Wrap Text
Half Year Results For The Period Ended 31 March 2018
Schroder European Real Estate Investment Trust PLC
(Incorporated in England and Wales)
Registration number: 09382477
JSE Share Code: SCD
LSE Ticker: SERE
ISIN number: GB00BY7R8K77
("SEREIT"/ the "Company" / "Group")
HALF YEAR REPORT AND ACCOUNTS
HALF YEAR RESULTS FOR THE PERIOD ENDED 31 MARCH 2018
PROFIT INCREASES BY 157% AS PORTFOLIO IS FULLY INVESTED IN WINNING EUROPEAN CITIES
Schroder European Real Estate Investment Trust plc ("SEREIT" or the "Company"), the company investing
in European growth cities, today announces its half-year results for the period ended 31 March 2018 as
required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2.
Financial Highlights for six months ending 31 March 2018:
- Profit for the six months increased 157% to EUR10.8 million (31 March 2017: EUR4.2 million), driven by uplift
in portfolio values and growth in net income
- Net asset value ('NAV') total return of 6.1% (31 March 2017: 2.5%)
- 4.9% increase in NAV to EUR187.1 million, or 139.9 cps (deducting the interim dividend declared in
December 2017 and paid in April 2018, the NAV would have been EUR184.6 million (138.1 cps) as at 31 March 2018)
- EPRA earnings of EUR6.5 million (31 March 2017: EUR2.6 million), reflecting the growth in rental income from
acquisitions and receipt of EUR2.4 million of the surrender premium for the Hamburg asset
- Dividend for quarter ended 31 March 2018 of 1.85 cps fully covered from income
- Annualised dividend rate of 5.5% based on the euro equivalent of the issue price as at admission, achieving the
target dividend stated at IPO. Total interim dividends declared to date relating to the year ending 30 September 2018
of 3.7 cps, representing a 68% increase over the same period in respect of the year ended 30 September 2017
- Loan to value ('LTV') of 28% (30 September 2017: 22%). The debt has a weighted average total interest rate of 1.3%, is
either fixed cost or capped and has a long duration of 6.4 years on average
Operational highlights
- Company fully invested
- Acquisition of a data centre and office premises inthe Netherlands, secured on a long lease to a strong tenant, for a
price of EUR19.8 million, reflecting a net initial yield of 10%
- Continued focus on winning cities and regions with 100% of the portfolio by value located in the faster GDP growth
locations in Europe (source: Oxford Economics)
- Lease surrender agreement at Hamburg office in return for a premium of EUR3.9 million. Provides the opportunity to re-let
space in the strong Hamburg market
- Contracted sale of two Casino supermarkets in France at a 10% premium to December 2017 independent valuation
- Portfolio valued at EUR237.3 million, reflecting an uplift of approximately 9.5% on the combined purchase price
- Successful execution of asset management initiatives across the portfolio, including six new lettings and re-gears
across approximately 5,000 sqm
- Portfolio occupancy of 97% and an unexpired lease term of 6.7 years to expiry.
Market Outlook
- Eurozone growth continues to drive a strong occupational market
- Low vacancy rates supporting favourable rental growth across the majority of markets the Company is invested in.
Commenting, Sir Julian Berney Bt., Chairman of the Board, said:
"This has been an active period for the Company, during which we have delivered growth in NAV, net
income and shareholder dividends. We have executed on the strategy outlined at IPO, constructing a
high quality real estate portfolio, across the growth cities of western continental Europe. Leveraging its
local expertise, Schroders is working on a number of asset management initiatives across the portfolio to
grow income and value and coupled with the positive economic backdrop in our target markets, we
believe the Company is well positioned for the next stage of growth."
Jeff O'Dwyer, of Schroder Real Estate Investment Management Limited, added:
"Our portfolio of assets across winning cities such as Berlin, Hamburg, Stuttgart, Frankfurt and Paris continues
to benefit from improving occupational demand and strong investment markets. Combined with the active asset management
initiatives that we have been driving, this has generated positive performance.
"Our immediate priority is to invest the capital that we are receiving from the profitable sale of the two Casino supermarket
investments and we are in negotiations on a number of new opportunities in both new and existing sectors. As previously stated,
our aspirations are to grow the portfolio through a disciplined and consistent approach centred on enhancing income and shareholder returns."
For further information:
Schroder Real Estate Investment Management 020 7658 6000
Duncan Owen / Jeff O'Dwyer
Ria Vavakis 020 7658 2371
Schroder Investment Management Limited
FTI Consulting 020 3727 1000
Dido Laurimore / Ellie Sweeney / Richard Gotla
A presentation for analysts and investors will be held at 08.45a.m. BST today at the offices of Schroders plc, 31 Gresham Street,
London EC2V 7QA. If you would like to attend, please contact James Lowe at Schroders on +44 (0)20 7658 2083 or james.lowe@Schroders.com
The Half-Year Report is also being published in hard copy format and an electronic copy of that document will shortly be available to
download from the Company's website www.schroders.co.uk/its. Please click on the following link to view the document:
The Company has submitted a pdf of the hard copy format of its Half-Year Report to the National Storage Mechanism and it will shortly
be available for inspection at www.morningstar.co.uk/uk/NSM.
A further announcement will be made in due course to confirm the full timetable of the second interim dividend.
Chairman's Statement
Overview
During the period the Company has achieved two significant milestones: full investment, following acquisition of an office and data
centre in the Netherlands; and growing the dividend to the target level set at IPO. The dividend yield is 5.5% p.a. against the euro
equivalent of the issue price as at admission and based on the Euro: GBP exchange rate as at 31 March 2018 the dividend
represents 6.5% p.a. against GBP1 invested at IPO.
The acquisition in the Netherlands has taken the real estate portfolio to 10 assets, located in growth cities and regions of
continental Europe. These markets are benefiting from the continued favourable Eurozone economic outlook and mega-themes
such as urbanisation and improving infrastructure.
In February the Company announced the sale of its interest in the two Casino supermarkets, representing a 10% premium to the
31 December 2017 valuation. Leveraging its extensive European local presence, the Investment Manager is pursuing new investment
opportunities for the redeployment of the proceeds that will be received in July. There are also a number of other value and
income-enhancing asset management initiatives underway across the portfolio which will maximise performance. Further detail on
these matters is set out in the Investment Manager's Review.
Results
The Company's net asset value ("NAV") at 31 March 2018, excluding non-controlling interests, was EUR187.1 million or 139.9 euro
cents per share (GBP164.4 million or 123.0 pence per share). Including dividends the NAV total return over the period was 6.1%.
Including the recognition of the interim dividend declared in December 2017, which went ex-dividend in March 2018 and was paid
on 13 April 2018 from income, the Company's NAV would have reduced to EUR184.6m or 138.1 euro cents per share (GBP162.2 million
or 121.3 pence per share).
The profit for the six month period to 31 March 2018 was EUR10.8 million and the EPRA earnings were EUR6.5 million.
Strategy
The investment strategy is based on targeting high quality assets in winning cities and regions in Continental Europe. The
current portfolio demonstrates this, with all of the assets located in cities with GDP growth forecasts in the top two quartiles of all
European regions (Source: Oxford Economics).
