TIDMDRIP
RNS Number : 9317L
Drum Income Plus REIT PLC
18 January 2021
18 January 2021
Drum Income Plus REIT plc
("Drum" or the "Company")
FULL YEAR RESULTS AND NOTICE OF AGM
Drum Income Plus REIT plc (LSE: DRIP) today announces the
Company's audited results for the 12 months ended 30 September
2020
The Company also announces that its 2021 Annual General Meeting
will be held on Thursday, 18 March 2021 at 12.00 p.m. at 16
Charlotte Square, Edinburgh EH2 4DF.
The Company's Annual Report and Financial Statements for the
year ended 30 September 2020 and the formal Notice of the Annual
General Meeting will be posted to shareholders and in accordance
with Listing Rule 9.6.1 copies of the documents have been submitted
to the UK Listing Authority and will shortly be available to view
on the Company's corporate website at https://www.dripreit.co.uk
and have also been submitted to the UK Listing Authority and will
be shortly available for inspection from the National Storage
Mechanism at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
It is possible that due to the Government restriction related to
COVID-19, this year's AGM will be held in a "restricted format"
with attendance limited to those Board members to enable quorum
requirements to be met. Shareholders should therefore submit their
votes by proxy by 6.00 p.m. on 16 March 2021. In light of the
social distancing measures imposed by the UK Government as a result
of the current COVID-19 pandemic, any proxy you appoint other than
the Chairman could be refused entry to the meeting.
Given the unprecedented circumstances, the Board will host the
AGM but with contingency arrangements that mean that the AGM will
not follow its usual format. Only the statutory, formal business
(consisting of voting on the resolutions proposed in the Notice of
AGM) to meet the minimum legal requirements will be conducted and
the AGM.
Given the social distancing measures currently in force and in
light of the latest published government guidance and pursuant to
the Corporate Insolvency and Governance Act 2020, proceeding with a
"technical" AGM is in the best interests not only of the Company,
but also of each of its individual shareholders. If circumstances
change and if social distancing measures are relaxed before the
AGM, the Company will notify shareholders of any changes to the
proposed format for the AGM via RIS and its website
https://www.dripreit.co.uk
LEI: 213800FG3PJGQ3KQH756
Enquiries:
Drum Real Estate Investment Management (Investment Manager)
Bryan Sherriff 0131 285 0050
Dickson Minto W.S. (Sponsor)
Douglas Armstrong 020 7649 6823
Weber Shandwick (Financial PR)
Nick Oborne 020 7067 0721
JTC (UK) Limited (Company Secretary)
Susan Fadil 020 3893 1005
Important information:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information Service
this inside information is now considered to be in the public
domain.
REPORT & FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER
2020
CHAIRMAN'S STATEMENT
Introduction
Drum Income Plus REIT PLC ('Drip') was established in May 2015
with the objective to provide its shareholders with a regular
dividend income and capital growth over the longer term from a
portfolio of regional real estate assets in the UK. I am pleased to
present the annual report and accounts for the year to 30th
September 2020.
Financial Highlights
The Group's Net Asset Value per share ('NAV') at 30th September,
2020 was 73.01 pence per share, a fall of 14.1% from 12 months
earlier, and a decrease of 7.9% on the NAV as at March 31, 2020 as
per the Interim Statement.
The Group has paid two interim dividends of 1.5p per share
during the first half of the year, and the two planned interim
dividends due in the second half year were postponed in order to
preserve cash as a result of the economic damage caused by the
global pandemic.
The Board remain committed to fully covered quarterly dividend
payments. As we navigate our way through the COVID-19 pandemic the
Board is looking for an opportunity to start the process of
building the dividend back up again as soon as it is prudent to so
do, ensuring that it meets the REIT requirements in the
meantime.
Review of the Year
The global pandemic known as COVID-19, which began in January
2020, has, at the time of writing, brought about over 1.5 million
fatalities throughout the world, and over 62,000 in the UK alone. A
second wave is now underway across many countries, and it is very
clear that any return to a normality of some kind will only be
possible once a successful vaccine has not only been approved, but
also manufactured and administered in the vast quantities that will
be required around the world. Recent news on a possible vaccine has
been positive, but we remain some way from commercial
availability.
As I indicated in my Interim statement back in May, global
recessions are now at hand, and the only question is to how deep
and how long-lasting they will be. Quantitative easing measures by
governments worldwide have served to reduce pressures and may well
continue in to 2021 in the short term, but to continue with such a
strategy over the medium to longer term is unproven at best, and
potentially damaging at worst.
The UK economy has not escaped - there have been and there will
continue to be many corporate casualties, big and small, with
certain sectors such as hospitality, travel and retail the worst
hit - and in sectors such as these it could take years to recover
to pre COVID levels of business.
The UK commercial real estate market in which your company
operates has inevitably been hit, primarily in high street retail,
shopping centres, hotels, leisure parks and centres and pubs, and
other sectors such as offices and industrial have not completely
escaped. Our portfolio comprises office, industrial, shopping
centre and retail, and, as we anticipated, many of the tenants in
those properties have suffered significant falls in their revenues,
and some are clearly fighting for their very survival.
Our Investment Adviser and their agents have though, in the
circumstances, done outstandingly well in terms of collecting
rental income - in the first three rental quarters of 2020, they
recovered over 91% of rental and service fee income due in Q1, over
81% in Q2, and over 90% to date in Q3. This figure is highly likely
to grow as the quarter passes. In cases where there has been
non-payment, they have engaged appropriately with the tenants and
their agents to attempt to work out revised payment plans and in
some cases revised lease terms. In some instances these will lead
to a loss of revenue in the short term, but they will also achieve
our primary aim in these most challenging of circumstances of
securing income streams for the medium and longer terms.
In the circumstances described above, it has been especially
pleasing to see certain of the asset management initiatives
throughout the portfolio reaching a satisfactory outcome - in
particular at Monteith House in Glasgow where a new 10 year lease
has been signed with Skills Development Scotland, which has
resulted in a meaningfully higher valuation of the property.
DIVIDS
When the economic damage caused by COVID first became clear back
in March/April of this year, your Board took the prudent decision
to suspend dividend payments for the final two quarters of the
financial year in order to maintain cash during a period in which
revenues were inevitably going to fall. This has resulted in the
final dividend for the year being 3p per share compared to the
anticipated 6p per share. Looking forward, it is clear that
revenues will be lower as tenants face the challenges of the
continuing recession without the prospect of similar levels of
government support as we have seen to date. That said, the Board
considers it important to resume the payment of dividends to
shareholders as soon as is practicable, and to that end it proposes
to re-commence quarterly dividends in February 2021, albeit at the
reduced level of 3.0p per share. As soon as it becomes possible to
increase that level of quarterly distribution, we will attempt to
do so.
OUTLOOK
With the uncertainty remaining over post-deal Brexit outcomes
adding to the economic damage which will continue to be caused for
some time by the pandemic, there will still be real uncertainty in
markets around the world, including real estate. That said, your
company owns a high class portfolio of property assets which are
the subject in many cases of long term leases, and I therefore
remain confident that the Company will in time achieve its primary
aim of providing satisfactory long term returns to its
shareholders.
Hugh Little | Chairman
15 January 2021
INVESTMENT ADVISER'S REPORT
Drum Income Plus REIT plc ("DRIP" or "the Group") is a UK real
estate investment trust ("REIT") which listed on the main market of
the London Stock Exchange on 29 May 2015 ("Admission"). Its
portfolio comprises ten properties predominantly let to
institutional grade tenants on long leases throughout the UK and is
characterised by smaller lot sizes. The Group offers investors the
opportunity to access a diversified portfolio of UK commercial real
estate through a closed-ended fund.
The Group paid two dividends at 1.5p per share in November 2019
and February 2020. The dividends were suspended for the remainder
of the year ended 30 September 2020. This equates to a dividend for
the year of 3.0p per share.
Financial Year Ended September 2020 has seen unprecedented
impact on the Real Estate sector by Covid-19 and ongoing
discussions regarding Brexit. Yields remained relatively flat in
September 2020 as UK commercial investment volumes reached GBP7.2
billion in Q3, which was a 55% increase on Q2, but the second
quarter was one of the lowest ever recorded. In comparison to the
quarterly average, based upon the last couple of years, Q3 2020 was
approximately half this 'normal' level. The shopping centre and
leisure sectors have seen the prime yield move out by a full
percentage point since the end of 2019, despite the lack of
transactional activity to support this movement. For example
Gosforth Shopping Centre has been hit by this sentiment despite
having a WAULT of around 8 years and c 40% of the Gross Contracted
Rent being for greater than 10 years.
The valuation of the portfolio as at 30 September 2019 was
GBP55.4m which aligned with a total purchase price for the assets
of GBP55.6m. The valuations remained largely static until March 20
when the impact of Covid began to set in. With limited market
comparables a Material Uncertainty clause was inserted into the
quarterly valuations and the valuations were reduced to GBP53.3m in
March 2020 with a further reduction to GBP48.9m in June 2020.
Valuations increased in September 2020 as slightly improved
conditions were evidenced during the quarter. Together with the SDS
letting at Monteith House, this resulted in a GBP2.2m improvement
in the quarter and a year-end valuation of GBP51.1m. The Material
Uncertainty clause has been removed from the December 2020
valuation.
The total net rent roll as at September 2020 is now c GBP3.6m
pa. Accepting that we will have to work with the pandemic
restrictions the Government impose on the UK, as we enter this next
period of the Business Plans, having a multi-sector and
multi-tenant portfolio should be of benefit. The income from the
portfolio remains strong and tenant retention is high as we
continue to agree tenant lease variations.
The WAULT to expiry is 5.17 years. The WAULT including breaks is
3.17 years.
Active Asset management
DRIP's strategy of active asset management to drive income
returns remains the core to portfolio performance and has been
exhibited by the strong rental income figures throughout the Covid
Pandemic from March.
The Group invests significantly in the portfolio which both
attracts new and retains existing high quality occupiers, evidenced
through our sustained high occupancy. This has recently been
evidenced by the 10 year lease entered into by Skills Development
Scotland at Monteith House in Glasgow.
Innovative Investment
The Group continue to invest strategically in the portfolio. A
physical change drives a clear perception change in our assets
which helps to facilitate corresponding investment from our
customers and fellow stakeholders, as well as helping to attract
new occupiers to the asset.
