TIDMVIN
RNS Number : 7568C
Value and Indexed Prop Inc Tst PLC
22 June 2021
VALUE AND INDEXED PROPERTY INCOME TRUST PLC
ANNUAL FINANCIAL REPORT
FOR THE YEARED 31 MARCH 2021
Chairman's Statement
Value and Income Trust PLC (VIT) became Value and Indexed
Property Income Trust PLC (VIP) in January 2021 following the
approval by Shareholders of the proposals put to the General
Meeting. The main change was to the investment policy of the
Company: this is now to invest predominantly in commercial
property. The appearance of the Annual Report has altered to
reflect this and the Property Manager's Report gives details of the
implementation of the policy so far.
Good progress has been made in buying properties on long leases
with index-linked rent reviews and negotiations on several more
opportunities are well advanced. The increased property portfolio,
together with the prior year refinancing of the 2021 debenture,
which was paid off on 31 March 2021, provides a good foundation for
rebuilding cover for our dividend and for future growth. The
secured term loan of GBP22 million now runs until 31 March 2031
mainly at a fixed annual rate of 3.2%.
Many of the Company's index-linked leases provide for maximum
and minimum increases at future rent review, often described as
'caps and collars'. The Financial Statements have been prepared
under IFRS (International Financial Reporting Standards). IFRS 16
requires that these minimum increases, which may arise only many
years in the future, are averaged over the whole life of the lease.
The effect is that the reported revenue return for the year to 31
March 2021 exceeds by GBP345,000 the rent actually falling due in
that year.
The Board has decided that, in line with the general practice of
property companies, all management expenses should be charged to
the revenue account. Until March 2021, the Company had, in common
with many investment companies, charged a percentage to capital, in
our case 70%. The effect of this change will be to reduce the
reported revenue by an estimated GBP735,000.
The Board is recommending a final dividend of 3.6p per share,
making total dividends of 12.3p per share for the year to 31 March
2021 compared to 12.1p per share in the previous year, an increase
of 1.7%. Subject to Shareholder approval at the Annual General
Meeting (AGM), the final dividend will be paid on 30 July 2021 to
Shareholders on the register on 2 July 2021. The ex-dividend date
is 1 July 2021. It will be the 34th year of dividend increases
following the reconstruction of the Company. In the short term,
this will require some use of our distributable capital
reserves.
In the medium term, however, the Board will aim to ensure that
the dividend is paid from rents and dividends received (after
interest costs and management expenses) and that the indexed leases
permit future increases at least in line with inflation.
Net Asset Value total return (with debt at par) and Share Price
total return are considered by the Board to be Alternative
Performance Measures (APMs) as explained further in the Business
Review in the Annual Report and defined in the Glossary. Over the
year, the Net Asset Value total return (with debt at par) was 12.3%
(2020: -21.8%) and the Share Price total return was 39.3% (2020:
-30.7%). This compares with the FTSE All-Share Index total return
of 26.7% (2020: -18.5%). The total return from the equity portfolio
was 26.6% (2020: -23.7%) and from the property portfolio was 2.3%
(2020: 6.3%) (the MSCI UK Quarterly Property Index total returns
were 0.9% and -0.6%). From 1 April 2021, our performance benchmark
has changed from the FTSE All-Share Index to the MSCI UK Quarterly
Property Index, to reflect the change in investment policy.
As provided for in the Circular issued to Shareholders in
December 2020, there will be an opportunity in the future for
Shareholders who wish to sell their shares to do so at Net Asset
Value less costs. The Board's intention is to table a proposal at
the AGM to be held in 2026.
The Company bought back its own shares for the first time,
starting at a price of 196.2p in January 2021 and ending in late
February at a price of 220p, one month before the year-end property
revaluation. The discount of the Share Price to Net Asset Value
narrowed by 9 percentage points over that period.
As noted in previous statements, the difference between the fair
value and the nominal value of our debenture stock and our secured
loans is reducing over the life of the debenture which will be
repaid at its nominal (par) value. The figures are set out in Note
17 to the Financial Statements in the Annual Report. The debenture
has covenants attached to it and further information is included in
Note 12; there is plenty of headroom in terms of both capital and
income.
The change in investment policy has caused us to consider the
composition of the Board. The reduction in the equity portfolio and
greater emphasis on property means that Dominic Neary will retire
following the conclusion of the AGM. We are very grateful for his
contribution to the development of VIP. I shall also retire during
the course of the next year.
Due to the uncertainty over the timing of the lifting of all
COVID restrictions and the social distancing measures required,
this year's AGM will be held once again in the offices of Maven
Capital Partners UK LLP, Kintyre House, 205 West George Street,
Glasgow G2 2LW on Friday, 23 July 2021 at 12.30pm. Due to social
distancing measures, Shareholders will be unable to attend the AGM
in person. The Notice of Annual General Meeting can be found in the
Annual Report. The Board encourages Shareholders to vote using the
Proxy Form, which can be submitted to Computershare, the Company's
Registrar. Proxy Forms should be completed and returned in
accordance with the instructions thereon and the latest time for
the receipt of Proxy Forms is 12.30pm on Wednesday, 21 July 2021.
Proxy votes can also be submitted by CREST or online using the
Registrar's Share Portal Service at
www.investorcentre.co.uk/eproxy. The Board would also encourage
Shareholders to submit any questions for the Board and Manager by
email or by letter in advance of the AGM. Shareholders wishing to
submit a question should write to: The Company Secretary, Value and
Indexed Property Income Trust PLC, First Floor, Kintyre House, 205
West George Street, Glasgow G2 2LW or by email to:
CoSec@mavencp.com.
James Ferguson
Chairman
22 June 2021
Summary of Portfolio
31 March 2021 31 March 2020
GBPm % GBPm %
------- ------- ------- -------
UK Equities 28.6 16.1 90.8 51.5
------- ------- ------- -------
UK Property 81.1 45.7 74.5 42.3
------- ------- ------- -------
Cash 67.9 38.2 10.9 6.2
------- ------- ------- -------
177.6 100.0 176.2 100.0
------- ------- ------- -------
Property Portfolio
The Market
UK commercial property values fell by 6% on average in 2020
giving a total return of -2%. Overall capital values have now
stopped falling and may produce a positive total return of 5% - 7%
over 2021. But these averages mask key structural changes in
property which the COVID crisis has made faster and deeper. We
expect a K-shaped recovery for both property and the UK economy,
with some sectors emerging stronger from the crisis and others in
serious structural decline. In the upward arm of the "K",
warehouse/industrial property, supermarkets, convenience stores and
some non-traditional "alternative" property types will outperform
offices, (particularly London) and non-food retail, (particularly
High Street shops and shopping centres) for the foreseeable future.
The five-day office commute is as dead as Debenhams and even the
four-day commute is an endangered species. Rising office vacancy
rates and a flood of major office occupiers announcing they are
downsizing should soon start showing up more clearly in office
property valuations. Tenants exercising break clauses and
surrendering or subletting surplus space will soon provide stark
evidence of falling office rents.
The MSCI UK Quarterly Property Index, the most representative
measure of the performance of institutional investment property
portfolios, showed a total return of -2.3% over 2020 as a whole.
Estimated rental values fell by 3% with further declines clearly in
the pipeline for offices and non-food retail as vacancies rise and
rents fall. Capital values bottomed out overall in the first
quarter of 2021 with further gains on industrial/warehouse
offsetting retail and office declines. Differential sector
movements have been dramatic, as this summary of capital value
changes shows:
Capital Value % Changes Year to March 2021
Supermarkets +3.6
Non Food Retail -15.7
------
Offices -4.5
------
Industrial/Warehouse +9.6
------
Leisure -8.9
------
ALL PROPERTY -3.2
------
UK Commercial Property - Average Annual % Growth Rates to March
2021
6 Months 1 Year 3 Years 5 Years 10 Years
Capital Values +0.8 -3.5 -2.9 -0.9 +1.7
--------- ------- -------- -------- ---------
Rental Values 1.6 -2.9 -1.2 +0.0 +0.9
--------- ------- -------- -------- ---------
Total Returns +5.4 +0.9 +1.5 +3.8 +6.9
--------- ------- -------- -------- ---------
Source: MSCI Quarterly Index - Annualised
Until five years ago all the main UK commercial property sectors
used to rise and fall in value together, albeit at different
speeds. But no longer - retail property values have now plumbed new
depths below the bottom of the property crash in 2009 - and are
clearly heading lower still as a torrent of Company Voluntary
Agreements (CVAs) washes away the traditional institutional lease
for non-food retail property. Warehouse/industrial property, by
contrast, has more than doubled in capital value over the past
decade, and capital and rental values have been rising rapidly in
recent months as the COVID explosion of online retail shatters
shopping centres and traditional high streets.
