6 December 2024
SCHRODER EUROPEAN REAL ESTATE
INVESTMENT TRUST PLC
("SEREIT"/ the "Company" /
"Group")
FULL YEAR RESULTS FOR THE
YEAR ENDED 30 SEPTEMBER 2024
Positive NAV total return
with portfolio indexation underpinning earnings growth and fully
covered dividend, supported by low LTV
Schroder European Real Estate
Investment Trust plc, the company investing in European growth
cities and regions, announces its full year results for the year
ended 30 September 2024.
|
-
|
Underlying EPRA earnings increased
3% to €8.2 million (2023: €8.0 million), primarily due to rental
growth offsetting the impact of higher interest costs
|
|
-
|
Total dividends declared for the
year totalled 5.92 euro cps, 103% covered by EPRA earnings,
offering an attractive dividend yield of c.7.1% based on the
closing share price of 69.2pps as at 29 November 2024
|
|
-
|
Net Asset Value ("NAV") of €164.1
million, or 122.7 cps, (30 September 2023: €171.4 million or 128.2
cps), primarily driven by outward yield movement in the first
half
|
|
-
|
IFRS profit of €0.6 million
contributing to a positive NAV total return of 0.4% (30 September
2023: -5.0% total return / €9.4 million IFRS loss)
|
|
-
|
Strengthened balance sheet with
completion of all near-term refinancings on attractive terms, with
no further debt expiries until June 2026 and a low average interest
cost of 3.2%
|
|
-
|
Low Loan to Value ("LTV") of 25%
(net of cash) and c.€25 million of available cash, providing
significant flexibility
|
|
-
|
As previously announced, the French
tax authorities are proceeding with a tax audit. The potential
exposure is up to €12.6 million (excluding penalties). Based on
professional advice, the Board continue to believe that an outflow
is not probable, and therefore no provision is recognised. The
Group will continue to monitor the situation and provide further
updates as required.
|
Operational expertise and exposure to winning sectors
supporting rental growth and recovery in capital
values
|
-
|
Direct property portfolio
independent valuation declined 3.6% to €208.1 million (or €7.6
million net of capex), entirely weighted towards the first half of
the year, due to outward yield movement as investor sentiment was
negatively impacted by higher interest rates
|
|
-
|
Concluded 16 new leases and
re-gears, totalling c.8,000 sqm, which generated €1.4 million of
contracted rent, at a weighted lease term of eight years
|
|
-
|
Portfolio benefits from high
occupancy level of 96% with an average portfolio lease term of 4.7
years
|
|
-
|
100% of rent due
collected
|
|
-
|
Progressed the Company's
sustainability strategy, including the completion of third-party
sustainability and Net Zero Carbon ("NZC") audits for 12
assets.
|
Sir
Julian Berney Bt., Chairman, commented:
"Despite the broader challenges
facing smaller REITs, the Company is well positioned, with a
differentiated and compelling investment thesis focused on assets
with robust property fundamentals in higher growth European
cities.
"We have a high conviction, shared
by our shareholders and supported by the stabilisation in values
that we have seen in more recent quarters, that the current
strategy and pipeline of value-enhancing asset management
initiatives will continue to drive earnings, support a covered and
ultimately growing dividend, and deliver risk-adjusted returns for
shareholders."
Jeff O'Dwyer, Fund Manager for Schroder Real Estate Investment
Management Limited, added:
"The portfolio has demonstrated
notable resilience, which is testament to the quality of our assets
and local teams, as well as the focus on high performing
sub-markets. Although further short term macroeconomic volatility
is expected, the medium term outlook is supportive of real estate
investment. Our focus moving forward is to maintain our balance
sheet strength whilst capturing the portfolio reversion to boost
earnings and asset liquidity, with the aim of reducing the current
share price discount."
The Annual Report and Accounts are
also being published in hard copy format and an electronic copy of
that document will shortly be available to download from the
Company's webpage www.schroders.co.uk/sereit.
The Company's annual report and
financial statements, including the Notice of Annual General
Meeting, will shortly be uploaded to the Financial Conduct
Authority's National Storage Mechanism and will be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism. A
separate announcement will be released once this has taken
place.
A further announcement will be made
shortly to confirm the full timetable of the fourth interim
dividend.
A presentation for analysts and
investors will be held at 9 a.m. GMT/11 a.m. SAST today.
Registration for which can be accessed via:
https://www.schroders.events/SEREFY24
Enquiries:
|
Jeff O'Dwyer
Schroder Real Estate Investment
Management Limited
|
020 7658 6000
|
|
Natalia de Sousa
Schroder Investment Management
Limited
|
020 7658 6000
|
|
Dido Laurimore/Richard Gotla/Ollie
Parsons
FTI Consulting
|
020 3727 1000
Schroderrealestate@fticonsulting.com
|
Chairman's Statement
Overview
We are pleased to announce our
audited results for the financial year ended 30 September
2024.
Reflecting on the past year, I am
proud to report that the Schroder European Real Estate Investment
Trust has shown significant resilience in a fluctuating economic
environment. Despite ongoing macroeconomic challenges, including
weak economic growth, varying debt availability and cost, and
geopolitical uncertainties, our strategic focus on assets with
strong property fundamentals in expanding European markets -
supported by substantial cash reserves and modest leverage - means
the Company is well placed as we move into 2025 and what should be
a more supportive backdrop for REITs.
2024 has been characterised by
stabilising inflation and the easing of monetary policy by the
European Central Bank. These developments will revitalise investor
confidence and enhance market liquidity. Our proactive asset
management approach, prioritising local expertise and operational
excellence, has delivered robust results and ensured stable income
returns for our stakeholders. Encouragingly, we have seen a slow
down in the rate of capital value decline across the portfolio,
with the anticipation that we will start to see yield compression
in the coming quarters.
Growing Underlying EPRA Earnings: Underlying EPRA earnings increased to €8.2 million (FY 2023:
€8.0 million), driven by high occupancy, a diversified tenant base,
excellent rent collection and the indexation features of our
portfolio delivering income growth. Collectively, these factors
have helped mitigate the impact of rising interest
costs.
Fully Covered Dividends: In the current quarter, the
Board has decided to maintain the quarterly dividend
of 1.48 euro cents per share.
The total dividends declared and paid for the year amounted to €7.9
million, equating to 5.92 euro cents per share, which offers an
attractive dividend yield of approximately 7% per annum based on
the share price of 69.2 pence sterling as of 29 November 2024. This
dividend is 103% covered by EPRA earnings.
Emphasis on Asset Management: Our focus on lease management has resulted in 16 new leases
and re-gears being concluded across the portfolio, totalling
approximately 8,000 sqm and generating €1.4 million in annual rent,
with a weighted lease term of eight years. This commitment to
operational excellence maximises shareholder returns, ensuring our
assets remain competitive. Our local investment and asset
management teams, equipped with specialised sector and country
knowledge, will continue to drive performance.
Strong Balance Sheet: We have
successfully completed all near-term refinancings on favourable
terms, ensuring the Company is in a robust financial position. Our
significant available cash balance stands at €25 million, with
modest gearing of 25% net of cash and no debt maturities until June
2026. This resilient balance sheet grants us considerable
operational flexibility. Further balance sheet upside is
foreseeable with the planned disposal of Seville reducing portfolio
gearing by 3%.
Portfolio Value: The uncertain
macroeconomic climate has resulted in a decrease in the valuation
of our underlying portfolio (net of capex) by €7.6 million, or
-3.6%, to €208.1 million, primarily driven by continued outward
yield movement. Positively, the decline was almost entirely
weighted towards the first half of the year and recent observations
indicate a stabilisation in valuations.
Alongside EPRA earnings, this has
resulted in an IFRS profit of €0.6 million and a NAV total return
of 0.4%. We are noticing an increase in investment volumes and
evidence for valuers across Europe, particularly for smaller lot
sizes in desirable cities, which reassures us about underlying
carrying values. Further European interest rate cuts should bolster
confidence and the potential for yield contraction, positively
impacting values and liquidity.
Energy and Carbon: We completed
third-party sustainability and Net Zero Carbon ('NZC') audits for
12 assets during the period with further
third-party specialist net zero carbon analysis ongoing at the
fund level. By leveraging the Investment Manager's platform and
proprietary ESG Scorecard, these audits support our ongoing
commitment to enhance our understanding of the quality of our
existing portfolio through informed investment decisions. During
the period, the Company also issued a TCFD Product report and
maintained its Global Real Estate Sustainability Benchmark
('GRESB') 4-star status.
Tax
disclosure: The French tax
authorities are proceeding with their tax audit and have requested
additional disclosures regarding previous tax filings related to
the structure. The range of potential outcomes indicates a possible
outflow of between €nil and €12.6 million, excluding potential
penalties. Based on professional advice, the Board has decided not
to make a provision, as they do not believe that an outflow is
probable. The Group will continue monitoring the situation and will
provide further updates as necessary.
Outlook: European occupational
markets remain resilient, with most of our sub-markets benefitting
from supply constraints and modest vacancy levels. We are
witnessing a bifurcation in office demand; there is a growing
investor and occupier appetite for centrally located offices that
meet building sustainability certifications1, while poorer quality
offices are struggling to maintain occupancy, income levels and
investor demand. More broadly, office occupancy rates across Europe
continue to tick up, passing 60% for the first time since the
pandemic in October, which is boosting take up, which increased 6%
year-on-year in the first half of 2024.
E-commerce and evolving supply chain
management practices are driving robust demand for logistics,
particularly in urban locations, where stronger rental growth is
anticipated. Retail demand continues to favour open air retail
parks, urban 'big box' units and convenience grocery offerings.
Despite a resurgence in physical retail, shopping centres are
facing ongoing challenges, as consumers increasingly prefer
dominant shopping centres that offer a diverse mix of fashion and
leisure options.
Looking ahead, we expect to continue
reaping benefits from a high-quality portfolio with strong
occupancy rates located in key European cities. As inflation eases
and interest rates fall, we expect sentiment to continue to improve
and larger economies and cities are poised for enhanced
growth.
The Board and Investment Manager are
acutely aware that the Company continues to trade at a significant
discount, alongside the broader challenges facing smaller REITs in
attracting new investors in the current market environment.
Nevertheless, we firmly believe - alongside our shareholders - that
the Company's strategic emphasis on the right cities and sectors,
coupled with targeted asset management initiatives from our local
specialist teams, will lead to positive returns in the future. With
this supportive backdrop, the Investment Manager is focused on
capitalising on portfolio reversion to enhance earnings. The
successful regearing of leases over the next 18 months,
particularly with KPN, Hornbach, and Nestlé, is expected to
strengthen the income profile and facilitate potentially
transformative asset management initiatives. We believe these
actions will support a re-rating and place us in a more
advantageous position.
Lastly, I would like to extend a warm
welcome to Mark Beddy, who joined us on 1 January 2024 as a new
Non-Executive Director and Chair of the Audit, Valuation and Risk
Committee, succeeding Jonathan Thompson. On behalf of my fellow
Directors and the Manager, I extend our thanks to Jonathan for his
dedication and service over the past nine years. The Board
continues to review succession planning particularly in relation to
the Chair role.
Sir
Julian Berney Bt.
Chairman
5 December 2024
Investment Manager's Report
Financial results
The net asset value ('NAV') as at 30
September 2024 stood at €164.1 million (£136.5 million), or 122.7
euro cents per share (102.0 pence per share), compared with €171.4
million, or 128.2 cps, as at 30 September 20231. During the period,
dividends totalling €7.9 million were paid, which resulted in a NAV
total return of 0.4%.
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 euro cents
per share.
|
|
€m
|
cps2
|
|
NAV
as at 1 October 2023
|
171.4
|
128.2
|
|
Unrealised change in the valuations
of the real estate portfolio3
|
(6.1)
|
(4.5)
|
|
Capital
expenditure3
|
(1.5)
|
(1.1)
|
|
Transaction
costs3
|
0.0
|
0.0
|
|
Paris, Boulogne-Billancourt post-tax
development profit
|
0.6
|
0.4
|
|
Movement on the Seville JV
investment
|
-
|
-
|
|
EPRA earnings4
|
8.2
|
6.2
|
|
Non-cash/capital items
|
(0.6)
|
(0.6)
|
|
Dividends
paid5
|
(7.9)
|
(5.9)
|
|
NAV
as at 30 September 2024
|
164.1
|
122.7
|
|
1
|
Exchange rate as at 30 September
2024 GBP:EUR 1.20.
|
|
2
|
Based on 133,734,686
shares.
|
|
3
|
The unrealised loss in the valuation
of the real estate of the portfolio (€6.1m), net of capital
expenditure (€1.5m), reconciles to the 'net gain/(loss) from fair
value adjustment on investment property' of (€7.6m) on page 66 of
the financial statements.
|
|
4
|
EPRA earnings as reconciled on page
96 of the financial statements.
|
|
5
|
Dividends of 5.92 cps were paid
during the financial period. A dividend for the quarter ended 30
September 2024 of 1.48 Euro cents per share was approved and will
be paid in November 2024. Total dividends declared relating to the
12 months' ended 30 September 2024 were 5.92 Euro cents per
share.
|
The direct portfolio, after
accounting for capital expenditure, declined in value by €7.6
million due to a re-rating of market yields for the underlying real
estate. The correction appears to have largely concluded in the
first half of the year, while the second half suggests a
stabilisation in valuations.
An additional profit from the Paris
BB sale was released into the NAV this financial period. The
majority of the profit has now been crystallised and there remains
approximately €0.6m of potential post-tax profit still to be
recognised in the NAV. Further information is disclosed in note 14
on pages 83 and 84.
Non-cash items of -€0.6 million
mainly result from derivative movements.
EPRA earnings for the period totalled
€8.2 million.
Our
strategy
Investment objective
Schroder European Real Estate
Investment Trust plc (the 'Company'/'SEREIT') aims to provide
shareholders with a regular and attractive level of income together
with the potential for income and capital growth through investing
in commercial real estate in Continental Europe.
Investment strategy
The strategy to deliver this, and
progress made during the year and since year end, is set out
below:
1
Maximising shareholder value through active asset
management
2
Increasing exposure to higher growth Winning Cities and
Regions
3
Applying a research-led approach to determine attractive sectors
and locations in which to invest in commercial real
estate
4
Managing the Company prudently and efficiently by controlling costs
and maintaining a strong balance sheet
5
Actively managing the Company and its assets, drawing on the
expertise of our sector specialists to maximise shareholder returns
and evolve the Company's asset management approach that is focused
on operational excellence
6
Managing assets as individual businesses, ensuring the services and
contract terms meet changing tenant demands and that assets are
operated efficiently to minimise the use of scarce
resources
Real
estate portfolio
As at 30 September 2024, the
portfolio comprised 15 institutional grade properties valued at
€208.1 million. In addition, the Company has a 50% interest in a
joint venture in Seville, Spain which continues to be recognised at
nil interest and which is therefore excluded in all relevant
statistics in the Chairman's Statement and the Investment Manager's
Report.
