and Technology Park, Garrycastle, Athlone for EUR13,044,609 (vendor price of EUR12,000,000 and transaction costs of EUR1,044,609)
The Group disposed of an industrial property, at Heather Road, Sandyford, for EUR1.1 million, the carrying value of the building was EUR950,000, a net gain of EUR123,174 after disposal costs and derecognition of the carrying value.
During the period the Group also completed the development of a car park on the IDA Athlone Business and Technology Park, Athlone, Westmeath and purchased additional car parking spaces at One Gateway, Dublin 3 for EUR229,035 (vendor price of EUR192,000 and transaction costs of EUR37,000) the building and other spaces were acquired in 2018.
A valuation is conducted on the Group's owned properties on 30 June and 31 December each year based upon the key assumptions of estimated rental values and market-based yields. In determining fair value, the valuers refer to market evidence and recent transaction prices for similar properties.
The Directors are satisfied that the valuation of the Group's properties is appropriate for inclusion in the accounts. The fair value of the Group's properties owned at 31 December 2019 is based on the valuation provided by the external independent Valuers, Lisney. This valuation is prepared on the basis of market value in accordance with the Royal Institution of Chartered Surveyors Valuation - Global Standards (June 2017) and the principles of IFRS 13.
Fair value
The valuation technique used in determining the fair value of the property assets is market value as defined by the Royal Institution of Chartered Surveyors Valuation, being the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion. This is in accordance with IFRS 13.
The main inputs for property valuation using a market-based capitalisation approach are the ERV ("Estimated Rental Value") and equivalent yield. ERV is a valuer's opinion as to the open market rental value of a property on a valuation date which could reasonably be expected to be the achievable rent for a new letting of that property on the valuation date. ERVs are not generally directly observable and therefore classified as Level 3 inputs. Equivalent yields depend on the valuer's assessment of market capitalisation rates and are therefore Level 3 inputs. There were no transfers between fair value levels in 2019 and 2018.
Details of the Group's investment properties and information about the fair value hierarchy using unobservable inputs (level 3) at 31 December 2019:
Range
Asset Class Market value Input Low Median High
------------- ----------------- -------- --------- ---------
Commercial Property ERV per sq.
Assets EUR115.8m ft EUR4.00 EUR12.00 EUR33.34
------------- ----------------- -------- --------- ---------
Equivalent yield
% 6.49% 7.77% 10.09%
------------- ----------------- -------- --------- ---------
at 31 December 2018:
Range
Asset Class Market value Input Low Median High
------------- ----------------- -------- --------- ---------
Commercial Property ERV per sq.
Assets EUR77.9m ft EUR4.00 EUR11.98 EUR33.33
------------- ----------------- -------- --------- ---------
Equivalent yield
% 6.44% 8.23% 10.23%
------------- ----------------- -------- --------- ---------
Sensitivity of measurement to variance of significant unobservable inputs
A decrease in the ERV will decrease the fair value. An increase in equivalent yield will decrease the fair value. There are interrelationships between these rates as they are partially determined by market rate conditions.
The table below shows the sensitivity of the Group's properties to changes in equivalent yield and ERV, which have been identified as key sensitivities by the directors. A change in long term vacancy rate was not considered significant and was not therefore tested, as the Group's long-term vacancy rates are low and lease contracts are long in duration.
Across the entire portfolio of investment properties, a 0.25% increase in equivalent yield would have the impact of a EUR4.0m (2018: EUR3.0m) reduction in fair value whilst a 0.25% decrease in yield would result in a fair value increase of EUR4.2m (2018: EUR3.3m), and a 5% increase in ERV would have the impact of a EUR5.0m (2018: EUR3.3m) increase in fair value whilst a 5% decrease in ERV would result in a fair value decrease of EUR5.1m (2018: EUR3.3m).
At 31 December 2019
Market Value Value Value Value
Value +5% -5% +0.25% -0.25% Equivalent
in ERV in Equivalent Yield
ERV Yield
EUR EUR EUR EUR
Commercial property
assets EUR115.8m 5.0m (5.1m) (4.0m) 4.2m
Total 5.0m (5.1m) (4.0m) 4.2m
---------------------- ---------- -------- ------- ------------ -------------------
at 31 December 2018
Market Value Value Value Value
Value +5% -5% +0.25% -0.25% Equivalent
in ERV in Equivalent Yield
ERV Yield
EUR EUR EUR EUR
Commercial property
assets EUR77.9m 3.3m (3.3m) (3.0m) 3.2m
Total 3.3m (3.3m) (3.0m) 3.2m
---------------------- --------- -------- ------- ------------ -------------------
15. Computer equipment
a) Group and Company
Costs Computer
Equipment Total
EUR EUR
--------------------- ------------ --------
At 1 January 2019 - -
Additions 5,575 5,575
---------------------- ----------- --------
At 31 December 2019 5,575 5,575
---------------------- ----------- --------
Accumulated Depreciation
At 1 January 2019 - - Charge for the year (858) (858) ---------------------- ------- ------- At 31 December 2019 (858) (858) ---------------------- ------- ------- Net Book Value 31 December 2019 4,717 4,717 --------------------------------- ------ ------ Net Book Value 31 December 2018 - - --------------------------------- ------ ------
16. Interest in joint venture (Group)
Details of the Group's only joint venture at the end of the reporting period was as follows:
Name of joint Country of Nature Investment Votes controlled Carrying
venture Incorporation of the by the amount
business Company 31 December
2019
Friends First
House, Cherrywood Private
Science & Limited
Technology Company.
Ashtown Management Park, Loughlinstown, Management Ashtown Management
Company Limited Co. Dublin, of common Company Limited
(Joint venture) Ireland areas (Joint venture) 50% EUR3,473
----------------------- ------------- -------------------- ----------------- -------------
This joint venture is accounted for using the equity method in these Consolidated financial statements as set out in the Group's accounting policies in note 1.