Total commercial property transaction volumes since March 2020
have been running far below normal levels, with Central London
office sales and lettings both below their nadir in 2009, along
with shopping centres and High Street retail. Leisure and
alternative sector transactions have also been few and far between.
But turnover in the strongest sectors, industrials and
supermarkets, is running above pre-pandemic averages. Meanwhile
property void rates are clearly heading much higher, up from 8.2%
to 9.8% over the past year (and 13.1% to 16.6% on offices).
Property investors have had to work hard to ensure tenants pay
their rent where they can, agree phased payment plans with tenants
who are basically sound but temporarily closed, and judge which
weaker tenants really cannot pay. Average lease lengths in property
are now shortening further, with multiple break clauses. Non-food
retailers are typically only prepared to renew or take new leases
at turnover-related rents, with most office occupiers now demanding
ever shorter and more flexible leases. Open market rent review
uplifts will be very rare over the next two or three years, except
on industrials.
The Government, under tenant pressure, has repeatedly suspended
landlords' traditional tools for enforcing rent collection -
eviction orders, use of Commercial Rent Arrears Recovery (CRAR)
bailiffs and statutory demands for winding up. The latest extension
is until end March 2022, with no clarity as to what will follow.
Unless the Government extends business rates relief past that date,
many weaker retail and hospitality tenants will simply be unable to
pay their rent, whether the landlords have the power to collect it
or not. The Government's Code of Practice for Commercial Property
is utterly unbalanced because it allows well-funded tenants like
Boots or JD Sports just to refuse to pay their rent. Well-advised,
robust landlords are however now selectively and effectively using
County Court Judgements (CCJs) to collect rent from persistent but
solvent late payers.
Warehouse/Industrial Property - in Growing Demand
Warehouse/industrial property has enjoyed an historic re-rating
in recent years, so that it is now valued at a significantly keener
yield than offices or retail property, reflecting its better rental
and capital growth prospects. It is the only sector to have
recorded rental growth over the past year, and with vacancy rates
low and tenant demand strong, that trend looks set to continue
throughout 2021. Driven by the explosion of online retailing, 2020
saw the highest ever take up of logistics "big boxes" at 35.8
million square feet, 64% above 2019. Well-let and well-located
industrial and warehouse property in all sizes from logistics "big
boxes" on motorway junctions to "last mile" urban sheds and estates
of smaller units in prosperous areas should all continue to
outperform, however, tenant failures and rising unemployment are
starting to raise vacancy rates on some multi-let industrial
estates, especially in the North.
Offices - Depreciation and Decline
The key strategic question now for UK commercial property is the
future of office investments in general, and highly valued and
rented London offices in particular. Their long-term performance
has broadly tracked the market as a whole, as measured by the MSCI
UK Quarterly Property Index, but with more volatility. OLIM
Property believes they are now suffering serious structural damage,
with falling rental values and lower net demand. There is still a
future demand for city centre offices, but for more limited space
for meeting, training and marketing purposes rather than where most
employees travel to work on most days.
Great swathes of mid and back-office work are now being done
mainly from home or partly at low cost non-city centre locations.
Cost reduction will be tenants' top priority with break clauses
exercised in most cases and tenants demanding considerable capital
expenditure from landlords to induce them to stay, even in less
space. More functional obsolescence and depreciation will therefore
need to be factored into most office valuations, leading to further
rises in most office valuation yields and substantial falls in
capital values to reflect lower effective net rents and greater
re-letting risk. A host of the largest UK office occupiers from
Nationwide, Lloyds and Santander to Aviva, Unilever, BP, Capita and
the large accountancy firms have been announcing their decisions to
close offices and move large parts of their workforce to a hybrid
or even wholly home- based work model. Even though there will still
be some prestige occupiers for premium office space, very few will
want more space than they have already and most will want less.
Non-Food Retail - Further to Fall
Many retailers in high streets and shopping centres were already
on their last legs before COVID; online retail sales peaked at 36%
during lockdown, up from 20% a year ago and only 14% five years
ago. Many non-food retail properties must now be valued simply at
their site value for alternative use, usually well below the former
retail value. Some leasehold shopping centres may now even have
negative value because outgoings exceed the rents collected. Retail
warehouse rents have also been under downward pressure but their
capital values are now edging ahead in more prosperous areas,
particularly if they are next to supermarkets or have good
alternative use values whether for industrial or distribution
purposes, low-rent food stores e.g. for Aldi or Lidl, or even
residential development.
On the high street, the steepest and most significant falls now
in property values are happening in Central London and other large
city centres dependent on intensive commuting and overseas
tourists. Unfair business rates had already crippled urban high
streets in less prosperous parts of the UK and the Government keeps
kicking the rates reform can down the road. Suburbs and market
towns with more affordable rents and an attractive mix of
convenience and independent traders will prove more resilient.
Food Retail - Winning Through and After the Crisis
Supermarkets and convenience stores (including petrol filling
stations), have had a good crisis, often with increases of 20%-30%
in their turnover, much of which they should still retain even
after COVID-related lockdowns are past, with more working from
home. The market leaders are better at combining physical and
online retailing than most non-food retailers; and M&S Foods'
alliance with Ocado now looks especially well timed. But on-line
penetration remains far lower than in non- food retail, and many
consumers still prefer the choice and convenience of their local
food shop, where the Co-op is uniquely well placed. More money will
be spent nearer home.
Non-Traditional Alternatives - Stick to Well-Funded Strong
Survivors
Property in the "Alternatives" sectors - i.e. everything except
office, industrial or retail - has been growing rapidly in
importance for institutional investors in recent years and now
accounts for over 16% of the MSCI UK Quarterly Property Index. It
covers a very wide range of property types and tenants, with some
being hit much harder than others by COVID.
Most alternative sector investments have long, often indexed,
leases, so the tenant's ability to pay is crucial for valuation
purposes. Some shakier operators may never reopen after the early
2021 lockdown, but the strong and well- capitalised, trading off
affordable rents, should benefit from weaker competitors being
squeezed out. Alternative investments should therefore resume their
outperformance of non-food retail and offices after the pandemic
but with strong survivor bias and wide variations between different
sub-sectors, as outlined below.
Alternatives - Leisure and Hotels - Small Towns and Countryside
Gain from Working from Home
Well-let pubs are safer investments than restaurants, where many
private-equity backed multiple chains were already drowning in debt
pre-COVID. The leading pub companies, like Greene King and
Wetherspoons, as well as most traditional regional brewers, have
strong balance sheets with plenty of freehold assets and borrowing
capacity. Profitable, spacious pubs, with plenty of outside space
let to strong tenants, traded well when they were open last summer
and autumn, with many reporting record trading even after the Eat
Out to Help Out subsidy ended in August. Pubs of this type in
suburban, small town and rural locations rather than city centres
have traded exceptionally well again outside since 12 April 2021,
whatever the weather. With far fewer of their customers holidaying
abroad this summer they should be both short and long-term winners
from changing work patterns.
Unlike most retail spending, a visit to a pub, especially a
food-led pub like many institutionally-owned managed houses, cannot
really be replicated on-line. Many pubs are also underpinned by
alternative, usually residential use value, because they were built
to serve customers living nearby. Meanwhile the well-established
trend of smaller pubs closing and larger and better-run pubs
gaining market share will speed up fast.