The portfolio generated rental income
of €16.91 million per annum, reflecting a net initial yield of
6.9%. The independent valuers' portfolio estimated rental value
('ERV') is €16.3 million per annum.
Key asset management highlights
included:
|
·
|
16 new leases / re-gears generating
€1.4m of annual income at a weighted unexpired lease term of 8
years;
|
|
·
|
15-year lease extension of anchor
tenant, Lidl, at the Frankfurt investment;
|
|
·
|
Capital expenditure improvements
including LED lighting at the Stuttgart office and roof insulation
enhancements to the Rumilly industrial investment;
|
|
·
|
Completed sustainability audits by
leveraging the Investment Manager's investment process and
third-party consultants to undertake net zero carbon analysis.
These efforts have been made with the aim of investing in, and
improving the quality of our existing portfolio.
|
The diversified nature and strength
of underlying tenants, along with the assets being generally leased
off affordable and sustainable rents, are expected to sustain
relatively resilient portfolio income in a weaker economic climate
and a more challenging period for consumers and businesses.
Approximately 33% of the portfolio by value is offices, all of
which are in supply-constrained locations and leased off affordable
rents. Our industrial exposure of 30% is a mixture of distribution
warehouses and light industrial accommodation in growth cities
within France and The Netherlands. Our retail exposure of 17%
comprises DIY and grocery investments in densely populated urban
areas and sectors that are performing strongly. 9% of the portfolio
is allocated to the alternatives sector, comprising a mixed-use
data centre and a car showroom, with the remaining 11%
in cash.
At the period end the portfolio void
rate was 4%, calculated as a percentage of estimated rental value.
The portfolio weighted average lease length, calculated to the
earlier of lease expiry or break, is 3.7 years.
European leases typically provide for
rents to be indexed to inflation. The majority (80%) of the
Company's income is subject to annual indexation with the remaining
20% linked to a hurdle (typically 10%) and hence we expect nearly
all the leases to directly benefit from inflation.
|
1
|
Represents the annualised contracted
rents as at 30 September 2024 of the
direct portfolio.
|
Portfolio Overview
The Company owns a diversified
portfolio of commercial real estate in Continental Europe
with favourable property fundamentals. The
Company has targeted assets located in Winning
Cities and Regions and in high-growth sectors.
Winning Cities and Regions are those that are
expected to generate higher and
more sustainable levels of economic growth, underpinned by
themes such as urbanisation, demographics,
technology and infrastructure improvements.
Number of properties1
15
Portfolio value1,2
€233.2m
Number of tenants1
51
Occupancy1
96%
Top
ten properties
|
|
Property
|
Sector
|
Value
(€m/% portfolio)1,2
|
|
1
|
France, Paris
(Saint-Cloud)
|
Office
|
€37.4m / 16%
|
|
2
|
Germany, Berlin
|
Retail/DIY
|
€27.7m / 12%
|
|
3
|
Germany, Hamburg
|
Office
|
€21.6m / 9%
|
|
4
|
France, Rennes
|
Industrial
|
€18.9m / 8%
|
|
5
|
Germany, Stuttgart
|
Office
|
€18.0m / 8%
|
|
6
|
The Netherlands,
Apeldoorn
|
Mixed
|
€13.6m / 6%
|
|
7
|
Germany, Frankfurt
|
Retail/Grocery
|
€11.8m / 5%
|
|
8
|
The Netherlands, Venray
|
Industrial
|
€11.3m / 5%
|
|
9
|
The Netherlands, Alkmaar
|
Industrial
|
€11.1m / 5%
|
|
10
|
France, Rumilly
|
Industrial
|
€9.9m / 4%
|
Remaining five properties shown on
the map are:
11 The
Netherlands, Houten - Industrial
12 France,
Cannes - Car showroom
13 France,
Nantes - Industrial
14 The
Netherlands, Utrecht - Industrial
15 The
Netherlands, Venray II - Industrial
|
1
|
Excludes the Seville property for
which the NAV exposure is nil.
|
|
2
|
Reflects the value of directly held
property assets of €208.1m and available cash of €25.1m (internally
calculated).
|
The table below sets out the
portfolio's top ten tenants by contracted rent, which are from a
diverse range of industry segments and represent 69% of the
portfolio1.
Top
ten tenants
|
Rank
|
Tenant
|
Industry
|
Property
|
Contracted
rent
|
WAULT break
(yrs)
|
WAULT expiry
(yrs)
|
|
€m
|
% of total
|
|
1
|
KPN
|
Telecom
|
Apeldoorn
|
3.0
|
18%
|
2.3
|
2.3
|
|
2
|
Hornbach
|
DIY
|
Berlin
|
1.8
|
11%
|
1.3
|
1.3
|
|
3
|
C-log
|
Logistics
|
Rennes
|
1.3
|
7%
|
6.4
|
6.4
|
|
4
|
Outscale
|
IT
|
Paris
|
1.1
|
6%
|
4.7
|
7.7
|
|
5
|
Cereal Partners
|
Consumer staples
|
Rumilly
|
0.8
|
5%
|
0.6
|
1.6
|
|
6
|
DKL
|
Logistics
|
Venray
|
0.8
|
5%
|
4.0
|
4.0
|
|
7
|
LandBW
|
Government
|
Stuttgart
|
0.8
|
5%
|
1.8
|
1.8
|
|
8
|
Schuurman Beheer
|
Manufacturing
|
Alkmaar
|
0.7
|
4%
|
13.5
|
18.5
|
|
9
|
Inventum
|
Manufacturing
|
Houten
|
0.7
|
4%
|
5.3
|
5.3
|
|
10
|
Filassistance
|
Insurance
|
Paris
|
0.7
|
4%
|
3.2
|
8.3
|
|
Total top ten tenants
|
11.7
|
69%
|
3.7
|
4.6
|
|
Remaining tenants
|
5.2
|
31%
|
3.9
|
4.9
|
|
Total
|
16.9
|
100%
|
3.7
|
4.7
|
|
1
|
Excludes the Seville property for
which the NAV exposure is nil.
|
The largest tenant is KPN,
representing 18% of the portfolio's contracted rent. KPN are a
leading telecommunications and IT provider and market leader in the
Netherlands which occupies our mixed-use Apeldoorn asset (data
centre and office).
The second largest tenant is
Hornbach, a leading German-based operator of do-it-yourself ('DIY')
stores and home centres. It is representing 11% the portfolio
rents and is the sole occupier of our Berlin DIY asset, comprising
a four-hectare site that has the potential to benefit from
alternative uses. Hornbach's lease expires December 2025 with 3x5
year options.
The remaining large tenants, with
businesses across a diversified range of industries, each account
for between 4-7% of portfolio rents. These include C-log, Outscale,
Cereal Partners (Nestlé), DKL, Land Baden-Württemberg,
Schuurman Beheer, Inventum and Filassistance.
Rent
collection update1
The diversification and granularity
of the underlying rental income and ongoing occupier engagement,
has again supported full rent collection rates with 100% of the
contracted rents collected for the financial year.
|
As
at 30 September 2024
|
Office
|
Industrial
|
Retail
|
Mixed
|
Total
portfolio
|
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
|
Paid
|
99.8%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
|
Deferred
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
|
Renegotiated/Outstanding2
|
0.2%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
|
Total
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
|
1
|
Rent collection table excludes the
Seville property for which the NAV exposure is nil. 2023 and 2024
refer to 12 months ending 30 September.
|
|
2
|
Outstanding amount relates to
indexation for two tenants at Hamburg in Q3 2024 which is expected
to be paid.
|
Portfolio performance
During the period, total property
returns ('TPRs') for the underlying property portfolio were 3.1%.
With the portfolio benefitting from indexation, strong occupancy
and high rent collection, property income returns were strong at
+6.9%, thereby more than offsetting negative capital returns of
-3.6%.
Strong performance was seen in the
industrial portfolio, with Venray delivering a TPR of +8%, Venray
II +11%, Nantes +10%, Rennes +7% and Houten +5%. Values for these
assets held up well and income returns were healthy.
The Frankfurt grocery asset delivered
a robust total return of 9%, largely attributable to the successful
completion of a new 15-year lease extension with anchor tenant,
Lidl.
The portfolio's mixed-use data centre
in Apeldoorn contributed to performance delivering a total return
of +7% due to high income return compensating capital value decline
as a result of outward yield movement.
The main detractors from portfolio
performance were the office assets in Stuttgart (-4% TPR), the car
showroom in Cannes (-1% TPR) and Hamburg (0% TPR) which witnessed
relatively strong valuation declines.
In summary, the real estate portfolio
has delivered ungeared property returns of 3.1%, 2.6% and 3.9% over
one, three and five years respectively.
Balance sheet
Over the period, the Investment
Manager successfully completed all remaining refinancings,
excluding Seville, at attractive terms, placing the Company in a
strong financial position with high cash levels of c.€25 million
and no further debt expiries until June 2026.
Re-gears have extended the average
loan maturity by 13 months. The average blended interest rate
across the loan portfolio has increased approximately 30 basis
points as a result of higher finance costs for the new
loans.
In detail:
|
·
|
The early refinancing of the Paris
office investment concluded at a margin of 1.9% for four years, an
increase from the existing margin of 1.3%. The loan principal was
reduced from €17 million to €14 million. The rationale for the
early refinancing is the expectation for a tighter and more
expensive lending environment, particularly for secondary
offices.
|
|
·
|
The refinancing of a €8.6 million
loan secured against the Rennes industrial asset completed with the
existing lender for five years at a margin of 1.6%, a slight
increase on the existing 1.4% margin.
|
The Company's third-party debt totals
€82.5 million across six loan facilities as at 30 September 2024.
The current blended all-in interest rate is 3.2% and the average
remaining loan term is 2.8 years. The loan to value ('LTV')
net of cash is 25% against the Company's gross asset value (gross
of cash LTV is 33%).
There is a net of cash LTV cap of 35%
that restricts concluding new external loans if the Company's net
LTV is above 35%. An increase in leverage above 35% as a result of
valuation decline is excluded from this cap.
The individual loans are detailed in
the table below. Each loan is held at the property-owning level
instead of the Group level and is secured by the individual
properties noted in the table. There is no cross-collateralisation
between loans. Each loan has specific LTV and income default
covenants. We detail the headroom against those covenants in the
latter two columns of the table below.
|
Lender
|
Property
|
Maturity date
|
Outstanding
principal
|
Interest
rate
|
Headroom LTV default
covenant
(% decline)
|
Headroom net income default
covenant
(% decline)
|
|
VR Bank Westerwald
|
Stuttgart / Hamburg
|
31/12/2027
|
€18.00m
|
3.80%
|
No
covenant
|
No
covenant
|
|
Deutsche Pfandbriefbank
|
Berlin / Frankfurt
|
30/06/2026
|
€16.50m
|
1.31%
|
33%
|
44%]
|
|
BRED Banque Populaire
|
Paris (Saint-Cloud)
|
15/12/2027
|
€14.00m
|
3M
Eur+1.9%
|
17%
|
>50%
|
|
ABN Amro
|
The Netherlands
industrials1
|
27/09/2028
|
€13.76m
|
5.30%
|
39%
|
25%
|
|
Landesbank SAAR
|
Rennes
|
26/03/2029
|
€8.60m
|
4.3%
|
17%
|
41%
|
|
Münchener Hypothekenbank
|
Seville (50%)2
|
31/12/2024
|
€11.68m
|
2.01%
|
In
breach3
|
In cash
trap
|
|
Total
|
|
|
€82.54m
|
|
|
|
|
1
|
The ABN Amro loan is secured against
five of the Netherlands industrial assets: Alkmaar, Houten,
Utrecht, Venray and Venray II.
|
|
2
|
Includes the Company's 50% share of
external debt in the Seville joint venture of €11.7 million and
excludes unamortised finance costs.
|
|
3
|
Operated under a standstill
agreement with the lender.
|
|
·
|
At Seville, the loan continues to be
in breach of its loan covenants. All excess income generated by
Seville is pledged to the lender. The loan is secured solely
against the Seville investment, with no recourse back to the
Company or any other entity within the Group.
|
|
·
|
The Seville loan is being operated
under a standstill agreement expiring 31 December 2024 to
facilitate a sale.
|
|
·
|
A disposal of the Seville property
/entity would reduce portfolio gearing by approximately
3%.
|
|
·
|
The German and Dutch loans are fixed
rate for the duration of the loan term.
|
|
·
|
The Paris loan is based on a margin
above three-month Euribor. The Company continues to benefit from an
existing interest rate hedge, capped at 1.25%, expiring 15 December
2024.
|
|
·
|
A further interest rate hedge
(capped at 3.25%) has been acquired covering the remaining loan
period to 15 December 2027. This allows the Company to benefit from
a potential decline in interest rates.
|
|
·
|
The combined fair value of the
derivative contracts is €0.7 million as at 30 September
2024.
|
Outlook
We have reached a pivotal moment in
various real estate sectors, with growing confidence in occupier
demand, liquidity and property values. This optimism is supported
by favourable developments concerning inflation, recent interest
rate cuts and the expected further easing of monetary policy over
the next 18 to 24 months. Such factors are anticipated to
positively impact commercial real estate and boost business
confidence.
Occupation markets have demonstrated
resilience, particularly within the sub-markets where we operate.
Our strategic focus on growth cities and locations that benefit
from infrastructure improvements, supply constraints and
alternative use investments leased at competitive rents, positions
the Company favourably.
In addition to these immediate
factors, our strategy continues to reflect the influence of
long-term structural trends, including urbanisation, technological
advancements, demographic shifts, and decarbonisation.
The successful conclusion of pending
lease expiries, particularly for KPN and Hornbach, will be crucial
in strengthening our income profile and ensuring dividend
stability.
Jeff
O'Dwyer
Fund Manager
5 December 2024
Principal risks and uncertainties
The Board is responsible for the
Company's system of risk management and internal control, and for
reviewing its effectiveness. The Board has adopted a detailed
matrix of principal risks affecting the Company's business as an
investment trust and has established associated policies and
processes designed to manage and, where possible, mitigate those
risks, which are monitored by the Audit, Valuation and Risk
Committee on an ongoing basis. This system assists the Board in
determining the nature and extent of the risks it is willing to
take in achieving the Company's strategic objectives. Both the
principal risks and the monitoring system are also subject to
robust review at least annually. The last review took place in
November 2024.
Although the Board believes that it
has a robust framework of internal control in place, this can
provide only reasonable, and not absolute, assurance against
material financial misstatement or loss and is designed to manage,
not eliminate, risk.
Currently the French tax authorities
are proceeding with a tax audit and have requested additional
disclosures and information regarding previous tax filings related
to the structure.