The Group acquired its interest in the joint venture in the prior when it acquired the entire class B ordinary share capital of the Yew Tree Investment Fund (in Members Voluntary Liquidation) on 8 June 2018. The share of profits attributable to the Group for the year ended 31 December 2019 and the period from 8 June 2018 to 31 December 2018 are as follows;
31 December 31 December
2019 2 018
EUR EUR
------------------------------------- --------------- --------------
Distribution in specie on 8 June
2018
Share of joint venture profits for - -
the period - 3,473
------------------------------------- --------------- --------------
Period ended 31 December 2019 - 3,473
------------------------------------- --------------- --------------
The joint venture broke-even for the year ended 2019 (2018: EUR6,946). Summarised financial information in respect to the results of the joint venture to 31 December 2019 is as follows:
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------------------------- ---------------
Revenue 306,908 178,198
Profit post tax from continuing operations - 6,946
Profit for the period - 6,946
---------------------------------------------- -------- ---------------
Total comprehensive income - 6,946
---------------------------------------------- -------- ---------------
The balance sheet value of the Company's interest in a joint venture as at 31 December 2019 is as follows:
31 December 2019 31 December
EUR 2 018
EUR
--------------------------------------- --------------
Cash and cash equivalents 61,126 122,349
Trade and other payables (54,180) (115,403)
---------------------------- ---------- --------------
As at 31 December 2019 6,946 6,946
---------------------------- ---------- --------------
17. Trade and other receivables
a) Group
31 December 31 December
2019 2 018
EUR EUR
------------------------------------- -------------- --------------
Trade receivables and prepayments 634,879 201,214
Taxation debtors - VAT recoverable 231,311 160,081
Deposit paid 2,530,000 -
Other receivables 131,564 203,805
------------------------------------- -------------- --------------
Total 3,527,754 565,100
------------------------------------- -------------- --------------
Trade receivables include amounts due from tenants for rental and service charges. The balance of trade and other receivables has no concentration of credit risk as it covers mainly prepayments. The directors therefore consider the carrying value of trade and other receivables approximates to their fair value.
A deposit of EUR2,530,000 was paid following an exchange of contracts to purchase a portfolio of six office buildings at Millennium Park, Naas, County Kildare on 19 December 2019 (Note 30).
b) Company
31 December 31 December
2019 2 018
EUR EUR
------------------------------------- -------------- --------------
Trade receivables and prepayments 214,390 199,090
Taxation debtors - VAT recoverable 231,311 160,081
Deposit paid 2,530,000 -
Other receivables 256,418 203,805
------------------------------------- -------------- --------------
Total 3,232,119 562,976
------------------------------------- -------------- --------------
Trade receivables include amounts due from tenants. Other receivables are inclusive of EUR124,854 (2018: EUR159,354) due from the liquidator of the Yew Tree Investment Fund (in Members Voluntary Liquidation).
On 27 July 2018, the Yew Tree Investment Fund was placed into Members' Voluntary Liquidation ("MVL") with the expectation that the Fund's properties and cash be distributed in specie to the Company as the 100% owner of the B ordinary shares. In the financial period to 31 December 2018 EUR31,234,552 (EUR25,910,000 in investment properties and EUR5,324,552 in cash) of the Fund's assets were distributed in specie to the Company. There was distribution of EUR34,500 made in 2019. The directors expect to receive a distribution of the remaining assets of the Fund in 2020.
Other than the amounts due from the liquidator of Yew Tree Investment Fund (in Members Voluntary Liquidation) the balance of trade and other receivables has no concentration of credit risk as it covers mainly prepayments and amounts due from tenants. The directors therefore consider the carrying value of trade and other receivables approximates to their fair value.
18. Cash and cash equivalents
a) Group
31 December 31 December
2019 2 018
EUR EUR
---------------------------------------- --------------
Cash and cash equivalents 14,577,461 4,823,734
---------------------------- ----------- --------------
b) Company
31 December 31 December
2019 2 018
EUR EUR
---------------------------------------- --------------
Cash and cash equivalents 14,086,632 4,364,045
---------------------------- ----------- --------------
As part of the company's facility agreement rent paid in advance on the facilities secured is collected into a rent account controlled by the bank. The amount of this cash as at 31 December 2019 was EUR778,352. Rent in excess of accrued facility interest is released at the end of each quarter to an account controlled by the Group.
The management of cash and cash equivalents is discussed in detail in note 28.
19. Trade and other payables
a) Group
31 December 2019 31 December
EUR 2 018
EUR
--------------------------------- ------------------- --------------
Trade payables and accruals 3,061,571 2,302,163
Taxation creditors - PAYE/PRSI 22,698 19,729
Borrowings 16,053 11,837
Other payables 477,335 -
--------------------------------- ------------------- --------------
Total 3,577,657 2,333,729
--------------------------------- ------------------- --------------
Trade payables include amounts due to third party suppliers and prepaid rent amounts received from tenants in advance. Accrued expenses include operational expenses incurred but not yet invoiced to the Group as at 31 December 2019. Trade and other payables are interest free and have settlement dates within one year. The Directors consider that the carrying value of the trade and other payables approximates to their fair value.
b) Company
31 December 31 December
2019 2 018
EUR EUR
--------------------------------- -------------- --------------
Trade payables and accruals 2,528,784 2,068,385
Taxation creditors - PAYE/PRSI 22,698 19,729
Borrowings 16,053 11,837
Other payables 477,335 -
--------------------------------- -------------- --------------
Total 3,044,870 2,099,951
--------------------------------- -------------- --------------
Trade payables includes amounts due to third party suppliers and prepaid rent amounts received from tenants in advance. Accrued expenses include operational expenses incurred but not yet invoiced to the Company as at 31 December 2019. Trade and other payables are interest free and have settlement dates within one year. The Directors consider that the carrying value of the trade and other payables approximates to their fair value.