Mayflower House Monteith House
Gateshead Glasgow
Acquisition Price GBP2.6m Acquisition Price GBP5.8m
----------- ------------------------ -----------
Net Initial Yield at Net Initial Yield at
Acquisition 9.25% Acquisition 7.60%
----------- ------------------------ -----------
Equivalent Yield at Equivalent Yield at
Acquisition 8.23% Acquisition 6.87%
----------- ------------------------ -----------
Occupancy at 30.09.2020 88% Occupancy at 30.09.2020 100%
----------- ------------------------ -----------
WAULT (including breaks 3.41 years WAULT (including breaks 9.87 years
at 30.09.2020 at 30.09.2020
----------- ------------------------ -----------
Lakeside 5500 Arthur House
Cheadle Royal Business Park, Manchester
Manchester
Acquisition Price GBP5.4m Acquisition Price GBP4.4m
----------- ------------------------ -----------
Net Initial Yield at Net Initial Yield at
Acquisition 6.71% Acquisition 4.87%
----------- ------------------------ -----------
Equivalent Yield at Equivalent Yield at
Acquisition 7.56% Acquisition 7.75%
----------- ------------------------ -----------
Occupancy at 30.09.2020 100% Occupancy at 30.09.2020 63%
----------- ------------------------ -----------
WAULT (including breaks 1.48 years WAULT (including breaks 1.22 years
at 30.09.2020 at 30.09.2020
----------- ------------------------ -----------
3 Lochside Way Burnside
Edinburgh Aberdeen
Acquisition Price GBP4.5m Acquisition Price GBP2.6m
----------- ------------------------ -----------
Net Initial Yield at Net Initial Yield at
Acquisition 8.44% Acquisition 10.55%
----------- ------------------------ -----------
Equivalent Yield at Equivalent Yield at
Acquisition 7.79% Acquisition 8.47%
----------- ------------------------ -----------
Occupancy at 30.09.2020 100% Occupancy at 30.09.2020 76%
----------- ------------------------ -----------
WAULT (including breaks 1.66 years WAULT (including breaks 4.09 years
at 30.09.2020 at 30.09.2020
----------- ------------------------ -----------
Kew Retail park Duloch Park
Southport Dunfermline
Acquisition Price GBP8.65m Acquisition Price GBP4.5m
----------- ------------------------ -----------
Net Initial Yield at Net Initial Yield at
Acquisition 8.75% Acquisition 7.39%
----------- ------------------------ -----------
Equivalent Yield at Equivalent Yield at
Acquisition 7.25% Acquisition 7.20%
----------- ------------------------ -----------
Occupancy at 30.09.2020 89% Occupancy at 30.09.2020 100%
----------- ------------------------ -----------
WAULT (including breaks 4.18 years WAULT (including breaks 3.57 years
at 30.09.2020 at 30.09.2020
----------- ------------------------ -----------
Eastern Avenue Gosforth Shopping Centre
Gloucester Gosforth
Acquisition Price GBP5.3m Acquisition Price GBP12.2m
----------- ------------------------ -----------
Net Initial Yield at Net Initial Yield at
Acquisition 8.41% Acquisition 7.47%
----------- ------------------------ -----------
Equivalent Yield at Equivalent Yield at
Acquisition 7.16% Acquisition 7.42%
----------- ------------------------ -----------
Occupancy at 30.09.2020 22% Occupancy at 30.09.2020 99%
----------- ------------------------ -----------
WAULT (including breaks 6.37 years WAULT (including breaks 7.99 years
at 30.09.2020 at 30.09.2020
----------- ------------------------ -----------
Outlook
Commercial property investment turnover recovered quite sharply
in both September and October 2020. While this recovery will by no
means compensate for the very low levels of turnover in the
preceding five months, it does give an indication that investors
still have confidence in the UK, despite the twin uncertainties of
COVI D-19 and Brexit. Of the transactions undertaken in September
and October a significant percentage took place in Greater London,
a trend that is absolutely normal as markets emerge from recession
and investors head towards core assets and locations as part of
wider 'risk-off' strategy.
The uncertainties arising from the pandemic are going to be
present for the foreseeable future. The short-term focus will
therefore remain on income not just in terms of rent collection,
but also through active asset management to retain existing
occupiers and attract new ones. However, the acceleration in the
rate of change in real estate markets is creating opportunity and
we are looking at ways in which the Group can benefit from this
opportunity.
PRINCIPAL RISKS AND UNCERTAINITIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
forthcoming financial year and could cause actual results to differ
materially from expected and historical results.
The Directors have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten the business model, future performance, solvency or
liquidity.
The table on the right outlines the key risk factors identified,
but does not purport to be exhaustive as there may be additional
risks that materialise over time that the Group has not yet
identified or has deemed not likely to have a potentially material
adverse effect on the business.
Risk Type:
Strategic
Investment Portfolio
Investment management
Financial
Operational
Regulatory
RISKS MITIGATING FACTORS
* Political: now that the UK has left the EU, albeit * Well diversified regional property portfolio, with no
with a deal, the impact of Brexit still remains exposure to London.
unclear. This may be particularly significant with
reference to the retail sector.
* Asset management remains a high priority and cash
control continues to be strong.
* Weak economic environment including impact of
COVID-19.
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* Tenant default * Investment policy limits the Group's rent roll to no
more than 20% to a single tenant.
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* Change in demand for space particularly in the retail * Focused on established business locations for
sector investment
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* Market pricing affecting value * Active portfolio diversification between office,
industrial and retail.
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* Excess concentration in geographical location or * Active management of lease expiry profile in forming
sector acquisition decisions.
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* Decrease in occupancy. * Building specifications not tailored to one user.
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* Experienced Investment Adviser
* Poor Investment decisions
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* Over exposure to a specific tenant, sector or * Agreed concentration limits reviewed quarterly by the
geographic location Board and continuously by the Investment Adviser.
-----------------------------------------------------------------
* Ineffective added value asset management of * Investment Adviser is experienced in active asset
properties management and pro-active with regard to lease and
development opportunities.
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* Reduced availability or increased cost of debt * 3 year GBP25m revolving credit facility extended in
September 2019.
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* Breach of borrowing covenants * New facility sufficient for spending plans
* On-going monitoring and management of the forecast,
liquidity and covenant position.
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* Inadequate performance controls or systems operated * Ongoing review of performance by independent Board of
by the Investment Adviser and Administrator Directors.
-----------------------------------------------------------------
* Adverse impact of new or revised legislation or * External professional advisers are engaged to review
regulations or by changes in the interpretation or and advice upon control environment and ensure
enforcement of existing laws and regulations. regulatory compliance.
-----------------------------------------------------------------
* Non-compliance with the REIT regime. * REIT regime compliance is reviewed by external tax
advisers and considered by the Board in assessing the
Group's financial position and by the manager in
making operational decisions.
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APPROVAL OF STRATEGIC REPORT
The Strategic Report incorporating the Chairman's Statement,
Investment Adviser's Report and Principal Risks and Uncertainties
was approved by the Board of Directors and signed on its behalf
by:
Hugh Little
Chairman
15 January 2021
SECTION 172 STATEMENT AND STAKEHOLDER RELATIONSHIPS
The Directors consider that in conducting the business of the
Company over the course of the year they have complied with Section
172(1) of the Companies Act 2006 ("the Act") by fulfilling their
duty to promote the success of the Company and act in the way they
consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a
whole.
The Company recognises the increasing importance of
sustainability and addressing Environmental, Social and Governance
(ESG) issues. It is committed to putting ESG as the heart of its
investment objectives and to operating in a responsible and
sustainable manner, looking at both the direct and indirect impact
on tenants, suppliers, service providers, local communities and the
environment.
Issues, factors and stakeholders
The Board has direct engagement with the Company's shareholders
and seeks a rounded and balanced understanding of the broader
impact of its decisions through regular engagement with its
stakeholder groups (detailed below) to understand their views,
typically through feedback from the Investment Manager, which is
regularly communicated to the Board via quarterly meetings.
Stakeholder engagement also ensures the Board is kept aware of any
significant changes in the market, including the identification of
emerging trends and risks, which in turn can be factored into its
strategy discussions. Management of the Company's day-to-day
operations has been delegated to the Investment Manager, and the
Company has no employees. This externally managed structure allows
the Board and the Investment Manager to have due regard to the
impact of decisions on the following matters specified in Section
172 (1) of the Act:
Section 172(1) factor Approach taken
a) Likely consequence of any The business model and strategy
decision in the long term of the Company is set out within
the Strategic Report. Any deviation
from or amendment to that strategy
is subject to Board and, if
necessary, shareholder approval.
The Company's Management Engagement
Committee ensures that the Investment
Manager is operating within
the scope of the Company's investment
objectives.
At least annually, the Board
considers a budget for the delivery
of its strategic objectives
based on a three-year forecast
model. The Investment Manager
reports non-financial and financial
key performance indicators to
the Board.
The Board's commitment to keeping
in mind the long-term consequences
of its decisions underlies its
focus on risk, including risks
to the long-term success of
the business, leading to the
conclusion that during the current
period of heightened political
and market uncertainty both
in the UK and globally, cash
resources should be retained
as far as possible.
The investment strategy of the
Company is focused on medium
to long-term returns as such
the long-term is firmly within
the sights of the Board when
all material decisions are made.
The board gains an understanding
of the views of the Company's
key stakeholders from the Investment
Manager and Management Engagement
Committee and considers those
stakeholders' interests and
views in board discussions and
long-term decision-making
----------------------------------------
b) The interests of the Company's The Company has no employees
employees as a result of its external
management structure, but the
Directors have regard to the
interests of the individuals
responsible for delivery of
the property management and
administration services to the
Company to the extent that they
are able to.
----------------------------------------
c) The need to foster the Company's Business relationships with
business relationships with suppliers, tenants and other
suppliers, customers and others counterparties are managed by
the Investment Manager. Suppliers
and other counterparties are
typically professional firms
such as lenders, property agents
and other property professionals,
accounting firms and legal firms
and tenants with which the Investment
Manager often has a longstanding
relationship. Where material
counterparties are new to the
business, checks, including
anti money laundering checks
are conducted prior to transacting
any business to ensure that
no reputational or legal issues
would arise from engaging with
that counterparty. The Company
pays suppliers in accordance
with pre-agreed terms.
The Investment Manager has open
lines of communication with
tenants and can understand and
resolve any issues promptly.
----------------------------------------
d) The impact of the Company's The Board recognises the importance
operations on the community of supporting local communities
and the environment where the Company's assets are
located and seeks to invest
in properties which will be
fit for future purpose.
The Board takes overall responsibility
for the Company's impact on
the community and the environment
and its ESG policies are set
out and strategy section of
the Strategic report.
----------------------------------------
e) The desirability of the Company The Board believes that the
maintaining a reputation for ability of the Company to conduct
high standards of business conduct its investment business and
finance its activities depends
in part on the reputation of
the Board and Investment Manager's
team. The risk of falling short
of the high standards expected
and thereby risking its business
reputation is included in the
Board's review of the Company's
risks. The principal risks and
uncertainties facing the business
are set out in that section
of the Strategic report.
----------------------------------------
f) The need to act fairly as The Company's shareholders are
between members of the Company a very important stakeholder
group. The Board and Investment
Manager aim to be open with
shareholders and available to
them, subject to compliance
with relevant securities laws.
The Investment Manager also
engages with existing investors
who may request meetings and
with potential new investors
on an ad hoc basis throughout
the year, including where prompted
by Company announcements. Information
is made available on the Company's
website. The Company has a single
class of share in issue with
all members of the Company having
equal rights.
----------------------------------------
METHODS USED BY THE BOARD
The main methods used by the Directors to perform their duties
include:
-- Board Strategy discussion held at least annually to review
all aspects of the Company's business model and strategy and assess
the long-term success of the Company and its impact on key
stakeholders;
-- The Management Engagement Committee engages with the
Company's key service providers and reports on their performance to
the Board. The responsibilities of the Management Engagement
Committee are detailed in the
Management Engagement Committee report;
-- The Board is responsible for the Company's ESG activities set
out in the Business strategy section of the Strategic report, which
it believes are a key part of benefitting the local communities
where the Company's assets are located;
-- The Board's risk management procedures set out in the
Governance report identify the potential consequences of decisions
in the short, medium and long-term so that mitigation plans can be
put in place to prevent, reduce or eliminate risks to the Company
and wider stakeholders;
PRINCIPAL DECISIONS IN THE YEAR
The Board has delegated operational functions to the Investment
Manager and other key service providers. In particular,
responsibility for management of the Company's property portfolio
has been delegated to the Investment Manager. The Board retains
responsibility for reviewing the engagement of the Investment
Manager and exercising overall control of the Company, reserving
certain key matters as set out in the Governance report.
The principal non-routine decision taken by the Board was the
decision to suspend the quarterly dividend due to the disruption to
cash collection caused by the COVID-19 pandemic and to protect the
business in the long-term for all of the stakeholders. The REIT
regulations also require the Company to distribute, subject to
detailed regulations, 90% of net rental income by the way of
dividend. Therefore, both the prudential payment of dividends based
on cash receipts, and meeting the REIT requirements, may result in
an upward recalibration of dividends, either by increasing the
quarterly rate or by payment of a special dividend. However, market
rates on rental income are still high and the impact of COVI D-19
is likely to be particularly significant on UK commercial property
so in the short-term the Company will continue to take a prudent
approach. This decision was taken to manage cash resources and
maintain liquidity to mitigate the risks associated with a period
of uncertainty created by the COVID-19 pandemic. Due to the nature
of this decision a variety of stakeholders had to be factored into
the Board's discussions. Each decision was announced at the time,
so that all stakeholders were aware of the decisions.
STAKEHOLDERS
The Board recognises the importance of stakeholder engagement to
deliver its strategic objectives and believes its stakeholders are
vital to the continued success of the Company. The Board is mindful
of stakeholder interests and keeps these at the forefront of
business and strategic decisions. Regular engagement with
stakeholders is fundamental to understanding their views. The below
section highlights how the Company engages with its key
stakeholders, why they are important and the impact they have on
the Company and therefore its long-term success, which the Board
believes helps demonstrate the successful discharge of its duties
under s172(1) of the Act.