Our target markets in Europe are benefiting from a broad-based economic recovery, with positive growth forecasts, declining
unemployment and inflation under control. Rental growth is returning to most parts of the market as occupier demand for good
quality, well-located assets remains healthy and development activity is reasonably subdued. This will be positive for the Company's
portfolio and supports our growth ambitions for the Company.
The Investment Manager's in-house research and local teams, which totals 145 people across eight key target markets in Europe,
provide a market-leading platform to identify assets fitting the investment strategy. The focus is on locations that are benefiting
from supply/demand imbalances, infrastructure improvements and competing land uses. These assets are actively managed by the
local teams, with the objective of improving rental income and delivering long-term capital growth.
Execution of this investment strategy has underpinned the delivery of shareholder returns. The Company is keen to build on this by
growing in a disciplined way that continues to improve earnings and value and brings additional benefits such as improved share
liquidity.
Debt
During the period the Company completed a new EUR13m debt facility secured against the Saint-Cloud office building in Paris. This
loan takes the Company's total third party debt as at 31 March 2018 to EUR73.4 million, representing a Loan to Value ("LTV") of
approximately 28% against the overall gross asset value of the Company.
The Company is focused on maintaining a robust balance sheet and overall leverage is capped at 35% at the time of drawing debt.
The debt strategy tailors gearing against those assets most suitable for debt financing. The Company has five debt facilities in place
with an average weighted total interest rate of 1.30%. All interest rates are either fixed or capped. Given the positive yield spread it
is likely the Company will draw further debt facilities against future acquisitions and target overall gearing at around the capped
level.
Dividend
The Company has declared a second interim dividend in respect of the year ending 30 September 2018 of 1.85 euro cents per share payable
on 20 July 2018 to shareholders on the register on 6 July 2018. The first and second interim dividends in respect of the year ending
30 September 2018 amount to 3.7 euro cents per share, representing a 68% increase compared to dividends declared over the same period
in respect of the year ended 30 September 2017.
The dividend is approximately 100% covered from recurring income from the portfolio. This excludes the positive impact of the receipt
of EUR2.4 million in respect of the first payment for the Hamburg lease surrender. Including the Hamburg surrender premium receipt the
dividend cover is 172%.
The latest declared dividend represents an annualised rate of 5.5% based on the euro equivalent of the issue price at admission,
achieving the target dividend stated at IPO. Based on the Euro: GBP exchange rate as at 31 March 2018, this equates to an
annualised rate of 6.5% on the GBP issue price at IPO of 100 pence per share.
The Company will continue to pursue a progressive dividend policy, which is sustainable from recurring income.
Outlook
Having delivered on the strategy outlined at IPO, the Company is well-positioned for the next phase of its growth. The high quality
real estate portfolio across the growth cities of continental Europe provides a strong platform for the Company. It generates an
attractive level of stable income which covers the dividend and provides opportunities to grow income and values over the long
term.
Occupier demand and rental growth in the target markets of Western Europe is increasing, underpinned by the continued economic growth.
This presents an opportunity for the Company and we look forward to working with the Investment Manager to progress the strategy.
Sir Julian Berney Bt.
Chairman
11 June 2018
Investment Manager's Report
Results
The Company's net asset value ("NAV") as at 31 March 2018 stood at EUR187.1 million (GBP164.4m), or 139.9 euro cents (123.0 pence)
per share, achieving a NAV total return for the first six months of the financial year of 6.1%.
The table below provides an analysis of the movement in NAV during the reporting period as well as a corresponding reconciliation
in the movement in the NAV cents per share:
% change per
NAV Movement EUR million(1) Cps(2) cps(3)
Brought forward as at 1 October 2017 178.3 133.3 -
Transaction costs of investments made during the period (1.3) (1.0) (0.8)
Capital expenditure (0.1) (0.1) (0.1)
Unrealised gain in valuation of the real estate portfolio 6.2 4.7 3.5
EPRA earnings 6.5 4.9 3.7
Non-cash items (0.5) (0.4) (0.3)
Dividend paid(4) (2.0) (1.5) (1.1)
Carried forward as at 31 March 2018 187.1 139.9 4.9
(1)Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures
quoted in this table include the Company's share of joint ventures on a line-by-line basis and exclude non-controlling interests in
the Company's subsidiaries
(2)Based on 133,734,686 shares
(3)Percentage change based on the starting NAV as at 1 October 2017
(4)This represents the fourth interim dividend for the year ended 30 September 2017 which was paid in January 2018. The first
interim dividend for the year ending 30 September 2018 was paid to investors from prior income on 13 April 2018 and is not
included as a NAV movement during the period
Market overview
The Eurozone has enjoyed its strongest period of growth during the last 10 years with Schroders forecasting that Eurozone GDP
will grow by 2-2.5% through 2018-2019. Investment is increasing, while unemployment continues to fall with consumer spending
increases. The acceleration in world trade means that external demand in the form of exports should continue to grow. While
stronger growth will feed through to higher inflation, Schroders expects it to remain at around 1.5% p.a. over the next couple of
years, with the result that the ECB is unlikely to raise interest rates before 2019. The main downside risk is a trade war which would
hurt the export-orientated Eurozone.
Offices
The economic momentum continues to drive strong demand in most European office markets and vacancy, particularly for modern
space in central locations, continues to erode. At the same time, the supply pipeline for the next two years remains muted and new
supply is often pre-let. This in turn continues to filter through to broad-based rental growth not just in CBD locations, but also in
other established and well-connected office locations.
Retail
While consumer spending is rising, much of the growth is generated online with varying effects on the various physical retail
formats and sectors. The food sector remains resilient to online sales and the trend away from big hypermarkets to smaller
supermarkets, convenience stores and organic food stores continues. Retail warehouses that sell bulky goods or DIY products seem
also relatively immune. On the other hand, fashion sees the biggest pressure from online sales. Several smaller chains have fallen
into insolvency and major retailers such as H&M and Inditex are closing stores and investing heavily in their websites and logistics.
Yet for these brands prime high street unit shops, or a presence in dominant shopping centres, is key for branding and marketing.
Logistics/warehousing
In many respects the industrial sector resembles the office market. Logistics take-up in continental Europe hit a new record in 2017,
reflecting the cyclical recovery in demand from manufacturers and third party logistics firms (3PLs) and the rapid structural growth
in online retail. Although development is increasing, the vast majority of schemes are being built on a pre-let "build to suit" basis
and vacancy in most locations remains low. Prime logistics rents increased by 3% on average last year (source: CBRE).
Investment market
Retail was the one sector where liquidity declined last year. The value of retail investment deals in Continental Europe was 16%
lower in 2017 than 2016 (source: RCA). Conversely, office and industrial deals increased while, in the search for yield, investment
alternatives such as hotels increased, too. Looking forward, the investment market is likely to remain highly competitive in 2018.
While the gap between prime real estate and government bond yields has narrowed since 2015 to around 3.0%, it still looks
attractive given the favourable outlook for rental and income growth in most sectors.
Investment progress
Over the six months since 1 October 2017, the Company completed the following three significant transactions:
- Purchase completed: The Company acquired a long-term fully leased, three storey office building and data centre in
Apeldoorn, The Netherlands for an all-in cost of EUR21.1 million and generating a net income yield of approximately 10%.