20. Borrowings
The Company has a revolving credit facility with Allied Irish Bank plc ("AIB"), secured by fixed and floating charges over certain property assets, the existing facility of EUR19,954,000 (December 2018) was extended with a second tranche in July 2019, increasing available funds by EUR9,120,000, for a total facility of EUR29,074,000. The facility can be repaid and re-drawn without penalty throughout its 3 years expected life. This facility was measured initially at fair value, after transaction costs, and carried at amortised cost, with all attributable costs charged to Consolidated Statement of Comprehensive Income over the life of the facility.
a) Group and Company
5 April 2018
31 December 2019 to
EUR 31 December
2 018
EUR
---------------------------------- ------------------- ---------------
Balance at the beginning of the
financial period 5,852,235 -
Bank finance drawn during the
financial period 14,591,200 6,199,540
Interest during the financial
period (523,219) -
Borrowing costs (185,976) (362,717)
Effective interest expense 685,020 15,412
---------------------------------- ------------------- ---------------
Balance at end of the financial
period 20,419,260 5,852,235
Maturity of borrowings is as
follows
Less than one year 16,053 11,837
Between two and five years 20,403,207 5,840,398
---------------------------------- ------------------- ---------------
Total
20,419,260 5,852,235
Undrawn at end of the financial
period 8,283,260 13,754,460
---------------------------------- ------------------- ---------------
The first loan facility was drawn down in December 2018 and there were no loan repayments during the period to 31 December 2018. The second facility was arranged and partial drawn in July 2019. The facility was partially repaid later in the year. The total interest paid was EUR523,219. As at 31 December 2019 EUR8,283,260 (2018: EUR13,754,460) available within the facility, EUR20,790,740 (2018: EUR6,199,540) was drawn.
The Company stated in its Admission document its intention to target borrowings, following full investment of the net proceeds raised at Admission, of 25% loan-to-value ("LTV"). LTV is the ratio of drawn debt to the value of property investments, which at 31 December 2019 was 17.96% (2018: 7.96%). Under the Irish REIT rules the REIT's borrowings must not exceed 50% of the value of its assets.
Where debt is drawn to finance material refurbishments and developments on qualifying assets, the borrowing cost associated with this debt is capitalised. No amounts were capitalised during the financial period for this purpose. All costs related to finance arrangements are amortised using the effective interest rate.
All borrowings are denominated in Euro. All borrowings are subject to six months or less interest rate changes and contractual re-pricing rates. Post year end the company extended its facility please refer to note 30 for details
21. Share Capital
31 December 31 December
2019 2018
Shares in issue 111,572,210 75,000,000
========================== ==========================
EUR EUR
Issue for cash 2018 750,000 750,000
Issue for cash 2019 365,722 -
-------------------------- --------------------------
In issue 31 December 2019 1,115,722 750,000
========================== ==========================
The Group has a single class of ordinary shares of one cent each. 75 million authorised and issued shares were outstanding on 31 December 2018, following the additional issue of 36.5 million shares in the period there were 111.6 million authorised and issued shares at 31 December 2019. All issued shares are fully paid.
On 7 June 2018, the day before Admission, the Company had 2,500,000 shares in issue, all of which had been issued to Jonathan Laredo. On 8 June 2018 an additional 72,500,000 shares were issued at a price of EUR1.00 each, of which 29,596 were issued to Jonathan Laredo. On 8 June 2018 Jonathan Laredo subscribed EUR1.00 for each of the 2,500,000 shares he already held, and an additional EUR29,596 for the shares issued to him on that date, such that all the Company's shares were subscribed for at a price of EUR1.00 and the proceeds of share issuance were EUR75,000,000.
On 13 June 2019 the Company announced details of an issuance program of up to 100 million new shares in a number of tranches through a 12-month Share Issuance Programme. This issuance program was approved at an EGM of the Company on 11 July 2019. A Launch Announcement of 11 July 2019 included details of an initial placing, the result of which was subscription for 10.0 million shares at a price of EUR1.00 per share, raising gross proceeds of EUR10 million for the Company.
On 22 November 2019 the company announced a further Placing which was conducted by way of a bookbuild. The result of this placing was subscription for 26.6 million shares on 4 December 2019 at a price of EUR0.97 per share, raising gross proceeds of approximately EUR25.8 million for the Company.
The Company had 63,427,790 unissued shares remaining under its share issuance program at 31 December 2019. All authorised shares are issues at year end.
The Company's entire authorised share capital is EUR10,000,000 comprising 1,000,000,000 ordinary shares.
22. Reserve s
a) Group
Share based
Share premium Retained payments
EUR earnings EUR
EUR
---------------------------------- ---------------- ------------- --------------
At 1 January 2019 4,000,000 70,383,180 -
Shares issued in the period 35,409,322 - -
Issue costs - (1,026,614) -
Share based payment (Note 25) - - 125,222
Profit for the financial period - 5,059,209 -
Dividend paid (Note 23) - (5,143,500) -
---------------------------------- ---------------- ------------- --------------
As at 31 December 2019 39,409,322 69,272,275 125,222
---------------------------------- ---------------- ------------- --------------
Share based
Share premium Retained payments
EUR earnings EUR
EUR
---------------------------------- ---------------- ------------- ------------
Shares issued in the period 74,250,000 - -
Issue costs - (2,200,699) -
Transfer to retained earnings (70,250,000) 70,250,000 -
Profit for the financial period - 2,333,879 -
---------------------------------- ---------------- ------------- ------------
As at 31 December 2018 4,000,000 70,383,180 -
---------------------------------- ---------------- ------------- ------------
b) Company
Share based
Share premium Retained payments
EUR earnings EUR
EUR
---------------------------------- ---------------- ------------- --------------
At 1 January 2019 4,000,000 70,151,672 -
Shares issued in the period 35,409,322 - -
Issue costs - (1,026,614) -
Share based payments (Note 25) - - 125,222
Profit for the financial period - 5,033,567 -
Dividend paid (Note 23) - (5,143,500) -
---------------------------------- ---------------- ------------- --------------
As at 31 December 2019 39,409,322 69,015,125 125,222
---------------------------------- ---------------- ------------- --------------
Share based
Share premium Retained payments
EUR earnings EUR
EUR
---------------------------------- ---------------- -------------- --------------
Shares issued in the period 74,250,000 - -
Issue costs - (2,200,699) -
Transfer to retained earnings (70,250,000) 70,250,000 -
Profit for the financial period - 2,102,371 -
---------------------------------- ---------------- -------------- --------------
As at 31 December 2018 4,000,000 70,151,672 -
---------------------------------- ---------------- -------------- --------------
The equity of the Company consists of Ordinary Shares issued. The par value of each share is recorded in the share capital account. The excess of proceeds received over the par value is recorded in the share premium account. Direct issue costs in respect of the issue of shares are accounted for in the retained earnings reserve, net of any related tax deduction.