The range of potential outcomes
indicate a possible outflow of between €nil and €12.6 million,
excluding potential penalties, together with a potential impact on
the level of future post-tax profits from the Group's investment
properties in France. Based on professional advice, the Board has
decided not to make a provision, as they do not believe that an
outflow is probable. The Group will continue monitoring the
situation and will provide further updates as necessary.
The successful debt refinancings of
both the Saint-Cloud and Rennes loans in the financial year, with
no further refinancings until June 2026 (excluding Seville for
which a standstill agreement has been agreed to 31 December 2024 to
facilitate an orderly sale, and for which the Group's equity has
been previously written down to nil), have been deemed to have
reduced the refinancing risk of the Company significantly, and the
sustainability of the portfolio has become a greater
focus.
From an emerging risks and
uncertainties perspective, the Board recognises and continues to be
mindful of the changing global environment and the potential risks
posed by volatile markets; inflation and corresponding interest
rate changes; geopolitical uncertainty; structural changes; and
occupier preferences which could affect the use and prospects of
some real estate sectors. The Board receives regular updates on
those macro risks from the Investment Manager. Overall, the
diversification of the Company's portfolio, and its evolving
strategy to place greater emphasis on sustainability-led asset
improvements, is expected to help minimise the impact of these
factors. The Board keeps these matters under review, particularly
in connection with its decisions to redeploy investable
cash.
The Company's property portfolio
remains resilient, as evidenced by rent collection levels over the
financial year. Loan covenants, interest rates, cost of debt and
expiry profiles continue to be actively managed as part of cash
flow forecasting and liquidity management. The Company has
substantial cash available providing a robust position to manage
the Company through current headwinds facing European
economies.
During the year, the Board has
reviewed the principal risks to ensure that identified risk and
mitigating actions remain appropriate.
A summary of the principal risks and
uncertainties faced by the Company, and the actions taken by the
Board to manage and mitigate these risks and uncertainties, are set
out below:
|
Principal risks
|
Mitigation of risk
|
|
Investment and strategy
An inappropriate investment
strategy, or failure to implement the strategy, could lead to
underperformance in the property portfolio compared to the property
market generally by incorrect sector or geographic weightings or a
loss of income through tenant failure, both of which could lead to
a fall in the value of the underlying portfolio.
|
The Board seeks to mitigate these
risks by:
|
·
|
Diversification of its property
portfolio through its investment restrictions and guidelines which
are monitored and reported on by the Investment Manager.
|
|
·
|
Receiving from the Investment
Manager timely and accurate management information including
performance data, attribution analysis, property level business
plans and financial projections.
|
|
·
|
Monitoring the implementation and
results of the investment process with the Investment Manager with
a separate meeting devoted to strategy each year.
|
|
·
|
Determining a borrowing policy, and
ensuring the Investment Manager operates within its borrowing
restrictions and guidelines.
|
|
·
|
Reviewing marketing and distribution
activity, and considering the use of a discount control mechanism
as necessary.
|
|
·
|
Undertaking an annual review of the
ongoing suitability of the Investment Manager.
|
|
|
Regulatory and tax compliance
The Company has to comply with a
wide range of legislation and regulations, covering tax, planning,
building regulations, health and safety, Company law, accounting,
reporting and UK Listing Rules.
|
The Board has appointed the
Investment Manager as its Alternative Investment Fund Manager
("AIFM") in accordance with the Alternative Investment Fund
Managers Directive ("AIFMD").
The Investment Manager monitors
legal requirements to ensure that adequate procedures and reminders
are in place to meet the Company's legal requirements and
obligations. The Investment Manager undertakes full legal due
diligence with advisors when transacting and managing the Company's
assets. All contracts entered into by the Company are reviewed by
the Company's legal and other advisors.
The Board is satisfied that the
Investment Manager has adequate procedures in place to ensure
continued compliance with the regulatory requirements of the
Financial Conduct Authority, the UK Listing Rules of the London
Stock Exchange and any other required authority. The Investment
Manager has retained external tax advisers, who are overseen by the
Schroders tax team, to ensure compliance with relevant local tax
regulations.
With regard to tax, the Group
operates in a number of jurisdictions and is subject to periodic
challenges by local tax authorities on a range of tax matters
during the normal course of business. The tax impact can be
uncertain until a conclusion is reached with the relevant tax
authority. The Group addresses this uncertainty by closely
monitoring tax developments, seeking independent advice, and
maintaining transparency with the authorities it deals with as and
when any enquiries are made.
The French tax authorities have
recently commenced a tax audit requesting information on tax
filings made in relation to the Group's SIIC structure. The
potential exposure is up to €12.6 million, excluding interest and
penalties. Having taken professional advice, the Board remains of
the view that a provision for this tax is not required as they do
not consider that the tax will ultimately be found due. However,
the position will remain uncertain until a conclusion is
reached.
This is set out in further detail in
note 10 of this Annual Report on page 79.
|
|
Economic and property market
The performance of the Company could
be affected by economic, currency and property market risk. In the
wider economy this could include inflation, stagflation or
deflation (including in respect of costs such as construction costs
and operating expenses), economic recessions, movements in foreign
exchange and interest rates or other external shocks. The
performance of the underlying property portfolio could also be
affected by structural or cyclical factors impacting particular
sectors (for example, retail) or regions of the property market and
counterparty solvency.
|
The Board considers economic
conditions and the uncertainty around political events when
considering investment decisions. The Board mitigates property
market risk through the review of the Company's strategy on a
regular basis and discussions are held to ensure the strategy is
still appropriate or if it needs updating. Diversification of the
majority of the portfolio across the office and
industrial/logistics sectors in growth cities, and a focus on
functional and affordable space, provides defensive
characteristics.
The portfolio also benefits from a
high percentage (approximately 100%) of inflation-linked leases
which contributes to rental growth and mitigates value
declines.
The assets of the Company are almost
all denominated in non-sterling currencies, predominantly the euro.
No currency hedging is planned, but the Board continues to consider
the hedging of dividend payments having regard to availability and
cost.
|
|
Valuation
Property valuations are inherently
subjective and uncertain, due to the individual nature of each
property and its liquidity, particularly under stressed market
conditions.
Valuations also include annual
reinstatement costs for insurance purposes. Inflation and
availability of goods and services, could heighten the risk around
correct reinstatement values and completion programs.
|
An external valuer provides an
independent valuation of all assets at least quarterly. The Audit,
Valuation and Risk Committee includes two experienced chartered
surveyors. Members of the Audit, Valuation and Risk Committee meet
with the external valuers to discuss the basis of their valuations,
and their quality control processes, on a quarterly
basis.
|
|
Gearing and leverage
The Company utilises credit
facilities. These arrangements increase the funds available for
investment through borrowing. While this has the potential to
enhance investment returns in rising markets, in falling markets
the impact and availability of financing could be detrimental to
performance, and may also result in potential non-compliance with
loan covenants or refinancing risk.
|
Gearing, including loan covenant
compliance, is monitored at quarterly Board meetings, and ad hoc as
required, and strict restrictions on borrowings are imposed both
internally and by lenders. The overall cost of debt is regularly
reviewed with any new debt or refinancing presented to the
Schroders Real Estate Investment Committee and Board for
approval.
All loans which had been due to
expire in the 2024 financial year were successfully refinanced in
good time. All remaining refinancings, excluding Seville, are now
completed at attractive terms, placing the Company in a strong
financial position. Future loan refinancings are monitored closely
and proactive discussions with third-party lenders commence well in
advance of existing loan maturity dates to reduce refinancing risk.
Furthermore, the Group's strong cash position continues to provide
viable future alternatives should the Group deem that loan
repayments, in part or in full, would be beneficial.
In relation to the Seville asset,
the Company is working closely with the lender to manage the asset
under an LTV covenant breach waiver to facilitate a sale. The loan
is secured only by the asset and there is no recourse to the
Company, or any other entity in the Group.
|
Risk
assessment and internal controls
Risk assessment includes
consideration of the scope and quality of the systems of internal
control operating within key service providers, and ensures regular
communication of the results of monitoring by such providers to the
Audit, Valuation and Risk Committee, including the incidence of
significant control failings or weaknesses that have been
identified at any time and the extent to which they have resulted
in unforeseen outcomes or contingencies that may have a material
impact on the Company's performance or condition.
No significant control failings or
weaknesses were identified from the Audit, Valuation and Risk
Committee's ongoing risk assessment which has been in place
throughout the financial year and up to the date of this report.
The Board is satisfied that it has undertaken a detailed review of
the risks facing the Company.
A full analysis of the financial
risks facing the Company and its subsidiaries is set out in note 22
on pages 89 to 93.
Viability statement
The Board is required to give a
statement on the Company's viability which considers the Company's
current position and principal risks and uncertainties together
with an assessment of future prospects.
The Board conducted this review over
a five-year time horizon commencing from the date of this report
which is selected to match the period over which the Board monitors
and reviews its financial performance and forecasting. The
Investment Manager prepares five-year total return forecasts for
the Continental European commercial real estate market. The
Investment Manager uses these forecasts as part of analysing
acquisition opportunities as well as for its annual asset level
business planning process. The Board receives an overview of the
asset level business plans which the Investment Manager uses to
assess the performance of the underlying portfolio and therefore
make investment decisions such as disposals and investing capital
expenditure. The Company's principal borrowings are for a weighted
duration of 2.6 years and the average unexpired lease term,
assuming all tenants vacate at the earliest opportunity, is 3.9
years.
The Board's assessment of viability
considers the principal risks and uncertainties faced by the
Company, as detailed in the Strategic Review on pages 31 to 33,
which could negatively impact its ability to deliver the investment
objective, strategy, liquidity and solvency. This includes
consideration of scenario stress testing and a cash flow model
prepared by the Investment Manager that analyses the sustainability
of the Company's cash flows, dividend cover, compliance with bank
covenants, general liquidity requirements and potential legal and
regulatory change for a five-year period.
These metrics are subject to a
sensitivity analysis which involves flexing a number of the main
assumptions including macroeconomic scenarios, delivery of specific
asset management initiatives, rental growth and void/reletting
assumptions. The Board also reviews assumptions regarding capital
recycling and the Company's ability to refinance or extend
financing facilities. Steps which are taken to mitigate these risks
as set out in the Strategic Review on pages 31 to 33 are also taken
into account.
Based on the assessment, and having
considered in detail base and downside scenarios modelling, the
Directors have concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the five-year period of their
assessment.
Going concern
The Board believes it is appropriate
to adopt the going concern basis in preparing the financial
statements. A comprehensive going concern statement setting
out the reasons the Board considers this to be the case is set out
in note 1 on page 70.
By order of the Board
Sir
Julian Berney Bt.
Chairman
5 December 2024
Statement of Directors' Responsibilities
The Directors are responsible for
preparing the Annual Report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to
prepare financial statements for each financial year. Under that
law the Directors have prepared the Group and the Company financial
statements in accordance with UK-adopted international accounting
standards and applicable law. Under company law, Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group and Company for
that period. In preparing the financial statements, the Directors
are required to:
|
·
|
select suitable accounting policies
and then apply them consistently;
|
|
·
|
state whether applicable UK-adopted
international accounting standards have been followed for the Group
financial statements and the Company financial statements, subject
to any material departures disclosed and explained in the financial
statements;
|
|
·
|
make judgements and accounting
estimates that are reasonable and prudent; and
|
|
·
|
prepare the financial statements on
the going concern basis unless it is inappropriate to presume that
the Group and Company will continue in business.
|
The Directors are also responsible
for safeguarding the assets of the Group and Company and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are also responsible
for keeping adequate accounting records that are sufficient to show
and explain the Group's and Company's transactions, and disclose
with reasonable accuracy at any time the financial position of the
Group and Company, and enable them to ensure that the financial
statements comply with the Companies Act 2006.
The Investment Manager is responsible
for the maintenance and integrity of the Company's web pages.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' confirmations
The Directors consider that the
Annual Report and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and Company's position and
performance, business model and strategy.
Each of the Directors, whose names
and functions are listed in the Directors' Report, confirm that, to
the best of their knowledge:
|
·
|
the Group and Company financial
statements, which have been prepared in accordance with UK-adopted
international accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit of the
Company; and
|
|
·
|
the Strategic Report includes a fair
review of the development and performance of the business and the
position of the Group and the Company, together with a description
of the principal risks and uncertainties that it faces.
|
On behalf of the Board
Sir
Julian Berney Bt.
Chairman
5 December 2024
Consolidated and Company Statements of Comprehensive
Income
For the year ended 30
September 2024
|
|
Note
|
Group
year to
30/09/24
€'000
|
Group
year to
30/09/23
€'000
|
Company year to
30/09/24
€'000
|
Company year to
30/09/23
€'000
|
|
Rental and service charge
income
|
3
|
20,647
|
19,666
|
-
|
-
|
|
Property operating
expenses
|
4
|
(5,602)
|
(5,398)
|
-
|
-
|
|
Net
rental and related income
|
|
15,045
|
14,268
|
-
|
-
|
|
Net loss from fair value adjustment
on
investment property
|
13
|
(7,740)
|
(19,726)
|
-
|
-
|
|
Development revenue
|
14
|
1,500
|
405
|
-
|
-
|
|
Development expense
|
14
|
(695)
|
1,133
|
-
|
-
|
|
Realised gain/(loss) on foreign
exchange
|
|
4
|
(12)
|
4
|
(12)
|
|
Net change in fair value of
financial instruments at fair value through profit or
loss
|
|
(494)
|
(260)
|
-
|
-
|
|
Management fee income
|
5
|
-
|
-
|
1,410
|
1,503
|
|
Provision on loan receivable from
joint venture
|
6
|
-
|
-
|
-
|
-
|
|
Provision of investment made in
subsidiaries
|
15
|
-
|
-
|
(50)
|
-
|
|
Dividends received
|
8,16
|
-
|
-
|
2,322
|
509
|
|
Expenses
|
|
|
|
|
|
|
Investment management fee
|
5
|
(1,899)
|
(1,981)
|
(1,899)
|
(1,981)
|
|
Valuer's and other professional
fees
|
|
(719)
|
(788)
|
(217)
|
(347)
|
|
Administrator's and accounting
fees
|
|
(586)
|
(566)
|
(120)
|
(120)
|
|
Auditor's remuneration and assurance
fees
|
7
|
(347)
|
(335)
|
(306)
|
(324)
|
|
Directors' fees
|
9
|
(239)
|
(232)
|
(239)
|
(232)
|
|
Other expenses
|
9
|
(540)
|
(442)
|
(418)
|
(313)
|
|
Total expenses
|
|
(4,330)
|
(4,344)
|
(3,199)
|
(3,317)
|
|
Operating profit/(loss)
|
|
3,290
|
(8,536)
|
487
|
(1,317)
|
|
Finance income
|
|
654
|
228
|
2,407
|
2,086
|
|
Finance costs
|
|
(2,596)
|
(1,714)
|
-
|
-
|
|
Net
finance (costs)/income
|
|
(1,942)
|
(1,486)
|
2,407
|
2,086
|
|
Share of loss from joint
venture
|
16
|
-
|
-
|
-
|
-
|
|
Profit/(Loss) before taxation
|
|
1,348
|
(10,022)
|
2,894
|
769
|
|
Taxation
|
10
|
(773)
|
640
|
-
|
-
|
|
Profit/(Loss) for the year
|
|
575
|
(9,382)
|
2,894
|
769
|
|
Other comprehensive income/(loss):
|
|
|
|
|
|
|
Other comprehensive income/(loss) items that may be
reclassified to profit or loss
|
|
-
|
-
|
-
|
-
|
|
Total other comprehensive profit/(loss)
|
|
-
|
-
|
-
|
-
|
|
Total comprehensive income/(loss) for the
year
|
|
575
|
(9,382)
|
2,894
|
769
|
|
Basic and diluted earnings per share attributable to owners of
the parent
|
11
|
0.4c
|
(7.0)c
|
-
|
-
|
All items in the above statement are
derived from continuing operations. The accompanying notes 1 to 28
form an integral part of the financial statements.