- Lease surrender completed: The Company agreed terms for City BKK to surrender its lease at the Hamburg office asset
in Germany in return for a cash payment to the Company of EUR3.9 million (of which EUR2.4 million was received during this
period). This EUR3.9 million cash payment represents 4.7 years of annual rental income from City BKK. Negotiating a
surrender with City BKK was a key initiative within the acquisition strategy. The agreement gives the Company the
opportunity to reposition the property and re-lease the space into a strengthening office sub-market which will also
diversify the property's income profile.
- Sale committed: The Casino Group has exercised a buy-back option for the Company's 70% interest in two Casino
supermarkets in Biarritz and Rennes. The combined sale value for the 70% share is EUR44.8 million, representing a 10%
premium to the 31 December 2017 valuation. The sale will complete on 31 July 2018. The Company will continue to
receive rental income from the properties until the sale completes.
The Company has invested EUR232 million since IPO and as of today is fully deployed. The sale of the Casino supermarkets in Rennes
and Biarritz will provide the Company with investment capacity of approximately EUR45m-EUR50m (including further gearing). The
Investment Manager is reviewing, and in exclusivity, on a number of new investment opportunities that could be suitable for
redeployment of this capital when it is received later in the year.
Real estate portfolio
The portfolio comprises 10 institutional grade properties, c.97% let, across winning cities and regions in France, Germany, Spain
and the Netherlands. All investments are owned 100% except for the Rennes and Biarritz supermarkets (70% interest) and the
Metromar shopping centre, Seville (50% interest).
The redeployment of the Casino sale proceeds will be focused on acquiring assets that complement the existing portfolio and
maintain good asset diversity, a stable income base and the opportunity for long-term capital growth through active asset
management. The Investment Manager has an identified pipeline of acquisitions spanning a number of sectors, including light
industrial and logistic investments, and is confident of deploying the capital in the near term.
The table below gives an overview of the portfolio:
Property Country Sector Contracted rents Value
EURm % total EUR0-EUR20m EUR20m-EUR40m EUR40m-EUR60m >EUR60m
Paris (B-B) France Office 2.4 14.8% X
Paris (SC) France Office 3.5 21.7% X
Berlin Germany Retail 1.6 10.0% X
Seville Spain Retail 2.0 12.2% X
Casino Supermarket,
1.3 X
Biarritz* France Retail 7.8%
Apeldoorn Netherlands Mixed 2.4 14.9% X
Casino Supermarket,
0.9 X
Rennes* France Retail 5.9%
Hamburg Germany Office 0.5 3.4% X
Stuttgart Germany Office 0.8 5.0% X
Frankfurt Germany Retail 0.7 4.3% X
Portfolio at 31/03/2018* 16.1 100.0 237.3
Biarritz & Rennes* France Retail 2.2 13.8%
Portfolio excluding Casino supermarkets 13.9 86.2% 192.5
* The value assigned to the Casino supermarkets in this table reflects the option price exercised by the Casino Group. The Casino
buy-back prices are at a 10% premium to the 31 December 2017 valuation.
The portfolio's country and sector allocations, pre and post the Casino supermarket sales, are specified below:
Portfolio Portfolio
excluding excluding
Country allocation Portfolio at Casino Sector allocation Portfolio at Casino
(% contracted rent) 31/03/2018 supermarkets (% contracted rent) 31/03/2018 supermarkets
France 50.2% 42.1% Office 44.8% 51.9%
Germany 22.7% 26.4% Retail 40.3% 30.8%
Spain 12.2% 14.2% Mixed 14.9% 17.3%
Netherlands 14.9% 17.3% Other 0.0% 0.0%
Total 100.0% 100.0% Total 100.0% 100.0%
Lease expiry profile
The 10 asset portfolio is 97% let generating EUR16.1 million p.a. in contracted income. The rent on all leases is indexed to inflation
and individual asset business plans are being implemented to improve future earnings and capital growth potential.
The average unexpired lease term is 4.6 years to first break and 6.7 years to expiry. Excluding the Casino supermarkets, the
contracted rents are EUR13.9m with average unexpired lease terms to first break and expiry of 4.7 years and 6.1 years.
The lease expiry profile to earliest break is shown below. The near-term lease expiries provide asset management opportunities to
renegotiate leases, extend weighted average unexpired lease terms, improve income security and generate rental growth. In turn,
this activity benefits NAV total return.
Top 10 tenants
The 10 ten tenants comprise a wide range of occupiers from different industry segments as shown below:
Contracted Unexpired
rent (EURm p.a.) Contracted lease term
Tenant Property Tenant risk(1) rent (% )(2) (years)(3)
1 KPN Apeldoorn Low 2.4 15% 8.8
2 Alten Paris (B-B) Low 2.3 14% 3.0
3 Casino Rennes & Biarritz Low 1.9 12% 4.2
4 Hornbach Berlin Low 1.6 10% 7.8
5 Filassistance Paris (SC) Low 0.9 5% 1.3
6 LandBW Stuttgart Low 0.7 4% 7.9
7 Thesee Paris (SC) Medium 0.6 4% 1.4
8 Ethypharm Paris (SC) Low 0.5 3% 3.2
9 Moody's Paris (SC) Low 0.4 2% 1.3
10 Outscale Paris (SC) Low 0.4 2% 2.1
Total top 10 tenants 11.7 71% 5.0
Remaining tenants 4.4 29% 3.3
Total 16.1 100% 4.6
(1)Regular tenant risk assessments are undertaken for the largest tenants. Among other considerations, the Investment Manager's
risk assessments are based on Dun & Bradstreet ratings and failure scores
(2)Percentage based on total contracted rent as at financial period end
(3)Unexpired lease term until earliest termination in years as at 31 March 2018 weighted by contracted rent
Valuation
The current portfolio value of EUR237.3 million reflects an increase of 9.5% (EUR20.5 million) compared to the combined purchase price
of the 10 asset portfolio. Transaction costs have already been fully recovered through valuation uplifts since acquisition.
The portfolio valuation has increased by 2.8% for the six months to 31 March 2018. Valuation uplift is positive for most assets. The
Hamburg office asset was the notable exception as the property had a value decline of -4.2%, reflecting EUR0.7 million. The main
reason for this is the surrender agreed with City BKK for its lease at the Hamburg asset in return for a cash payment to the
Company of EUR3.9 million to be received in two instalments: EUR2.4 million in 2018 and another EUR1.5 million to be received in 2019.
A fall in the Seville valuation has been offset by a corresponding reduction in the initial purchase price as a result of certain
purchase conditions being met. The Seville valuation remains above initial purchase price by 1.9%. Including the purchase price
reduction, Seville valuation performance was positive for the six months since 1 October 2017.
With regard to the assets which saw their values increase, the valuation uplift was particularly strong for the properties in Paris
Saint-Cloud (+3.8%/EUR1.3 million), Stuttgart (+2.3%/EUR0.4 million) and Paris B-B (+1.4%/EUR0.6 million), all benefiting from strong rental
and investment markets.
The external valuation of the Casino supermarkets remained flat over the six month period. However, the sale price of the buy-back
option exercised by the Casino Group is at a 10% premium (EUR4.1 million) to the current external valuation. Therefore these
properties are held at a value reflecting the sale price.
The newly acquired property in Apeldoorn witnessed a valuation uplift against its purchase price (+2.0%/EUR0.4 million).