On 1 November 2018 the High Court of Ireland made an Order confirming the Company's capital reduction resolution for the reduction of the Company's Share Premium Account in the sum of EUR70,250,000 such that the balance remaining credited to that account will be EUR4,000,000 such that the reserve resulting from such cancellation be treated as realised profits as defined by Section 117 of the Companies Act 2014. The Order of Court and Minute on reduction of share premium account was registered with the Companies Registration Office on the 2 November 2018.
23. Distributions made and declared
Cash dividends to the equity holders 31 December 5 April 2018
of the Company: 2019 to
EUR 31 December
2018
EUR
-------------------------------------- ------------ -------------
Dividends on ordinary shares declared
and paid
Final dividend for 2018: 0.96 cent 723,000 -
per share
Interim dividend for Q1 2019: 1.10 825,000 -
cent per share
Interim dividend for Q2 2019: 1.37 1,027,500 -
cent per share
Special dividend* Q2 2019: 1.86 cent 1,395,000 -
per share
Interim dividend for Q3 2019: 1.38 1,173,000
cent per share
Total 5,143,500 -
-------------------------------------- ------------ -------------
Declared dividend on ordinary shares
Proposed Interim dividend for Q4 2019: 1,160,350 -
1.04 cent per share
--------------------------------------- ----------
*The declared Q2 interim dividend on ordinary shares was declared on 26 June 2019 and paid to equity holders on 24 July 2019. This dividend was inclusive of a special dividend of 1.86 cent per share following the receipt of a lease surrender during the period.
The Dividend for the year resulted in a full year dividend amount of 6.75 cent per share (7.08 cent per share undiluted) Proposed dividend had not been accounted for as a liability at year end. The board approved the dividend on 13 February 2020 and it was paid on 19 March 2020.
24. Related party transactions
The Directors are considered to be related parties.
On Admission to the AIM and the Euronext Growth market the Executive Directors subscribed for shares in the Company at the issued price. They subscribed their post-tax proceeds from redemption of shares in the Yew Tree Investment Fund (in Members Voluntary Liquidation) and their shares of all incentive fees due from Parapet Capital Advisors' role as Investment Adviser to the AIFM of the Yew Tree Investment Fund (in Members Voluntary Liquidation). Concurrently the Non-executive Directors subscribed for shares in the Company at the issued price.
The Directors made further subscriptions for shares at the issued price in the July and December share placings. The interest of the Directors in the share capital of the Group as at 31 December 2019 is as follows in 2019:
Director No. of Ordinary Shares % of issued share
capital
Michael Gibbons 2,052,544 1.84%
----------------------- ------------------
Charles Peach 277,213 0.25%
----------------------- ------------------
Jonathan Laredo 2,575,396 2.31%
----------------------- ------------------
Barry O'Dowd 50,309 0.05%
----------------------- ------------------
Garry O'Dea 75,773 0.07%
----------------------- ------------------
Eimear Moloney 70,773 0.06%
----------------------- ------------------
Brian Owens 70,773 0.06%
----------------------- ------------------
The Directors of the Group received remuneration, fees and other benefits from the Group for their services. Total amounts for the financial period were EUR1,358,154. No remuneration, fees or other benefits were paid to the Directors by any subsidiary or joint venture.
All transactions between the Company and its subsidiaries are eliminated on consolidation.
Key management personnel
The remuneration of the key management personnel during the financial period is disclosed in note 25 below.
Subsidiaries, Associates and joint ventures
All transactions between the Company and its subsidiaries are eliminated on consolidation.
The following lists the subsidiaries of the Group:
Name of subsidiary Registered Address/Country Nature of Membership Votes controlled
of Incorporation the business by the Company
Gateway Estate 2(nd) Floor, River Management 2/3 99% of voting
Management Company House, East Wall of common rights
Limited by Guarantee Road, Dublin 3, areas
Ireland
--------------------------- -------------- ----------- -----------------
Mallow Business Mallow Business Management 1/2 50% of voting
Park Management Park, Gooldhill, of common rights
Company Limited Mallow, Co. Cork areas
by Guarantee
--------------------------- -------------- ----------- -----------------
The following lists the joint ventures of the Group:
Name of joint venture Registered Address/Country Nature of Votes controlled
of Incorporation the business by the Company
Ashtown Management Friends First House, Management
Company Limited Cherrywood, Loughlinstown, of common
by Guarantee Co.Dublin, Ireland areas 50%
----------------------------- --------------- -----------------
The joint venture had a break even result for the period to 31 December 2019.
Other related parties.
No other related party transactions have been identified.
25. Directors' remuneration
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------------------ ------------- --------------
Remuneration - Independent Non-executive
Directors 230,000 129,169
Remuneration - Executive Directors 375,012 210,426
Total Directors and Non-executive Directors
remuneration
Bonus accrual 605,012 339,595
Pension defined contribution plan - Executive
Directors 615,000 -
Other benefits Health insurance - Executive
Directors 113,242 63,126
24,900 12,086
------------------------------------------------ ------------- --------------
Total 1,358,154 414,807
------------------------------------------------ ------------- --------------
The remuneration of Directors and key management is determined by the Remuneration Committee to reflect the performance of individuals and market trends. Other benefits paid to the three Executive Directors during the period includes health insurance, death in service and illness combined insurance. Defined contribution pension payments represent contributions on behalf of the three Executive Directors. All fees paid to Non-Executive Directors are for services as Directors to the Group, they receive no other benefits. There were no payments of compensation made to Directors for termination or loss of office.