Stakeholder Stakeholder interests Stakeholder engagement
Tenants --High quality assets --Regular dialogue
The Investment --Profitability through rent collection
Manager --Efficient operations process.
understands --Knowledgeable and --Review published
the businesses committed landlord data, such as accounts,
occupying the --Flexibility to adapt trading updates and
Company's to the changing UK analysts' reports.
assets and commercial landscape --Ensured buildings
seeks to --Buildings with strong comply with the necessary
create environmental credentials safety regulations
long-term and insurance.
partnerships --All tenants have
and understand been directly contacted
their to understand the
needs to impact of the COVID-19
deliver fit pandemic on their
for purpose businesses.
real estate
and develop
asset
management
opportunities
to underpin
long-term
sustainable
income
growth and
maximise
occupier
satisfaction.
-------------------------------------------------------------- ----------------------------------------------------------
The Investment --Long-term viability --Board and Committee
Manager of the Company meetings
and its --Long-term relationship --Face-to-face and
employees with the Company video-conference meetings
As an --Maintaining a positive with the Chairman
externally and transparent relationship and other Board Directors
managed with the Board --Monthly and quarterly
fund the KPI reporting to the
Company's Board
key service --External Board evaluation,
provider including feedback
is the from key Investment
Investment Manager personnel
Manager is a --Informal meetings
key and calls
stakeholder.
The Investment
Manager's
culture aligns
with
that of the
Company
and its
reputation
of operating
in the
small lot-size
market
is key when
representing
the Company.
-------------------------------------------------------------- ----------------------------------------------------------
Suppliers --Collaborative and --Board and Committee
A transparent working meetings
collaborative relationships --One-to-one meetings
relationship --Responsive communication particularly in relation
with our --Being able to deliver to the challenges
suppliers, service level agreements presented by COVID-19
including and the need to test
those to the resilience of
whom key all the Company's
services operations and supply
are --Annual review of
outsourced, key service providers
ensures by the Management
that we Engagement Committee
receive high --Regular contact
quality with the two main
services to service providers,
help deliver the Investment Manager
strategic and Administrator
and investment
objectives.
-------------------------------------------------------------- ----------------------------------------------------------
Shareholders
Building a * Attractive level of income returns * Quarterly NAV statements and half yearly accounts
strong
investor base
through * Strong Corporate Governance and environmental * AGM
clear and credentials
transparent
communication * Market announcements and corporate website
is vital * Transparent reporting framework
to building a
successful
and
sustainable
business
and generating
long-term
growth.
-------------------------------------------------------------- ----------------------------------------------------------
Lenders
Our lender * Stable cash flows * Regular covenant reporting
plays an
important role
in * Stronger covenants * Face-to-face meetings
our business.
The
Investment * Being able to meet interest payments
Manager
maintains
close and * Maintaining agreed gearing ratios
supportive
relationships
with this * Regular financial reporting
group of
long-term
stakeholders, * Proactive notification of issues or changes
characterised
by openness,
transparency
and mutual
understanding
-------------------------------------------------------------- ----------------------------------------------------------
Government,
local * Openness and transparency * Engagement with local authorities where we operate
authorities
and
communities * Compliance with new legislation * Two way dialogue with regulators and HMRC
As a
responsible
corporate * Proactive engagement
citizen the
Company
is committed * Support for local economic and environmental plans
to engaging and strategies
constructively
with
central and * Playing its part in providing the real estate fabric
local of the economy, giving employers a place of business
government and
ensuring
we support the
wider
community
-------------------------------------------------------------- ----------------------------------------------------------
INVESTMENT POLICY
The Group pursues its investment objective by investing in a
diversified portfolio of UK commercial properties.
The Group invests principally in three commercial property
sectors: office, retail (including retail warehouses) and
industrial, without regard to a traditional property market
relative return benchmark.
The Group invests predominantly in income producing investments.
Investment decisions are based on analysis of, inter alia,
prospects for future income and capital growth, sector and
geographic prospects, tenant covenant strength, lease length,
initial and equivalent yields and the potential for active asset
management of the property.
The Group does not invest in other investment companies or
funds. However, the Group may hold property through special purpose
vehicles and is permitted to invest up to 25% of total assets, at
the time of investment, in joint ventures which hold real estate
directly. The Group is also permitted to forward fund purchases of
properties on a pre-let or a non-pre-let basis and obtain options
over properties.
Investment risk is spread through investing in a range of
geographical areas and sectors, and through letting properties,
where possible, to low risk tenants. Although the Group has not set
any maximum geographic exposure or maximum weightings in any of the
three principal property sectors, it may invest no more than 25% of
total assets, at the time of investment, in other sectors such as
leisure, residential, student residential, healthcare and hotels.
The Group is now fully invested (including drawdown of available
debt facilities), and no single property may exceed 20% of total
assets at the time of investment. Speculative development (i.e.
properties under construction which have not been pre-let) is
restricted to a maximum of 10% of total assets at the time of
investment or commencement of the development. Development, other
than speculative development, is also restricted to a maximum of
10% of total assets at the time of investment or commencement of
the development.
The Group is not permitted to acquire an investment if, as a
result, income receivable from any one tenant, or from tenants
within the same group (other than from central or local
government), would in any one financial year exceed 20% of the
total rental income of the Group for that financial year.
The Group is permitted to invest cash held for working capital
purposes and awaiting investment in cash deposits, gilts and money
market funds. The Board intends that gearing, calculated as
borrowings as a percentage of the Group's gross assets, will not
exceed 50% at the time of drawdown.
Any material change to the investment policy requires the prior
approval of shareholders.
KEY PERFORMANCE INDICATORS
The Board uses a number of performance measures to assess
success in meeting objectives. The key performance indicators are
as follows:
-- Dividend per share;
-- Net Asset Value ("NAV") per share; and
The Group's key performance indicators were chosen in light of
its investment objective.
The Group's performance against the key performance indicators
for the year under review is reported in the Financial
Statements.
In addition to the key performance indicators, the Board also
reports a number of other measures which it believes may be of
interest to shareholders. These include diversification;
loan-to-value; occupancy rate; annual rent roll; current yield;
gross contracted rent; and, WAULT. The Board believes these
measures provide background information which shareholders should
be aware of.
GOING CONCERN
Under Provision 35 of the AIC Code, the Board needs to consider
whether it is appropriate to adopt the going concern basis of
accounting in preparing the Financial Statements. Based on this
information the Directors believe that the Group has the ability to
meet its financial commitments for a period of at least 12 months
from the date of approval of the Financial Statements. For this
reason they continue to adopt the going concern basis in preparing
the Financial Statements.
VIABILITY STATEMENT
In accordance with the AIC Code and FRC Guidance on Risk
Management, Internal Controls and Related Financial Business
Reporting, the Directors have also assessed the prospects of the
Group over a period longer than the 12 months required by the
'Going Concern' provision.
The Board conducted this review for a period of three years,
which was selected for the following reasons:
- The Board regularly considers a detailed cash flow model
covering a longer time period which does not indicate any matters
which does not indicate any matters which would give concern over
the Group's longer term viability, the property portfolio held by
the Group is not expected to remain unchanged over the longer
term.
-The Investment Adviser is expected to undertake property
acquisitions, and may undertake sales, in line with the Group's
investment objective and policy. While the weighted average
unexpired lease term ("WAULT") of the portfolio is 5.17 years, 5 of
the 10 properties have a WAULT less than 4.0 years. The longer the
time horizon which is considered, the higher the degree of
uncertainty over the constituents of the Group's investment
property portfolio and, on balance, the Board considers that a
period of three years is an appropriate length of time over which a
detailed sensitivity analysis can be conducted whilst retaining a
reasonable level of accuracy regarding forecast rental income and
valuation movements.
The three-year viability assessment conducted by the Board
considered the Group's cash flows, dividend cover, REIT compliance
and other key financial ratios over the period. The three-year
viability assessment conducted by the Board takes cognisance of the
COVID-19 pandemic.
The lease incentive assumptions in the three- year viability
assessment are prudent. A downside scenario including additional
void costs and bad debt was also prepared. Both the three-year
viability assessment and downside scenario recorded sufficient
working capital to meet obligations and covenant compliance.
At 30 September 2020 the Group held GBP1.12 million in cash and
GBP22.8 million of the GBP25 million facility agreement had been
drawn down. The Group continues to be fully compliant with its loan
covenants. This resource is sufficient to finance all currently
identified capital expenditure opportunities within the Group's
existing property portfolio.
Based on the results of this analysis, the Directors have
concluded that there is a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as
they fall due, for a period of three years from the date of
approval of this Report.
POST BALANCE SHEET EVENTS
After the balance sheet date, within the investment property
valuations the "material uncertainty" clause has now been removed
from external valuations.
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 financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union and company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable
law). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the group and 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 international accounting standards
in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
have been followed for the group financial statements and United
Kingdom Accounting Standards, comprising FRS 101, have been
followed for 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 responsible for keeping adequate accounting
records that are sufficient to show and explain the group 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 and the Directors'
Remuneration Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity
of the company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
Each of the directors, whose names and functions are listed in
Board of Directors confirm that, to the best of their
knowledge:
-- the company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
"Reduced Disclosure Framework", and applicable law), give a true
and fair view of the assets, liabilities, financial position and
profit of the company;
-- the group financial statements, which have been prepared in
accordance with with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the group; and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
group and company, together with a description of the principal
risks and uncertainties that it faces.
Hugh Little
Chairman
15 January 2021
CONSOLIDATED STATEMENTS
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 September 30 September
2020 2019
------------------------------------- ---- ------------------------ -------- --------------------------
Revenue Capital Revenue Capital
Total GBP'000 Total
GBP'000 GBP'000 GBP'000
Note GBP'000 GBP'000
------------------------------------- ---- ------------------------ -------- --------------------------
Capital losses on investments
------------------------------------- ---- ------------------------ -------- ------------ ------------
Held at fair value 9 - (5,518) (5,518) - (3,133) (3,133)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Revenue
------------------------------------- ---- ------------------------ -------- ------------ ------------
Rental income 4,145 - 4,145 4,249 - 4,249
------------------------------------- ---- ------------------------ -------- ------------ ------------
4,145 (5,518)
Total income/(expense) (1,373) 4,249 (3,133) 1,116
------------------------------------- ---- ------------------------ -------- ------------ ------------
Expenditure
------------------------------------- ---- ------------------------ -------- ------------ ------------
Investment adviser's fees 2 (205) - (205) (335) - (335)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Other expenses 3 (1,254) - (1,254) (1,193) - (1,193)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Total expenditure (1,459) - (1,459) (1,528) - (1,528)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Profit/(loss) before finance 2,686 (5,518)
costs and taxation (2,832) 2,721 (3,133) (412)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Interest receivable 4 - - - - - -
------------------------------------- ---- ------------------------ -------- ------------ ------------
Interest payable 5 (592) - (592) (657) - (657)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Profit/(loss) before taxation 2,094 (5,518) (3,424) 2,064 (3,133) (1,069)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Taxation 6 - - - - - -
------------------------------------- ---- ------------------------ -------- ------------ ------------
Other Comprehensive income - - - - - -
------------------------------------- ---- ------------------------ -------- ------------ ------------
Total comprehensive Income/(expense)
for the year 2,094 (5,518) (3,424) 2,064 (3,133) (1,069)
------------------------------------- ---- ------------------------ -------- ------------ ------------
Basic and diluted earnings/(loss) 5.48p (14.44)p
per ordinary share 8 (8.96)p 5.40p (8.20)p (2.8)p
------------------------------------- ---- ------------------------ -------- ------------ ------------
The total column of this statement represents the Group's
Consolidated Statement of Comprehensive Income, prepared in
accordance with IFRS. There are no other gains and losses for the
year other than total comprehensive income/(expenses) reported
above.
The supplementary revenue and capital return columns are
prepared under guidance published by the Association of Investment
Companies. All revenue and capital items in the above statement are
derived from continuing operations.
No operations were acquired or discontinued in the year.