Health and Fitness clubs have also reported generally
encouraging results since they have been able to re-open,
especially on large out of town sites with good car parking near
where customers are often able to work from home.
The two main ten pin bowling companies both also traded well
when allowed, but bingo halls and cinemas face a difficult future
as repeated lockdowns drive more of their older customers online to
the likes of Netflix and Amazon Prime. Rents will need to fall and
niche local cinemas in smaller towns may do better than mass market
over-indebted operators like Cineworld in town centres and leisure
parks.
Hotel values may also diverge sharply. City centre and airport
hotels serving overseas visitors and big corporate customers will
continue to underperform hotels in smaller towns and rural areas
serving British holidaymakers and businesses. Covenant strength
will also be key, with Premier Inn (the GBP6.2 billion market
capitalised Whitbread plc) preferred to over-indebted operations
like Travelodge.
Alternatives - Student Accommodation and Care Homes - Covenant
Strength is Key
Student accommodation still faces challenges, but students are
now gradually returning to more normal learning, with most
universities reopening fully in May. Investments let directly to
the best universities on long leases should benefit from a general
flight to safety but some weaker universities and colleges may
struggle. Individually let student flats may suffer from general
weakness in the residential letting market in 2021, especially in
city centres like London where the population has clearly fallen
over the past year.
COVID has hit care homes hard. Costs and vacancy rates have
risen because of more deaths, slower admissions and Brexit-related
staff shortages, while private-equity backed care home providers
need more equity and lower rents. High quality homes with
self-funded residents will continue to outperform those dependent
on public funding. Medical centres and private hospitals will stay
in demand.
The Economy
2020 showed the sharpest full year drop in UK GDP since 1921, at
nearly 10%. Government expenditure as a share of GDP is the highest
since 1945 and Government debt has risen to over 100% of GDP with
the ONS estimating the furlough scheme will cost the Exchequer over
GBP60 billion. With many businesses now deep in debt and struggling
to survive the latest lockdown, many "Bounce Back" loans will also
have to be written off and unemployment may rise to over 5% when
the furlough scheme comes to an end, as it must, to protect the
public finances. Britain's excellent progress on mass vaccination
should provide a welcome insurance policy against further
nationwide lockdowns; but overseas travel, for business or holidays
will be well below pre-pandemic levels so long as high infection
rates and new variants continue in so much of the world.
The UK was the hardest hit country in the G7 last year, with
higher rates of COVID infections and deaths and deeper losses of
output and jobs. After GDP fell by 20% in the second quarter, it
recovered very strongly in the third quarter and again in March
2021. There should be a strong recovery in 2021, maybe by as much
as 7% helped by pent-up, although potentially unbalanced, consumer
spending by lockdown beneficiaries, and reassuring leadership and
massive economic stimulus in the United States.
The UK economy underperformed in the crisis for two main reasons
- initial Government delays in crisis management and an
exceptionally large service sector. There had been hopeful signs as
retailing, hospitality and domestic tourism re-opened over the
summer, along with construction and parts of manufacturing. But
mechanistic economic models may underestimate the unequal impact of
the pandemic with poorer people typically hardest hit, and the
long-term scarring left by so many people losing their jobs and
small businesses going under. Post-Brexit trade friction remains a
problem. In 2020, 180,000 people lost their jobs in retail and 2021
will see widespread job losses in many sectors as short-term
subsidies run down. Consumer confidence is high but the recovery
will inevitably be unbalanced, with some less skilled workers
unable to work from home and able to afford essentials only,
especially in post-industrial parts of Britain. Meanwhile savings
have shot up for many consumers, mainly the better-off, who have
done well in the pandemic and have potential spending power which
could push prices of some goods and services up quite sharply.
Inflation rates are clearly now rising as economies recover, with a
sharp jump in the UK annual rates to 2.1% for the CPI and 3.3% for
the RPI in May 2021.
The Treasury will soon have to start withdrawing some of their
exceptional crisis spending splurge. The Bank of England's vast
asset purchases since 2019 mean that one third of all gilts are
owned by the Bank, reducing their effective maturity from 11 to
only 4 years. This highlights the risks of letting the public
sector deficit rise further if it has to be financed by borrowing
at significantly higher interest rates in the years ahead.
Conclusion - Stay Safe with Indexed Income as Economic Risks
Grow
UK commercial property capital values should make modest gains
overall this year. Offices and non-food retail will keep falling
with industrials, supermarkets and convenience stores gaining in
capital value, as well as some well-let alternative sector
investments. The key valuation question this year will be when
valuers properly reflect the weak tenant demand for offices.
The COVID crisis is teaching investors a stark lesson: stick to
properties let at affordable rents to strong tenants on long,
preferably index-linked, leases. Secure, long-term income will be
valued ever more highly after the crisis is over in a yield-hungry
world of slashed equity dividends and microscopic interest rates
and bond yields. In a K-shaped future for the UK economy and
property market, that means stay on the right side of structural
change. Avoid offices and non-food retail and stay safe elsewhere.
In this uncharted economic and investment territory, inflation and
interest rates may not stay so low much longer.
Performance
VIP's property portfolio produced a total return of 2.3% over
the year to March, against 0.9% for the MSCI UK Quarterly Property
(formerly IPD) Index, the main benchmark for commercial property
performance. The capital value of properties held throughout the
year fell by 3.3% over the year as a whole but recovered by 1.0%
over the last six months. Industrials, Supermarkets and the Caravan
Park performed best, but Pubs and Leisure properties were down.
Contracted rental income rose by 1.5%.
VIP's property record is shown in the Annual Report.
We specialise in UK commercial properties with long, strong,
index-related income streams to deliver above average long-term
real returns. The total returns on our property portfolio have been
between 8% and 12% a year over the past 5, 10, 20 years and 34
years and are above the MSCI averages over all these periods. The
real returns above the Retail Price Index from VIP's property
portfolio were 1% last year and between 3% and 9% a year over all
cumulative periods from 3 to 34 years since the inception of our
management.
Properties
All 31 properties are let on full repairing and insuring leases
(tenants are responsible for repair, maintenance and outgoings),
with upward only rent reviews and an average unexpired lease length
now of over 15 years (17 years if the break options are not
exercised). All the properties valued at 31 March 2021 are freehold
with the exception of two which are long leasehold with 110 and 84
years to run (Doncaster and Fareham).
Purchases to 31 March 2021
Seven new properties were purchased over the year, all with
indexed-linked rent reviews: six supermarkets let to the
Co-operative Group Food Limited and a driving test centre let to
H.M. Government for GBP17.6 million in total, at an average net
initial yield on purchase of 5.3%; their average unexpired lease
length was 12 years (if the break options are exercised). These
purchases with index-linked leases to the undoubted covenants of
the Co-operative Group Limited and the Government should produce
attractive long term real returns at very low risk from an initial
yield over 7 points above index-linked gilts with favourable capped
and collared RPI and CPI indexation on three properties, uncapped
RPI indexation on three properties and fixed increases on one.
Purchases Since 31 March 2021
The following five freehold purchases totalling GBP14.1m
completed since the year end at a net initial yield of 5.4% after
all costs.
Screwfix, Faraday Street, Dryburgh Industrial Estate, Dundee:
The (heritable) freehold detached industrial unit on a busy estate
is let to Screwfix Direct Limited on a full repairing and insuring
lease expiring 20 November 2032 with five yearly fixed rent
increases in November 2022 and 2027. They have over 640 stores in
the UK which have performed exceptionally well during the pandemic
and should have no difficulty in meeting the rental payments with
fixed increases.
Marks & Spencer Simply Foods, Langton Road, Blandford Forum,
Dorset: The freehold detached supermarket in the town centre is let
to Marks & Spencer plc until July 2030 with five yearly RPI
indexed-linked rent reviews collared at 1% p.a. and capped at 3%
p.a. with the next review due in July 2025.