Share based payments
In February 2019, the Remuneration Committee granted 1,125,000 share options to senior executives under the Long-Term Incentive Plan ("LTIP"). The exercise price of the options of EUR0.01 is equal to the nominal price of the shares on the date of grant. The options vest (30% if at lowest hurdle, 100% if at or above highest hurdle) if the Company's Net Asset Value ("NAV") growth is 10% - 20%, Dividend per Share is EUR0.06 - EUR0.075 per share and Total Shareholder Return ("TSR") is 10% - 15%.
Vesting is three years from the date of grant and requires the senior executive to still be employed by the Company on such date. If the lower hurdles are not met, the options lapse. The vested options must be exercised within 2 years of vesting. The fair value at grant date is estimated using a Monte Carlo simulation pricing model, taking into account the terms and conditions upon which the options were granted. There is no cash settlement of the options. The fair value of options granted during the period to 31 December 2019 was estimated on the date of grant using the following assumptions:
Dividend yield (%) 6.14
Expected volatility (%) 17.94
Risk-free interest rate (%) 1
Vesting period of share options (years) 2.87
Grant date share price (EUR) 0.98
While the TSR linked option values calculated are based on market based assumptions, the NAV and dividend per share linked options, being non-market based, required management assumptions as to the probability of their respective hurdles being achieved.
For the year ended 31 December 2019, the Group has recognised EUR125,222 of share-based payment expense in the Consolidated Statement of Comprehensive Income.
26. Acquisition of subsidiaries
Yew Tree Investment Fund plc (in Member's Voluntary Liquidation)
On 8 June 2018 the Company acquired 100% of the class B ordinary share capital of the Yew Tree Investment Fund (in Members Voluntary Liquidation) for cash consideration of EUR23,064,484. The AIFM of the Yew Tree Investment Fund (in Members Voluntary Liquidation) had previously been advised by the Executive Directors, and details of the Fund and its assets were included in the Company's Admission document. Goodwill arising on the acquisition of the Yew Tree Investment Fund (in Members Voluntary Liquidation) was been capitalised and assessed for impairment at the prior period end date.
Analysis of acquisition of the Yew Tree Investment Fund (In Member's Voluntary Liquidation)
Upon acquisition of a subsidiary, fair values are attributed to the identifiable net assets acquired. The amount s recognised in respect of the identifiable assets acquired and liabilities assumed in the prior period are set out in the table below.
Book value Fair value
Net assets at the date of at the date Fair value at the date
acquisition of acquisition adjustment of acquisition
EUR EUR EUR
Investment properties 25,910,000 - 25,910,000
Trade receivables and prepayments 513,727 (238,750) 274,977
Cash and cash equivalents 5,781,977 - 5,781,977
---------------- ------------ ----------------
32,205,704 (238,750) 31,966,954
Trade payables and accruals (811,798) - (811,798)
Loan (8,329,422) - (8,329,422)
---------------- ------------ ----------------
23,064,484 (238,750) 22,825,734
Share of net asset acquired
(100%) 22,825,734
Cash consideration 23,064,484
----------------
Goodwill arising on acquisition 238,750
On 8 June 2018 the Company subscribed for 23,064,484 of the EUR1 B ordinary share capital in Yew Tree Investment Fund (in Members Voluntary Liquidation) for EUR23,064,484 as consideration for the Fund's net assets.
The fair value of unamortised loan facility costs with a book value of EUR238,750 included trade receivables was estimated to have a fair value of EURnil at the acquisition date.
No deferred tax arose from this acquisition.
On 27 July 2018, the Yew Tree Investment Fund was placed into Members Voluntary Liquidation, from which date the Yew Tree Investment Fund is no longer consolidated in the Group's financial statements.
Subsequent to the appointment of the liquidator on 27 July 2018 and prior to 31 December 2018, Yew Tree Investment Fund's properties of EUR25.9m and cash of EUR5.3m had been distributed in specie to Yew Grove REIT plc as the 100% owner of the B ordinary shares. A distribution of EUR34,500 was made during the year. A further distribution is expected to be made on finalisation of the liquidation in 2020.
At the Statement of Financial Position date the Yew Tree Investment Fund (in Members Voluntary Liquidation) was still under the Member's Voluntary Liquidation process.
Gateway Estate Management Company Limited by Guarantee
On 2 July 2018 the Group acquired 99% of the voting rights of Gateway Estate Management Company Limited by Guarantee for nil consideration following the acquisition of One and Three Gateway, East Wall Road, Dublin 3. Negative goodwill arising on the acquisition of Gateway Estate Management Company Limited by Guarantee has been taken directly to the Statement of Comprehensive Income during the period. The investment in Gateway Estate Management Company Limited by Guarantee has been included in the Group's balance sheet at its fair value.
Analysis of acquisition of Gateway Estate Management Company Limited by Guarantee
Upon acquisition of a subsidiary, fair values are attributed to the identifiable net assets acquired. The amount s recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below.
Book value Fair value
at the date at the date
Net assets at the date of acquisition of acquisition of acquisition
EUR EUR
Trade receivables and prepayments 142,621 142,621
Cash and cash equivalents 91,161 91,161
---------------- ----------------
233,782 233,782
Trade payables and accruals (175,043) (175,043)
---------------- ----------------
58,739 58,739
Share of net asset acquired (100%) 58,739
Consideration -
----------------
Negative goodwill arising on acquisition (58,739)
Negative goodwill arising on the acquisition of Gateway Estate Management Company Limited by Guarantee has been taken directly to the Statement of Comprehensive Income during the prior period.
27. Operating lease receivables
Future aggregate minimum rental receivables (to the next break date) under non-cancellable operating leases and licences are:
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
------------------------------------- -------------- ---------------
Operating lease rentals and licence
income receivables due in:
Less than one year 8,778,209 6,283,984
Between two and five years 20,983,091 16,679,791
Greater that five years 9,943,038 7,918,572
------------------------------------- -------------- ---------------
Total 39,704,338 30,882,347
------------------------------------- -------------- ---------------
The Group has both operating leases and operating licences. The operating licences are predominantly for car parking spaces and are less than one year in duration.