Asset management
We manage each asset around an identified business plan, constructed by our local real estate professionals and approved by the
Investment Manager's investment committee. Our asset management expertise assists in de-risking assets, enhancing income
profiles and positioning investments to benefit from occupier demand and ultimately growth, all positively contributing to the
delivery of the Company's return performance.
Fauststraat 1, Apeldoorn, the Netherlands
- Acquired in February 2018 for a purchase price of EUR19.8 million
- Valuation at 31 March 2018: EUR20.2 million
- Lettable area: c.23,700 sq.m
- Investment rationale:
- Attractive nine year income stream from a strong tenant;
- Established and strategic location c.1 hour from Amsterdam;
- Longer term alternative use potential;
- Mixed-use asset comprising data centre/office use; and
- The technology (ICT) influence provides additional portfolio
diversification into a growth sector
Due to the core, long-term lease profile asset management initiatives are limited in the short term. In the longer term we continue
to explore alternative use potential.
Boulevard Jean Jaur�s, Boulogne-Billancourt (Paris) 92100, France
- Acquired in March 2016 for a purchase price of EUR37.5 million
- Valuation at 31 March 2018: EUR42.1 million
- Lettable area: c.6,900 sq.m
- Investment rationale:
- Mixed-use area with a high incidence of competing uses;
- Affordable and sustainable rents;
- Supply-constrained location; and
- Modest capital value per sq.m
Asset management over the period centred on the investigation of alternative use potential and liaising with the tenant to advance
longer term occupational intentions.
Gro�beerenstra�e, 12107 Berlin, Germany
- Acquired in March 2016 for a purchase price of EUR24.3 million
- Valuation at 31 March 2018: EUR26.0 million
- Lettable area: c.16,800 sq.m
- Investment rationale:
- Above average population growth;
- Supply-constrained location;
- Mixed-use area with a high incidence of competing uses; and
- Large site area of 4 hectares
Due to the core, long-term lease profile, asset management initiatives are limited in the short-term. We continue to explore ways to
utilise the site to a greater density and income potential.
Neckarstra�e, 70190, Stuttgart, Germany
- Acquired in April 2016 for a purchase price of EUR14.4million
- Valuation at 31 March 2018: EUR15.6 million
- Lettable area: c.5,800 sq.m
- Investment rationale:
- Supply-constrained location;
- Mixed-use area with a high incidence of competing uses;
- Affordable/sustainable rents; and
- Improving infrastructure driven by the neighbouring "Stuttgarter 21"
redevelopment
Asset management over the period has centred on improving neighbouring fire certification conformance.
Hammerbrookstra�e, 20097, Hamburg, Germany
- Acquired in April 2016 for a purchase price of EUR14.4 million
- Valuation at 31 March 2018: EUR16.0 million
- Lettable area: c.7,000 sq.m
- Investment rationale:
- Modest capital value per sq.m;
- Mixed-use area with a high incidence of competing uses;
- The City-Sud sub-market is one stop from the city centre and is
evolving as a destination where people want to live, work and
socialise;
- Affordable/sustainable rents that represent approximately a third of the prime city centre; and
- Location has medium to longer term growth potential
Asset management over the period included the negotiation of the EUR3.9 million lease surrender premium with City BKK. With
vacancy rates in the sub-market falling substantially, we felt now was the right time to take on leasing risk and utilise our asset
management expertise to de-risk.
Lorscher Stra�e, 60489, Frankfurt - Rodelheim, Germany
- Acquired in May 2016 for a purchase price of EUR11.1 million
- Valuation at 31 March 2018: EUR11.5 million
- Lettable area: c.4,500 sq.m
- Investment rationale:
- Supermarket anchored convenience retail centre servicing a growing
urban catchment;
- Larger than standard supermarket size allowing for a broader grocery
offer relative to local competition;
- Mixed-use area with a dense residential population; and
- Above average provision of parking
Asset management over the period has included the prolongation of the beverage store lease on a short-term basis and review of
the building's fire safety regulations.
Le Directoire, Saint-Cloud (Paris), France
- Acquired in February 2017 for a purchase price of EUR30.0 million
- Valuation at 31 March 2018: EUR35.2 million
- Lettable area: c.15,800 sq.m
- Investment rationale:
- Supply-constrained location;
- Leased on affordable/sustainable rents;
- Attractive capital value per sq.m substantially less than
replacement cost;
- Benefits from future infrastructure improvements; and
- Mixed-use area with strong competition from multiple uses
Asset management over the period included:
- Re-gearing of c.25% of the office area with the merging of Fila Assistance and Garantie Assistance. Revised lease is on a
4/6/9 year term at an annual rent 13% above ERV;
- A new six year lease agreement with Ethypharm, a pharmaceutical company, for 2,450 sq.m;
- Progression of a long-term lease with a local governmental body, for c.270 sq.m of vacant storage accommodation; and
- Commencement of the renovation of lift lobbies, with completion in H2 2018, demonstrating to tenants our commitment
to the premises
Metromar Shopping Centre, Seville, Spain
*Values refer to 50% interest
- Acquired in May 2017 for a purchase price of EUR26.2 million
which has been subsequently adjusted to EUR25.5 million
- Valuation at 30 September 2017: EUR26.0 million
- Lettable area: c.23,000 sq.m
- Investment rationale:
- Dominant retail offer for the local urban catchment;
- Anchored by grocery and leisure, both relatively immune to e-commerce;
- Attractive capital value per sq.m substantially less than replacement
cost; and
- Local region is undergoing strong population growth driven by infrastructure improvements
Asset management over the period included:
- Signing of a new lease with leisure specialist Urban Planet for c.1,200 sq.m to an historically non-income-producing
space. This addition will complement the centre's existing leisure offering and is expected to significantly drive customer
footfall and dwell time;
- Removed underperforming restaurant and added a new burger specialist, strengthening the restaurant offer for
consumers;
- Progressed design initiatives to improve brand, signage, wayfaring, lighting and general vibrancy; and
- Progressed discussions concerning the leasing of the former Massimo Dutti space
The Casino supermarket properties have been excluded from this asset management overview due to their pending sale to the
Casino Group. The sale's price represents a 10% premium to last quarter's independent valuation.
Finance
As at 31 March 2018, the Company's total debt was EUR73.4 million across five loan facilities. This represents a loan to value of 28%
against the Company's gross asset value.
The loans drawn are secured against the four German properties in Berlin, Frankfurt, Stuttgart and Hamburg, the Spanish asset in
Seville and three French assets in Paris Saint-Cloud, Biarritz and Rennes.
The current blended all-in interest rate is 1.3%, significantly below the portfolio yield of 5.8% p.a.
The average unexpired loan term is 6.4 years.
As part of the sale of the Casino supermarkets the Company's share of the debt associated with that investment will be transferred
to the buyer.
Maturity date Outstanding
Lender Property principal(1) Interest rate
Berlin/Frankfurt 30/06/2026 16,500,000 1.31%
Deutsche Pfandbriefbank
Stuttgart/Hamburg 30/06/2023 14,000,000 0.85%
Credit Agricole(1) Casino supermarkets 30/07/2023 18,200,000 3M Euribor + 1.35%
BRED Banque Populaire Paris (SC) 15/12/2024 13,000,000 3M Euribor + 1.30%
M�nchener Hypothekenbank(1) Seville 22/05/2024 11,678,750 1.76%
Total 73,378,750
(1)All statistics in the Investment Manager's report reflect a 50% ownership share of Seville and a 70% ownership share of the Casino
supermarket investments. As a result, debt allocations for those investments in the table above are similarly proportioned.