Consolidated and Company Statements of Financial
Position
As at 30 September
2024
|
|
Note
|
Group
30/09/24
€'000
|
Group
30/09/23
€'000
|
Company
30/09/24
€'000
|
Company
30/09/23
€'000
|
|
Assets
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Investment property
|
13
|
206,522
|
213,098
|
-
|
-
|
|
Investment in
subsidiaries
|
15
|
-
|
-
|
69,921
|
69,921
|
|
Investment in joint
venture
|
16
|
-
|
-
|
-
|
-
|
|
Receivables from
subsidiaries
|
1
|
-
|
-
|
55,507
|
65,174
|
|
Loans to joint ventures
|
6,16
|
-
|
-
|
-
|
-
|
|
Non-current assets
|
|
206,522
|
213,098
|
125,428
|
135,095
|
|
Current assets
|
|
|
|
|
|
|
Trade and other
receivables
|
17
|
10,026
|
8,897
|
909
|
1,285
|
|
Interest rate derivative
contracts
|
|
236
|
674
|
-
|
-
|
|
Cash and cash equivalents
|
|
27,362
|
32,445
|
18,165
|
13,548
|
|
Current assets
|
|
37,624
|
42,016
|
19,074
|
14,833
|
|
Total assets
|
|
244,146
|
255,114
|
144,502
|
149,928
|
|
Equity
|
|
|
|
|
|
|
Share capital
|
18
|
17,966
|
17,966
|
17,966
|
17,966
|
|
Share premium
|
18
|
43,005
|
43,005
|
43,005
|
43,005
|
|
Retained earnings/(accumulated
losses)
|
|
103,126
|
(6,142)
|
83,002
|
(28,818)
|
|
Other reserves
|
|
-
|
116,610
|
-
|
116,843
|
|
Total equity
|
|
164,097
|
171,439
|
143,973
|
148,996
|
|
Liabilities
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
19
|
70,471
|
65,023
|
-
|
-
|
|
Deferred tax liability
|
10
|
4,163
|
4,225
|
-
|
-
|
|
Non-current liabilities
|
|
74,634
|
69,248
|
-
|
-
|
|
Current liabilities
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
19
|
-
|
8,600
|
-
|
-
|
|
Trade and other payables
|
20
|
4,955
|
4,856
|
529
|
932
|
|
Current tax liabilities
|
10
|
460
|
971
|
-
|
-
|
|
Current liabilities
|
|
5,415
|
14,427
|
529
|
932
|
|
Total liabilities
|
|
80,049
|
83,675
|
529
|
932
|
|
Total equity and liabilities
|
|
244,146
|
255,114
|
144,502
|
149,928
|
|
|
|
|
|
|
|
|
Net
asset value per ordinary share
|
21
|
122.7
|
128.2
|
107.7
|
111.4
|
The financial statements on pages 66
to 69 were approved at a meeting of the Board of Directors held on
5 December 2024 and signed on its behalf by:
Sir
Julian Berney Bt.
Chairman
The accompanying notes 1 to 28 form
an integral part of the financial statements.
Registered in England and Wales as a
public company limited by shares.
Company registration number:
09382477
Consolidated and Company Statements of Changes in
Equity
For the year ended 30
September 2024
|
Group
|
Note
|
Share
capital
€'000
|
Share
premium
€'000
|
(Accumulated losses)/Retained
earnings
€'000
|
Other
reserves
€'000
|
Total
equity
€'000
|
|
Balance as at 1 October 2022
|
|
17,966
|
43,005
|
10,662
|
116,610
|
188,243
|
|
Loss for the year
|
|
-
|
-
|
(9,382)
|
-
|
(9,382)
|
|
Other comprehensive income/(loss)
for the year
|
|
-
|
-
|
-
|
-
|
-
|
|
Dividends paid
|
12
|
-
|
-
|
(7,422)
|
-
|
(7,422)
|
|
Balance as at 30 September 2023
|
|
17,966
|
43,005
|
(6,142)
|
116,610
|
171,439
|
|
Transfers
|
|
-
|
-
|
116,610
|
(116,610)
|
-
|
|
Profit for the year
|
|
-
|
-
|
575
|
-
|
575
|
|
Other comprehensive income/(loss)
for the year
|
|
-
|
-
|
-
|
-
|
-
|
|
Dividends paid
|
12
|
-
|
-
|
(7,917)
|
-
|
(7,917)
|
|
Balance as at 30 September 2024
|
|
17,966
|
43,005
|
103,126
|
-
|
164,097
|
|
Company
|
Note
|
Share
capital
€'000
|
Share
premium
€'000
|
(Accumulated
losses)/Retained
earnings1
€'000
|
Other
reserves1
€'000
|
Total
equity
€'000
|
|
Balance as at 1 October 2022
|
|
17,966
|
43,005
|
(22,165)
|
116,843
|
155,649
|
|
Profit for the year
|
|
-
|
-
|
769
|
-
|
769
|
|
Other comprehensive income/(loss)
for the year
|
|
-
|
-
|
-
|
-
|
-
|
|
Dividends paid
|
12
|
-
|
-
|
(7,422)
|
-
|
(7,422)
|
|
Balance as at 30 September 2023
|
|
17,966
|
43,005
|
(28,818)
|
116,843
|
148,996
|
|
Transfers
|
|
-
|
-
|
116,843
|
(116,843)
|
-
|
|
Profit for the year
|
|
-
|
-
|
2,894
|
-
|
2,894
|
|
Other comprehensive income/(loss)
for the year
|
|
-
|
-
|
-
|
-
|
-
|
|
Dividends paid
|
12
|
-
|
-
|
(7,917)
|
-
|
(7,917)
|
|
Balance as at 30 September 2024
|
|
17,966
|
43,005
|
83,002
|
-
|
143,973
|
|
1
|
These reserves form the
distributable reserves of the Company and include a historic share
premium reduction and may be used to fund distribution of profits
to investors via dividend payments.
|
The accompanying notes 1 to 28 form
an integral part of the financial statements.
Consolidated and Company Statements of Cash
Flows
For the year ended 30
September 2024
|
|
Note
|
Group
30/09/24
€'000
|
Group
30/09/23
€'000
|
Company
30/09/24
€'000
|
Company
30/09/23
€'000
|
|
Operating activities
|
|
|
|
|
|
|
Profit/(Loss) before tax for the
year
|
|
1,348
|
(10,022)
|
2,894
|
769
|
|
Adjustments for:
|
|
|
|
|
|
|
Net loss/(gain) from fair value
adjustment on investment property
|
13
|
7,740
|
19,726
|
-
|
-
|
|
Realised foreign exchange
(gain)/loss
|
|
(4)
|
12
|
(4)
|
12
|
|
Provision of loan made to Seville
joint venture
|
6
|
-
|
-
|
-
|
-
|
|
Provision of investment made in
subsidiaries
|
15
|
-
|
-
|
50
|
-
|
|
Finance income
|
|
(654)
|
(228)
|
(2,407)
|
(2,087)
|
|
Finance costs
|
|
2,596
|
1,714
|
-
|
-
|
|
Net change in fair value of
financial instruments through
profit or loss
|
|
494
|
260
|
-
|
-
|
|
Dividend income classified as
investing cash flows
|
|
-
|
-
|
(2,322)
|
(509)
|
|
Operating cash generated from/(used in) before changes in
working capital
|
|
11,520
|
11,462
|
(1,789)
|
(1,815)
|
|
(Increase)/decrease in trade and
other receivables
|
|
(627)
|
7,564
|
276
|
370
|
|
(Decrease)/increase in trade and
other payables
|
|
(167)
|
(1,071)
|
(497)
|
(450)
|
|
Cash generated from/(used in) operations
|
|
10,726
|
17,955
|
(2,010)
|
(1,895)
|
|
Finance costs paid
|
|
(2,145)
|
(1,573)
|
-
|
-
|
|
Finance income received
|
|
654
|
228
|
4,598
|
397
|
|
Tax (paid)/received
|
|
(1,345)
|
(714)
|
-
|
-
|
|
Net
cash generated from/(used in) operating
activities
|
|
7,890
|
15,896
|
2,588
|
(1,498)
|
|
Investing activities
|
|
|
|
|
|
|
Acquisition of investment
property
|
13
|
-
|
(11,167)
|
-
|
-
|
|
Additions to investment
property
|
13
|
(1,682)
|
(3,984)
|
-
|
-
|
|
Loans to subsidiary
companies
|
|
-
|
-
|
(2,200)
|
(1,459)
|
|
Loan repayment from subsidiary
company
|
|
-
|
-
|
9,820
|
19,000
|
|
Investment in subsidiary
|
16
|
-
|
-
|
-
|
(5,400)
|
|
Dividends received
|
|
-
|
-
|
2,322
|
300
|
|
Net
cash generated (used in)/from investing
activities
|
|
(1,682)
|
(15,151)
|
9,942
|
12,441
|
|
Financing activities
|
|
|
|
|
|
|
Proceeds from borrowings
|
19,20
|
-
|
31,760
|
-
|
-
|
|
Repayment of borrowings
|
19,20
|
(3,000)
|
(26,950)
|
-
|
-
|
|
Interest rate derivative contracts
purchased
|
|
(56)
|
-
|
-
|
-
|
|
Refinancing costs paid
|
|
(322)
|
-
|
-
|
-
|
|
Dividends paid
|
12
|
(7,917)
|
(7,422)
|
(7,917)
|
(7,422)
|
|
Net
cash used in financing activities
|
|
(11,295)
|
(2,612)
|
(7,917)
|
(7,422)
|
|
Net
(decrease)/increase in cash and cash equivalents
for
the year
|
|
(5,087)
|
(1,867)
|
4,613
|
3,521
|
|
Opening cash and cash
equivalents
|
|
32,445
|
34,324
|
13,548
|
10,039
|
|
Effects of exchange rate change on
cash
|
|
4
|
(12)
|
4
|
(12)
|
|
Closing cash and cash equivalents
|
|
27,362
|
32,445
|
18,165
|
13,548
|
The accompanying notes 1 to 28 form
an integral part of the financial statements.
Notes to the Financial Statements
1.
Significant accounting policies
Schroder European Real Estate
Investment Trust plc (the 'Company') is a closed-ended investment
company incorporated in the United Kingdom. The consolidated
financial statements of the Company for the year ended 30 September
2024 comprise those of the Company and its subsidiaries (together
referred to as the 'Group'). The Group holds a portfolio of
investment properties in continental Europe. The shares of the
Company are listed on the London Stock Exchange (primary listing)
and Johannesburg Stock Exchange Limited (secondary listing). The
registered office of the Company is 1 London Wall Place, London,
England EC2Y 5AU.
Statement of compliance
The consolidated financial statements
of the Group and Company financial statements have been prepared
under the UK-adopted 'International Accounting Standards in
accordance with the Companies Act 2006'.
The financial statements give a true
and fair view and are in compliance with applicable legal and
regulatory requirements and the UK Listing Rules and JSE Listing
Authority.
Basis of preparation
Company law requires the Directors to
prepare financial statements for each financial year. Under that
law the Directors have prepared the Group and the Company financial
statements in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act
2006.
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
flows of the entities included in the consolidated financial
statements.
Going concern
The Directors have examined
significant areas of possible financial risk including: cash held
and the liquidity of the Group's assets; forward-looking compliance
with third-party debt covenants, in particular the loan to value
('LTV') covenant and interest cover ratios; the likelihood of any
payment of contingent tax liabilities; potential falls in property
valuations; the non-collection of rent and service charges; and the
existing, and future, anticipated cash requirements of the
Group.
Furthermore, ongoing geopolitical
developments, and macroeconomic variables such as projected
interest rates and inflation, have also been considered regarding
the Group's property investments in France, Germany, Spain and the
Netherlands.
Cash flow forecasts, based on deemed
plausible downside scenarios, have led the Board to conclude that
the Group will have sufficient cash reserves to continue in
operation for twelve months from the date of the signing of the
annual report.
The Group has six loans secured by
individual assets, with no cross-collateralisation. Other than
Seville, whereby there is a cash trap in operation and a LTV
breach, all loans are in compliance with their debt covenants. More
details of the individual loans, and headroom on the LTV and net
income default covenants, is provided on page 19.
Excluding Seville, for which the
Group has already written its investment fully down to nil, there
are no further loans maturing within the going concern
period.
After due consideration, 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 12 months from the
date of the approval of the consolidated annual report and
financial statements, which would be 31 December 2025. 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 financial
statements under the UK adopted international accounting standards,
in conformity with the Companies Act 2006, 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 relate to the carrying
value of investment properties, as disclosed in note 13, including
those investment properties within joint ventures, which are stated
at fair value. The fair value of investment property is inherently
subjective because, in the absence of readily-observable market
data, the valuer has to make professional judgements on valuation
inputs. The Group uses an external professional valuer to determine
the relevant amounts.
The following are other key areas of
estimates and judgements:
|
·
|
Accounting for development revenue
and variable consideration regarding Paris, Boulogne-Billancourt:
When determining an appropriate level of development revenue to be
recognised in the reporting period, the Group considered the
contractual penalties of not meeting certain criteria within the
agreement; the total development costs incurred; the stage of
completion of the refurbishment; the milestones achieved and still
to be achieved; the timing of further future cash receipts from the
purchaser; and the overall general development risk to form a
considered judgement of revenue to be appropriately recognised in
the financial statements. Further details of the judgement are
disclosed in note 14.
|
|
·
|
Tax provisioning and disclosure:
Management uses external tax advisers to monitor changes in tax
laws in countries where the Group has operations. New tax laws that
have been substantively enacted are recognised in the Group's and
Company's financial statements. The Group is also subject to
periodic challenges by local tax authorities on a range of tax
matters during the normal course of business. Where changes to tax
laws or challenges by local tax authorities give rise to a
provision or potential contingent liability, the Group discloses
the estimated amounts appropriately within the notes to the
financial statements (further details are disclosed in note
10).
|
|
·
|
IFRS 9 expected credit losses: All
receivables, inter-company and joint venture loans are financial
assets and must therefore be assessed for impairment and
application of forward-looking expected credit loss model. For
impairments identified including those applied using the expected
credit loss model, appropriate recognition is required in the
consolidated statement of comprehensive income, together with
appropriate disclosure and sensitivity analysis in the notes to the
financial statements (further details are disclosed in note 6). The
Seville joint venture loan has been Level 3 calculated on the
lifetime expected credit loss method. The following factors were
considered when determining the probability of default used for the
impairment provision calculation for the Seville joint venture
loan: the property valuation and future potential movements; that
there is an LTV breach and a cash trap in place; cash flow
forecasts; the longer-term effects of the prior lockdown measures
in Spain on tenants and their trading; and rent collection rates.