The Group leases its investment properties under operating leases. The weighted average unexpired lease term of these leases ("WAULT") at 31 December 2019 is 8.1 years to expiry (2018: 7.4 years).
These calculations are based on all lease and licences outstanding at 31 December 2019.
The Company shares weekly reports which includes details of the next lease events for all its leases . Following distribution of this report the company holds a weekly meeting at which each property, and the strategy for impending or future lease amendments is discussed. The principal strategies for managing risk of its leases are: monitoring the creditworthiness and business models of existing tenants and their guarantors, arranging new leases with existing or new tenants, effecting rent reviews and lease amendments with existing tenants.
28. Financial instruments - risk management and fair value
Financial assets and financial liabilities
The following table shows the Group's financial assets and liabilities and the methods used to calculate fair value.
ASSET/ CARRYING CARRYING LEVEL VALUATION TECHNIQUE
LIABILITY VALUE VALUE
--------------------- ------------ ----------- -------- ----------------------------------
All trade and other receivables
that could be classified
as financial instruments
are short-term, the majority
being less than three months
in duration, and therefore
face value approximates fair
value on an amortised costs
Trade and Amortised basis using the effective
other receivables cost 960,819 3 interest rate method.
--------------------- ------------ ----------- -------- ----------------------------------
The carrying amount of loans
and borrowings held at amortised
cost have been calculated
by discounting the expected
Loans and Amortised cashflows at prevailing interest
borrowings cost 20,419,260 3 rates.
--------------------- ------------ ----------- -------- ----------------------------------
All trade and other payables
that could be classified
as financial instruments
are short-term, the majority
being less than one month
in duration, and therefore
face value approximates fair
value on an amortised cost
Trade and Amortised basis using the effective
other payables cost 3,061,571 3 interest rate method.
-------------------- ------------- ----------- -------- ----------------------------------
The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The Audit Committee is responsible for developing and monitoring the Group's risk management policies. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. All of these policies are regularly reviewed in order to reflect changes in the market conditions and the Group's activities.
The main risks arising from the Group's financial instruments are market risk, credit risk and liquidity risk. The policies for managing each of these and the principal effects of these policies on the results for the financial period are summarised below:
i. Market risk
Market risk is the risk that the fair value or cashflows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects interest rate risk, currency risk and other price risks. The Group's financial assets mainly comprise of investment properties, and trade and other receivables and cash which are classified as financial assets. The Group has no financial assets or liabilities denominated in foreign currencies. Financial liabilities comprise short-term payables and bank borrowings. All of these items are denominated in Euro. The Group's primary market risk for financial instruments is interest rate risk.
a) Interest rate risk
Bank borrowing interest rates are based on short-term variable interest rates which the Group has chosen not to hedge. Exposure to interest rates is limited to the exposure of its earnings from uninvested funds and borrowings. The Group has a revolving credit facility with AIB of EUR29.1m (2018: EUR19.9m), of which EUR8.3m was undrawn as at 31 December 2019 (2018: EUR13.7) Interest due on the drawn amount of the facility will vary with changes in the underlying interest rate which may result in an increase in financing costs. The Group's drawings under its bank facility float at a margin over the higher of 3 months Euribor or 0% at drawing and quarterly reset dates and therefore the impact of a rise in 3 months Euribor to 1% for a full year on drawings
as at 31 December 2019 would be approximately EUR0.21m (2018: EUR0.06m), and if the facility were fully drawn would be EUR0.30m (2018: EUR0.20m).
The Group is also exposed to interest rate risk on its cash and cash equivalents. There were EUR14.38m uninvested Group funds held within Bank of Ireland, Allied Irish Bank and Societe Generale accounts at 31 December 2019 (2018: EUR4.36). These balances attract low interest rates and therefore a relative increase or decrease in their interest rates would not have a material effect on the Consolidated Statement of Comprehensive Income.
b) Currency risk
The Company has a sterling bank account with Societe Generale. As at 31 December 2018 the amount outstanding was GBP6,202 (2018: GBP18,168). This amount is judged sufficient to settle expected sterling payments due to service providers. As such, the Company had minimal foreign exchange exposure.
ii. Liquidity risk
Liquidity risk is the risk the Group may encounter difficulties in meeting the obligations associated with its financial liabilities settled by cash or other financial assets. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group monitors the level of expected cash inflows on trade and other receivables, together with expected cash outflows on trade and other payables and capital commitments.
Detailed below are the contractual maturities of the Group's financial liabilities;
2019: Carrying 6 months 6 to 1 to 2 to 5 More Total contractual
Value or less 12 months 2 years years than amount
5 years
------------------ ----------- ----------- ----------- --------- ----------- --------- ------------------
Borrowings 20,419,260 297,440 297,440 594,879 20,419,260 - 21,609,018
Trade and
other payables 3,561,604 3,344,401 201,150 - - - 3,545,551
------------------ ----------- ----------- ----------- --------- ----------- --------- ------------------
Total carrying
amount 23,980,864 3,641,841 498,590 594,879 20,419,260 - 25,154,569
------------------ ----------- ----------- ----------- --------- ----------- --------- ------------------
2018: Carrying 6 months 6 to 1 to 2 to 5 More Total contractual
Value or less 12 months 2 years years than amount
5 years
----------------- ---------- ---------- ----------- --------- ---------
Borrowings 5,840,398 159,101 159,100 319,703 6,508,152 - 7,146,056
Trade and
other payables 1,930,902 1,930,902 - - - - 1,930,902
Total carrying
amount 7,771,300 2,090,003 159,100 319,703 6,508,152 - 9,076,958
iii. Credit risk
Cash and cash equivalents : cash and cash equivalents are held with major Irish and European banking institutions. These banking institutions and their short term ratings are listed below (ratings for each are from Standard and Poors/Moody's/Fitch):
Societe Generale S.A. has short term unsecured debt ratings of A-1/P-1/F1
Allied Irish Bank plc has short term unsecured debt ratings of A-2/P-1/F2
The Governor and Company of the Bank of Ireland has short term ratings of A-2/P-1/F2
Trade and other receivables: rents and licences are generally received monthly in advance or quarterly in advance from tenants. The balance of trade and other receivables has no concentration of credit risk as it comprises mainly prepayments.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of its customers. Trade and other receivables relate mainly to the Group's property tenants. The day-to-day management of the Group's customers is managed by appointed property agents under the oversight of the Group's internal property management group.