The accompanying notes form an integral part of these Financial
Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September As at 30
2020 GBP'000 September
Notes 2019 GBP'000
------------------------------ ----- ------------------ ----------------
Non-current assets
------------------------------ ----- ------------------ ----------------
Investment properties 9 49,569 54,880
------------------------------ ----- ------------------ -------------
49,569 54,880
------------------------------ ----- ------------------ -------------
Current assets
------------------------------ ----- ------------------ -------------
Trade and other receivables 11 3,003 2,643
------------------------------ ----- ------------------ -------------
Cash and cash equivalents 12 1,120 510
------------------------------ ----- ------------------ -------------
4,123 3,153
------------------------------ ----- ------------------ -------------
Total assets 53,692 58,033
------------------------------ ----- ------------------ -------------
Current liabilities
------------------------------ ----- ------------------ -------------
Trade and other payables 14 (3,176) (3,014)
------------------------------ ----- ------------------ -------------
(3,176) (3,014)
------------------------------ ----- ------------------ -------------
Non-current liabilities
------------------------------ ----- ------------------ ----------------
Loan 13 (22,626) (22,559)
------------------------------ ----- ------------------ -------------
Total liabilities (25,802) (25,573)
------------------------------ ----- ------------------ -------------
Net assets 27,890 32,460
------------------------------ ----- ------------------ -------------
Equity and reserves
------------------------------ ----- ------------------ -------------
Called up equity share
capital 16 3,820 3,820
------------------------------ ----- ------------------ -------------
Share premium 5,335 5,335
------------------------------ ----- ------------------ -------------
Special distributable reserve 20,694 21,840
------------------------------ ----- ------------------ -------------
Capital reserve (11,231) (5,713)
------------------------------ ----- ------------------ -------------
Revenue reserve 9,272 7,178
------------------------------ ----- ------------------ -------------
Total Equity 27,890 32,460
------------------------------ ----- ------------------ -------------
Net asset value per Ordinary
Share 15 73.01p 84.97p
------------------------------ ----- ------------------ -------------
The accompanying notes form an integral part of these Financial
Statements.
Company number: 09511797.
The Financial Statements were approved by the Board of Directors
on 15 January 2021 and signed on its behalf by:
Hugh Little
Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2020
Share Share Special Capital Revenue Total
Capital Premium Distributable Reserve Reserve equity
Account Reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- --------- --------- --------------- --------- --------- --------
As at 1 October
2019 3,820 5,335 21,840 (5,713) 7,178 32,460
----- --------- --------- --------------- --------- --------- --------
(Loss/profit
for the year
and total
comprehensive
(expense)/income
for the year - - - - (5,518) 2,094 (3,424)
----- --------- --------- --------------- --------- --------- --------
Other Comprehensive - - - - - -
Income
----- --------- --------- --------------- --------- --------- --------
Transfers - - (1,146) - 1,146 -
----- --------- --------- --------------- --------- --------- --------
Transactions
with owners
recognised
in equity:
----- --------- --------- --------------- --------- --------- --------
Issue of Ordinary 16 - - - - - -
Share capital
----- --------- --------- --------------- --------- --------- --------
Dividends
paid 7 - - - - (1,146) (1,146)
----- --------- --------- --------------- --------- --------- --------
As at 30 September
2020 3,820 5,335 20,694 (11,291) 9,272 27,890
----- --------- --------- --------------- --------- --------- --------
During the year, the Group transferred GBP1,146,000 from the
special distributable reserve to the revenue reserve to cover
dividends.
For the year ended 30 September 2019
Share Share Special Capital Revenue Total
Capital Premium Distributable Reserve Reserve equity
Account Reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- --------- --------- --------------- --------- --------- --------
As at 1 October
2018 3,820 5,335 21,840 (2,580) 7,406 35,821
----- --------- --------- --------------- --------- --------- --------
Profit and
total comprehensive
expense for
the year - - - - - 2,213 2,213
----- --------- --------- --------------- --------- --------- --------
(Loss/profit
for the year
and total
comprehensive
(expense)/income
for the year - - - (3,133) 2,064 (1,069)
----- --------- --------- --------------- --------- --------- --------
Other Comprehensive - - - - - -
Income
----- --------- --------- --------------- --------- --------- --------
Transactions - - - - - -
with owners
recognised
in equity:
----- --------- --------- --------------- --------- --------- --------
Issue of Ordinary
Share capital 16 - - - - (2,292) (2,292)
----- --------- --------- --------------- --------- --------- --------
Dividends
paid 7
----- --------- --------- --------------- --------- --------- --------
As at 30 September
2019 3,820 5,335 21,840 (5,713) 7,178 32,460
----- --------- --------- --------------- --------- --------- --------
CONSOLIDATED STATEMENT OF CASH FLOW
Year ended Year ended
30 September 30 September
2020 2019
Note GBP'000 GBP'000
------------------------------------- ---- ------------- -------------
Cash flows from operating activities
------------------------------------- ---- ------------- -------------
(Loss)/profit before tax (3,424) (1,069)
------------------------------------- ---- ------------- -------------
Adjustments for:
------------------------------------- ---- ------------- -------------
Amortisation 42 16
------------------------------------- ---- ------------- -------------
Interest payable 592 657
------------------------------------- ---- ------------- -------------
Unrealised revaluation loss
on property portfolio 5,518 3,133
------------------------------------- ---- ------------- -------------
Operating cash flows before
working capital changes 2,728 2,737
------------------------------------- ---- ------------- -------------
(Increase)/decrease in trade
and other receivables (360) 6
------------------------------------- ---- ------------- -------------
increase in trade and other
payables 615 60
------------------------------------- ---- ------------- -------------
Net cash inflow from operating
activities 2,983 2,803
------------------------------------- ---- ------------- -------------
Cash flows from investing activities
------------------------------------- ---- ------------- -------------
Purchase of investment properties - -
------------------------------------- ---- ------------- -------------
Property costs capitalised (437) (489)
------------------------------------- ---- ------------- -------------
Net cash outflow from investing
activities (437) (489)
------------------------------------- ---- ------------- -------------
Cash flows from financing activities
------------------------------------- ---- ------------- -------------
Bank loan drawn down net of
arrangement fees 13 - -
------------------------------------- ---- ------------- -------------
Issue of Ordinary Share capital - -
------------------------------------- ---- ------------- -------------
Interest paid (790) (651)
------------------------------------- ---- ------------- -------------
Equity dividends paid 7 (1,146) (2,292)
------------------------------------- ---- ------------- -------------
Net cash (outflow)/inflow from
financing activities (1,936) (2,943)
------------------------------------- ---- ------------- -------------
Net increase/(decrease) in cash
and cash equivalents 12 610 (629)
------------------------------------- ---- ------------- -------------
Opening cash and cash equivalents 510 1,139
------------------------------------- ---- ------------- -------------
Closing cash and cash equivalents 1,120 510
------------------------------------- ---- ------------- -------------
The accompanying notes form an integral part of these Financial
Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The entity is incorporated and registered in England and Wales
and is domiciled in the United Kingdom. It is public limited
company and is limited by shares.
1. ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
Basis of Accounting
These Consolidated Financial Statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union, the Statement of
Recommended Practice in line with the Association of Investment
Companies (AIC) best accounting practice, applicable legal and
regulatory requirements of the Companies Act 2006 as applicable to
companies using IFRS and the Disclosure, Guidance and Transparency
Rules. The Financial Statements have been prepared on a historical
cost basis, except for investment property valuations that have
been measured at fair value.
The Group opted for one single statement of profit or loss and
other comprehensive income approach as permitted under IFRS.
The major accounting policies of the Group are set below and
have been applied consistently throughout the current and prior
years.
The notes and Financial Statements are presented in pounds
sterling (being the functional currency and presentational currency
for the Company and Group) and are rounded to the nearest thousand
except where otherwise indicated.
Going Concern
Under Provision C.1.3 of the UK Corporate Governance Code, the
Board needs to report whether the business is a going concern. In
considering this requirement, the Directors have taken the
following into account:
-- the Group's forecast for the next three years, in particular
the cash flows, borrowings and occupancy rate;
-- A new facility was signed on 30 September 2019 on compatible terms, for three years;
-- the ongoing ability to comply with the Group's financial
covenants (details of the loan covenants are included in Note
13);
-- the risks included on the Group's risk register that could
impact on the Group's liquidity and solvency over the next 12
months (details of risks are included in the Strategic Report;
and
-- the risks on the Group's risk register that would be a
potential threat to the Group's business model (details of risks
are included in the Strategic Report).
The directors have also assessed the following specific areas in
relation to the COVID-19 pandemic:
-- The extent of any operational disruption
-- Potential curtailment of rental receipts
-- Diminished demand for leasing the Company's assets going forward
-- The impact of the material uncertainty clause which is
included as a disclosure as part of the external valuations,
highlights that less certainty, and consequently a higher degree of
caution, should be attached to the valuation.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report. The Strategic Report also
includes the Group's risks and risk management processes.
Having due regard to these matters and after making appropriate
enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Therefore, the Board continues to adopt
the going concern basis in preparing these Consolidated Financial
Statements.
Significant Accounting Judgements, Estimates and Assumptions
The preparation of Financial Statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported for revenues, expenses, assets and liabilities and the
disclosure of contingent liabilities as at the year-end date. The
nature of the estimation means that actual outcomes could differ
from those estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis.
Key Estimates
The only significant source of estimation uncertainty relates to
the assumptions made in the investment property valuations, further
details are provided in note 1(f) of the financial statements.
Revisions to accounting estimates are recognised in the year in
which the estimate is revised, if the revision affects only that
year, or in the year of the revision and future years, if the
revision affects both current and future years.
The fair value measurement for the assets and liabilities are
categorised into different levels in the fair value hierarchy based
on the inputs to valuation techniques used. The different levels
have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly.
Level 3: unobservable inputs for the asset or liability. Value
is the Directors' best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques and
on assumptions as to what inputs other market participants would
apply in pricing the same or similar instrument. As explained in
more detail in Note 9, all investment properties are included in
Level 3. The Group recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the transfer has occurred.
Valuation of Investment Properties The fair value of investment
properties is determined by independent real estate valuation
experts using recognised valuation techniques. The properties have
been valued on the basis of 'Fair Value' as adopted by the
International Accounting Standards Board. Further detail is
provided in note 1(f) to the financial statements. 30 September
2020 valuations are subject to a "material uncertainty" clause in
line with prevailing RICS guidance. Further information regarding
this is provided in Note 9.
Key judgements
Key judgements relate to the treatment of compliance with REIT
status, the valuation of investment properties, production of
consolidated financial statements and property acquisitions where
different accounting policies could be applied. These are described
in more detail below.
Compliance with REIT Status
As disclosed in Note 6, the Group has been approved as a REIT.
As a result, the Group does not pay UK corporation tax on its
profits and gains from qualifying rental business in the UK
provided it meets certain conditions. Non-qualifying profits and
gains of the Group continue to be subject to corporation tax as
normal. In order to achieve and retain group REIT status, several
entrance tests had to be met and certain ongoing criteria must be
maintained. The main criteria are as follows:
-- at least 90% of the tax exempt rental business profits must
be distributed in the form of a Property Income Distribution;
-- at the start of each accounting period, the assets of the tax
exempt business must be at least 75% of the total value of the
Group's assets;
-- at least 75% of the Group's total profits must arise from the tax exempt business; and
-- the Group must hold a minimum of three properties with no
single property exceeding 40% of the portfolio value.
The Directors intend that the Group should continue as a group
REIT for the foreseeable future, with the result that deferred tax
is not recognised on temporary differences relating to the property
rental business. Should the ongoing criteria not continue to be
met, the corporation tax payable by the Group may be significantly
higher. Further detail is provided in note 1(e) to the financial
statements.
When reviewing dividend policy, the Board confirmed that
dividends paid and payable will allow the Group to continue to meet
REIT status. The Board has taken account of the suspension of
dividend.