An evaluation of these factors has allowed management to determine
that the loan is a Level 3 impairment and is deemed not
recoverable. These judgements were also considered within the
impairment in the investments held in subsidiaries for the Parent
Company.
|
Basis of consolidation
Subsidiaries
The consolidated financial statements
comprise the financial statements of the Company and all of its
subsidiaries drawn up to 30 September each year. Subsidiaries are
those entities, including special purpose entities, controlled by
the Company. Control exists when the Company is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to
direct the activities of the entity. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases. Where properties are acquired by the Group through
corporate acquisitions, but the acquisition does not meet the
definition of a business combination, the acquisition is treated as
an asset acquisition.
Transactions eliminated on consolidation
Intra-group balances, and any gains
and losses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Gains arising from
transactions with joint ventures are eliminated to the extent of
the Group's interest in the entity. Losses are eliminated in the
same way as gains but only to the extent that there is no evidence
of impairment. Non-controlling interests in the results and equity
of subsidiaries are shown separately in the consolidated statement
of comprehensive income, statement of changes in equity and balance
sheet respectively.
Joint arrangements
Under IFRS 11 Joint Arrangements, the
Group's investments in joint arrangements are classified as joint
ventures. Interests in joint ventures are accounted for using the
equity method, after initially being recognised at cost, in the
consolidated statement of financial position.
Under the equity method of
accounting, the investments are initially recognised at cost and
adjusted thereafter to recognise the Group's share of the
post-acquisition profits or losses of the investee in profit or
loss.
When the Group's share of losses in
an equity-accounted investment equals or exceeds its interest in
the entity, including any other unsecured long-term receivables,
the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group's interest in
these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
Investment property
Investment property comprises land
and buildings held to earn rental income together with the
potential for capital growth.
Acquisitions and disposals are
recognised on an unconditional exchange of contracts. Acquisitions
are initially recognised at cost, being the fair value of the
consideration including any transaction costs associated with the
investment property.
After initial recognition, investment
properties are measured at fair value with unrealised gains and
losses recognised in profit or loss. Realised gains and losses on
the disposal of properties are recognised in profit and loss in
relation to the carrying value at the beginning of the accounting
period. Fair value is based on the market valuations of the
properties as provided by a firm of independent chartered surveyors
at the reporting date. Market valuations are carried out on a
quarterly basis.
As disclosed in note 23, the Group
leases out all owned properties on operating leases which are
classified and accounted for as an investment property where the
Group holds it to earn rentals, capital appreciation, or both. Any
such property leased under an operating lease is classified as an
investment property and carried at fair value.
Please refer to note 13 for
disclosure of key inputs, assumptions and sensitivities with
respect to the fair valuation of investment properties.
Prepayments
Prepayments are carried at cost and
released to the statement of comprehensive income on a
straight-line basis.
Leases
Leases in which a significant portion
of the risks and rewards of ownership are retained by another
party, the lessor, are classified as operating leases. Rental
income, including prepayments, received under operating leases (net
of any incentives granted by the lessor) are recognised in the
statement of comprehensive income on a straight-line basis over the
period of the lease. Properties leased out under operating leases
are included as investment properties in the consolidated statement
of financial position (note 13).
Financial assets and liabilities
Non-derivative financial assets and
liabilities
Non-derivative financial assets are
measured at amortised cost less impairment whereas financial
liabilities are measured at amortised cost. The Group calculates
impairment provisions for non-derivative financial assets based on
lifetime expected credit losses under IFRS 9.
Cash and cash equivalents
Cash at bank, and short-term deposits
that are held to maturity, are carried at amortised cost. Cash and
cash equivalents are defined as cash in hand, demand deposits and
short-term, highly liquid investments readily convertible to known
amounts of cash and subject to insignificant risk of changes in
value. For the purposes of the statement of cash flows, cash and
cash equivalents consist of cash in hand and short-term deposits at
banks with a term of no more than three months.
Loans and borrowings
Borrowings are recognised initially
at the fair value of the consideration received less attributable
transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised in
the profit and loss over the period of the borrowings on an
effective interest basis.
Borrowing costs such as arrangement
fees are capitalised and amortised over the loan term.
Derivative financial assets and liabilities
Derivative financial assets and
liabilities comprise interest rate caps for hedging purposes
(economic hedge). These are recognised at fair value, with the
revaluation gains or losses immediately recorded in the statement
of comprehensive income.
Share capital
Ordinary shares, including treasury
shares, are classified as equity when there is no obligation to
transfer cash or other assets. The Company's accounting policy is
to fix the share capital at the spot rate at the date of issue. The
Company does not retranslate its share capital at the end of each
reporting period.
Share premium
Share premium represents the excess
of proceeds received over the nominal value of new shares issued.
The Company's accounting policy is to fix the share premium at the
spot rate at the date of issue. The Company does not retranslate
its share premium at the end of each reporting period.
Other reserves
Other reserves mainly consist of a
share premium reduction reserve arising from the conversion of
share premium into a distributable reserve.
Dividends
Final dividends to the Company's
shareholders are recognised as a liability in the Group's financial
statements in the period in which the dividends are approved by the
Company's shareholders. Interim dividends are recognised when
paid.
Impairment
Investments
The carrying amounts of the Group's
and Company's investments, other than investment property but
including joint ventures and investments held in subsidiaries, are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the
asset's recoverable amount is estimated.
The recoverable amount of an asset or
cash-generating unit is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
that asset.
An impairment loss is recognised if
the carrying amount of an asset or its cash-generating unit exceeds
its estimated recoverable amount. Impairment losses are recognised
in the profit and loss.
Revenue
Rental income
Rental income from operating leases
is recognised on a straight-line basis over the lease term. When
the Group provides incentives to its tenants, the cost of
incentives is recognised over the lease term, on a straight-line
basis, as a reduction of rental income.
Where a rent incentive fits the
definition of a lease modification under IFRS 16, the cost of
incentives is recognised over the remaining lease term starting
from the effective date of the lease modification, on a
straight-line basis, as a reduction of rental income.
Service charges
These include income in relation to
service charges, directly recoverable expenditure and management
fees. Revenue from services is recognised over time, as services
are rendered as there is a transfer of control of these services
over time when services are rendered by third party service
providers.
Finance income and costs
Finance income comprises interest
income on funds invested that are recognised in the statement of
comprehensive income. Finance income is recognised on an accruals
basis.
Finance costs comprise interest
expenses on borrowings that are recognised in the statement of
comprehensive income. Attributable transaction costs incurred in
establishing the Group's credit facilities are deducted from the
fair value of borrowings on initial recognition and are amortised
over the lifetime of the facilities through profit and loss.
Finance expenses are accounted for on an effective interest
basis.
Expenses
All expenses are accounted for on an
accruals basis. They are recognised in the statement of
comprehensive income in the year in which they are incurred on an
accruals basis.
Taxation
The Company and its subsidiaries are
subject to income tax on any income arising on investment
properties after deduction of debt financing costs and other
allowable expenses.
Income tax on the profit or loss for
the year comprises current and deferred tax. Current tax is the
expected tax payable on the taxable income for the year, using tax
rates enacted or substantially enacted at the reporting date, and
any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided in full,
using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred tax is
determined using tax rates (and laws) that have been enacted, or
substantially enacted, by the date of the statement of financial
position and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is
settled.
Deferred income tax assets are
recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences
can be utilised.
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.
Foreign currency translation
Items included in the financial
statements of each of the Group's entities are measured using the
currency of the primary economic environment in which the entity
operates (the 'functional currency').
The functional currency of all the
entities in the Group is the euro, as this is the currency in which
the majority of investment takes place and in which the majority of
income and expenses are incurred. The financial statements are also
presented in euros.
Foreign currency transactions are
translated into euros using the exchange rate prevailing at the
date of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions are recognised
in profit or loss in the statement of comprehensive
income.
Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
translated into the presentational currency using the exchange rate
prevailing at that date. Foreign exchange differences arising on
translation to the presentation currency are taken to the
consolidated statement of comprehensive income.
2.
New standards and interpretations
New
standards and interpretations adopted by the
Group
In the current year, the Group has
applied a number of new standards and amendments to IFRS Accounting
Standards issued by the International Accounting Standards Board
('IASB') that are mandatorily effective for an accounting period
that begins on or after 1 October 2023. Their adoption has not had
any material impact on the disclosures or on the amounts reported
in these financial statements.
These new standards and amendments
are listed below:
|
·
|
Amendments to IAS 7 and IFRS 7 -
Disclosures titled supplier finance arrangements
|
|
·
|
Amendments to IAS 1 - Classification
of liabilities as current or non-current
|
|
·
|
Amendments to IFRS 16 - Lease
liability in a sale and leaseback
|
At the date of authorisation of these
financial statements, the Group has not applied the following new
and revised IFRS Accounting Standards that have been issued but are
not yet effective:
|
·
|
Amendments to IAS 21 - Lack of
exchangeability
|
|
·
|
IFRS 18 - Presentation and
Disclosures in the Financial Statements
|
|
·
|
IFRS 19 - Subsidiaries without
Public Accountability disclosures
|
The Directors do not expect that the
adoption of the standards listed above will have a material impact
on the financial statements of the Group in future
periods.
3.
Rental and service charge income
|
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Rental income
|
16,385
|
15,555
|
-
|
-
|
|
Service charge income
|
4,262
|
4,111
|
-
|
-
|
|
|
20,647
|
19,666
|
-
|
-
|
Service charge income is charged in
addition to rent payments to cover the landlord's costs. Factors
such as the size of the asset, number of occupants, occupancy rates
and purpose of the asset can affect the amount and timing of
revenue and cash flows.
The Group has concluded that it
transfers control of these services over time, as services are
rendered by the third party service providers, because this is when
tenants receive and, at the same time, consume the benefits from
these services.
The service charge receivable amounts
to €3,972,000 (2023: €3,086,000). Payment of service charge income
from tenants is impacted by the timing of service charge
reconciliations by property managers.
4.
Property operating expenses
|
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Repairs and maintenance
|
2,750
|
2,932
|
-
|
-
|
|
Service charge, insurance and
utilities on vacant units
|
670
|
456
|
-
|
-
|
|
Real estate taxes
|
1,474
|
1,410
|
-
|
-
|
|
Property management fees
|
375
|
376
|
-
|
-
|
|
Other
|
333
|
224
|
-
|
-
|
|
|
5,602
|
5,398
|
-
|
-
|
All the above amounts relate to
either service charge or property operating expenses which are
recoverable from tenants, except for €1,340,000 (2023: €1,382,000)
which relates to non-recoverable landlord expenses.
5.
Material agreements
Schroder Real Estate Investment
Management Limited ('SREIM') is the Investment Manager to the
Company. 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 12th of the aggregate of 1.1% of the EPRA NAV of the Group. The
Investment Management Agreement can be terminated by either party
on not less than 12 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 year was €1,899,000 (2023: €1,981,000). At the year end
€140,000 (2023: €626,000) was outstanding.
SREIM charges accounting services to
the Company with a minimum contracted annual charge of €81,000
(£70,000). The total charge to the Company was €102,000 (2023:
€104,000). At the year end €8,000 (2023: €35,000) was outstanding.
SREIM also charged accounting services to the subsidiaries
registered in Luxembourg at a contracted annual charge of €135,000
up until 10 March 2024. The total charge to the Luxembourg
subsidiaries was €60,000 (2023: €Nil). At the year end €Nil (2023:
€Nil) was outstanding. These fees are included in administrator's
and accounting fees in the consolidated statement of comprehensive
income. From 11 March 2024, CBRE's Investment Accounting &
Reporting Solutions (IA&R) group charged accounting services to
the Luxembourg subsidiaries.
SREIM provides administrative and
company secretarial services to the Group with a contracted annual
charge of €58,000 (£50,000). The total charge to the Group was
€58,000 (2023: €58,000). These are included in administrator's and
accounting fees in the consolidated statement of comprehensive
income. At the year end €5,000 (2023: €19,000) was
outstanding.
Details of Directors' fees are
disclosed in note 9.
Details of loans to Urban SEREIT
Holdings Spain S.L., a related party, are disclosed in note
16.
The Company received management fees
of €1,410,000 (2023: €1,503,000) from subsidiary companies during
the year. The amounts recharged to subsidiaries and outstanding are
provided in the following table.
|
|
Fees recharged in the year to
30 September
€'000
|
Fees outstanding as at 30
September
€'000
|
|
Subsidiary
|
2024
|
2023
|
2024
|
2023
|
|
SCI SEREIT Rumilly
|
48
|
53
|
12
|
24
|
|
SAS Clarity Developpement
|
375
|
386
|
189
|
187
|
|
SEREIT Berlin DIY Sàrl
|
134
|
153
|
34
|
74
|
|
SEREIT Hamburg Sàrl
|
109
|
120
|
55
|
57
|
|
SEREIT Stuttgart Sàrl
|
89
|
104
|
22
|
48
|
|
SEREIT Frankfurt Sàrl
|
56
|
58
|
14
|
27
|
|
SCI SEREIT Directoire
|
182
|
194
|
46
|
141
|
|
SEREIT Apeldoorn Sàrl
|
70
|
79
|
17
|
38
|
|
SEREIT UV Sàrl
|
121
|
125
|
31
|
62
|
|
SEREIT Alkmaar Sàrl
|
54
|
42
|
13
|
28
|
|
SCI SEREIT Pleudihen
|
91
|
100
|
46
|
72
|
|
SCI SEREIT Nantes
|
29
|
31
|
15
|
15
|
|
SCI LC Invest
|
34
|
38
|
17
|
18
|
|
SEREIT Holdings S.a.r.l
|
18
|
20
|
5
|
10
|
|
Total
|
1,410
|
1,503
|
516
|
801
|
6.
Provision of loan made to Seville joint venture
As at 30 September 2024, the Group
owned 50% of the Metromar Joint Venture, which owns a shopping
centre in Seville, and had advanced €10,000,000 as a loan and was
owed interest of €2,391,000 (2023: €1,941,000). The loan carries a
fixed interest rate of 4.37% per annum payable quarterly and
matures on a date as agreed with the lender.