The Group applies the simplified approach to trade receivables for which expected credit losses uses the lifetime expected credit allowance. The Group has no exposure to bad debts as the majority of the Group's rental income is from State bodies or FDI entities as they have good credit standing. The payment and credit performance of these tenants is closely monitored; therefore, the expected credit loss is not material and has not been presented .
There was no credit loss in the year as a result of the Directors' assessment.
Detailed below are the carrying amount of the Group's financial assets as the maximum amount of exposure to credit risk;
5 April 2018
31 December to
2019 31 December
EUR 2 018
EUR
---------------
Trade and other receivables 3,477,065 565,100
Cash and cash equivalents 14,577,461 4,823,734
---------------
Balance at end of period 18,054,526 5,388,834
---------------------------- ---------------
Capital management
The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The key performance indicators used in evaluating the achievement of strategic objectives are return on capital, growth in NAV and dividends to ordinary shareholders (dividend per share) as well as the total return of the Group's property portfolio.
Capital consists of share capital, reserves and retained earnings. At 31 December 2019 the equity of the Group was EUR109.92m (2018: EUR75.13m).
The Group seeks to leverage capital in order to enhance returns. Refer to note 20 for more details.
The Group's share capital is publicly traded on the Euronext Growth market of Euronext Dublin and the Alternative Investment Market of the London Stock Exchange.
29. Contingent Liabilities
The Group has not identified any contingent liabilities which are required to be disclosed in the Consolidated financial statements.
30. Events after the reporting period
On 23 January 2020 the Company appointed Liberum Capital Limited as joint corporate broker and Nominated Adviser. Goodbody Stockbrokers UC continues as joint corporate broker and has been appointed as Euronext Growth Adviser.
On 31 January 2020 the Company agreed a EUR9.9 million increase to its three year floating rate loan facility with Allied Irish Banks, p.l.c. ("AIB") bringing the total Facility to EUR39.0 million. The Facility is in place until December 2021, secured on certain of Yew Grove's properties, and interest is charged on a margin over three month Euribor.
On 06 February 2020 the Company completed the acquisition of a portfolio of six office buildings at Millennium Park, Naas, County Kildare (the "Portfolio"). The purchase price for the Portfolio was EUR25.3 million which represents a net initial yield of 5.8 per cent. after accounting for purchase costs. The Portfolio has reversionary potential expected to yield in excess of 9 per cent. The Portfolio has 141,000 sq. ft. of modern offices over six buildings, as well as 773 carparking spaces and a six-acre greenfield site. Five of the office buildings are tenanted by foreign direct investment ("FDI") and large Irish enterprises, with one of the buildings being vacant. The combined leases have a weighted average unexpired lease term (WAULT) to break of approximately 2.5 years and to lease expiry of approximately 5 years. The current annual rent roll for the Portfolio is approximately EUR1.6 million.
On 13 February 2020 the Company declared the payment of an interim dividend for the fourth quarter in respect of the period ended 31 December 2019 of EUR1,160,350 for 1.04 cents per ordinary share. This will be paid to shareholders on 19 March 2020.
On 3 March 2020 the Company agreed a EUR10.1 million increase to its three year floating rate loan facility with Allied Irish Banks, p.l.c. ("AIB") bringing the total Facility to EUR49.1 million. The Facility is in place until December 2021, secured on certain of Yew Grove's properties, and interest is charged on a margin over three month Euribor.
31. Capital commitments
At the Statement of Financial Position, the Group has entered contracts for future capital expenditure of amounting to EUR268,163. There is a commitment of EUR120,000 for works at Ashtown Gate for improvements to the estate, the amount is half the full capital expenditure required as this relates to the joint venture, the full amount is recoverable from tenants under the lease agreements over the next three years. Works at Letterkenny have also been committed to with an expected cost of EUR48,163. It is also expected that a car park is built at the Waterford property with an estimated cost of EUR100,000, this commitment was taken on as part of the purchase of the property in 2019 and was due to be completed by December 2019, an extension was requested in respect of the development of the car park to 2020.
There are no other capital commitments at the Statement of Financial Position date.
Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA) 'Guidelines on Alternative Performance Measures' in this Annual Report and Consolidated financial statements. An alternative performance measure ("APM") is a measure of financial or future performance, position or cashflows of the Group which is not a measure defined by International Financial Reporting Standards ("IFRS").
The following are the APMs used in this report together with information on their calculation and relevance.
APM IFRS measure Note Description
for reconciliation
Contracted rent NA Annualised cash
roll rental income
(net of car park
licence income)
being received
as at the stated
date
EPRA Earnings IFRS EPS Note 12 Earnings from
per share core operational
activities. A
key measure of
a company's underlying
operating results
from its property
rental business
and an indication
of the extent
to which current
dividend payments
are supported
by earnings
EPRA NAV IFRS NAV Note 13 The objective
of the EPRA NAV
measure is to
illustrate the
fair value of
net assets on
an ongoing, long-term
basis. Assets
and liabilities
that are not
expected to crystallise
in normal circumstances
(e.g. the fair
value of financial
derivatives,
deferred taxes
on property valuation
surpluses) are
excluded
EPRA NAV per IFRS NAV per Note 13 EPRA NAV calculated
share share on a diluted
basis taking
into account
the impact of
any options,
convertibles,
etc. that are
dilutive.
Loan to Value NA Outstanding drawings
under loan facilities
as a percentage
of the fair value
of the investment
properties
Total Debt to NA Outstanding drawings
Equity Gearing under loan facilities
as a percentage
of the IFRS nett
asset value of
the Group
Total Shareholder NA A measurement
Return of the growth
in share value
for shareholders
(assuming gross
dividends are
reinvested and
share appreciation)
over a defined
period.