Production of Consolidated Financial Statements
The Company is required to consider whether it is an 'investment
entity' under the definition contained within IFRS 10. The
Directors have concluded that the Company is not an investment
entity as so defined. In arriving at this conclusion the Directors
considered:
-- the Company does not have a defined timeframe for exiting each investment property;
-- although the Company measures the investment properties held
by its subsidiary at fair value, other measures, such as cash flows
and rental income, are also considered when making and evaluating
investment decisions; and
-- the Company does not, through its subsidiary, just hold a
portfolio of static investment properties but also undertakes other
business activities including maintenance, capital expenditure and
leasing activities.
Were the Directors to conclude that the Company was an
investment entity then it would not consolidate its wholly owned
subsidiary and would instead report the investment in its
subsidiary at fair value through profit or loss.
Basis of Consolidation
The Consolidated Financial Statements comprise the Financial
Statements of the Company and its subsidiary drawn up to 30
September 2019. The Subsidiary is an entity controlled by the
Company as detailed in Note 10. Control exists when the Company is
exposed, or has rights, to variable returns from its investment
with the investee and has the ability to affect those returns
through its power over the investee. In assessing control,
potential voting rights that presently are exercisable are taken
into account. The Financial Statements of the subsidiary are
included in the Consolidated Financial Statements from the date
that control commences until the date that control ceases. In
preparing the Consolidated Financial Statements, intra-Group
balances, transactions and unrealised gains or losses have been
eliminated in full. Uniform accounting policies are adopted by the
Company and the Subsidiary.
(B) REVENUE RECOGNITION
Rental Income
Rental income excluding VAT arising on investment properties is
accounted for in the Statement of Comprehensive Income on a
straight-line basis over the terms of the individual leases.
Lease incentives including rent-free periods and payments to
tenants, are allocated to the Statement of Comprehensive Income on
a straight-line basis over the lease term or on another systematic
basis, if applicable. Where income is recognised in advance of the
related cash flows, an adjustment is made to ensure that the
carrying value of the relevant property, including accrued rent
disclosed separately within 'trade and other receivables' does not
exceed the external valuation.
Lease incentives are spread evenly over the lease term, even if
payments are not made on such a basis. The lease term is the
non-cancellable period of the lease together with any further term
for which the tenant has the option to continue the lease, where,
at the inception of the lease, the Directors are reasonably certain
that the tenant will exercise that option. The Group may from time
to time receive surrender premiums from tenants who break their
leases early. To the extent they are deemed capital receipts to
compensate the Group for loss in value of the property to which
they relate, they are credited to capital reserves. All other
surrender premiums are recognised within rental income in the
Statement of Comprehensive Income.
Amounts drawn down from escrow which arise from rent free
periods are accounted for on an accruals basis and recognised as
rental income within the Statement of Comprehensive Income over the
length of the time that the rental guarantee exists as it pertains
to vacant space and/or rent-free periods.
Interest Income
Interest income is accounted for on an accruals basis.
Service Charges and Expenses Recoverable from Tenants
Where service charges and other expenses are recharged to
tenants, the expense and the income received in reimbursement are
offset within the Statement of Comprehensive Income and are not
separately disclosed, as the Directors consider that the Group acts
as agent in this respect. Service charges and other
property-related expenses that are not recoverable from tenants are
recognised in expenses on an accruals basis.
(C) OTHER EXPENSES
Expenses are accounted for on an accruals basis. The Group's
investment management and administration fees, finance costs and
all other expenses are charged to revenue through the Statement of
Comprehensive Income net of Value Added Tax.
Amounts drawn down from escrow which arise from non-recoverable
expenses relating to vacant space are recognised as a deduction
from expenses.
(D) DIVIDS PAYABLE
Dividends are accounted for in the period in which they are
paid.
(E) TAXATION
The Group is a REIT and is thereby exempt from tax on both
rental profits and chargeable gains. In order to retain REIT
status, certain ongoing criteria must be maintained.
The Directors intend that the Group should continue as a REIT
for the foreseeable future, with the result that deferred tax is no
longer recognised on temporary differences relating to the property
rental business which is within the REIT structure.
Taxation on any profit or loss for the period not exempt under
UK-REIT regulations comprises current and deferred tax. Taxation is
recognised in the Statement of Comprehensive Income except to the
extent that it relates to items recognised as direct movements in
equity, in which case it is also recognised as a direct movement in
equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates and laws enacted or substantively
enacted at the year-end date. Deferred income tax is provided using
the liability method on all temporary differences at the reporting
date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred income
tax assets are recognised only to the extent that it is probable
that taxable profit will be available against which deductible
temporary differences, carried forward tax credits or tax losses
can be utilised. The amount of deferred tax provided is based on
the expected manner of realisation or settlement of the carrying
amount of assets and liabilities. In determining the expected
manner of realisation of an asset the Directors consider that the
Group will recover the value of investment property through sale.
Deferred income tax relating to items recognised directly in equity
is recognised in equity enacted or substantively enacted at the
balance sheet date.
(F) INVESTMENT PROPERTIES
Investment properties consist of land and buildings which are
not occupied for use by or in the operations of the Group or for
sale in the ordinary course of business but are held to earn rental
income together with the potential for capital and income
growth.
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Any subsequent capital
expenditure incurred in improving investment properties is
capitalised in the period incurred and included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value, with gains and losses recognised in the Statement of
Comprehensive
Income. Fair value is based on an open market valuation provided
by Savills (UK) Limited, Chartered Surveyors at the year-end date
using recognised valuation techniques appropriately adjusted for
unamortised lease incentives, lease surrender premiums and rental
adjustments. The determination of the fair value of investment
properties requires the use of estimates such as future cash flows
from assets (including lettings, tenants' profiles, future revenue
streams, capital values of fixtures and fittings, plant and
machinery, any environmental matters and the overall repair and
condition of the property) and discount rates applicable to those
assets. These estimates are based on local market conditions
existing at the balance sheet date.
Investment property is derecognised when it has been disposed of
or permanently withdrawn from use and no future economic benefit is
expected from its disposal. On derecognition, gains and losses on
disposals of investment properties are recognised in the Statement
of Comprehensive Income and transferred to the Capital Reserve -
investments sold. Recognition and derecognition occurs on the
completion of a sale.
Gains or losses on the disposal of investment property are
determined as the difference between net disposal proceeds and the
carrying value of the asset in the previous period's financial
information.
(G) CASH AND CASH EQUIVALENTS
Cash consists of cash in hand and short-term deposits in banks
with an original maturity of three months or less.
(H) TRADE AND OTHER RECEIVABLES
Rents receivable, which are generally due for settlement at the
relevant quarter end, are recognised and carried at the original
invoice amount less an allowance for any uncollectable amounts. An
estimate for credit losses in accordance with IFRS 9 is made when
collection of the full amount is no longer probable. Bad debts are
written off when identified.
(I) INTEREST-BEARING LOANS AND BORROWINGS
All loans and borrowings are initially recognised at cost, being
fair value of the consideration received net of arrangement costs
associated with the borrowing. After initial recognition, all
interest bearing loans and borrowings are subsequently measured at
amortised cost; any difference is recognised in the Statement of
Comprehensive Income over the period of the borrowing using the
effective interest method. Amortised cost is calculated by taking
into account any loan arrangement costs and any discount or premium
on settlement.
(J) PROPERTY ACQUISITIONS
Where property is acquired, via corporate acquisitions or
otherwise, the substance of the assets and activities of the
acquired entity is considered whether the acquisition represents
the acquisition of a business or the acquisition of an asset.
Where such acquisitions are not judged to be an acquisition of a
business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based on their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred taxation arises. Otherwise,
acquisitions are accounted for as business combinations.
(K) RESERVES
Share Premium
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account. The reserve is
non-distributable.
Capital Reserves
The amount of the capital reserve that is distributable is
complex to determine and is not necessarily the full amount of the
reserve as disclosed within these Financial Statements.
The following are accounted for in the capital reserve:
- gains and losses on the disposal of investment properties;
- increases and decreases in the fair value of investment
properties held at the year-end; and
- the cost of professional advice relating to the capital structure of the Group.
Revenue Reserve
The amount of the revenue reserve that is distributable is
complex to determine and is not necessarily the full amount of the
reserve as disclosed within these Financial Statements. The net
profit/(loss) arising in the revenue column of the Statement of
Comprehensive Income is added to or deducted from this reserve
Special Distributable Reserve
An application to Court was successfully made for the
cancellation of the launch share premium account which allowed the
transfer of monies to the special distributable reserve. This
reserve is available for paying dividends and buying back the
Company's shares to the extent that the remaining reserve is
sufficient to cover the deficit on the capital reserve.
Capital Management
The Group's capital is represented by the Ordinary Shares, Share
Premium, Capital Reserves, Revenue Reserve and Special
Distributable Reserve. The Group is not subject to any
externally-imposed capital requirements.
The capital of the Group is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares, the
buy back or re-issuance of shares from treasury, the management of
the Group's discount to net asset value and consideration of the
Group's net gearing level. There have been no changes in the
capital management objectives and policies or the nature of the
capital managed during the year.
The account policies adopted are consistent with those of the
previous financial year.
(L) CHANGES IN ACCOUNTING
POLICIES
The following new standards have been adopted in the current
year with no material impact on the Financial Statements:
- IFRS 16 'Leases'
IFRS 16 specifies how an IFRS reporter will recognise, measure,
present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognise assets and
liabilities for all leases unless the lease term is 12 months or
less or the underlying asset has a low value. Lessors continue to
classify leases as operating or finance, with IFRS 16's approach to
lessor accounting substantially unchanged from its predecessor, IAS
17. IFRS 16 applies to annual reporting periods beginning on or
after 1 January 2019.
The leasing activity of the Group relates fully to the leasing
of investment property. The weighted average unexpired lease term
of the leases held by the Group is just over 5 years.
There has been no material impact on the financial statements as
presented by implementing IFRS 16 in the current year.
Standard issued but not yet effective
The following standards have been issued but are not yet
effective for the accounting year and have not been adopted
early.
- IFRS 3 (Amendments) 'Definition of a Business'
The amendments clarify that, when an entity obtains control of a
business that is a joint operation, it applies the requirements for
a business combination achieved in stages, including remeasuring
previously held interest in the assets and liabilities of the joint
operation at fair value. In doing so, the acquirer remeasures its
entire previously held interest in the joint operation.
These amendments are expected to have no impact on the financial
statements.
2. INVESTMENT ADVISER'S FEE
Year ended 30 Year ended 30
September 2020 September 2019
GBP'000 GBP'000
---------------- ----------------
Investment Adviser's fee 205 335
---------------- ----------------
Total 205 335
---------------- ----------------
The Group's Alternative Investment Fund Manager ("AIFM") and
Investment Manager, R&H Fund Services (Jersey) Limited was
appointed on 28 April 2015. The property management arrangements of
the Group were delegated by R&H Fund Services (Jersey) Limited,
with the approval of the Group, to Drum Real Estate Investment
Management Limited ("the Investment Adviser") on 28 April 2015. The
Investment Adviser is responsible for the day to day management of
the portfolio. See note 17 for further details.
The capital of the Group is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares, the
buy back or re-issuance of shares from treasury, the management of
the Group's discount to net asset value and consideration of the
Group's net gearing level.
There have been no changes in the capital management objectives
and policies or the nature of the capital managed during the
year.
3. OTHER EXPENSES
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
-------------- --------------
Administration fee 40 20
-------------- --------------
AIFM Fee 15 15
-------------- --------------
Directors' fees 75 75
-------------- --------------
Statutory audit - PWC 54 35
-------------- --------------
Tax services - Deloitte 15 12
-------------- --------------
Services charges* 391 386
-------------- --------------
Consultancy fees 48 49
-------------- --------------
Valuation fees 23 24
-------------- --------------
Legal fees 45 32
-------------- --------------
Property expenses 84 77
-------------- --------------
Abortive costs" - 264
-------------- --------------
Bad debts 373 82
-------------- --------------
Other 91 122
-------------- --------------
Total 1,254 1,193
-------------- --------------
*Service charges relate to non-recoverable expenses on vacant
properties.
"Abortive costs relate to a cost incurred in relation to a deal
which was not finalised.