Halfords Autocentres t/a Universal Tyres, Laleham Road, Staines,
Surrey and 680 London Road, Thurrock, Essex: These two freehold
detached industrial units in busy roadside locations have just been
let in a sale and leaseback transaction to Halfords Autocentres
Limited on full repairing and insuring leases expiring May 2036
with five yearly CPIH index-linked rent reviews collared at 1% p.a.
and capped at 3% p.a. There is a tenant's option to break in 2031
on both properties. These are well established vehicle servicing,
mechanical repair and MOT testing centres.
Premier Inn, Princes Gate, Richmond Road, Catterick, North
Yorkshire: The freehold detached 62 bedroom hotel, plus 300 cover
restaurant t/a Brewers Fayre, is located in Princes Gate Shopping
Park at Catterick Garrison. It is let to Premier Inn Hotels limited
on a full repairing and insuring lease expiring in September 2040
with five yearly CPI index- linked rent reviews capped at 5% p.a.
There is a tenant's option to break in 2035. This hotel traded at
over 90% occupancy throughout the past year.
Purchase Pipeline
Two further properties are now in solicitors' hands and we are
actively seeking more index linked strong income.
Sales to 31 March 2021
In the last quarter the sales of two properties completed: a
short leasehold petrol filling station with a McDonald's in Horsham
and a bingo hall in Manchester let to Buzz Bingo for a combined
GBP4.7 million in total (18.8% above valuation) at a net sale yield
of 7.0%.
Due to our strategic sales programme over the last 10 years the
Company is now no longer invested in high street shops.
Portfolio Management Assignment Milton Keynes
Adelie Foods went into administration in May 2020. The lease was
assigned to Winterbotham Darby Ltd at the same rent with the
unexpired lease term increased to just under 15 years with a
tenant's option to break in 2030.
Rent Reviews
There have been thirteen rent reviews (one open market and
twelve index-linked) over the course of the year: 7 pubs, 2 bowling
centres, 1 petrol filling station, an industrial, the caravan park
and a new supermarket purchase at Kirriemuir which give a combined
3% uplift on passing rents.
VIP's Assistance to Occupiers During the COVID-19 Pandemic
We have been working closely with our tenants during this
unprecedented period, agreeing phased payment plans for temporary
rental concessions, changing quarterly to monthly payments or rent
deferments and extending lease lengths in return for rent free
periods. During the full year, 90.0% of contracted rent was
collected, with only 1.6% of rent written off due to the Adelie
Foods Administration. The leases on eight pub properties were
extended by a further five years in return for rent free periods
totalling 7.8% of contracted income over the year which have
lengthened and strengthened the future income streams of the
assets. Less than 2% of rent is on a rent deferment plan to be
fully paid off by the end of 2021.
Independent Revaluation
The property portfolio is independently valued by Savills at the
end of March and September each year. The VIP property portfolio
was subject to an independent professional revaluation at 31 March
2021 by Savills. The revaluation showed a value of GBP80,550,000
(before taking into account the right of use asset classified as
investment property related to properties held under leasehold). As
at 31 March 2021, the portfolio of 31 properties (2020: 26) was
100% let with contracted rental income of GBP5.2m (2020: GBP4.5m)
on an income yield of 6.4%. Savills valuations on the same basis
totalled GBP72,825,000 (29 properties) at 30 September 2020 and
GBP70,200,000 (26 properties) on 31 March 2020.
Safe, long let indexed property like the VIP Property Portfolio
has weathered previous downturns well (as the Property Record Table
shows in the Annual Report) and should prove resilient again as all
our tenants reopen.
Louise Cleary & Matthew Oakeshott
OLIM Property Limited
22 June 2021
UK Equities
Market Background
The coronavirus pandemic has dominated financial markets and
economies over VIP's reporting year to the end of March 2021. At
the beginning of the period financial markets had just begun their
long recovery after the severe falls seen during the first quarter
of 2020 as the virus took hold. The harsh lockdown measures imposed
by many countries to control the initial spread of the virus meant
that economic activity worldwide suffered one of its largest ever
contractions. Sadly, despite the lockdowns and their economic
consequences, millions have now died from the virus and many
countries are still imposing stringent lockdown measures. However,
coronavirus vaccines are now offering the hope of a return to
normality and that the worst of the economic effects may be behind
us.
Over the last twelve months the tone for financial markets has
been set by the success or otherwise of measures to control the
virus. Global equities recovered strongly in the early months of
VIP's financial year as infection numbers declined markedly over
the late spring and summer months. Share prices then took a turn
for the worse in the early autumn as it became apparent that a
second wave of infections was occurring. Stock markets have
recovered steadily since then, having received a figurative shot in
the arm in the final weeks of 2020 after the announcement that
several promising vaccine candidates had been shown to be effective
against the virus and equities have recorded impressive gains since
then.
Despite the economic challenges, equity markets have been strong
over the year. The FTSE All Share Index rose by 23.3% in the
twelve-month reporting period and, including income, the total
return was 26.7%. Although this represents a substantial recovery
from the spring 2020 low point, the UK stock market has
underperformed other world markets in the recovery phase. By
comparison, the US, German and Japanese markets have all risen by
over 50% (in local currency) over the last twelve months, with
these markets more than recovering all of their pandemic inspired
falls.
The UK stock market underperformed other world markets in part
due to the considerably weaker performance of the UK economy,
whilst investors were also concerned about the impact of the UK
finally leaving the European Union at the end of 2020.
Consequently, the share prices of many of the UK's largest
companies have not regained their pre-pandemic levels, leaving the
performance of the FTSE 100 Index of largest companies well behind
its international counterparts. Having underperformed during the
market fall, higher yielding stocks have also underperformed in the
recovery phase; the FTSE 350 Higher Yield Index rose by 18.4% and
delivered a total return of 23.2% over the year, some way behind
the wider market. The high yielding sector of the market has been
particularly affected by the large number of dividend cuts and
suspensions seen across the market, with many stalwart income
stocks either cutting their dividends substantially or passing them
altogether. Consequently, total dividends from UK listed companies
fell by 37% in 2021.
In the bond market, ten-year gilt yields ended the period at
0.9%, up from 0.2% a year earlier, whilst twenty-year gilt yields
rose to 1.4%, as the economic recovery took hold and inflationary
pressures began to surface. This meant that gilts produced a
negative total return over the year, in stark contrast to the
strong positive returns seen from UK equities. Commodity prices
reflected the general background in financial markets and recovered
steadily over the year. Having fallen to below $20 per barrel in
March 2020, the price of oil had recovered to $63 per barrel by the
period end, similar to its pre-pandemic level. The recovery has
been driven by OPEC production cuts and a gradual recovery in
demand as economies have opened up. Other industrial commodities
such as copper and iron ore have also seen strong price rises over
the year.
Performance
VIP's equity portfolio performed in line with its benchmark, the
FTSE All Share Index, until 31 March 2021. Adjusted for the
sizeable disposals made during the latter stages of the year, the
portfolio recorded a total return of 26.6% compared to the 26.7%
achieved by the FTSE All Share Index. Although high yielding shares
had generally struggled during the recovery of the market, this was
not reflected in the performance of VIP's equity portfolio, which
benefitted from some strong individual share price performances and
by being underweight in several sectors that have underperformed
during the year. In particular, the oil and tobacco sectors, which
make up a significant part of the high yield index, remained well
below their pre-pandemic levels. VIP had no tobacco exposure and
was underweight in the oil sector for much of the year.
Strong individual performances came in areas geared to the
economic recovery or where the market had underestimated the
company's resilience to the difficult economic conditions. M&G
(+84%), Rio Tinto (+68% to sale) and Croda International (+49%) all
outperformed the index as a result. Companies that have continued
to pay their dividends have tended to be in more defensive sectors,
such as utilities and telecommunications, and these areas have
underperformed in the recovery phase, also holding back the high
yield index. Several of VIP's larger remaining holdings, such as
Unilever (-1% over the year) and Wm Morrison (+5%), fell into this
camp and struggled to keep up with the market as a whole, which
meant that, overall, the equity portfolio performed in line with
its benchmark.