The German and Spanish loans are fixed rate for the duration of the loan term.
The French loans are based on a margin above 3 month Euribor and the Company has acquired an interest rate cap to limit future
potential interest costs if Euribor were to increase. The strike rate on the caps are 1.25% p.a. The market value of the interest caps
are positive at EUR0.4 million as at the end of March 2018.
Outlook
Having reached full investment, the current focus is centred on maximising performance from the portfolio. The disposal and
reinvestment of the Casino supermarket sale proceeds, and value-enhancing asset management initiatives such as the surrender
and re-letting of space in the Company's Hamburg asset, are good examples of how we are actively pursuing this strategy.
We have identified new investments which are in various stages of exclusivity for the redeployment of the profitable Casino sale.
We will continue to take a disciplined approach to growth to enhance shareholder returns and the aspirations are to grow the
portfolio in an accretive way in order to deliver investors with further diversification, cost economies of scale and ultimately
enhanced liquidity.
Schroder Real Estate Investment Management Limited
11 June 2018
Regulatory Information
Principal risks and uncertainties
The principal risks and uncertainties with the Company's business fall into the following risk categories: strategic; investment
management; custody; gearing and leverage; accounting, legal and regulatory; and service provider. A detailed explanation of the
risks and uncertainties in each of these categories can be found on pages 31 and 32 of the Company's published Annual Report and
Accounts for the year ended 30 September 2017. The Company is aware of potential changes to tax legislation, one retrospective, which,
if implemented, may impact the Company. The Company is monitoring these matters closely. Otherwise, these risks and uncertainties have
not materially changed during the six months ended 31 March 2018 and are not expected to change during the remaining six months of
the financial year.
Going concern
Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as
set out on page 32 of the published Annual Report and Accounts for the year ended 30 September 2017, the Directors consider it
appropriate to adopt the going concern basis in preparing the accounts.
Related party transactions
There have been no transactions with related parties that have materially affected the financial position or the performance of the
Company during the six months ended 31 March 2018.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- the condensed consolidated set of half year interim financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union; and
- the Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct
Authority's Disclosure Guidance and Transparency Rules.
Sir Julian Berney Bt.
Chairman
11 June 2018
Condensed Consolidated Interim Statement of Comprehensive Income
Six months to Six months to Year to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
Rental and service charge income 10,347 7,416 17,296
Other income 2 2,400 - -
Property operating expenses (3,899) (2,011) (5,527)
Net rental and related income 8,848 5,405 11,769
Net valuation gain on investment property 4 6,359 1,588 4,284
Realised gain/(loss) on foreign exchange 1 (6) (4)
Net fair value (loss)/gain of financial instruments at fair value (39) 158 72
through profit or loss
Expenses
Investment management fee (849) (962) (1,849)
Valuers' and other professional fees (309) (418) (666)
Administrators and accounting fee (147) (146) (306)
Auditors' remuneration (134) (148) (280)
Directors' fees (62) (64) (120)
Other expenses (119) (155) (291)
Total expenses (1,620) (1,893) (3,512)
Operating profit before net finance costs 13,549 5,252 12,609
Finance income 378 5 174
Finance costs (502) (471) (918)
Net finance costs (124) (466) (744)
Share of profit/(loss) of joint venture 5 292 - (185)
Profit before taxation 13,717 4,786 11,680
Taxation (815) (158) (505)
Profit after taxation 12,902 4,628 11,175
Attributable to:
Owners of the parent 10,798 4,211 10,288
Non-controlling interests 2,104 417 887
12,902 4,628 11,175
Basic and diluted earnings per share attributable to owners of 3 8.1c 3.2c 7.7c
the parent
Profit after taxation 12,902 4,628 11,175
subsequently reclassified to profit or loss:
Currency translation differences - 35 (3)
Total other comprehensive profit/(loss) - 35 (3)
Total comprehensive profit for the period 12,902 4,663 11,172
Total comprehensive profit attributable to:
Owners of the parent 10,798 4,246 10,285
Non-controlling interests 2,104 417 887
12,902 4,663 11,172
All items in the above statement are derived from continuing operations. The accompanying notes 1 to 14 form an integral part of
the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Financial Position
31/03/2018 30/09/2017 31/03/2017
Assets Notes EUR000 EUR000 EUR000
Non-current assets (unaudited) (audited) (unaudited)
Investment property 4 166,173 202,563 199,881
Investment in joint ventures 5 6,582 6,290 -
Loans to joint ventures 10,035 10,035 -
Non-current assets 182,790 218,888 199,881
Trade and other receivables 850 2,063 3,542
Interest rate derivative contracts 7 232 273 359
Cash and cash equivalents 21,268 28,521 42,977
Current assets 22,350 30,857 46,878
Assets of disposal group held for sale 6 70,389 - -
Total assets 275,529 249,745 246,759
Equity
Share capital 8 15,215 15,167 15,751
Share premium 30,310 30,215 31,379
Retained earnings 9,442 650 (1,817)
Other reserves 132,151 132,294 130,597
Issued capital and reserves attributable to owners 187,118 178,326 175,910
Non-controlling interest 9,795 7,691 7,221
Total equity 196,913 186,017 183,131
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 9 43,079 58,772 58,707
Deferred tax 883 473 141
Non-current liabilities 43,962 59,245 58,848
Current liabilities
Trade and other payables 3,980 4,483 4,729
Current income tax liabilities 114 - 51
Current liabilities 4,094 4,483 4,780
Liabilities of disposal group held for sale 30,560 - -
Total liabilities 78,616 63,728 63,628
Total equity and liabilities 275,529 249,745 246,759
Net Asset Value per ordinary share 10 139.9c 133.3c 131.5c
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Changes in Equity
Non-
Share Share Retained Other Owners of controlling Total
Note capital premium earnings reserves the parent interests equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance as at 1 October 2017 15,167 30,215 650 132,294 178,326 7,691 186,017
Total comprehensive income - - 10,798 - 10,798 2,104 12,902
Dividends paid 11 - - (2,006) - (2,006) - (2,006)
Unrealised foreign exchange 48 95 - (143) - - -
Balance as at 31 March 2018 15,215 30,310 9,442 132,151 187,118 9,795 196,913
(unaudited)
Non-
Share Share Retained Other controlling Total
Note capital premium earnings reserves Sub-total interests equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR'000 EUR'000
Balance as at 1 October 2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Profit for the year - - 10,288 - 10,288 887 11,175
Other comprehensive loss for the year - - - (3) (3) - (3)
Dividends paid 11 - - (6,152) - (6,152) - (6,152)
New equity issuance 1,390 15,288 - (245) 16,433 - 16,433
Unrealised foreign exchange (217) 45 - 172 - - -
Balance as at 30 September 2017 15,167 30,215 650 132,294 178,326 7,691 186,017
(audited)
Non-
Share Share Retained Other Owners of controlling Total
Note capital premium earnings reserves the parent interests equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance as at 1 October 2016 13,994 14,882 (3,486) 132,370 157,760 6,804 164,564
Total comprehensive income - - 4,211 35 4,246 417 4,663
Dividends paid 11 - - (2,542) - (2,542) - (2,542)
New equity issuance 1,390 15,288 - (232) 16,446 - 16,446
Unrealised foreign exchange 367 1,209 - (1,576) - - -
Balance as at 31 March 2017 15,751 31,379 (1,817) 130,597 175,910 7,221 183,131
(unaudited)
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements.