When considering an appropriate level
of impairment, the Group primarily considered: the current market
liquidity, and achievable market price, for such an asset; the
property valuation and future potential movements; debt covenant
breaches; cash flow forecasts; the tenants' trading levels; vacancy
rates; and the rent collection rates of the asset.
The impairment provision booked
during the year was €Nil as the loan and interest is now considered
a stage 3 impairment (2023: €Nil) bringing the cumulative
impairment to €11,537,000 and the Group's investment with regard to
Seville now stands at €Nil (2023: €Nil).
No further interest income was
recognised in the consolidated financial statements in the year to
30 September 2024 as the loan and interest is now considered a
stage 3 impairment and therefore a Loss Given Default rate of 100%
has been applied. Hence, cumulative interest receivable recognised
in the consolidated financial statements previously and
subsequently impaired amounts to €1,544,000.
Furthermore, Management has
separately assessed that if a sale were to be achieved at the
current fair value of the property of €24,000,000 then, all else
being equal, the Group could reverse €Nil of the previously
recognised impairment. The sensitivity of potential impairment
reversals, based on potential exit prices, is shown in the table
below:
|
|
-10%
|
0%
|
+10%
|
|
Valuation of Metromar, Seville
property
|
21,600,000
|
24,000,000
|
26,400,000
|
|
Potential future impairment
reversal
|
-
|
-
|
800,000
|
Underlyingly, and as set out in the
above, the Investment Manager does not believe at the current time
that ultimately a sale price will be achieved above the carrying
value of the third-party debt and thus there has been no reversal
of prior impairments in the current financial year.
7.
Auditor's remuneration and assurance fees
The Group's total audit fees for the
year are €347,000 (2023: €330,000) which includes the Group audit
and the individual statutory audits. The Company's total audit fees
for the year were €244,000 (2023: €239,000) which only covers the
Group audit.
The interim review fee was €52,100
(2023: €51,000) which is an assurance related non-audit service and
is included in the total auditor's remuneration for the year. The
auditor did not perform any other non-audit services for the Group
during the year (2023: €Nil).
8.
Dividends received
During the year, the Group did not
receive any dividends from its joint venture operation Urban SEREIT
Holdings Spain S.L. (2023: €Nil) (see note 15).
During the year, the Company received
dividends from its subsidiary undertakings. €722,000 (2023:
€300,000) was received from OPPCI SEREIT France, €Nil (2023:
€209,000) was received from SEREIT Holdings France and €1,600,000
(2023: €Nil) was received from SAS Clarity Development.
9.
Other expenses
|
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Directors' and officers' insurance
premium
|
14
|
14
|
14
|
14
|
|
Bank charges
|
71
|
114
|
9
|
27
|
|
Regulatory costs
|
73
|
89
|
51
|
66
|
|
Marketing
|
83
|
57
|
83
|
60
|
|
Other expenses
|
299
|
168
|
261
|
147
|
|
|
540
|
442
|
418
|
314
|
Directors are the only officers of
the Company and there are no other key personnel. The Group has one
employee; for further details see note 27. The Directors' annual
remuneration for services to the Group was €215,000 (2023:
€203,000), as set out in the Directors' Remuneration Report on
pages 50 to 52. The total charge for Directors' fees was €239,000
(2023: €232,000), which included employer's National Insurance
contributions. Other expenses include items such as domiciliation
fees and registrar fees.
10.
Taxation
|
|
30/09/2024
€'000
|
30/09/2023
€'000
|
|
Current tax charge
|
1,017
|
739
|
|
Current tax adjustment in respect of
prior periods
|
(182)
|
(480)
|
|
Deferred tax
(credit)/charge
|
(62)
|
(899)
|
|
Tax
expense/(credit) in year
|
773
|
(640)
|
|
Reconciliation of effective tax rate
|
|
|
|
Profit/(Loss) before
taxation
|
1,348
|
(10,022)
|
|
Effect of:
|
|
|
|
Tax charge at weighted average
corporation tax rate of 23.40% (2023: 22.65%)
|
468
|
(2,210)
|
|
Tax exempt income or non-deductible
losses
|
185
|
840
|
|
Tax adjustment on net revaluation
loss
|
543
|
625
|
|
Tax adjustment of share of joint
venture loss
|
-
|
691
|
|
Minimum Luxembourg tax
charges
|
84
|
88
|
|
Tax effect of property
depreciation
|
(468)
|
(418)
|
|
Tax adjustment in respect of prior
periods
|
(182)
|
(480)
|
|
Other permanent
differences
|
143
|
224
|
|
Total tax expense/(credit) in the year
|
773
|
(640)
|
The effective tax rate is a weighted
average of the applicable tax rates in the countries the Group has
operations. The opening deferred tax liability was €4,225,000,
which after a debit of €62,000 leads to a closing liability of
€4,163,000. A potential deferred tax asset of €1,741,000 (2023:
€1,306,000) arose on tax losses which has not been provided
for.
SEREIT plc has elected to be treated
as a société d'investissement immobilier cotée ('SIIC') for French
tax purposes. Provided that SEREIT plc meets certain requirements,
the SIIC should be exempt from French CIT on net rental income and
gains arising from interests in property. Management intends that
the Group will continue to comply with the SIIC regulations for the
foreseeable future.
The Group operates in a number of
jurisdictions and is subject to periodic challenges by local tax
authorities on a range of tax matters during the normal course of
business. The tax impact can be uncertain until a conclusion is
reached with the relevant tax authority. The Group addresses this
uncertainty by closely monitoring tax developments, seeking
independent advice and maintaining transparency with the
authorities it deals with as and when any enquiries are
made.
The French tax authorities have
recently commenced a tax audit requesting information on tax
filings made in relation to the Group's SIIC structure. The
potential exposure is up to €12.6 million excluding possible
penalties (2023: €9.5 million). Having taken professional advice,
the Board remains of the view that a provision for this tax is not
required as they do not consider that the tax will ultimately be
found due. However, the position will remain uncertain until a
conclusion is reached.
11.
Earnings per share
Basic earnings per share
The basic earnings per share for the
Group is calculated by dividing the net profit after tax
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares in issue during the
year.
|
|
30/09/2024
|
30/09/2023
|
|
Total comprehensive income/(loss) for the
year
|
€575,000
|
€(9,382,000)
|
|
Weighted average number of ordinary
shares in issue
|
133,734,686
|
133,734,686
|
|
Basic IFRS earnings per share (cents
per share)
|
0.4
|
(7.0)
|
Diluted earnings per share
The Group has no dilutive potential
ordinary shares and hence the diluted earnings per share is the
same as the basic earnings per share in both 2023 and
2024.
Headline earnings per share
The headline earnings and diluted
headline earnings for the Group is 6.1 euro cents per share (2023:
6.0 euro cents per share) as detailed on page 97.
12.
Dividends paid
Interim dividends of €7,917,000
(2023: €7,422,000) were paid to the shareholders of the Company
during the year as follows:
|
In
respect of
|
Ordinary
shares
|
Rate
(cents)
|
30/09/2024
€'000
|
|
Interim dividend paid on 17 November
2023
|
133,734,686
|
1.48
|
1,980
|
|
Interim dividend paid on 25 January
2024
|
133,734,686
|
1.48
|
1,979
|
|
Interim dividend paid on 10 May
2024
|
133,734,686
|
1.48
|
1,979
|
|
Interim dividend paid on 12 August
2024
|
133,734,686
|
1.48
|
1,979
|
|
Total interim dividends paid
|
133,734,686
|
|
7,917
|
|
In
respect of
|
Ordinary
shares
|
Rate
(cents)
|
30/09/2023
€'000
|
|
Interim dividend paid on 13 January
2023
|
133,734,686
|
1.85
|
2,474
|
|
Interim dividend paid on 5 May
2023
|
133,734,686
|
1.85
|
2,474
|
|
Interim dividend paid on 11 August
2023
|
133,734,686
|
1.85
|
2,474
|
|
Total interim dividends paid
|
133,734,686
|
|
7,422
|
13.
Investment property
|
Group
|
€'000
|
|
Fair value as at 1 October 2022
|
217,456
|
|
Acquisitions
|
11,150
|
|
Acquisition costs
|
1,218
|
|
Additions
|
3,000
|
|
Net loss from fair value adjustment
on investment property
|
(19,726)
|
|
Fair value as at 30 September 2023
|
213,098
|
|
Acquisitions
|
-
|
|
Acquisition costs
|
-
|
|
Additions
|
1,164
|
|
Net loss from fair value adjustment
on investment property
|
(7,740)
|
|
Fair value as at 30 September 2024
|
206,522
|
In 2023 and 2024, the Group held one
leasehold property.
The value of the respective sectors
held were as follows:
|
Sector
|
2024
€'000
|
2023
€'000
|
|
Industrial
|
77,921
|
78,537
|
|
Retail (including retail
warehousing)
|
39,328
|
39,650
|
|
Offices
|
89,273
|
94,911
|
|
Total
|
206,522
|
213,098
|
The fair value of investment
properties, as determined by the valuer, totals €208,050,000 (2023:
€214,125,000) with the valuation amount relating to a 100%
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 per the consolidated
financial statements of €206,522,000 (2023: €213,098,000) includes
a tenant incentive adjustment of €1,528,000 (2023:
€1,027,000).
The net valuation loss on investment
property of €7,740,000 (2023: loss of €19,726,000) consists of net
property revaluation losses of €7,239,000 (2023: losses of
€19,509,000) and a movement of the above-mentioned tenant incentive
adjustment of €501,000 (2023: €217,000).
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 November 2021, incorporating the International
Valuations Standards, and RICS Professional Standards UK, November
2018 (effective January 2019).
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 an 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.
The Group has incorporated
Environmental, Social and Governance ('ESG') objectives into its
core investment strategy and at every stage of the investment
process. It has clearly defined its social and environmental
targets into distinct categories, for which each has clear and
measurable impact objectives. The valuers take into account
environmental considerations in their assessment of ERV, discount
rate and capital expenditure assumptions for each asset. Some
examples include: Hamburg office (c.€800k) for future BMS, HVAC and
tenant wellbeing measures in order to continue to keep the asset
relevant for occupiers; Stuttgart (c.€500k) and Venray (c.€500k)
primarily ESG related capital expenditure; and Paris Saint-Cloud
(c.€2.2 million) relating to fire security enhancements and
co-ownership works which will improve ESG ratings in line with
Tertiary Decree requirements.
A provision or contingent liability
would only be recognised in the consolidated financial statements
if the ESG factors led to a constructive or legal obligation for
the Group. None of the above amounts have been provided for in the
30 September 2024 annual accounts as there is no legal or
constructive obligation to perform these works at the reporting
date.
The Group's total valuation fees for
the year are €73,000 (2023: €67,000). The fee payable to Knight
Frank LLP is less than 5% of its total revenue in any
year.
All investment properties are
categorised within Level 3 of the fair value hierarchy, as they use
significant unobservable inputs. There have not been any transfers
between levels during the year. 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
30 September:
|
2024
|
|
Industrial
|
Retail
(incl. retail
warehouse)
|
Office
|
Total
|
|
Fair value (€'000)
|
|
77,950
|
39,500
|
90,600
|
208,050
|
|
Area ('000 sqm)
|
|
95.030
|
21.326
|
54.580
|
170.936
|
|
Net passing rent € per sqm per
annum
|
Range
Weighted
average1
|
33.23-118.05
64.98
|
56.85-108.12
92.80
|
120.65-163.59
138.14
|
33.23-163.59
102.12
|
|
Gross ERV € per sqm
per annum
|
Range
Weighted
average1
|
44.00-115.36
64.78
|
101.58-163.33
120.03
|
79.93-233.70
185.21
|
44.00-233.70
127.71
|
|
Net initial yield2
(%)
|
Range
Weighted
average1
|
5.43-9.61
6.62
|
1.99-5.94
6.15
|
4.39-19.94
7.02
|
1.99-19.94
6.44
|
|
Equivalent yield (%)
|
Range
Weighted
average1
|
5.50-6.98
6.17
|
5.13-5.55
5.42
|
4.20-14.89
7.59
|
4.20-14.89
6.65
|
|
1
|
Weighted by market value.
|
|
2
|
Yields based on rents receivable
after deduction of head rents and non-recoverables.
|
|
2023
|
|
Industrial
|
Retail
(incl. retail
warehouse)
|
Office
|
Total
|
|
Fair value (€'000)
|
|
78,575
|
39,650
|
95,900
|
214,125
|
|
Area ('000 sqm)
|
|
95.071
|
21.325
|
54.579
|
170.975
|
|
Net passing rent € per sqm per
annum
|
Range
Weighted
average1
|
33.16-125.09
63.79
|
108.12-154.66
121.09
|
118.63-158.07
138.22
|
33.16-158.07
107.73
|
|
Gross ERV € per sqm per
annum
|
Range
Weighted
average1
|
42.00-110.30
63.20
|
101.58-162.27
118.50
|
79.93-234.01
181.29
|
42.00-234.01
126.33
|
|
Net initial yield2
(%)
|
Range
Weighted
average1
|
5.42-9.54
6.35
|
5.76-5.79
5.77
|
4.02-17.09
6.60
|
4.02-17.09
6.35
|
|
Equivalent yield (%)
|
Range
Weighted
average1
|
5.57-9.76
5.94
|
5.36-5.40
5.39
|
3.87-13.38
7.17
|
3.87-13.38
6.39
|
|
1
|
Weighted by market value.
|
|
2
|
Yields based on rents receivable
after deduction of head rents and non-recoverables.
|
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 significant increase in input
|
Impact on fair value measurement
of 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 are
shown below:
|
Estimated movement in fair value of investment
properties
at
30 September 2024
|
Industrial
€'000
|
Retail
€'000
|
Office
€'000
|
Total
€'000
|
|
Increase in ERV by 10%
|
1,500
|
3,350
|
6,350
|
11,200
|
|
Decrease in ERV by 10%
|
(1,500)
|
(3,350)
|
(6,300)
|
(11,150)
|
|
Increase in net initial yield by
0.5%
|
(2,300)
|
(3,400)
|
(6,750)
|
(12,450)
|
|
Decrease in net initial yield by
0.5%
|
2,600
|
4,150
|
8,200
|
14,950
|
|
Estimated movement in fair value of investment
properties
at
30 September 2023
|
Industrial
€'000
|
Retail
€'000
|
Office
€'000
|
Total
€'000
|
|
Increase in ERV by 10%
|
4,900
|
2,600
|
7,100
|
14,600
|
|
Decrease in ERV by 10%
|
(4,900)
|
(2,600)
|
(7,100)
|
(14,600)
|
|
Increase in net initial yield by
0.5%
|
(6,200)
|
(3,400)
|
(9,000)
|
(18,600)
|
|
Decrease in net initial yield by
0.5%
|
7,400
|
4,100
|
9,800
|
21,300
|
14.