Portfolio
The last twelve months saw sales of equities of GBP79.6m and
purchases of just GBP4.5m (excluding the 2.0m VIP shares bought in
as part of the share buy-back programme) giving total transactions
of GBP84.1m, with net sales of GBP75.1m. The large sales programme
reflects Shareholders' approval of VIP's new investment policy to
focus on directly held property and property backed securities. The
direct equity portfolio has been reduced to just under GBP30m in
value and the cash raised will be used to fund future direct
property purchases. Sales were made across the portfolio and, in
particular, after the vaccine inspired rises seen over the final
months of VIP's year.
At the end of the reporting year the equity portfolio had 11
remaining investments valued at GBP28.6m. As part of the
restructuring of the portfolio we are starting to switch these
holdings into property-backed securities, reflecting the new
investment policy.
Patrick Harrington
OLIM Property Limited
22 June 2021
Business Review
This Business Review is intended to provide an overview of the
strategy and business model of the Company as well as the key
measures used by the Directors in overseeing its management. The
Company is an investment trust company that invests in accordance
with the investment objective and investment policy outlined in the
Business Review.
Value and Income Trust PLC changed its name on 22 January 2021
to Value and Indexed Property Income Trust PLC (VIP or the
Company). VIP's Ordinary Shares are listed on the Premium segment
of the Official List and traded on the main market of the London
Stock Exchange. The Company is registered as a public limited
company in Scotland under company number SC050366. VIP is an
investment company within the meaning of Section 833 of the
Companies Act 2006. The Company has one class of share. VIP is a
member of the Association of Investment Companies (AIC).
The Group
Value and Indexed Property Income Services Limited (VIS), a
wholly owned subsidiary of the Company, is authorised by the
Financial Conduct Authority to act as the Company's Alternative
Investment Fund Manager (AIFM).
Capital Structure
As at 31 March 2021, and as at the date of this Annual Report,
VIP's share capital consisted of 43,557,464 Ordinary Shares of 10p
nominal value in issue and 1,992,511 Ordinary Shares of 10p each
held in Treasury. Each Ordinary Share in issue entitles the holder
to one vote on a show of hands and, on a poll, to one vote for
every share held.
Share Dealing
Shares in VIP can be purchased and sold in the market through a
stockbroker, or indirectly through a lawyer, accountant or other
professional adviser. Further information on how to invest in VIP
is detailed in the Annual Report.
Recommendation of Non-Mainstream Investment Products
VIP currently conducts its affairs so that the shares issued by
it can be recommended by independent financial advisers to ordinary
retail investors in accordance with the rules of the Financial
Conduct Authority (FCA) in relation to non-mainstream investment
products and intends to do so for the foreseeable future. VIP's
shares are excluded from the FCA's restrictions which apply to
non-mainstream investment products because they are shares in an
investment trust company and the returns to investors are based on
investments in publicly quoted securities and directly held
property.
Highlights of the Year
-- Net Asset Value total return (with debt at par)* of 12.3%
(2020: -21.8%) over one year and -8.5% (2020: -19.8%) over three
years.
-- Share Price total return* of 39.3% (2020: -30.7%) over one
year and -3.3% (2020: -25.7%) over three years.
-- FTSE All-Share Index total return of 26.7% (2020: -18.5%)
over one year and 9.9% (2020: -12.2%) over three years.
-- Dividends for year up 1.7% - increased for the 34th consecutive year.
Financial Record
31 Mar 2021 31 Mar 2020
NAV (valuing debt at par) (p) 271.1 253.1
----------- -----------
NAV (valuing debt at market) (p)* 256.6 232.7
----------- -----------
Ordinary share price (p) 218.0 165.0
----------- -----------
Discount of share price to NAV (valuing
debt at market) (%) 15.0 29.1
----------- -----------
Dividend per share (p) 12.3 12.1
----------- -----------
Total assets less current liabilities
(GBPm) 177.6 176.2
----------- -----------
*This is an Alternative Performance Measure (APM) which has been
explained in the Glossary in the Annual Report.
NEW INVESTMENT OBJECTIVE AND POLICY
In the year to 31 March 2021, at a General Meeting of the
Company held on 7 January 2021, Shareholders approved the adoption
of a new Investment Objective and Investment Policy as detailed
below.
Investment Objective
The Company invests mainly in directly held UK commercial
property to deliver secure, long-term index-linked income and
partly in property-backed UK securities. The Company aims to
achieve long term real growth in dividends and capital value
without undue risk.
Investment Policy
The Company's policy is to invest in directly held UK commercial
property, property-backed securities listed on the London Stock
Exchange and cash or near cash securities. The Company will not
invest in overseas property or securities or in unquoted companies.
UK directly held commercial property will usually account for at
least 80 per cent. of the total portfolio but it may fall below
that level if relative market levels and investment value, or a
desired increase in cash or near cash securities, make it
appropriate.
The UK commercial property portfolio
The Company will target secure income and capital returns linked
to inflation, mainly through its diversified portfolio of UK
property assets, let or pre-let to a broad range of strong tenants
on long leases with rental growth subject to index-linked or fixed
increases. The Company has not set any geographical limits, except
that it may invest in all four nations of the United Kingdom. It
has also set no structural limits and expects the portfolio to be
focused on (but not limited to), the industrial/ warehouse,
supermarket, roadside and leisure sectors (including for example,
caravan parks, pubs, hotels, garden and bowling centres) income
strips and ground rents. Offices and high street retail properties
would not be priority sectors for investment. In order to manage
risk in the portfolio, at the time of purchase, no single property
asset will exceed in value 25 per cent. of the Company's gross
asset value and no single tenant (except UK Government and public
sector) will account for more than 30 per cent. of the Company's
total rental income.
The UK quoted securities portfolio
In order to limit the risk to the Company's overall portfolio
total of assets that are derived from any particular securities
investment, no individual shareholding will account for more than
10 per cent. of the gross assets of the Company at the time of
purchase. The Company will not use derivatives. The Company is
permitted to invest cash held for working capital purposes and
awaiting investment in cash deposits, gilts and money market
funds.
Borrowing policy
The Company has a longstanding policy of funding most of the
increases in its property portfolio through the judicious use of
borrowings. Gearing will normally be within a range of 25 per cent.
and 50 per cent. of the total portfolio. The Company will not raise
new borrowings if total net borrowings would then represent more
than 50 per cent. of the total assets.
Until 2015, all borrowings had been long-term debentures to
provide secure long-term funding, and avoiding the risks associated
with short-term funding of having to sell illiquid assets at a low
point in markets if loans had to be repaid. On 26 February 2015, a
five year secured term loan facility of GBP5 million was arranged
at a five year fixed interest rate of 4% p.a. including all costs.
This loan was refinanced on 12 May 2016 and a new ten year secured
term loan facility of GBP15 million was arranged at a ten year
interest rate of 4.4% p.a. including all costs to replace the
original GBP5 million loan arranged in February 2015.
On 28 November 2019, the Company entered into a seven year
secured term loan of GBP22 million at a fixed interest rate of 3.1%
per annum (3.3% per annum after all expenses) on GBP20.9 million
and at a floating rate of Libor plus 2.35% on the balance of GBP1.1
million. The net proceeds were held on accessible deposit until 31
March 2021 when they were used to refinance the Company's GBP15
million 11% First Mortgage Debenture Stock 2021 which expired on
that date and the balance will be used to support the acquisition
of further UK properties and equities in accordance with the
Company's investment policy. On 3 March 2021, the term of this
agreement was extended to 31 March 2031 at a new fixed interest
rate of 3.28% on the GBP20.9 million.
No material changes may be made to the Company's investment
policy described above without the prior approval of Shareholders
by the passing of an Ordinary Resolution.