Condensed Consolidated Interim Statement of Cash Flows
Six months to Six months to Year to
31/03/2018 31/03/2017 30/09/2017
Note EUR000 EUR000 EUR000
(unaudited) (unaudited) (audited)
Operating activities
Profit before tax for the period/year 13,717 4,786 11,680
Adjustments for:
Net valuation gain on investment property 4 (6,359) (1,588) (4,284)
investment property
Share of (profit)/loss of joint venture (292) - 185
Realised foreign exchange (gains)/losses (1) 6 4
Finance income (378) (5) (174)
Finance expense 502 471 918
Net fair value (loss)/gain of financial instruments 39 (158) (72)
at fair value through profit or loss
Operating cash generated before changes in 7,228 3,512 8,257
working capital
Decrease/(increase) in trade and other (113) (1,614) 434
receivables
Increase in trade and other payables 816 2,288 1,647
Cash generated from/(used in) operations 7,931 4186 10,338
Finance costs paid (664) (424) (751)
Interest received 381 5 9
Tax paid (224) (12) (145)
Net cash generated from operating 7,424 3,755 9,451
activities
Investing Activities
Acquisition of investment property (21,070) (33,182) (33,159)
Additions (123) (3) (12)
Investment in joint ventures - - (16,510)
Net cash used in investing activities (21,193) (33,185) (49,681)
Financing Activities
New bank loan advance 13,000 - -
Interest rate cap purchased (227) - -
Share issue net proceeds - 16,446 16,434
Dividends paid 11 (2,006) (2,542) (6,152)
Net cash generated from financing 10,767 13,904 10,282
activities
Net decrease in cash and cash equivalents (3,002) (15,526) (29,948)
for the year
Opening cash and cash equivalents 28,521 58,476 58,476
Foreign exchange losses 1 27 (7)
Transfer to disposal group held for sale 6 (4,252) - -
Closing cash and cash equivalents 21,268 42,977 28,521
The accompanying notes 1 to 14 form an integral part of the condensed consolidated financial statements
Notes to the financial statements
1. Significant accounting policies
The Company is a closed-ended investment company incorporated in England and Wales. The condensed interim financial
statements of the Company for the period ended 31 March 2018 comprise those of the Company and its subsidiaries (together
referred to as the "Group"). The shares of the Company are listed on the London Stock Exchange (Primary listing) and the
Johannesburg Stock Exchange (Secondary listing). The registered office of the Company is 31 Gresham Street, London, EC2V 7QA.
These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 30 September 2017 were approved by the Board of Directors on
5 December 2017 and were delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
These condensed interim financial statements have been reviewed and not audited.
Statement of compliance
The condensed interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom Financial Conduct Authority and IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all
of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 30 September 2017. The condensed interim financial statements have been prepared
on the basis of the accounting policies set out in the Group's annual financial statements for the year ended 30 September 2017. T
he financial statements for the year ended 30 September 2017 have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union. The Group's annual financial statements refer to new Standards and Interpretations
none of which had a material impact on the financial statements.
Basis of preparation
The financial statements are presented in euros rounded to the nearest thousand. They are prepared on a going concern basis,
applying the historical cost convention except for the measurement of investment property and derivative financial instruments that
have been measured at fair value.
The accounting policies have been consistently applied to the results, assets, liabilities and cash flow of the entities included in the
consolidated financial statements and are consistent with those of the year end financial report.
Going concern
The Directors have examined significant areas of possible financial risk including cash and cash requirements and the debt
covenants. The Directors have not identified any material uncertainties which would cast significant doubt on the Group's ability to
continue as a going concern for a period of not less than twelve months from the date of the approval of the financial statements.
The Directors have satisfied themselves that the Group has adequate resources to continue in operational existence for the
foreseeable future.
Use of estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect
the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised
and in any future periods affected.
The most significant estimates made in preparing these financial statements are the same as that applied in the consolidated
financial statements for the year ended 30 September 2017.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one
geographical area, Continental Europe. The chief operating decision-maker is considered to be the Board of Directors who are
provided with consolidated IFRS information on a quarterly basis.
Financial risk factors
The Directors are of the opinion that there have been no significant changes to the financial risk profile of the Group since the end
of the last annual financial reporting period for the year ended 30 September 2017 of which they are aware.
The main risks arising from the Group's financial instruments and properties are: market price risk, currency risk, credit risk, liquidity
risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks.
2. Other income
Other income relates to a lease surrender premium agreement at the Company's Hamburg office asset in Germany, part of the
principal of which was received during the period.
3. Basic and diluted earnings per share
The basic and diluted earnings per share for the Group is based on the net profit for the period, excluding non-controlling interests
and currency translation differences, of EUR10,798,000 (31 March 2017: EUR4,211,000, 30 September 2017: EUR10,288,000) and the weighted
average number of ordinary shares in issue during the period of 133,734,686 (31 March 17: 131,811,609, 30 September 2017:
132,775,782).
EPRA(1) earnings reconciliation
Six months to Six months to Year to
31/03/2018 31/03/2017 30/09/2017
EUR000 EUR000 EUR000
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate EPRA earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Exchange differences on monetary items (unrealised) - (35) 3
Share of joint venture (gain)/loss on investment property (156) - 429
Minority interest's net revenue (378) (370) (744)
Deferred tax 410 111 443
Finance costs/(income): interest rate cap 39 (158) (72)
EPRA profit 6,458 2,623 6,947
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
IFRS earnings per share (cents per share) 8.1 3.2 7.7
EPRA earnings per share (cents per share) 4.8 2.0 5.2
(1)European Public Real Estate Association ('EPRA') earnings per share reflects the underlying performance of the company calculated
in accordance with the EPRA guidelines.
Headline(2) earnings reconciliation
Six months to Six months to Year to
31/03/2018 31/03/2017 30/09/2017
EUR000 EUR000 EUR000
Total comprehensive profit 12,902 4,663 11,172
Adjustments to calculate headline earnings exclude:
Net valuation gain on investment property (6,359) (1,588) (4,284)
Share of joint venture (gain)/ loss on investment property (156) - 429
Minority Interests net revenue (378) (370) (744)
Deferred tax 410 - 443
Finance costs: interest rate cap 39 (158) (72)
Headline earnings 6,458 2,547 6,944
Weighted average number of ordinary shares 133,734,686 131,811,609 132,775,782
Headline and diluted headline earnings per share (cents per 4.8 1.9 5.2
share)
(2)Headline earnings per share reflects the underlying performance of the company calculated in accordance with the Johannesburg
Stock Exchange listing requirements.