GLOSSARY
CBD: The central business district of a city.
Contracted rent roll : The annualised cash rental income (including car park licence income) being received as at the stated date.
Debt to Equity gearing: The ratio calculated by dividing the amount of drawn loans by the Net Asset Value of the Group.
Dublin Catchment Area: The geographic area within an approximately thirty-minute commute of the M50 motorway.
EPRA: The European Public Real Estate Association.
EPRA EPS : is calculated by dividing EPRA Earnings for the reporting period attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the reporting period. EPRA Earnings measures the level of income arising from operational activities. It is intended to provide an indicator of the underlying income generated from leasing and management of the property portfolio and so excludes components not relevant to the underlying net income performance of the portfolio such as unrealised changes in valuation and any gains or losses on disposals of properties.
EPRA NAV: A measures of the fair value of net assets on an ongoing, long-term basis in accordance with guidelines issued by the EPRA while taking into account the dilutive effects of any outstanding options, convertibles, or other financial instruments. The EPRA NAV excludes the net mark-to market value of financial instruments used for hedging purposes where a company has the intention to keep the hedge position until the end of the contractual duration, and deferred tax in respect of any difference between the fair value and the book value of the investment properties.
ERV/ Estimated Rental Value: A valuer's opinion as to the open market rental value of a property on a valuation date which could reasonably be expected to be the achievable rent for a new letting of that property on the valuation date. Colloquially referred to as market rent.
Foreign Direct Investment companies ("FDI"): Overseas companies that have established operations in Ireland, often with the assistance of IDA Ireland.
Gross reversionary yield: The reversionary rent roll of a property or group of properties as a percentage of their fair value.
Gross yield at fair value: A calculation of the current expected cash rental return, being the contracted rent roll divided by the fair value of the investment property or properties.
Loan to Value/LTV : The LTV is calculated by dividing the amount of drawn loans by the fair value of the Company's investment properties.
Net Initial Yield ("NIY"): Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.
Net valuation gain: The fair value gain over the period (from the shorter of the time to the last valuation or purchase). Purchases made since the last valuation are initially recognised at price including transaction costs.
Next rent reversion date: The earliest following date at which the Company could be expected to choose to re-let a property at the property's ERV.
Property income: As defined in section 705A of the Taxes Consolidation Act, 1997. It means, in relation to a company or group, the Property Profits of the company or group, as the case may be, calculated using accounting principles, as: (a) reduced by the Property Net Gains of the company or group, as the case may be, where Property Net Gains arise, or (b) increased by the Property Net Losses of the company or group, as the case may be, where Property Net Losses arise.
Property Net Losses: As defined in section 705A of the Taxes Consolidation Act, 1997.
Property Net Gains: As defined in section 705A of the Taxes Consolidation Act, 1997.
Property Profits: As defined in section 705A of the Taxes Consolidation Act, 1997.
Property Rental Business : As defined in section 705A of the Taxes Consolidation Act, 1997.
QIAIF: A Qualifying Investor Alternative Investment Fund.
Rent review: A clause often included in property leases that provides for a periodic adjustment of the rent of a property to the market level of rent.
Reversion: A term used to describe the difference in rent from that which is currently due on outstanding leases and the ERV. Under-rented properties have contracted rents lower than ERV, over-rented properties have contracted rents higher than ERV.
Reversionary rent roll: The annualised cash rental income (net of car park licence income) that would be received if the property or properties were leased at ERV.
Seed portfolio : The portfolio of investment properties owned by the Yew Tree Investment Fund (in Members Voluntary Liquidation) when it was purchased on 8 June 2018.
SME : As defined by Enterprise Ireland, an enterprise that has between 50 employees and 249 employees and has either an annual turnover not exceeding EUR50m or an annual balance sheet total not exceeding EUR43m.
State Body: a body established by legislation in the Republic of Ireland which is either entirely or majority owned by the Irish Government
Total debt to equity gearing: The ratio of drawn debt to NAV of the Company.
Total expense ratio ("TER"): The ratio of the Company's annualised expenses, excluding transaction costs, financing costs and capital expenses as a percentage of the average net assets during that period.
Total shareholder return: The growth in share value over a period assuming all dividends are reinvested in shares of the Company when paid.
Vacancy: Lettable space owned by the Company which is not let or licenced to a tenant.
WAULT: Weighted average unexpired lease term
Corporate Information
Directors Barry O'Dowd (Chair, Independent Non-executive
Director)
Eimear Moloney (Independent Non-executive
Director)
Garry O'Dea (Independent Non-executive
Director)
Brian Owens (Independent Non-executive
Director)
Jonathan Laredo (Chief Executive Officer)
Charles Peach (Chief Financial Officer)
Michael Gibbons (Chief Investment Officer)
Registered office 4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
Company Secretary Sanne Corporate Administration Services
Ireland Limited
4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
AIFM Ballybunion Capital Limited
Ashley House
Morehampton Road
Dublin 4, Ireland
Euronext Growth Goodbody Stockbrokers
Adviser and Joint Ballsbridge Park
Broker Ballsbridge
Dublin 4, Ireland
Nominated Adviser Liberum Capital Limited
and Joint Broker Ropemaker Place,
25 Ropemaker Street,
London EC2Y 9LY
Legal Adviser William Fry
to the Company Grand Canal Square
as to Irish law Grand Canal Dock
Dublin 2, Ireland
Registrar Link Asset Services
Link Registrars Limited
2 Grand Canal Square
Dublin 2, Ireland
Depositary and Société Générale
Custodian S.A., Dublin Branch
3rd Floor, IFSC House
IFSC
Dublin 1, Ireland
Valuer Lisney Limited
St. Stephen's Green House
Dublin 2, Ireland
Auditor Deloitte Ireland LLP
Chartered Accountants and Statutory Audit
Firm
Deloitte & Touche House
29 Earlsfort Terrace
Dublin 2, Ireland
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR EAFDNEEAEEAA
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March 10, 2020 03:00 ET (07:00 GMT)
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