Performance, Results and Dividend
As at 31 March 2021, the Net Asset Value (NAV) total return
(with debt at par) over one year was 12.3% and the Share Price
total return over one year was 39.3%. This compares to the FTSE
All-Share Index total return over one year of 26.7%. Total assets
less current liabilities was GBP177.6 million. A review of the
performance of the property and equity portfolios is detailed in
the Chairman's Statement and in the Property and Equity Manager's
Reports in the Annual Report.
For the year to 31 March 2021, quarterly dividends of 2.9p per
share were each paid on 30 October 2020, 29 January 2021 and 30
April 2021. The Directors have declared that a final dividend of
3.6p per Ordinary Share (2020 fourth interim: 3.4p), if approved by
Shareholders at the 2021 AGM, is paid on 30 July 2021 to
Shareholders on the register on 2 July 2021. The ex-dividend date
is 1 July 2021. This represents an annual increase in dividends of
1.7% as compared with the 1.5% and 0.7% annual increases in the
Retail Price and Consumer Price Indices as at the end of March
2021. This continues the Company's strong long-term record of real
growth in dividends.
Principal and Emerging Risks and Uncertainties
The Board has an ongoing process for identifying, evaluating and
monitoring the principal and emerging risks and uncertainties
facing the Group and the Parent Company. The risk register forms a
key part of the Group and the Parent Company's risk management
framework used to carry out a robust assessment of the risks,
including a significant focus on the controls in place to mitigate
them. The principal and emerging risks and uncertainties which
affect the Group's and the Company's business are:
Market Risk
The fair value of, or future cash flows from, a financial
instrument held by the Group may fluctuate because of changes in
market prices. This market risk comprises three elements - price
risk, interest rate risk and currency risk.
Price Risk
Changes in market prices (other than those arising from interest
rate or currency risk) may affect the value of the Group's
investments.
For equities, asset allocation and stock selection, as set out
in the Investment Policy in the Annual Report, both act to reduce
market risk.
As announced on 4 November 2020, OLIM Limited (OLIM), the
Investment Manager responsible for the management of the Company's
equity portfolio, informed the Company of its intention to resign
as equities manager due to the closure of its business, and
resigned with effect from 28 February 2021. OLIM Property Limited
(OLIM Property), the Investment Manager responsible for the
management of the Company's property portfolio, on 1 March 2021
assumed responsibility for the management of the equity portfolio
and continues to manage the property portfolio.
VIS delegates its portfolio management responsibilities to OLIM
Property, which actively monitors market prices throughout the year
and reports to VIS and to the Board, which meet regularly in order
to review investment strategy. The equity investments held by the
Group are listed on the London Stock Exchange. All investment
properties held by the Group are commercial properties located in
the UK with long-term index-linked income streams.
Interest Rate Risk
Interest rate movements may affect:
-- the fair value of the investments in property;
-- the level of income receivable on cash deposits; and
-- the fair value of borrowings.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure that gearing levels
are appropriate to market conditions and reviews these on a regular
basis. Current borrowings comprise a debenture stock and two
secured term loans, with five and ten year terms remaining,
providing secure long-term funding. It is the Board's policy to
maintain a gearing level, measured on the most stringent basis of
calculation after netting off cash equivalents, of between 25% and
50%.
Currency Risk
A small proportion of the Group's investment portfolio is
invested in securities whose fair value and dividend stream are
affected by movements in foreign exchange rates. It is not the
Company's policy to hedge this risk.
Liquidity Risk
This is the risk that the Group will encounter difficulty in
meeting obligations associated with its financial liabilities.
The Group's assets comprise readily realisable securities which
can be sold to meet commitments, if required, and investment
properties which, by their nature, are less readily realisable. The
maturity of the Company's existing borrowings is set out in the
interest rate risk profile section of Note 21 to the Financial
Statements.
Credit Risk
This is the failure of a counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Group suffering a loss.
The risk is not significant and is managed as follows:
-- investment transactions are carried out on behalf of VIP by
an outsourced dealing agent. Settlement of these transactions is
executed by a large investment bank whose credit standing is
reviewed periodically by OLIM Property (which reports to VIS).
-- the risk of counterparty exposure due to failed trades
causing a loss to the Group is mitigated by the review of failed
trade reports on a daily basis. In addition, a stock reconciliation
to third party administrators' records is performed on a daily
basis to ensure that discrepancies are picked up on a timely basis.
VIS carries out periodic reviews of the Depositary's operations and
reports its findings to the Company. This review also includes
checks on the maintenance and security of investments held.
-- cash is held only with reputable banks with high quality
external credit ratings which are monitored on a regular basis.
Property Risk
The Group's commercial property portfolio is subject to both
market and specific property risk. Since the UK commercial property
market has been markedly cyclical for many years, it is prudent to
expect that to continue.
The price and availability of credit, real economic growth and
the constraints on the development of new property are the main
influences on the property investment market.
Against that background, the specific risks to the income from
the portfolio are tenants being unable to pay their rents and other
charges or leaving their properties at the end of their leases. All
leases are on full repairing and insuring terms, with upward only
rent reviews and the average unexpired lease length is 17 years
(2020: 17 years) and over 15 years if break options are exercised.
Details of the tenant and geographical spread of the portfolio are
set out in the Annual Report. The long-term record of performance
through the varying property cycles since 1987 is set out in the
Annual Report. OLIM Property is responsible for property investment
management, with surveyors, solicitors and managing agents acting
on the portfolio under OLIM Property's supervision.
Political Risk
Although the EU (Future Relationship) Act 2020 came into effect
on 1 January 2021, the full political, economic and legal
consequences of the UK leaving the European Union (EU) are not yet
known.
It is possible that investments in the UK may be more difficult
to value and assess for suitability of risk, harder to buy or sell
and may be subject to greater or more frequent rises and falls in
value. In the longer term, there is likely to be a period of
uncertainty as the UK seeks to negotiate its ongoing relationship
with the EU and other global trade partners. The UK's laws and
regulations, including those relating to investment companies, may
in future, diverge from those of the EU. This may lead to changes
in the operation of the Company or the rights of investors in the
territories in which the shares of the Company may be promoted and
sold.
The Board reviews regularly the political situation, together
with any associated changes to the economic, regulatory and
legislative environment, to ensure that any risks arising are
mitigated as effectively as possible.
An explanation of certain economic and financial risks and how
they are managed is contained in Note 21 to the Financial
Statements.
Climate Change and Social Responsibility Risk
The Board recognises that climate change is an important
emerging risk that all companies should take into consideration
within their strategic planning.
As referred to elsewhere in this Strategic Report and in the
Statement of Corporate Governance in this Annual Report, the
Company has little direct impact on environmental issues. As an
investment trust company, the Company has no direct employee or
environmental responsibilities. The Board is aware that the Manager
continues to take into account
environmental, social and governance matters when considering
investment proposals.
Other Emerging Risks
The Directors are cognisant of the impact of the coronavirus
(COVID-19) pandemic and its implications for the activities of the
Manager and on the performance of investee companies and assets.
This is covered in more detail in the Property and Equity Manager's
Reports in the Annual Report.
While VIP's property portfolio is sufficiently robust to
withstand the current market impacts of the pandemic, there is a
risk that, as discussed in the Property Manager's Report, property
values may fall and tenants may struggle to pay rent. If this
happens, there is a risk that loan to value and interest cover
covenants could be breached. If this were to occur, VIP has
sufficient cash and liquid equity investments to cover any loan
repayments triggered by covenant breaches. However, as noted in the
Property Manager's Report in the Annual Report, safe, long let
property like VIP's property portfolio should prove resilient again
once all tenants are allowed to fully reopen and trade.
Additional risks and uncertainties include:
-- Discount volatility: The Company's shares may trade at a
price which represents a discount to its underlying net asset
value.