4. Investment property
Freehold
EUR000
Fair value as at 30 September 2016 165,365
Property acquisitions 32,925
Additions 3
Net valuation gain on investment property 1,588
Fair value as at 31 March 2017 199,881
Property acquisitions -
Additions (14)
Net valuation gain on investment property 2,696
Fair value as at 30 September 2017 202,563
Property acquisitions 21,127
Additions 124
Net valuation gain on investment property 6,359
230,173
Transfer to disposal group held for sale (64,000)
Fair value as at 31 March 2018 166,173
The fair value of investment properties, as determined by the valuer, and excluding the Rennes/Anglet Casino supermarket assets
held for sale and valued at the option price, totals EUR166,500,000 (30 September 2017: EUR202,700,000) with the valuation amount
relating to a hundred per cent ownership share for all the assets in the portfolio.
None of this amount is attributable to trade or other receivables in connection with lease incentives. The fair value of investment
properties disclosed above includes a tenant incentive adjustment of EUR327,000 (30 September 2017: EUR137,000).
The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who are
registered independent appraisers. The valuation has been undertaken in accordance with the RICS Valuation - Global Standards
2017, incorporating the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015).
The properties have been valued on the basis of "Fair Value" in accordance with the RICS Valuation - Professional Standards VPS4
(1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of Fair Value used by the
International Accounting Standards Board.
The valuation has been undertaken using appropriate valuation methodology and the Valuer's professional judgement. The Valuer's
opinion of Fair Value was primarily derived using recent comparable market transactions on arm's length terms, where available, and
appropriate valuation techniques (The Investment Method).
The properties have been valued individually and not as part of a portfolio.
All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been any
transfers between levels during the period. Investment properties have been classed according to their real estate sector.
Information on these significant unobservable inputs per class of investment property is disclosed below:
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 31 March 2018
(unaudited)
Industrial Retail Office Other Total
(including
retail
warehouse)
Fair value (EURm) - EUR147.65m EUR129.05m - EUR276.70m(3)
Area ('000 sq m) - 73.330 60.423 - 133.753
Net passing rent Range - 94.73 - 140.01 65.73 - 344.78 - 94.73 - 344.78
EUR psm per Weighted average 118.50 198.01 155.58
annum (2)
Gross ERV psm Range - 97.39 - 193.45 79.76 - 419.91 - 97.39 - 419.91
per annum Weighted average 141.34 239.86 187.29
(2)
Net initial yield(1) Range - 4.62 - 5.57 2.61 - 10.78 - 2.61 - 10.78
Weighted average 5.27 6.20 5.70
(2)
Equivalent yield Range - 4.60 - 6.06 4.48 - 9.97 - 4.48 - 9.97
Weighted average 5.52 6.15 5.81
(2)
Notes:
(1)Yields based on rents receivable after deduction of head rents and non-recoverables
(2)Weighted by Market Value
(3)This table includes the Joint Venture investment property and the Held for Sale investment property
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 30 September 2017
(audited).
Retail (incl. retail Office Total
warehouse)
Fair value (EUR000) 148,300 107,300 255,600
Area 73.330 35.504 108.834
('000 sq.m)
Net passing rent EUR per Range 94.73 - 145.32 131.03 - 344.63 94.73 - 344.63
sqm per annum Weighted average (2) 118.92 240.86 170.11
Gross ERV per sqm per Range 97.39 - 185.61 126.12 - 413.10 97.39 - 413.10
annum Weighted average (2) 139.03 265.45 192.10
Net initial yield (1) Range 4.62 - 5.62 4.59 - 8.96 4.59 - 8.96
Weighted average (2) 5.29 6.43 5.77
Equivalent yield Range 4.60 - 5.93 4.47 - 7.25 4.47 - 7.25
Weighted average (2) 5.49 5.46 5.48
(1) Yields based on rents receivable after deduction of head rents and non-recoverables
(2) Weighted by market value
(3) This table includes the Joint Venture investment property valued at EUR52.9 million which is disclosed within the summarised
information within note 12 as part of total assets
Sensitivity of measurement to variations in the significant unobservable inputs
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the
Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are
shown below:
Unobservable input Impact on fair value measurement of Impact on fair value measurement of
significant increase in input significant decrease in input
Passing rent Increase Decrease
Gross ERV Increase Decrease
Net initial yield Decrease Increase
Equivalent yield Decrease Increase
There are interrelationships between the yields and rental values as they are partially determined by market rate conditions. The
sensitivity of the valuation to changes in the most significant inputs per class of investment property is shown below:
Estimated movement in fair value of investment properties at Retail Office Total
31 March 2018 EUR'000 EUR'000 EUR'000
Increase in ERV by 5% 5,250 5,200 10,450
Decrease in ERV by 5% -5,300 -5,500 -10,800
Increase in net initial yield by 0.25% -6,650 -6,050 -12,700
Decrease in net initial yield by 0.25% 7,300 6,300 13,600
Estimated movement in fair value of investment properties at 30 Retail Office Total
September 2017 EUR'000 EUR'000 EUR'000
Increase in ERV by 5% 5,200 4,600 9,800
Decrease in ERV by 5% -5,200 -4,950 -10,150
Increase in net initial yield by 0.25% -6,700 -5,750 -12,450
Decrease in net initial yield by 0.25% 7,350 5,900 13,250
5. Investment in joint ventures
The Group has a 50% interest in a joint venture called Urban SEREIT Holdings Spain S.L. The principal place of business of the joint
venture is Calle Velazquez 3, 4th Madrid 28001 Spain.
31/3/2018
EUR000
Balance as at 1 October 2017 6,290
Share of profit/(loss) for the period 442
Dividends (150)
Balance as at 31 March 2018 6,582
30/9/2017
EUR000
Balance as at 1 October 2016 -
Purchase of interest in joint venture 6,475
Share of profit/(loss) for the period (185)
Balance as at 30 September 2017 6,290
During the period ended 31 March 2017 there were no interests in joint ventures.
Summarised joint venture financial information:
31/3/2018 30/9/2017
EUR000 EUR000
Total assets 59,586 59,719
Total liabilities (46,422) (47,139)
Net assets 13,164 12,580
Net asset value attributable to the Group 6,582 6,290
Six months to Six months to
31/3/2018 31/3/2017
EUR000 EUR000
Revenues 2,838 -
Total comprehensive profit 884 -
Total comprehensive profit attributable to the Group 442 -
6. Non-current assets classified as held for sale
The assets and liabilities related to the Group company SCI Rennes Anglet, comprising the Casino supermarkets, were presented as
held for sale at 31 March 2018 following the decision by Casino Group to exercise a buy-back option on the Group's 70% share of
these assets. Under the option, the repurchase will complete on 31 July 2018. Casino Group will also take over the Group's share of
the existing debt facility on the assets.
The two investment properties held for sale are at their respective option price and do not form part of the Knight Frank valuation.
All other assets and liabilities of the disposal group are presented at their carrying amount or fair value as required by IFRS 5.
Net assets of disposal group classified as held for sale
31/03/2018
EUR000
Investment property 64,000
Derivatives 228
Trade and other receivables 1,909
Cash and cash equivalents 4,252
Total assets 70,389
Interest-bearing loans and borrowings 28,561
Trade and other payables 1,999
Total liabilities 30,560
Net assets held for sale 39,829
7. Derivative financial instruments
The group has an interest rate cap in place purchased for EUR260,000 from Credit Agricole Corporate and Investment Bank on
10 August 2016 in connection to a EUR26.0 million loan facility drawn from the same bank with a maturity date of July 2023. The cap
interest rate is 1.25% with a floating rate option being Euribor 3 months. In line with IFRS 9 this derivative is reported in the financial
statements at its fair value. As at 31 March 2018 the fair value of the interest rate cap was EUR228,000. Transaction costs incurred in
obtaining the instrument are being amortised over the extended period of the above mentioned loan. During the period this asset
has been reclassified as part of a disposal group held for sale (note 6).