Recognition of development revenue and profit
During the financial year ended 30
September 2021, the Group transferred the legal title of its office
asset in Paris, Boulogne-Billancourt to a purchaser.
The forward funded sale agreement
which the Group entered into is comprised of two key performance
obligations: i) to sell the asset as referenced above; and ii) to
undertake a comprehensive refurbishment of the asset on behalf of
the purchaser.
The transaction price for the sale of
the asset is determined with regard to the deemed fair value of the
asset at the date of the transfer of the legal title to the
purchaser. On 16 December 2020 the Group transferred, as part of
the sale, the legal title to the purchaser for a deemed sale price
of €69.8 million. In return, the Group received on the completion
date an initial €52.9 million cash receipt from the purchaser and
€16.9 million was paid in the year to 30 September 2022 upon the
completion of certain milestones.
The forward funded sale contract also
included a development element whereby the Group would undertake a
comprehensive refurbishment of the asset on behalf of the purchaser
over an approximate 18 month period with practical completion
occurring in the second quarter of 2022. The amount of revenue the
Group will receive for the development of the asset is variable as
it is based on the Group achieving certain milestones.
When forming a judgement as to an
appropriate level of development revenue to be recognised in the
reporting period, the Group considered the contractual penalties of
not meeting certain criteria within the agreement; the total
development costs incurred; the stage of completion of the
refurbishment; the milestones achieved and still to be achieved;
the timing of further future cash receipts from the purchaser; and
the overall general development risk.
The Group has estimated that it will
receive total development revenue of €30.4 million (2023: €30.4
million).
During the year, the Group incurred
costs of €0.7 million (2023: cost savings €1.1 million), which
cumulatively to date, represents 99.6% of the total project
expenditure and a sum of €1.5 million (2023: €0.4 million) of
development revenue has been recognised following consideration of
the factors identified above. Total development revenue from this
contract recognised since inception is €29.6 million, which
represents 97% of total development revenue. The cash received in
the year was €2.1 million. The remaining development revenue is
expected to be recognised in the year ending 30 September 2025. The
lag between development revenue and development cost represents the
inherent development risk that is still evident in the
project.
The total amount of the contract
asset recognised by the Group that is due from the purchaser
thereby totalled €1.3 million (2023: €1.9 million) at the end of
the financial year and is included in trade and other
receivables.
The below sensitivity table presents
the change in the total development revenue expected from the
purchaser if the variable consideration increases or decreases by
10%. Note that the maximum amount of variable revenue remaining
that could be recognised is €0.8 million. This is also the expected
amount of revenue to be received, therefore no +10% analysis is
performed.
|
2024
|
-10%
|
0%
|
+10%
|
|
Variable development revenue
expected from the purchaser (€m)
|
0.7
|
0.8
|
0.8
|
|
2023
|
-10%
|
0%
|
+10%
|
|
Variable development revenue
expected from the purchaser (€m)
|
1.9
|
2.2
|
2.2
|
15.
Investment in subsidiaries
|
Company
|
Company
2024
€'000
|
Company
2023
€'000
|
|
Balance as at 1 October
|
69,921
|
61,386
|
|
Additions
|
50
|
8,535
|
|
Provision of investment made in
subsidiaries
|
(50)
|
-
|
|
Balance as at 30 September
|
69,921
|
69,921
|
During the year to 30 September 2024,
SEREIT plc invested €50,000 into SEREIT (Jersey) Limited. This
investment was impaired in full.
During the year to 30 September 2023,
SEREIT plc invested €5,400,000 into SEREIT Holdings Sàrl as part of
the acquisition of the Alkmaar property and the creation of the SPV
SEREIT Alkmaar Sàrl.
During the year to 30 September 2023,
the Group made the decision that a dividend of €3,135,000
previously paid to SEREIT plc from SEREIT Holdings Sàrl was to be
reclassified as a partial repayment of an interest free
loan.
The subsidiary companies listed below
are those which were part of the Group as at 30 September 2024.
Unless otherwise stated, they have share capital consisting solely
of ordinary shares that are held directly by the Group and the
proportion of ownership of interests held equals the voting rights
held by the Group.
|
Undertaking
|
Country of incorporation
|
Group ownership
|
Registered office address
|
|
SEREIT (Jersey) Limited
|
Jersey
|
100%
|
22 Grenville Street, Jersey, JE4
8PX
|
|
SEREIT Finance Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Holdings Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
OPPCI SEREIT France
|
France
|
100%
|
153 Rue Saint Honoré, 75001
Paris
|
|
SCI SEREIT Rumilly
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SEREIT Berlin DIY Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Hamburg Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Stuttgart Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Frankfurt Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SCI SEREIT Directoire
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SEREIT Apeldoorn Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT UV Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Alkmaar Sàrl
|
Luxembourg
|
100%
|
404, Route d'Esch, Luxembourg,
14711
|
|
SEREIT Holdings France
SAS
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SCI SEREIT Pleudihen
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SAS Clarity Developpment
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SEREIT France Invest SAS
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SCI SEREIT Nantes
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
SCI LC Invest
|
France
|
100%
|
8-10 Rue Lamennais, 75008
Paris
|
|
1
|
Up until 10 March 2024, the
registered office was 15, Boulevard F.W. Raiffeisen, 2411. From 11
March 2024 to 31 October 2024 the registered office was 4, Rue Fort
Wallis, Luxembourg, 2714.
|
16.
Investment in joint venture
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.
|
Group
|
2024
€'000
|
2023
€'000
|
|
Balance as at 1 October
|
-
|
-
|
|
Investment in joint
venture
|
-
|
-
|
|
Share of loss for the
year
|
-
|
-
|
|
Balance as at 30 September
|
-
|
-
|
|
Summarised joint venture financial
information:
|
2024
€'000
|
2023
€'000
|
|
Total assets
|
26,548
|
28,078
|
|
Total liabilities
|
(51,259)
|
(50,055)
|
|
Net
liabilities
|
(24,711)
|
(21,977)
|
|
Net asset value attributable to the
Group
|
-
|
-
|
|
Revenues for the year
|
2,756
|
2,329
|
|
Total comprehensive loss
|
(2,734)
|
(2,832)
|
|
Total comprehensive loss attributable to the
Group
|
-
|
-
|
As at 30 September 2024, the joint
venture in Seville, of which SEREIT holds a 50% share, had total
net liabilities of €24,711,000 (2023: €21,977,000). The Group has
therefore recognised a nil interest as its investment in the joint
venture and would only recognise its share of net liabilities where
certain legal or constructive obligations are in force. No such
obligations exist with regard to the Seville joint
venture.
A reduction in rental income has
resulted in a requirement under the minimum net rental income
covenant in the loan agreement for the lender to retain all excess
rental income generated by the Seville property in the
property-owning special purpose vehicle ('SPV'). This position will
continue until the rental income increases sufficiently to meet the
level required under the loan. A significant fall in valuation over
the last few years has resulted in a 'Hard LTV' covenant breach
which leads to an automatic increase in the interest margin. The
bank has agreed a waiver until the maturity date of the additional
interest margin expiring on 31 December 2024.
In 2024 and 2023, within total
liabilities of the joint venture, there is also a loan amount of
€10,000,000 owed to the Group. The Group has fully impaired the
loan and interest receivable from the joint venture and further
details are provided in note 6. The loan is expected to mature at
the same time as the above-mentioned bank loan and carries a fixed
interest rate of 4.37% per annum payable quarterly.
17.
Trade and other receivables
|
|
Group
2024
€'000
|
Group
2023
€'000
|
Company
2024
€'000
|
Company
2023
€'000
|
|
Rent and service charges
receivable
|
5,091
|
4,467
|
-
|
-
|
|
Amounts due from subsidiary
undertakings
|
-
|
-
|
836
|
1,221
|
|
VAT receivable
|
322
|
297
|
11
|
4
|
|
Rental and security
deposits
|
1,401
|
1,067
|
-
|
-
|
|
Proceeds receivable from
development1
|
1,338
|
1,898
|
-
|
-
|
|
Other debtors and
prepayments
|
1,874
|
1,168
|
62
|
60
|
|
|
10,026
|
8,897
|
909
|
1,285
|
|
1
|
Refer to note 14 for proceeds due
from the development of Boulogne-Billancourt in Paris.
|
Other debtors and prepayments
includes tenant incentives of €1,528,000 (2023: €1,027,000). Rent
and service charge receivables includes a provision of €51,000
(2023: €Nil).
18.
Share capital and share premium
|
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Ordinary share capital
|
17,966
|
17,966
|
17,966
|
17,966
|
|
Share premium
|
43,005
|
43,005
|
43,005
|
43,005
|
As at 30 September 2024, the share
capital of the Company was represented by 133,734,686 ordinary
shares (2023: 133,734,686 ordinary shares) with a par value of
10.00 pence.
Issued share capital
As at 30 September 2024, the Company
had 133,734,686 ordinary shares in issue (2023: 133,734,686) (no
shares were held in treasury). The total number of voting rights of
the Company at 30 September 2024 was 133,734,686 (2023:
133,734,686).
Incremental costs directly
attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
19.
Interest-bearing loans and borrowings
This note provides information about
the contractual terms of the Group's interest-bearing loans and
borrowings. For more information about the Group's exposure to
interest rate risk, see note 22.
|
|
Group
2024
€'000
|
Group
2023
€'000
|
Company
2024
€'000
|
Company
2023
€'000
|
|
As
at 1 October
|
73,623
|
68,744
|
-
|
-
|
|
Drawdown of new loans
|
-
|
31,760
|
-
|
-
|
|
Repayment of loans
|
(3,000)
|
(26,950)
|
-
|
-
|
|
Capitalisation of finance
costs
|
(322)
|
(84)
|
-
|
-
|
|
Amortisation of finance
costs
|
170
|
153
|
-
|
-
|
|
As
at 30 September
|
70,471
|
73,623
|
-
|
-
|
Borrowings are removed from the
statement of financial position when the obligation specified in
the contract is discharged, cancelled or expired. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least 12 months after the reporting period.
Bank
loan - HSBC Bank plc
The Group had a loan facility of
€9.25 million with HSBC Bank plc which was entered into during the
year ended 30 September 2018.
The total amount had been fully drawn
and matured on 27 September 2023. It carried an interest rate which
is the aggregate of the applicable Euribor three-month rate and a
margin of 2.15% per annum, payable quarterly. The facility was
subject to a 1% arrangement fee which is being amortised over the
period of the loan. The debt had a LTV covenant of 62.5% and the
interest cover should be above 275%.
The lender had a charge over
properties owned by the Group with a value of €25,050,000. A pledge
of all shares in the borrowing Group company is in
place.
This loan was fully repaid in
September 2023.
Bank
loan - ABN AMRO
The Group entered into a facility of
€13.76 million with ABN AMRO during the year ended 30 September
2023. The loan was fully drawn down on 28 September 2023 and
matures on 27 September 2028.
It carries an interest rate of 5.3%
which is payable quarterly. The debt has an LTV covenant of 62.5%,
with a cash trap of 55% which reduces by 1% each year from 1
September 2024 and the debt to yield ratio should be above
12.5%.
The lender has a charge over property
owned by the Group with a value of €36,200,000. A pledge of all
shares in the borrowing Group company is in place.
Bank
loan - BRED Banque Populaire
The Group entered into a loan
facility totalling €13.0 million with BRED Banque Populaire during
the year ended 30 September 2018.
The total amount was fully drawn and
was initially due to mature on 15 December 2024. The loan carries
an interest rate which is the aggregate of the applicable Euribor
three-month rate and a margin of 1.30% per annum, payable
quarterly. The facility was subject to an arrangement fee of
€70,000 which is being amortised over the period of the loan. The
debt has an LTV covenant of 60% and the interest cover ratio
('ICR') should be above 400%. The Group has purchased an interest
rate cap to have risk coverage on the variation of the interest
rate.
During the year ended 30 September
2020, the Group received a further €4.0 million of debt into SCI
Directoire under its existing loan facility with BRED Banque
Populaire. The additional loan amount carries an interest rate of
1.45% and was subject to a €30,000 arrangement fee which will be
amortised over the period of the loan.
On 15 December 2023, the Group
completed an early refinancing of the loan, extending the term by
three years from 15 December 2024 to 15 December 2027, with an
option of a further year. The principal of the loan was also
reduced by €3.0 million from €17.0 million to €14.0 million.
Following the refinancing, the loan now carries an interest rate
which is the aggregate of the applicable Euribor 3 months rate and
a margin of 1.90% per annum, payable quarterly.
The lender has a charge over property
owned by the Group with a value of €37,400,000. A pledge of all
shares in the borrowing Group company is in place.
Bank
loan - Deutsche Pfandbriefbank AG
The Group had two loan facilities
totalling €30.50 million with Deutsche Pfandbriefbank AG which were
entered into during the year ended 30 September 2016.
One of the loan facilities totalling
€14.0 million was repaid in March 2023 and carried a fixed interest
rate of 0.85% per annum payable quarterly.
The remaining loan totalling €16.5
million matures on 30 June 2026 and carries a fixed interest rate
of 1.31% per annum. An additional fixed fee of 0.30% per annum was
payable until certain conditions relating to the Frankfurt property
were fulfilled on 30 December 2016. The facility was subject to a
0.35% arrangement fee which is being amortised over the period of
the loan. The debt has a LTV covenant of 65% and the debt yield
must be at least 8%.
The lender has a charge over property
owned by the Group with a value of €39,500,000. A pledge of all
shares in the borrowing Group companies is in place.
Bank
loan - Westerwald Bank eG
The Group entered into a facility of
€18.0 million with Westerwald bank on 31 March 2023. The loan has
been fully drawn and matures on 31 December 2027. It carries an
interest rate of 3.8% which is payable quarterly.
The lender has a charge over property
owned by the Group with a value of €39,600,000.
Bank
loan - Landesbank Saar
The Group entered into a loan
facility of €8.6 million with Landesbank Saar on 27 March
2019.
The loan was initially due to mature
on 28 March 2024 and carried an interest rate of 1.40% plus Euribor
three-month per annum, payable quarterly. An additional 25bps was
applied to the margin if the LTV was between 56% and 60%, or 50bps
if the LTV was above 60%. The facility was subject to a €56,000
arrangement fee which was amortised over the period of the loan.
The debt had an LTV covenant of 64% and the interest cover was
required to be above 220%. A pledge of all shares in the borrowing
Group company is in place.
This loan was classified as a current
liability for the year ended 30 September 2023.
On 26 March 2024, the Group
refinanced the loan, the loan now matures on 26 March 2029 and
attracts interest at a fixed rate of 4.3%. As a result of the
refinancing, the covenants were amended. An additional 25bps is now
applied to the interest rate if the LTV is between 50% and 53%, or
50bps if the LTV is between 53% and 55%. The debt now has an LTV
covenant of 55% and the interest cover should be above
200%.
Bank
loan - Landesbank Saar
On 25 November 2019, SCI Rumilly
entered into a new loan facility with Landesbank Saar for €3.7
million.