-- Regulatory risk: The Directors strive to maintain a good
understanding of the changing regulatory agenda and consider
emerging issues so that appropriate changes can be implemented and
developed in good time. The Group operates in a complex regulatory
environment and therefore faces a number of regulatory risks. A
breach of Section 1158 of the Corporation Tax Act 2010 would result
in the Company being subject to capital gains tax on portfolio
investments. Breaches of other regulations, including but not
limited to, the Companies Act 2006, the FCA Listing Rules, the FCA
Disclosure, Guidance and Transparency Rules, the Market Abuse
Regulation, the Packaged Retail and Insurance-based Investment
Products (PRIIPs) Regulation and the Second Markets in Financial
Instruments Directive (MiFID II), could lead to a number of
detrimental outcomes and reputational damage.
The Company is required to comply with tax legislation under the
Foreign Account Tax Compliance Act and the Common Reporting
Standard. The Company has appointed its registrar, Computershare,
to act on its behalf to report annually to HM Revenue & Customs
(HMRC).
The Company must also comply with the UK General Data Protection
Regulation (UK GDPR), which came into force in January 2021, post
Brexit, and also the Data Protection Act 2018. This legislation
enforces the principle of 'privacy by design and by default' and
enshrines new rights for individuals, including the right to be
forgotten and to data portability. The Directors have worked with
the third parties that process Shareholders' personal data to
ensure that their rights under the new regulation are
protected.
The Company's privacy policy is available to view on the
Company's web pages hosted by the Investment Manager at
www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
.
Breaches of controls by service providers to the Company could
also lead to reputational damage or loss. The Audit and Management
Engagement Committee monitors compliance with regulations by
reviewing internal control reports from the Administrator and from
the Investment Manager.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (AIFMD)
introduced an authorisation and supervisory regime for all managers
of authorised investment funds in the EU.
In accordance with the requirements of the AIFMD, the Company
appointed VIS as its Alternative Investment Fund Manager (AIFM) and
BNP Paribas Securities Services as its Depositary. VIS's status as
AIFM remains unchanged following the UK's departure from the EU.
The Board has controls in place in the form of regular reporting
from the AIFM and the Depositary to ensure that both are meeting
their regulatory responsibilities in relation to the Company.
Key Performance Indicators
At each Board Meeting, the Directors consider a number of
performance measures to assess the Company's success in achieving
its objectives and which also enable Shareholders and prospective
investors to gain an understanding of its business.
A historical record of these performance measures, with
comparatives, together with the Alternative Performance Measures
(APMs) are shown in the Highlights of the Year and Financial Record
section of the Business Review. Definitions of the APMs can be
found in the Glossary in the Annual Report.
In addition, in the year under review, the Board identified the
three key performance indicators below to determine the performance
of the Company:
-- Net asset value total return relative to the FTSE All-Share Index (total return);
-- Share price total return relative to the FTSE All-Share Index (total return); and
-- Dividend growth relative to the Retail Prices Index.
The net asset value (NAV) total return is considered to be a
more appropriate long-term measure of Shareholder value as it
includes the current NAV per share and the sum of dividends paid to
date.
The share price total return relative to the FTSE All-Share
Index (total return) is the theoretical return including
reinvesting each dividend in additional shares in the Company at
the current mid-market price on the day that the shares go
ex-dividend.
Dividend growth relative to the Retail Prices Index is included
to track performance against inflation.
The Board reviews the Company's investment income and
operational expenses on a quarterly basis, as the Directors
consider that both of these elements are important components in
the generation of Shareholder returns. Further information can be
found in Notes 2 and 4 to the Financial Statements.
Prior to the change to the investment policy in January 2021,
the Board considered that the MSCI UK Quarterly Property Index was
the main benchmark for commercial property performance and that the
FTSE All-Share Index was the most appropriate index to use as a
comparison to the performance of the equity portfolio. The Property
and Equity Manager's Reports report on how the Company performed
during the year under review against the MSCI UK Quarterly Property
Index and the FTSE All-Share Index. In addition, the Directors will
consider economic, regulatory and political trends and factors that
may impact on the Company's future development and performance.
Following the change in investment policy to invest
predominantly in property, the Directors will carry out a review of
the key performance indicators for the year to 31 March 2022 and
will report accordingly in the 2022 Annual Report.
From 1 April 2021, the Board considers that the MSCI UK
Quarterly Property Index is the benchmark for the performance of
the Company's portfolio.
Share Buy-backs
As referred to in the Chairman's Statement and in the Directors'
Report, during the year to 31 March 2021, the Company bought back
its own shares for the first time. As at 31 March 2021, and as at
the date of this Annual Report, 1,992,511 Ordinary Shares of 10p
each have been bought back and are held in Treasury. Further
information can found in the Annual Report.
At the forthcoming AGM, the Board will seek the necessary
Shareholder authority to continue to conduct share buy-backs.
Statement of Compliance with Investment Policy
The Company is adhering to its stated investment policy and
managing the risks arising from it. This can be seen in various
tables and charts throughout this Annual Report, and from the
information provided in the Chairman's Statement, and in the
Property and Equity Manager's Reports.
The Board's Section 172 Duty and Stakeholder Engagement
The Directors recognise the importance of an effective Board and
its ability to discuss, review and make decisions to promote the
long-term success of the Company and protect the interests of its
key stakeholders. As required by Provision 5 of The AIC Code of
Corporate Governance (the AIC Code) (and in line with The UK
Corporate Governance Code (the Code)), the Board has discussed the
Directors' duty under Section 172 of the Companies Act and how the
interests of key stakeholders have been considered in the Board
discussions and decision making during the year.
This has been summarised in the table below:
Stakeholder Form of Engagement Influence on Board decision making
Shareholders AGM - Under normal circumstances, Dividend declarations - The Board
Shareholders are encouraged recognises the importance of
to attend the AGM and are dividends to Shareholders and
provided with the opportunity takes this into consideration
to ask questions and engage when making decisions to pay
with the Directors and the quarterly and propose final dividends
Manager. Shareholders are for each year. Further details
also encouraged to exercise regarding dividends for the year
their right to vote on the under review can be found in
resolutions proposed at the the Chairman's Statement.
AGM (please refer to the Chairman's Share buy-back policy - the Directors
Statement). recognise the importance to Shareholders
Shareholder documents - The of the Company maintaining an
Company reports formally to active buy-back policy and considered
Shareholders by publishing this when establishing the current
Annual and Interim Reports, programme. Further details can
normally in June and November be found in the Chairman's Statement,
each year. In addition, the in this Business Review and in
Company produces a Quarterly the Directors' Report.
Factsheet which is published Shareholder communication and
on the Company's web pages feedback from the Broker feeds
hosted by the Manager at directly into the Board's annual
www.olimproperty.co.uk/value-and-indexed-property-inco strategy review, the asset allocation
me-trust.html. considerations and the Manager's
Significant matters or reporting guidance on desirable investment
obligations are disseminated characteristics.
to Shareholders by way of
announcement to the London
Stock Exchange.
The Company Secretary acts
as a key point of contact
for the Board and all communications
received from Shareholders
are circulated to the Board.
Other Shareholder events include
investor and wealth manager
lunches and roadshows organised
by the Company's Broker at
which the Manager is invited
to present.
------------------------------------------------------- --------------------------------------------
Investee Quarterly Board Meetings - As referred to in the Property
companies The Manager reports to the Manager's Report in the Annual
and assets Board on the Company's investment Report, the Property Manager
portfolio and the Directors has been working closely with
challenge the Manager where all tenants during the COVID-19
they feel it is appropriate. pandemic, including agreeing
phased payment plans for temporary
rental concessions, changing
quarterly to monthly payments
or rent deferments and extending
lease lengths in return for rent
free periods.
The Directors are aware that
the exercise of voting rights
is key to promoting good corporate
governance and, through the Manager,
ensures that the listed companies
are encouraged to adopt best
practice corporate governance.
The Board has delegated the responsibility
for monitoring the listed companies
to the Manager and has given
it discretion to vote in respect
of the Company's holdings in
the equity portfolio, in a way
that reflects the concerns and
key governance matters discussed
by the Board.