During the period the group entered into another interest rate cap purchased for EUR227,000 from BRED Banque Populaire on
20 December 2017 in connection to a EUR13.0 million loan facility drawn from the same bank with a maturity of 15 December 2024. The
cap interest rate is 1.25% with a floating rate option being Euribor 3 months. In line with IFRS 9, this derivative is reported in the
financial statements at its fair value. As at 31 March 2018 the fair value of the interest rate cap was EUR232,000.
8. Issued capital and reserves
Share capital
As at the date of this report, the Company has 133,734,686 ordinary shares in issue with a par value of 10.00 pence (no shares are
held in Treasury). The total number of voting rights of the Company is 133,734,686.
The Sterling value of issued share capital was GBP13,373,000 (30 September 2017: GBP13,373,000, 31 March 2017: GBP13,373,000) and the
Euro value at the period end was EUR15,215,000 (30 September 2017: EUR15,167,000, 31 March 2017: EUR15,751,000).
9. Interest-bearing loans and borrowings
Six months to
31/03/2018
EUR000
Brought forward 58,772
Drawdown of borrowings 13,000
Capitalisation of finance costs (204)
Amortisation of finance costs 72
71,640
Transfer to disposal group held for sale (28,561)
Carried forward 43,079
Year ended
30/09/2017
EUR000
Brought forward 58,724
Capitalisation of finance costs (80)
Amortisation of finance costs 128
Carried forward 58,772
Six months to
31/03/2017
EUR000
Brought forward 58,724
Capitalisation of finance costs (81)
Amortisation of finance costs 64
Carried forward 58,707
Bank loan - BRED Banque Populaire
The Group entered into a EUR13.0 million loan facility with BRED Banque Populaire on 18 December 2017.
The facility matures on 15 December 2024 and carries an interest rate of 1.30% plus Euribor 3 months per annum payable quarterly.
The facility was subject to a EUR70,000 arrangement fee which is being amortised over the period of the loan. The debt has an LTV
covenant of 60% and the interest cover ratio should be above 400%. The loan is collateralised by property assets owned by the
Group with a carrying value of EUR35,200,000.
Bank loan - Deutsche Pfandbriefbank AG
On 3 August 2016 the Group entered into two loan facilities totalling EUR30.50 million with Deutsche Pfandbriefbank AG.
Of the total amount drawn EUR14.0 million matures on 30 June 2023 and carries a fixed interest rate of 0.85% payable quarterly; the
remaining EUR16.5 million matures on 30 June 2026 and carries a fixed interest rate of 1.31%. The facility was subject to a 0.35%
arrangement fee which is being amortised over the period of the loan. The debt has an LTV covenant of 65% and the debt yield
must be at least 8.0%.
The lender has a charge over property owned by the Group with a value of EUR69,000,000. A pledge of all shares in the borrowing
Group companies is in place.
Bank loan - Credit Agricole Corporate and Investment Bank
The Group entered into a EUR26.0 million loan facility with Credit Agricole Corporate and Investment Bank on 29 July 2016.
The facility matures on 29 July 2023 and carries an interest rate of 1.35% plus Euribor 3 months per annum payable quarterly. The
facility was subject to a 0.85% arrangement fee which is being amortised over the period of the loan.
The debt has an LTV covenant of 65% and the interest cover ratio should be above 200%. The loan is collateralised by property
assets owned by the Group with a carrying value of EUR64,000,000.
During the period this loan has been reclassified as part of a disposal group held for sale (note 6).
Business partner loan - Casino Group
On 28 June 2016 the Group entered into a EUR10.75 million loan facility with Casino Group, a 30% minority investor in the share capital
of SCI Rennes Anglet, a 70% owned subsidiary of the Group. The loan matures on 28 June 2031 and carries an interest rate of 2.08%
payable annually. The interest can be capitalised if not paid. On 1 August 2016 EUR7.69 million was repaid leaving a loan balance
outstanding as at 31 March 2018 of EUR3.06 million.
During the period this loan has been reclassified as part of a disposal group held for sale (note 6).
10. NAV per ordinary share
The NAV per ordinary share is based on the net assets excluding non-controlling interests of EUR187,118,000 (30 September 2017:
EUR178,326,000, 31 March 2017: EUR175,910,000) and 133,734,686 ordinary shares in issue at the Statement of Financial Position
reporting date (30 September 2017: 133,734,686, 31 March 2017: 133,734,686).
11. Dividends paid
In respect of the six months ended 31 March 2018 Number of Rate 31/03/2018
ordinary shares (cents) EUR000
Interim dividend paid 19 January 2018 133,734,686 1.50 2,006
A dividend for the quarter ended 31 December 2017 of EUR2,474,000 was paid on 13th April 2018.
In respect of the six months ended 31 March 2017 Number of Rate 31/03/2017
ordinary shares (cents) EUR000
Interim dividend paid 27 January 2017 133,734,686 0.9 1,205
Interim dividend paid 17 March 2017 133,734,686 1.0 1,337
Total 1.9 2,542
In respect of the year ended 30 September 2017 Number of Rate 30/09/2017
ordinary shares (cents) EUR000
Interim dividend paid on 27 January 2017 133,734,686 0.90 1,205
Interim dividend paid on 17 March 2017 133,734,686 1.00 1,337
Interim dividend paid on 7 July 2017 133,734,686 1.20 1,604
Interim dividend paid on 1 September 2017 133,734,686 1.50 2,006
Total interim dividends paid 4.60 6,152
12. Related party transactions
Schroder Real Estate Investment Management Limited is the Group's Investment Manager.
The Investment Manager is entitled to a fee, together with reasonable expenses, incurred in the performance of its duties. The fee is
payable monthly in arrears and shall be an amount equal to one twelfth of the aggregate of 1.1% of the EPRA NAV of the Company.
The Investment Management Agreement can be terminated by either party on not less than twelve months written notice, such
notice not to expire earlier than the third anniversary of admission, or on immediate notice in the event of certain breaches of its
terms or the insolvency of either party. The total charge to profit and loss during the period was EUR849,000 (six months ended
31 March 2017: EUR962,000, year ended 30 September 2017: EUR1,849,000). At the period end EUR881,000 was outstanding (six months ended
31 March 2017: EUR480,000, year ended 30 September 2017: EUR125,000).
Directors are the only officers of the Company and there are no other key personnel. The Directors' remuneration for services to the
group for the six months ended 31 March 2018 was EUR62,000 (six months ended 31 March 2017: EUR64,000, year ended 30 September
2017: EUR120,000) equivalent to GBP54,055. Each of the three directors owns 10,000 shares in the Company.
13. Capital commitments
At 31 March 2018 the Group had capital commitments of EUR400,000 (30 September 2017: GBPNil, 31 March 2017: GBPNil).
14. Post balance sheet events
There were no post balance sheet events.
12 June 2018
Sponsor: PSG Capital
Date: 12/06/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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