4. INTEREST RECEIVABLE
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
-------------- --------------
Bank interest received - -
-------------- --------------
Total - -
-------------- --------------
5. INTEREST PAYABLE
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
--------------- --------------
Bank loan interest and non-utilisation
fee 524 609
--------------- --------------
Loan arrangement fees 68 48
--------------- --------------
Total 592 657
--------------- --------------
6. TAXATION
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
-------------- --------------
Total tax charge - -
-------------- --------------
A reconciliation of the corporation tax charge applicable to the
results at the statutory corporation tax rate to the charge for the
year is as follows:
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
------------------- --------------
(Loss)/profit before taxation (3,424) (1,069)
------------------- --------------
Effects of:
------------------- --------------
REIT exempt profits 398 392
------------------- --------------
REIT exempt (losses) (1,048) (595)
------------------- --------------
Total tax charge - -
------------------- --------------
The Company served notice to HM Revenue & Customs that the
Company, and its subsidiary, qualified as a Real Estate Investment
Trust with effect from August 2015. Subject to continuing relevant
UK-REIT criteria being met, the profit from the Group's property
rental business, arising from both income and capital gains, are
exempt from corporation tax.
7. DIVIDS
The Group declared the following dividends:
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
----------------- --------------
A fourth interim dividend of 1.5p (1.5p)
in respect of the period ended 30 September
2019 was paid to shareholders on 22 November
2019 573 573
----------------- --------------
A first interim dividend of 1.5p (1.5p)
in respect of the period ended 31 December
2019 was paid to shareholders on 21 February
2020. 573 573
----------------- --------------
No second interim dividend (1.5p) was
paid in respect of the period ended 31
March 2020. - 573
----------------- --------------
No third interim dividend (1.5p) was
paid in respect of the period
ended 30 June 2020. - 573
----------------- --------------
Total dividends paid 1,146 2,292
----------------- --------------
The directors are not proposing a final dividend in respect of
2020 at this time.
8. BASIC AND DILUTED EARNINGS/(LOSS) PER ORDINARY SHARE
Year ended Year ended
30 September 2020 30 September
2019
GBP'000 Pence per GBP'000 Pence
share per
share
------------------- ------------------- -------- -------
Revenue earnings 2,094 5.48 2,064 5.40
------------------- ------------------- -------- -------
Capital loss (5,518) (14.44) (3,133) (8.20)
------------------- ------------------- -------- -------
Total (loss)/earnings (3,424) (8.96) (1,069) (2.80)
------------------- ------------------- -------- -------
Average number of shares in
issue 38,201,990 38,201,990
---------------------------------------- -----------------
9. INVESTMENT PROPERTIES
Year ended 30 Year ended
September 2020 30 September
GBP'000 2019 GBP'000
--------------------------------------- --------------------------- -------------------
Opening fair value 54,880 57,351
Purchases - -
Property costs capitalised 250 678
Amortisation of lease costs (43) (16)
Revaluation movement (including lease
incentive movement) (5,518) (3,133)
--------------------------------------- --------------------------- -------------------
Closing fair value 49,569 54,880
--------------------------------------- --------------------------- -------------------
Changes in the valuation of investment
properties
2020 2019
GBP'000 GBP'000
--------------------------------------- --------------------------- -------------------
Unrealised loss on revaluation of
investment properties (5,518) (3, 133)
--------------------------------------- --------------------------- -------------------
The properties were valued at GBP51,050,000 as at 30 September
2020 (30 September 2019: GBP55,350,000) by Savills (UK) Limited
('Savills'), in their capacity as external valuers adjusted for
lease incentives of GBP1,480,679 (2019: GBP470,000). 30 September
2020 valuations are subject to a "material uncertainty" clause in
line with prevailing RICS guidance, however post year end this has
been removed. The impact of the material uncertainty clause as at
30 September 2020, which is included as a disclosure as part of the
external valuations, highlights that less certainty, and
consequently a higher degree of caution, should be attached to the
valuation.
The fair value of investment properties is determined by
independent real estate valuation experts using recognised
valuation techniques. The properties have been valued on the basis
of 'Fair Value' and VPGA1 Valuations for Inclusion in the Financial
Statements, which adopt the definition of Fair Value as adopted by
the International Accounting Standards Board. In line with the
recommendation of the European Public Real Estate Association, all
properties have been deemed to be Level 3 under the fair value
hierarchy classification. This is described in more detail in the
accounting policy. Revisions to accounting estimates are recognised
in the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future period/years, if the revision affects both current and
future period/years.
The Group is required to classify fair value measurements of its
investment properties using a fair value hierarchy, in accordance
with IFRS 13 'Fair Value Measurement'. In determining what level of
the fair value hierarchy to classify the Group's investments
within, the Directors have considered the content of IFRS 13. The
position paper on IFRS 13 prepared by the European Public Real
Estate Association concludes that, it is likely that valuers of
investment property will use unobservable inputs resulting in the
vast majority of investment properties being classified as level
3.
After significant consideration of the Group's valuation process
and IFRS 13, the Directors believe it is reasonable to classify the
Group's assets within level 3 of the fair value hierarchy, as all
assets are subject to operating leases.
10. INVESTMENT IN SUBSIDIARY
The Group's results consolidate those of Drum Income Plus
Limited, a wholly owned subsidiary, incorporated in England &
Wales (Company Number: 09515513). Drum Income Plus Limited was
incorporated on 28 March 2015, acquired on 19 August 2015 and began
trading on 19 January 2016, when it was transferred the ownership
of the entirety of the Group's property portfolio. Drum Income Plus
Limited continues to hold all the investment properties owned by
the Group and is also the party which holds the Group's borrowings.
The registered office of Drum Income Plus Limited is Level 13,
Broadgate Tower, 20 Primrose Street, London, EC2A 2EW.
11. TRADE AND OTHER RECEIVABLES
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
----------------- --------------
Rent receivable 307 441
----------------- --------------
Service charge receivable 962 1,042
----------------- --------------
Lease incentives 1,481 470
----------------- --------------
Other 253 690
----------------- --------------
Total 3,003 2,643
----------------- --------------
12. CASH AND CASH EQUIVALENTS
All cash balances at the year-end were held in cash, current
accounts or deposit accounts.
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
----------------- --------------
Cash and cash equivalents 1,120 510
----------------- --------------
Total 1,120 510
----------------- --------------
13. LOAN
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
------------------ --------------
Principal amount outstanding 22,760 22,760
------------------ --------------
Set-up costs (134) (201)
------------------ --------------
Total 22,626 22,559
------------------ --------------
On 6 January 2017 the Group entered into a GBP25 million secured
3 year revolving credit facility agreement with the Royal Bank of
Scotland ('the Bank') at a rate of 1.75% plus LIBOR per annum which
had a maturity date of January 2020. This facility was extended on
30 September 2019 for a further 3 years.
As part of the loan agreement the Bank has a standard security
over the properties currently held by the Group, with an aggregate
value of GBP51,050,000 at 30 September 2020 (30 September 2019 -
GBP55,350,000).
Under the financial covenants related to this loan, the Group
has to ensure that for Drum Income Plus Limited:
- the interest cover, being the rental income as a percentage of
finance costs is at least 250%;
- the loan to value ratio, being the value of the loan as a
percentage of the aggregate market value of the relevant
properties, must not exceed 50%.
Breach of the financial covenants, subject to various cure
rights, may lead to the loans falling due for repayment earlier
than the final maturity date stated above. The Group has complied
with all the loan covenants during the year.
14. TRADE AND OTHER PAYABLES
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
----------------- --------------
Rental income received in advance 718 890
----------------- --------------
Service charge 920 923
----------------- --------------
Accruals 205 744
----------------- --------------
VAT 78 95
----------------- --------------
Other creditors 1,255 362
----------------- --------------
Total 3,176 3,014
----------------- --------------
The policy is to ensure settlement of supplier invoices in
accordance with stated terms.
15. NET ASSET VALUE
The Group's net asset value per ordinary share of 73.01 pence
(30 September 2019: 84.97 pence) is based on equity shareholders'
funds of GBP27,890,000 (30 September 2019: GBP32,460,000) and on
38,201,990 (30 September 2019: 38,201,990) ordinary shares, being
the number of shares in issue at the year end.
16. CALLED UP EQUITY SHARE CAPITAL
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
2020 2019 2020 2019
Shares Shares GBP'000 GBP'000
---------------------- -------------- -------------- --------------
Issued and fully paid
---------------------- -------------- -------------- --------------
Opening total issued ordinary
shares of 10p each 38,201,990 38,201,990 3,820 3,820
---------------------- -------------- -------------- --------------
Closing total issued ordinary
shares 38,201,990 38,201,990 3,820 3,820
---------------------- -------------- -------------- --------------
No shares were issued to increase capital base of the
Company.
Ordinary shareholders are entitled to all dividends declared by
the Company and to all of the Company's assets after repayment of
its borrowings and ordinary creditors. Ordinary shareholders have
the right to vote at meetings of the Company. All Ordinary Shares
carry equal voting rights.
There is only one class of share in issue.
17. RELATED PARTY TRANSACTIONS
The Directors are considered to be related parties. No Director
had an interest in any transactions which are, or were, unusual in
their nature or significant to the nature of the Group.
The Directors of the Group received fees for their services.
Total fees for the year were GBP75,000 (30 September 2019:
GBP75,000 ) of which GBPnil was payable at the year-end (30
September 2019: GBPnil).
The Investment Manager and Investment Adviser are considered to
be related parties.
Under the terms of the agreements amongst the Group, R&H
Fund Services (Jersey) Limited (the "AIFM") and Drum Real Estate
Investment Management Limited (the "Investment Adviser"), the Group
paid to the AIFM a fixed fee of GBP15,000 per annum. The AIFM
agreed that the annual portfolio management fee would be paid to
the Investment Adviser, in accordance with the terms of the
agreements. With effect from 1 October 2019, Drum Real Estate
Investment Management Limited reduced its annual portfolio
management fee to 0.7%.
The management agreements are terminable by any party on 12
months' written notice, provided that such notice shall expire no
earlier than the fourth anniversary of Admission.
R&H Fund Services (Jersey) Limited, as AIFM and Investment
Manager, earned GBP15,000 during the year (30 September 2019:
GBP15,000). GBP47,000 was payable at the year-end (30 September
2019: GBP32,000).
Drum Real Estate Investment Management Limited, as Investment
Adviser, earned GBP205,000 during the year (30 September 2019:
GBP335,000). GBPnil was payable at the year-end (GBPnil at 30
September 2019).
18. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Group is engaged in a
single unified business, being property investment, and in one
geographical area, the United Kingdom, and that therefore the Group
has no segments. The Board of Directors, as a whole, has been
identified as constituting the chief operating decision maker of
the Group. The key measure of performance used by the Board to
assess the Group's performance is the total return on the Group's
net asset value. As the total return on the Group's net asset value
is calculated based on the net asset value per share calculated
under IFRS as shown at the foot of the Consolidated Statement of
Financial Position, the key performance measure is that prepared
under IFRS. Therefore no reconciliation is required between the
measure of profit or loss used by the Board and that contained in
the Financial Statements.
The view that the Group is engaged in a single unified business
is based on the following considerations:
- one of the key financial indicators received and reviewed by
the Board is the total return from the property portfolio taken as
a whole;
- there is no active allocation of resources to particular types
or groups of properties in order to try to match the asset
allocation of an index or benchmark; and
- the management of the portfolio is ultimately delegated to a
single Investment Adviser, Drum Real Estate Investment Management
Limited.
19. FINANCIAL INSTRUMENTS
Consistent with its objective, the Group holds UK commercial
property investments. In addition, the Group's financial
instruments comprise cash and receivables and payables that arise
directly from its operations. The Group does not have exposure to
any derivative instruments.
The Group is exposed to various types of risk that are
associated with financial instruments. The most important types are
credit risk, liquidity risk, interest rate risk and market price
risk. There is no foreign currency risk as all assets and
liabilities of the Group are maintained in pounds sterling.
The Board reviews and agrees policies for managing the Group's
risk exposure. These policies are summarised below. These
disclosures include, where appropriate, consideration of the
Group's investment properties which, whilst not constituting
financial instruments as defined by IFRS, are considered by the
Board to be integral to the Group's overall risk exposure.