The loan carried an interest rate of
1.30% plus Euribor three-month per annum payable quarterly. An
additional 25bps was applied to the margin if the LTV was between
52% and 56%, or 50bps if the LTV was equal to or above 56%. The
facility was subject to a €46,000 arrangement fee which was
amortised over the period of the loan. The debt had a maximum LTV
covenant of 60% and a minimum ICR covenant of 200%. A pledge of all
shares in the borrowing Group company was in place. The loan was
fully repaid in April 2023.
20.
Trade and other payables
|
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Rent received in advance
|
1,001
|
880
|
-
|
-
|
|
Rental deposits
|
1,411
|
1,393
|
-
|
-
|
|
Interest payable
|
486
|
206
|
-
|
-
|
|
Retention payable
|
-
|
85
|
-
|
-
|
|
Amounts due to subsidiary
undertakings
|
-
|
-
|
58
|
-
|
|
Accruals
|
1,699
|
2,194
|
424
|
893
|
|
Trade payables
|
358
|
98
|
47
|
39
|
|
|
4,955
|
4,856
|
529
|
932
|
All trade and other payables are
interest free and payable within one year. Included within the
Group's accruals are amounts relating to management fees of
€140,000 (2023: €626,000) and property expenses of €626,000 (2023:
€505,000).
21.
Net asset value per ordinary share
The NAV per ordinary share of 122.7
euro cents per share (2023: 128.2 euro cents per share) is based on
the net assets attributable to ordinary shareholders of the Group
of €164,097,000 (2023: €171,439,000), and 133,734,686 ordinary
shares in issue at 30 September 2024 (2023: 133,734,686 ordinary
shares).
22.
Financial instruments, properties and associated
risks
Financial risk factors
The Group holds cash and liquid
resources as well as having debtors and creditors that arise
directly from its operations. The Group uses interest rate caps
when required to limit exposure to interest rate risks, but does
not have any other derivative instruments. The financial risk
profile of the Group has been heightened, in part due to ongoing
geopolitical developments, together with macroeconomic
uncertainty.
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 and these are summarised below:
Market price risk
Rental income and the market value
for properties are generally affected by overall conditions in the
economy, such as changes in gross domestic product, employment
trends, inflation and changes in interest rates. Changes in gross
domestic product may also impact employment levels, which in turn
may impact the demand for premises. Furthermore, movements in
interest rates may also affect the cost of financing for real
estate companies.
The Group's investments comprise of
continental European commercial property. Property and
property-related assets are inherently difficult to value due to
the individual nature of each property. As a result, valuations are
subject to substantial uncertainty. There is no assurance that the
estimates resulting from the valuation process will reflect the
actual sale's price even where such sales occur shortly after the
valuation date.
Both rental income and property
values may also be affected by other factors specific to the real
estate market, such as competition from other property owners; the
perceptions of prospective tenants of the attractiveness,
convenience and safety of properties; the inability to collect
rents because of bankruptcy or the insolvency of tenants; the
periodic need to renovate, repair and re-lease space and the costs
thereof; the costs of maintenance and insurance, and increased
operating costs.
The Board monitors the market value
of investment properties by having independent valuations carried
out quarterly by a firm of independent chartered surveyors. See
note 13.
At the date of signing this report,
the conflict in Ukraine continues to have significant societal and
economic impact. The Group does not have a material direct exposure
to Russia or Ukraine, but continues to monitor the
situation closely.
Currency risk
The Group's policy is for Group
entities to settle liabilities denominated in their functional
currency with the cash generated from their own operations in that
currency. Where Group entities have liabilities in a currency other
than their functional currency (and have insufficient reserves of
that currency to settle them), cash already in that currency will,
where possible, be transferred from elsewhere within the Group. The
functional currency of all entities in the Group is the euro.
Currency risk sensitivity has not been shown due to the small
values of non-euro transactions. The table below details the
Group's exposure to foreign currencies at the year end:
|
Net
assets
|
Group
30/09/2024
€'000
|
Group
30/09/2023
€'000
|
Company
30/09/2024
€'000
|
Company
30/09/2023
€'000
|
|
Euros
|
163,912
|
171,346
|
143,788
|
148,903
|
|
Sterling
|
28
|
13
|
28
|
13
|
|
Rand
|
157
|
80
|
157
|
80
|
|
|
164,097
|
171,439
|
143,973
|
148,996
|
Interest rate risk
Exposure to market risk for changes
in interest rates relates primarily to the Group's long-term debt
obligations and to interest earned on cash balances. As interest on
the Group's long-term debt obligations is payable on a fixed-rate
basis, or is capped, the Group has limited exposure to downside
interest rate risk, but is exposed to changes in fair value of
long-term debt obligations such as derivatives which are driven by
interest rate movements. As at 30 September 2024, the total
carrying value of the Group's loans was €70.9 million (2023: €73.9
million). Although held at carrying value in the financial
statements, the Group has its fixed-rate debt fair valued, and as
at 30 September 2024, the fair value of the Group's fixed rate debt
was €56.51 million (2023: €47.3 million). The carrying value for
the fixed-rate debt was €56.86 million (2023: €48.3 million). The
Group does not fair value variable rate debt. The carrying value of
the variable rate debt, which is €14.0 million (2023: €25.6
million), is deemed to approximate the fair value. A 1% increase or
decrease in short-term interest rates would decrease or increase
the annual income and equity by €0.1 million (2023: €0.1 million)
based on the net of cash and variable debt balances as at 30
September 2024. 1% has been chosen as the sensitivity rate to
demonstrate the linear relationship to interest rate
changes.
Credit risk
Credit risk is the risk that an
issuer or counterparty will be unable or unwilling to meet a
commitment that it has entered into with the Group. In the event of
default by an occupational tenant, the Group will suffer a rental
income shortfall and incur additional costs, including legal
expenses, in maintaining, insuring and re-letting the
property.
The Group calculates the expected
credit loss for rent and service charge receivables based on the
lifetime expected credit losses under the IFRS 9 simplified
approach.
With regard to the loan to the
Seville joint venture, the Directors have assessed this for an
expected credit loss under IFRS 9 and, consequently, have
recognised an impairment against the receivable; see note 6 for
further details.
The Investment Manager reviews
reports prepared by Dun & Bradstreet or other sources, to
assess the credit quality of the Group's tenants and aims to ensure
there is no excessive concentration of risk and that the impact of
any default by a tenant is minimised.
In respect of credit risk arising
from other financial assets, which comprises of cash and cash
equivalents and a loan to a joint venture, exposure to credit risk
arises from default of the counterparty with a maximum exposure
equal to the carrying amounts of these instruments. In order to
mitigate such risks, cash is maintained with major international
financial institutions with high-quality credit ratings.
The table below shows the balance of
cash and cash equivalents held with various financial institutions
at the end of the reporting year.
|
Bank
|
Ratings as at
30/09/2024
|
Group balance at
30/09/2024
€'000
|
Company balance at
30/09/2024
€'000
|
|
HSBC Bank plc
|
AA-
|
5,907
|
5,707
|
|
ING Bank N.V.
|
AA-
|
2,876
|
-
|
|
BNP Paribas
|
A+
|
883
|
-
|
|
BRED Banque Populaire
|
A
|
278
|
-
|
|
Santander
|
A-
|
529
|
496
|
|
Societe Generale SA
|
A-
|
4,594
|
1,935
|
|
Commerzbank AG
|
A
|
1,466
|
-
|
|
FirstRand Bank Limited
|
BB-
|
157
|
157
|
|
Royal Bank of Scotland
International
|
A
|
9,870
|
9,870
|
|
ABN AMRO Bank
|
A
|
802
|
-
|
|
|
|
27,362
|
18,165
|
|
Bank
|
Ratings as
at
30/09/2023
|
Group balance at
30/09/2023
€'000
|
Company balance at
30/09/2023
€'000
|
|
HSBC Bank plc
|
A-
|
7,222
|
1,450
|
|
ING Bank N.V.
|
A-
|
5,123
|
-
|
|
BNP Paribas
|
A-
|
1,274
|
-
|
|
BRED Banque Populaire
|
A
|
1,664
|
-
|
|
Santander
|
A-
|
7,096
|
7,089
|
|
Societe Generale SA
|
A-
|
3,773
|
871
|
|
Commerzbank AG
|
BBB
|
2,155
|
-
|
|
FirstRand Bank Limited
|
BBB-
|
80
|
80
|
|
Royal Bank of Scotland
International
|
BBB+
|
4,058
|
4,058
|
|
|
|
32,445
|
13,548
|
The maximum exposure to credit risk
for rent and service charge receivables at the reporting date by
type of sector was:
|
|
30/09/2024 Carrying
amount
€'000
|
30/09/2023 Carrying
amount
€'000
|
|
Office
|
4,157
|
3,357
|
|
Retail (including retail
warehousing)
|
239
|
561
|
|
Industrial
|
695
|
550
|
|
|
5,091
|
4,468
|
Rent and service charges receivables
which are past their due date, but which were not impaired at the
reporting date, were:
|
|
30/09/2024 Carrying
amount
€'000
|
30/09/2023 Carrying
amount
€'000
|
|
0-30 days
|
276
|
65
|
|
31-60 days
|
61
|
59
|
|
61-90 days
|
2
|
8
|
|
91 days plus
|
346
|
712
|
|
|
685
|
844
|
Liquidity risk
Liquidity risk is the risk that the
Group will encounter difficulties in meeting its financial
obligations.
Investments in property are
relatively illiquid. However, the Group has tried to mitigate this
risk by investing in properties that it considers to be good
quality.
In certain circumstances, the terms
of the Group's debt facilities entitle the lender to require early
repayment and in such circumstances the Group's ability to maintain
dividend levels and the net asset value could be adversely
affected. The Investment Manager prepares cash flows on a rolling
basis to ensure the Group can meet future liabilities as and when
they fall due.
The following table indicates the
undiscounted maturity analysis of the financial
liabilities.
|
As
at 30 September 2024
|
Carrying
amount
€'000
|
Expected
cash flows
€'000
|
6 months
or less
€'000
|
6 months
to 2 years
€'000
|
2-5 years
€'000
|
More than
5 years
€'000
|
|
Financial liabilities
|
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings and interest
|
70,860
|
80,368
|
1,358
|
20,536
|
58,474
|
-
|
|
Trade and other payables
|
4,955
|
3,954
|
3,954
|
-
|
-
|
-
|
|
Total financial liabilities
|
75,815
|
84,322
|
5,312
|
20,536
|
58,474
|
-
|
|
As
at 30 September 2023
|
Carrying
amount
€'000
|
Expected
cash flows
€'000
|
6 months
or less
€'000
|
6 months
to 2 years
€'000
|
2-5 years
€'000
|
More than
5 years
€'000
|
|
Financial liabilities
|
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings and interest
|
73,860
|
81,289
|
9,587
|
19,604
|
52,098
|
-
|
|
Trade and other payables
|
4,856
|
4,856
|
4,856
|
-
|
-
|
-
|
|
Total financial liabilities
|
78,716
|
86,145
|
14,443
|
19,604
|
52,098
|
-
|
Fair values
The fair values of financial assets
and liabilities approximate their carrying values in the financial
statements.
The fair value hierarchy levels are
as follows:
Level 1 - quoted prices (unadjusted)
in active markets for identical assets and liabilities;
Level 2 - inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
Level 3 - inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
There have been no transfers between
Levels 1, 2 and 3 during the year (2023: none).
The following summarises the main
methods and assumptions used in estimating the fair values of
financial instruments and investment property (which is a
non-financial asset).
Investment property - Level 3
Fair value is based on valuations
provided by an independent firm of chartered surveyors and
registered appraisers. These values were determined after having
taken into consideration recent market transactions for similar
properties in similar locations to the investment properties held
by the Group. The fair value hierarchy of investment property is
Level 3. See note 13 for further details.
Interest-bearing loans and borrowings - Level
2
Fair values are based on the present
value of future cash flows discounted at a market rate of interest.
Issue costs are amortised over the period of the
borrowings.
Trade and other receivables/payables
All receivables and payables are
deemed to be due within one year and as such the carrying value
approximates the fair value.
Derivatives - Level 2
Fair values of derivatives are based
on current market conditions such as the current EURIBOR rate
compared to the terms of the derivative agreements.
Capital management
The Board's policy is to maintain a
strong capital base so as to maintain investor, creditor and market
confidence, and to sustain future development of the business. The
objective is to ensure that it will continue as a going concern and
to maximise return to its equity shareholders through an
appropriate level of gearing.
The Group's debt and capital
structure comprises the following:
|
|
30/09/2024
€'000
|
30/09/2023
€'000
|
|
Debt
|
|
|
|
Loan facilities and accrued
interest
|
70,806
|
73,828
|
|
Equity
|
|
|
|
Called-up share capital and share
premium
|
60,971
|
60,971
|
|
Retained earnings and other
reserves
|
103,126
|
110,468
|
|
Total equity
|
164,097
|
171,439
|
|
Total debt and equity
|
234,903
|
245,267
|
There were no changes in the Group's
approach to capital management during the year.
The Company's capital structure is
comprised of equity only.
23.
Operating leases
The Group leases out its investment
property under operating leases. At 30 September 2024, the future
minimum lease receipts under non-cancellable leases are as
follows:
|
The
Group as a lessor
|
30/09/2024
€'000
|
30/09/2023
€'000
|
|
Less than one year
|
16,023
|
16,511
|
|
Between one and two years
|
12,675
|
15,617
|
|
Between two and three
years
|
8,610
|
12,768
|
|
Between three and four
years
|
6,445
|
7,858
|
|
Between four and five
years
|
5,061
|
5,695
|
|
More than five years
|
14,463
|
13,189
|
|
|
63,277
|
71,638
|
The total above comprises the total
contracted rent as at 30 September 2024.
24.
Related party transactions
Material agreements are disclosed in
note 5 and Directors' emoluments are disclosed in note 9. Loans to
related parties are disclosed in the consolidated and company
statements of financial position and other amounts due from related
parties are disclosed in note 17.
Details of dividends received from
the joint venture are disclosed in note 16.
Interest receivable from the joint
venture was impaired during the year; refer to note 6 for further
details.
25.
Contingent liability
There are no contingent liabilities
other than those disclosed in note 10.
26.
Capital commitments
At 30 September 2024, the Group had
capital commitments of €131,000 (2023: €400,000) with regard to its
directly held portfolio. This relates to various small projects
across the portfolio.
In addition, the Group is expected to
incur a further €0.1 million (2023: €1.0 million) of development
expenditure with regards to the comprehensive refurbishment of the
Paris, Boulogne‑Billancourt asset.
27.
Employees
The Group has one employee who is
appointed by the French branch of the Company. The total charge for
the employee during the year was €22,000 (2023:
€22,000).
28.
Post balance sheet events
There were no significant events
occurring after the balance sheet date.