The Company has not, in the year to 30 September 2020 (2019:
same), participated in any: repurchase transactions; securities
lending or borrowing; buy-sell back transactions; margin lending
transactions; or total return swap transactions (collectively
called SFT). As such, it has no disclosure to make in satisfaction
of the EU regulations on transparency of SFT.
The following table summarises the Group's financial assets and
liabilities into the categories required by IFRS 7 'Financial
Instruments: Disclosures':
As at 30 September 2020 As at 30 September 2019
---------------------- --------------------------------------- ------------------------------------
Held at fair Financial assets Held at fair Financial
value through and liabilities value through assets and
profit and at amortised profit and liabilities
loss GBP'000 cost GBP'000 loss GBP'000 at amortised
Financial assets cost GBP'000
---------------------- ------------------ ------------------- ------------------- ---------------
Investment properties 49,569 - 54,880 -
---------------------- ------------------ ------------------- ------------------- ---------------
Cash and cash
equivalents - 1,120 - 510
---------------------- ------------------ ------------------- ------------------- ---------------
Rent receivable - 307 - 441
---------------------- ------------------ ------------------- ------------------- ---------------
Service charge
receivable - 962 - 1,042
---------------------- ------------------ ------------------- ------------------- ---------------
Lease incentives - 1,481 - 470
---------------------- ------------------ ------------------- ------------------- ---------------
Other receivables - 253 - 690
---------------------- ------------------ ------------------- ------------------- ---------------
49,569 4,123 54,880 3,153
---------------------- ------------------ ------------------- ------------------- ---------------
Financial liabilities
---------------------- ------------------ ------------------- ------------------- ---------------
Loan - (22,626) - (22,559)
---------------------- ------------------ ------------------- ------------------- ---------------
Trade and other
payables - (3,176) - (3,014)
---------------------- ------------------ ------------------- ------------------- ---------------
- (25,802) - (25,573)
---------------------- ------------------ ------------------- ------------------- ---------------
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. At the reporting date, the Group's financial assets
exposed to credit risk amounted to GBP4,123,000 (2019:
GBP3,153,000), consisting of cash of GBP1,120,000 (2019:
GBP510,000), rent receivable of GBP307,000 (2019: GBP441,000),
service charge receivable of GBP962,000 (2019: GBP1,042,000), lease
incentives of GBP1,480,679 (2019: GBP470,000), and other
receivables of GBP252,321 (2019: GBP690,000).
In the event of default by a tenant if it is in financial
difficulty or otherwise unable to meet its obligations under the
lease, the Group will suffer a rental shortfall and incur
additional expenses until the property is re-let. These expenses
could include legal and surveyor's costs in reletting, maintenance
costs, insurances, rates and marketing costs and may have a
material adverse impact on the financial condition and performance
of the Group and/or the level of dividend cover. The Board receives
regular reports on concentrations of risk and any tenants in
arrears. The Investment Adviser monitors such reports in order to
anticipate, and minimise the impact of, defaults by occupational
tenants.
Where there are concerns over the recoverability of rental
income, the amounts outstanding will be fully provided for. There
was a provision recognised in the year to 30 September 2020 for
potential bad debts. The increase in this provision in comparison
to prior years was as a result of the COVID-19 pandemic. The Group
has also seen an increase in lease incentives and rent concessions
as a result of the COVID-19 pandemic.
All of the Group's cash was placed with The Royal Bank of
Scotland plc as at 30 September 2020. Bankruptcy or insolvency of
the bank holding cash balances may cause the Group's ability to
access cash placed with them to be delayed, limited or lost. RBS is
rated at BBB- or better by the main rating agencies, with a stable
or positive outlook. Should the credit quality or the financial
position of the banks currently employed significantly deteriorate,
cash holdings would be moved to another bank.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will encounter
difficulties in realising assets or otherwise raising funds to meet
financial commitments. The Group's investments comprise commercial
properties.
Property and property-related assets in which the Group invests
are not traded in an organised public market and may be illiquid.
As a result, the Group may not be able to liquidate quickly its
investments in these properties at an amount close to their fair
value in order to meet its liquidity requirements.
The Group's liquidity risk is managed on an ongoing basis by the
Investment Adviser and monitored on a quarterly basis by the Board.
In order to mitigate liquidity risk the Group has a comprehensive
three year cash flow forecast that aims to have sufficient cash
balances, taking into account projected receipts for rental income
and property sales, to meet its obligations for a period of at
least 12 months. The three year viability assessment conducted by
the Board takes cognisance of the COVID-19 pandemic.
At the reporting date, the maturity of the financial assets
was:
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Trade and other receivables
------------------- -------------------
* 3 months or less 1,710 2,173
------------------- -------------------
* 3 months to 3 years 4 34
------------------- -------------------
* More than 3 years 387 436
------------------- -------------------
2,101 2,643
------------------- -------------------
The lease incentive debtor is shown in the period in which the
lease incentive ends
At the reporting date, the financial liabilities on a
contractual maturity basis were:
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Loan
------------------- -------------------
- -
* 3 months
------------------- -------------------
* 3 months to 3 years 22,760 22,760
------------------- -------------------
- -
* More than 3 years
------------------- -------------------
22,760 22,760
------------------- -------------------
Trade and other payables
------------------- -------------------
* 3 months or less 3,176 3,014
------------------- -------------------
- -
* 3 months to 3 years
------------------- -------------------
- -
* More than 3 years
------------------- -------------------
3,176 3,014
------------------- -------------------
Total 25,936 25,774
------------------- -------------------
IMPACT OF BREXIT AND THE COVID-19 PANDEMIC
As set out in the Principal Risks and Uncertainties section of
the Strategic Report, the Board believes it too early to fully
understand the impact of the COVID-19 pandemic and Brexit, but the
Board believes the Company is well placed to weather any short-term
impact due to the reasons set out in the Strategic Report.
INTEREST RATE RISK
Some of the Group's financial instruments will be
interest-bearing. During the year to 30 September 2020, the Group
only held interest-bearing financial instruments that carried
interest at a variable rate. As a consequence, the Group will be
exposed to cash flow interest rate risk due to fluctuations in the
prevailing market rate. The Group did not hold any interest-bearing
financial instruments that carried interest at a fixed interest
rate and was therefore not exposed to fair value interest rate
risk.
When the Group retains cash balances, they will ordinarily be
held on interest-bearing deposit accounts. The Group's policy is to
hold cash in variable rate or short-term fixed rate bank accounts.
Exposure varies throughout the year as a consequence of changes in
the composition of the net assets of the Group arising out of the
investment and risk management policies.
The following table sets out the carrying amount of the Group's
financial instruments that are exposed to interest rate risk:
As at 30 September As at 30 September
2020 2019
Fixed rate Variable Fixed rate Variable
rate rate
------------ --------- ----------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
------------ --------- ----------- ---------
Cash and cash equivalents - 1,120 - 510
------------ --------- ----------- ---------
Loan - (22,760) - (22,760)
------------ --------- ----------- ---------
An increase of 0.50% in interest rates would have increased the
reported loss for the year and decreased the net assets at the
year-end by GBP113,000 (30 September 2019: GBP113,000), a decrease
of 0.50% in interest rates would have an equal and opposite effect.
These movements are calculated as at 30 September 2020 (30
September 2019) and may not be reflective of actual future
conditions.
MARKET PRICE RISK
The management of market price risk is part of the investment
management process and is typical of a property investment company.
The portfolio is managed with an awareness of the effects of
adverse valuation movements through detailed and continuing
analysis, with an objective of maximising overall returns to
shareholders. Investments in 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 sales price even
where such sales occur shortly after the valuation date. Such risk
is minimised through the appointment of external property valuers.
The basis of valuation of the property portfolio is set out in
detail in the accounting policies. Any changes in market conditions
will directly affect the profit and loss reported through the
Statement of Comprehensive Income. Details of the Group's
investment property portfolio held at the balance sheet date are
disclosed in Note 9. Every 25 bps movement in yield can impact
valuation by GBP2.5m. Every 1% movement in rent can impact the
valuation by GBP0.5m.
The calculations are based on the investment property valuations
at the respective balance sheet date and are not representative of
the year as a whole, nor reflective of future market
conditions.
20. CAPITAL COMMITMENTS
The Group did not have any contractual commitments to refurbish,
construct or develop any investment property, or for repair,
maintenance or enhancements as at 30 September 2020 (30 September
2019: nil).
21. LEASES
The Group earns rental income from operating leases as defined
by IFRS 16. Income as earned by leases is defined as follows:
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Operating lease income - variable - -
lease payments
------------------- -------------------
Operating lease income - other 4,252 4,484
------------------- -------------------
Finance lease income - -
------------------- -------------------
Total 4,252 4,484
------------------- -------------------
The Group leases out its investment properties under operating
leases. These properties are measured under the fair value model as
the properties are held to earn rentals. All leases are
non-cancellable with a weighted average unexpired lease term of
5.15 years.
The minimum lease payments based on the unexpired lessor lease
length at the year-end were as follows (based on actual
rentals):
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Less than one year 181 298
------------------- -------------------
Between one and five years 4,626 4,521
------------------- -------------------
Over five years 13,191 11,608
------------------- -------------------
Total 17,998 16,427
------------------- -------------------
The largest single tenant at the year-end accounted for 12 % (30
September 2019: 10%) of the passing rental income.
22. POST BALANCE SHEET EVENTS
In the period between the year end and the signing of these
accounts the RICS Material Valuation Uncertainty Leaders Forum (UK)
reached consensus that reporting material valuation uncertainty may
no longer be appropriate for most sectors and assets and following
that guidance the independent valuers have removed the material
uncertainty clause from the valuation for 31 December. This will
not have a material impact on the property valuations .
COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER
2020
As at 30 As at 30 September
September 2019 GBP'000
Non-current assets Notes 2020 GBP'000
---------------------------- ------ ------------- -------------------------
Investment in subsidiary
undertaking C 27,764 30,400
---------------------------- ------ ------------- -------------------------
27,764 30,400
----------------------------------- ------------- -------------------------
Current assets
---------------------------- ------ ------------- -------------------------
Trade and other receivables D 326 8
---------------------------- ------ ------------- -------------------------
Cash and cash equivalents E 6 36
---------------------------- ------ ------------- -------------------------
332 44
----------------------------------- ------------- -------------------------
Total assets 28,096 30,444
------------------------------------ ------------- -------------------------
Current liabilities
---------------------------- ------ ------------- -------------------------
Trade and other payables F (205) (473)
---------------------------- ------ ------------- -------------------------
Total liabilities (205) (473)
------------------------------------ ------------- -------------------------
Net assets 27,891 29,971
------------------------------------ ------------- -------------------------
Equity and reserves
---------------------------- ------ ------------- -------------------------
Called up equity share
capital G 3,820 3,820
---------------------------- ------ ------------- -------------------------
Share premium 5,334 5,334
------------------------------------ ------------- -------------------------
Special distributable
reserve 20,694 21,840
------------------------------------ ------------- -------------------------
Capital reserve (1,146) (1,146)
------------------------------------ ------------- -------------------------
Revenue reserve (811) 123
------------------------------------ ------------- -------------------------
Equity shareholders'
funds 27,891 29,971
------------------------------------ ------------- -------------------------
The accompanying notes are an integral part of these Financial
Statements.
Company number 09511797.
The Company Financial Statements were approved by the Board of
Directors on 15 January 2021 and signed on its behalf by:
Hugh Little
Chairman
Company Statement of Changes in Equity
For the year ended 30 September 2020
Share Share Capital Special Revenue Total
Capital Premium Reserve Distributable equity
Account Reserve Reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------ --------- --------- --------- --------------- -------- --------
As at 1 October
2019 3,820 5,334 (1,146) 21,840 123 29,971
--------- --------- --------- --------------- -------- --------
Total comprehensive
expense for
the year - - - - - (934) (934)
------ --------- --------- --------- --------------- -------- --------
Transfer to
revenue reserves - - - - (1,146) (1,146)
--------- --------- --------- --------------- -------- --------
Transactions
with owners
recognised
in equity:
------ --------- --------- --------- --------------- -------- --------
Issue of Ordinary G - - - - - -
Share capital
------ --------- --------- --------- --------------- -------- --------
Issue costs - - - - - -
------ --------- --------- --------- --------------- -------- --------
Dividends
paid B - - - - (1,146) (1,146)
------ --------- --------- --------- --------------- -------- --------
As at 30 September
2020 3,820 5,334 (1,146) 20,694 (811) 27,891
--------- --------- --------- --------------- -------- --------
For the year ended 30 September 2019
Share Share Capital Special Revenue Total
Capital Premium Reserve Distributable equity
Account Reserve Reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------ --------- --------- --------- --------------- -------- --------
As at 1 October
2018 3,820 5,334 (1,146) 21,840 202 30,050
--------- --------- --------- --------------- -------- --------
Profit and
total comprehensive
expense for
the year - - - - - 2,213 2,213
------ --------- --------- --------- --------------- -------- --------
Transfer to
revenue reserves - - - - (1,146) (1,146)
--------- --------- --------- --------------- -------- --------
Transactions
with owners
recognised
in equity:
------ --------- --------- --------- --------------- -------- --------
Issue of Ordinary G - - - - - -
Share capital
------ --------- --------- --------- --------------- -------- --------
Issue costs - - - - - -
------ --------- --------- --------- --------------- -------- --------
Dividends
paid B - - - - (2,292) (2,292)
------ --------- --------- --------- --------------- -------- --------
Transfer to
revenue reserves
------ --------- --------- --------- --------------- -------- --------
As at 30 September
2019 3,820 5,334 (1,146) 21,840 123 29,971
--------- --------- --------- --------------- -------- --------
The accompanying notes are an integral part of these Financial
Statements.
Notes to the company Financial Statements
The entity is incorporated and registered in England and Wales
and is domiciled in the United Kingdom. It is public limited
company and is limited by shares.
A. ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company Financial Statements have been prepared in
accordance with Financial Reporting Standard 101: Reduced
Disclosure Framework ('FRS 101') and in accordance with applicable
legal and regulatory requirements of the Companies Act 2006.
The Financial Statements have been prepared on a historical cost
basis except for investment property valuations that have been
measured at fair value. A summary of the principal accounting
policies, all of which have been applied consistently throughout
the year, is set out below.
The major accounting policies of the Company are set out below
and have been applied consistently throughout the current and prior
year.
The Company has taken advantage of the following disclosure
exemption available under FRS 101: Reduced Disclosure
Framework:
-- the requirement to prepare a cash flow statement;
-- the disclosure of related party transactions between a parent
and its wholly owned subsidiaries;
-- the requirement to present comparative reconciliations from investment property;
-- the requirement to present capital management disclosures; and
-- the requirement to disclose standards in issue which are not yet effective.
The results of the Company are included in the consolidated
Financial Statements of its parent company as presented, Drum
Income Plus REIT plc which are available from Broadgate Tower, 20
Primrose Street, London EC2A 2EW.
The notes and Financial Statements are presented in pounds
sterling (being the functional currency and presentational currency
for the Company) and are rounded to the nearest thousand except
where otherwise indicated.
GOING CONCERN
Under Provision C.1.3 of the UK Corporate Governance Code, the
Board needs to report whether the business is a going concern. In
considering this requirement, the Directors have taken the
following into account:
-- the Company's forecast for the next three years;
-- the risks included on the Company's risk register that could
impact on the Company's liquidity and solvency over the next 12
months (details of risks are included in the Group Strategic
Report); and
-- the risks on the Company's risk register that would be a
potential threat to the Company's business model (details of risks
are included in the Group Strategic Report).
The directors have also assessed the following specific areas in
relation to the COVID-19 pandemic:
-- The extent of any operational disruption
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report. The Strategic Report also
includes the Company's risks and risk management processes.
Having due regard to these matters and after making appropriate
enquiries, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Therefore, the Board continues to adopt
the going concern basis in preparing these Consolidated Financial
Statements.
INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
Investments in subsidiary undertakings are stated at cost less,
where applicable, any provision for impairment.
CAPITAL MANAGEMENT
The Company's capital is represented by the Ordinary Shares,
Share Premium, Capital Reserves, Revenue Reserve and Special
Distributable Reserve and is managed in line with the policies set
out for the Group.
COMPANY PROFIT FOR THE FINANCIAL YEAR AFTER TAX
Under Section 408 of the Companies Act 2006 the Company is
exempt from the requirement to present its own profit and loss
account. The loss for the financial year was GBP934,000 (2019:
profit GBP2,213,000).
The Company does not have any employees (2019: nil). Details of
the Directors' fees paid during the year are disclosed in the
Group's Remuneration Report and in Note 3 to the Consolidated
Financial Statements.
Audit fees payable to PwC in relation to the parent Company were
GBP19,000 (2019: GBP19,000), excluding VAT.
KEY JUDGEMENTS
Key judgements relate to the treatment of compliance with REIT
status, the valuation of investment properties, production of
consolidated financial statements and property acquisitions where
different accounting policies could be applied. These are described
in more detail below.
COMPLIANCE WITH REIT STATUS
As disclosed in Note 6, the Group has been approved as a REIT.
As a result, the Group does not pay UK corporation tax on its
profits and gains from qualifying rental business in the UK
provided it meets certain conditions. Non-qualifying profits and
gains of the Group continue to be subject to corporation tax as
normal.
In order to achieve and retain group REIT status, several
entrance tests had to be met and certain ongoing criteria must be
maintained. The main criteria are as follows:
-- at least 90% of the tax exempt rental business profits must
be distributed in the form of a Property Income Distribution;
-- at the start of each accounting period, the assets of the tax
exempt business must be at least 75% of the total value of the
Group's assets;
-- at least 75% of the Group's total profits must arise from the tax exempt business; and
-- the Group must hold a minimum of three properties with no
single property exceeding 40% of the portfolio value.
The Directors intend that the Group should continue as a group
REIT for the foreseeable future, with the result that deferred tax
is not recognised on temporary differences relating to the property
rental business. Should the ongoing criteria not continue to be
met, the corporation tax payable by the Group may be significantly
higher. Further detail is provided in note 1(e) to the financial
statements.
OTHER EXPENSES
Expenses are accounted for on an accruals basis. The Group's
investment management and administration fees, finance costs and
all other expenses are charged to revenue through the Statement of
Comprehensive Income net of Value Added Tax.
DIVIDS PAYABLE
Dividends are accounted for in the period in which they are
paid.
TAXATION
The Group is a REIT and is thereby exempt from tax on both
rental profits and chargeable gains. In order to retain REIT
status, certain ongoing criteria must be maintained.
The Directors intend that the Group should continue as a REIT
for the foreseeable future, with the result that deferred tax is no
longer recognised on temporary differences relating to the property
rental business which is within the REIT structure.
Taxation on any profit or loss for the period not-exempt under
UK-REIT regulations comprises current and deferred tax. Taxation is
recognised in the Statement of Comprehensive
Income except to the extent that it relates to items recognised
as direct movements in equity, in which case it is also recognised
as a direct movement in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates and laws enacted or substantively
enacted at the year-end date.
Deferred income tax is provided using the liability method on
all temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which deductible temporary differences, carried forward tax credits
or tax losses can be utilised. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities. In determining the
expected manner of realisation of an asset the Directors consider
that the Group will recover the value of investment property
through sale.
Deferred income tax relating to items recognised directly in
equity is recognised in equity enacted or substantively enacted at
the balance sheet date.
RESERVES
Share Premium
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account. The reserve is
non-distributable.
Capital Reserves
the cost of professional advice relating to the capital
structure of the Group are accounted for in the capital reserve.
The amount of the capital reserve that is distributable is complex
to determine and is not necessarily the full amount of the reserves
as disclosed within these financial statements.
Revenue Reserve
The amount of the revenue reserve that is distributable is
complex to determine and is not necessarily the full amount of the
reserve as disclosed within these Financial Statements. The net
profit/ (loss) arising in the revenue column of the Statement of
Comprehensive Income is added to or deducted from this reserve.
Special Distributable Reserve
An application to Court was successfully made for the
cancellation of the launch share premium account which allowed the
transfer of monies to the special distributable reserve.
This reserve is available for paying dividends and buying back
the Company's shares to the extent that the remaining reserve is
sufficient to cover the deficit on the capital reserve and the
revenue reserve.
Capital Management
The Group's capital is represented by the Ordinary Shares, Share
Premium, Capital Reserves, Revenue Reserve and Special
Distributable Reserve. The Group is not subject to any externally-
imposed capital requirements.
The capital of the Group is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares, the
buy back or re- issuance of shares from treasury, the management of
the Group's discount to net asset value and consideration of the
Group's net gearing level.
There have been no changes in the capital management objectives
and policies or the nature of the capital managed during the
year.
B. DIVIDS
Details of dividends paid by the Company are included in Note 7
to the Consolidated Financial Statements.
C. INVESTMENTS IN SUBSIDIARY UNDERTAKING
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Opening balance 30,400 30,400
------------------- -------------------
Impairment (2,636) -
------------------- -------------------
Closing balance 27,764 30,400
------------------- -------------------
The Company has a single equity investment in a wholly owned
subsidiary, Drum Income Plus Limited. This is the only regulated
undertaking of the Company. The registered office address is: Level
13, Broadgate Tower, 20 Primrose Street, London EC2A. See Note 10
to the Consolidated Financial Statements.
During the year, an impairment review was carried out by
evaluating the net asset value of the subsidiary. This resulted in
an impairment of the investment of GBP2,636,000.
D. TRADE AND OTHER RECEIVABLES
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Amount due from subsidiary - -
undertaking
------------------- -------------------
Other debtors 326 8
------------------- -------------------
Total 326 8
------------------- -------------------
E. CASH AND CASH EQUIVALENTS
All cash balances at the year-end were held in cash, current
accounts or deposit accounts.
F. TRADE AND OTHER PAYABLES
As at 30 September As at 30 September
2020 2019
GBP'000 GBP'000
------------------- -------------------
Amount due from subsidiary - -
undertaking
------------------- -------------------
Other payables 205 473
------------------- -------------------
Total 205 473
------------------- -------------------
The Company's payment policy is to ensure settlement of supplier
invoices in accordance with stated terms.
G. CALLED UP SHARE CAPITAL
Allotted, called-up and fully paid Ordinary Shares of 10 pence
par value
Number of Shares GBP'000
Opening balance as at
1 October 2019 38,201,990 3,820
Balance as at 30 September
2020 38,201,990 3,820
Shares were issued to increase the base of the company.
There is only one class of share in issue.
H. FINANCIAL INSTRUMENTS
The Company's risks associated with financial instruments and
the policies for managing its risk exposure are consistent with
those detailed in Note 19 to the Consolidated Financial
Statements.
With regards to the categorisation required by IFRS 7 'Financial
Instruments: Disclosures' all of the Company financial assets and
liabilities are categorised as 'financial assets and liabilities at
amortised cost'. The Company's financial assets consist of trade
and other receivables and cash and cash equivalents. The Company's
financial liabilities consist of trade and other payables.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to GBP332,000 (2019: GBP44,000) consisting
solely of the Company's cash balance of GBP6,000 (2019: GBP36,000)
and other debtors and accrued income of GBP326,000 (2019:
GBP8,000).
The maturity of the Company's financial liabilities (on a
contractual maturity basis) at 30 September 2020 was as
follows:
As at 30 September 2020 As at 30 September 2019
GBP'000 GBP'000
Three months or less 205 473
More than three months - -
but less than three
years
More than three years - -
205 473
The Company's only financial instrument exposed to interest rate
risk at 30 September 2020 was its cash balance of GBP6,000 (2019:
GBP36,000) which received variable rate of interest. An increase of
0.50% in interest rates would have decreased the reported loss for
the year, and the net assets at year end, by GBP30 (2019: GBP180).
A decrease in interest rates would have had an equal and opposite
effect. These movements are calculated as at 30 September 2020 (30
September 2019) and may not be reflective of actual future
conditions.
J. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Company is engaged in
a single unified business, being property investments, and in one
geographical area, the United Kingdom, and that therefore the
Company has no segments. Full details are provided in Note 18 to
the Consolidated Financial Statements.
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END
FR FLFFALVIELIL
(END) Dow Jones Newswires
January 18, 2021 02:00 ET (07:00 GMT)
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