------------------------------------------------------- --------------------------------------------
Manager Quarterly Board Meetings - During the year under review,
The Manager attends every the Board undertook a review
Board Meeting and presents of the Company's objective and
a detailed portfolio analysis investment policy and decided
and reports on key issues that in order to achieve the
such as performance of the Company's objectives and maintain
equity and property portfolios. its dividend record, the Company's
investment policy should be changed
so that the Company could in
future invest predominantly in
property. At a General Meeting
held in January 2021, Shareholders
approved the adoption of a new
investment objective and policy
to allow the Company to invest
predominantly in property.
The Directors and the Manager
are cognisant of the Company's
new investment policy and the
strategy agreed by the Board,
which the Manager has been tasked
with implementing, which has
resulted in a reduction in the
number of equity investments
and an increase in the number
of properties held in the portfolio.
The Board engages constructively
with the Manager to ensure investments
are consistent with the agreed
strategy and investment policy.
------------------------------------------------------- --------------------------------------------
Registrar Review meetings and control The Directors review the performance
reports. of all third party service providers;
this includes ensuring compliance
with GDPR.
------------------------------------------------------- --------------------------------------------
Depositary Regular statements and control The Directors review the performance
and Custodian reports received, with all of all third party providers,
holdings and balances reconciled. including oversight of securing
the Company's assets.
------------------------------------------------------- --------------------------------------------
Advisers The Company relies on the The Directors review the performance
expert audit, accounting and of all third party service providers.
legal advice received from
its Auditor, Administrator
and Legal Advisers.
------------------------------------------------------- --------------------------------------------
Employee, Environmental and Human Rights Policy
As an investment trust company, the Company has no direct
employee or environmental responsibilities, nor is it responsible
for the emission of greenhouse gases. Its principal responsibility
to Shareholders is to ensure that the investment portfolio is
properly managed and invested. The Company has no employees and
accordingly, has no requirement to report separately on employment
matters.
Management of the investment portfolio is undertaken by the
Investment Manager through members of its portfolio management
team. In light of the nature of the Company's business, there are
no relevant human rights issues and, therefore, the Company does
not have a human rights policy.
Independent Auditor
The Company's Independent Auditor is required to report if there
are any material inconsistencies between the content of the
Strategic Report and the Financial Statements. The Independent
Auditor's Report can be found in the Annual Report.
Future Strategy
The Board and the Investment Manager intend to maintain the
strategic policies set out above for the year ending 31 March 2022
as it is believed that these are in the best interests of
Shareholders.
The Company's Viability Statement is included in the Annual
Report.
Approval
This Business Review, and the Strategic Report as a whole, was
approved by the Board of Directors and signed on its behalf by:
James Ferguson
Chairman
22 June 2021
Going Concern
The Group and the Parent Company's business activities, together
with the factors likely to affect their future development and
performance, are set out in the Directors' Report, and the
financial position of the Group and of the Parent Company is
described in the Chairman's Statement within the Strategic Report.
In addition, Note 21 to the Financial Statements includes: the
policies and processes for managing the financial risks; details of
the financial instruments; and the exposures to market price risk,
interest rate risk, liquidity risk, credit risk and price risk
sensitivity. The Directors believe that the Group and the Parent
Company are well placed to manage their business risks.
Following a detailed review, and taking into account the impact
of the COVID-19 pandemic referred to in the Property and Equity
Manager's Reports in the Annual Report, the Directors have a
reasonable expectation that the Group and the Parent Company have
adequate financial resources to enable them to continue in
operational existence for the foreseeable future, being at least 12
months from approval of the Financial Statements, and accordingly,
they have continued to adopt the going concern basis (as set out in
Note 1(b) to the Financial Statements in the Annual Report) when
preparing the Annual Report and Financial Statements.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law, the Directors
are required to prepare the Group Financial Statements, and have
elected to prepare the Company Financial Statements, in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006. 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 for the
Group and Company for that period. The Directors are also required
to prepare Financial Statements in accordance with international
financial reporting standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
In preparing these Financial Statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, subject to any material
departures disclosed and explained in the Financial Statements;
-- state whether they have been prepared in accordance with IFRS
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union, subject to any material departures disclosed
and explained in the Financial Statements;
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006 and, as
regards the Group Financial Statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and, hence, for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual
Report and Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for Shareholders to assess the Group's position and performance,
business model and strategy.
The Directors are responsible for ensuring the Annual Report and
Financial Statements are made available on a website. Financial
Statements are published on the Company's web pages hosted by the
investment manager in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's web pages is the
responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the Financial Statements
contained therein.
Directors' Responsibility Statement
Each Director confirms, to the best of his or her knowledge,
that:
-- the Financial Statements have been prepared in accordance
with the applicable set of accounting standards and Article 4 of
the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and
Company; and that
-- the Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Group and Company, together with a description of the principal and
risks and uncertainties that they face.
The Directors confirm that the Annual Report and Financial
Statements taken as a whole is fair, balanced and understandable
and provides the information necessary for Shareholders to assess
the Group's position and performance, business model and
strategy.
For and on behalf of the Board of
Value and Indexed Property Income Trust PLC
James Ferguson
Chairman
22 June 2021
Group Statement of Comprehensive Income
For the year ended 31 March
Year ended Year ended
31 March 2021 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income Note
Rental income 2 5,359 - 5,359 4,716 - 4,716
Investment income 2 3,414 - 3,414 5,931 - 5,931
Other income 2 159 - 159 97 - 97
8,932 - 8,932 10,744 - 10,744
Gains and losses on
investments
Realised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 8,588 8,588 - (3,482) (3,482)
Unrealised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 1,185 1,185 - (31,381) (31,381)
Total income 8,932 9,773 18,705 10,744 (34,863) (24,119)
-------------- -------------- ---------- ------------- ------------- ------------
Expenses
Investment
management
fees 3 (301) (702) (1,003) (345) (805) (1,150)
Other operating
expenses 4 (771) - (771) (878) - (878)
Finance costs 5 (5,084) - (5,084) (4,609) - (4,609)
Total expenses (6,156) (702) (6,858) (5,832) (805) (6,637)
-------------- -------------- ---------- ------------- ------------- ------------
Profit/(loss)
before
taxation 2,776 9,071 11,847 4,912 (35,668) (30,756)
Taxation 6 (359) 1,132 773 (263) 359 96
-------------- -------------- ---------- ------------- ------------- ------------
Profit/(loss)
attributable
to equity
shareholders
of parent company 2,417 10,203 12,620 4,649 (35,309) (30,660)
-------------- -------------- ---------- ------------- ------------- ------------
Earnings per
ordinary
share (pence) 7 5.35 22.56 27.91 10.21 (77.52) (67.31)
The total column of this statement represents the Statement of
Comprehensive Income of the Group, prepared in accordance with
IFRS. The revenue return and capital return columns are
supplementary to this and are prepared under guidance published by
the Association of Investment Companies. All items in the above
statement derive from continuing operations.
The Group does not have any other comprehensive income and so
the total profit/(loss), as disclosed above, is the same as the
Group's total comprehensive income. All income is attributable to
the equity holders of Value and Indexed Property Income Trust PLC,
the parent company. There are no minority interests.
The Notes form part of these Financial Statements.
The Board is proposing a final dividend of 3.60p per share,
making a total dividend of 12.30p per share for the year ended 31
March 2021 (2020: 12.10p per share) which, if approved by
Shareholders, will be payable on 30 July 2021 (see Note 8).
Company Statement of Comprehensive Income
for the year ended 31 March 2021
Year ended Year ended
31 March 2021 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income Note
Rental income 2 5,359 - 5,359 4,716 - 4,716
Investment income 2 3,414 - 3,414 5,931 - 5,931
Other income 2 159 - 159 97 - 97
8,932 - 8,932 10,744 - 10,744
Gains and losses on
investments
Realised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 8,588 8,588 - (3,482) (3,482)
Unrealised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 1,781 1,781 - (30,781) (30,781)
Total income 8,932 10,369 19,301 10,744 (34,263) (23,519)
------------- ------------- ---------- ------------- ------------- ------------
Expenses
Investment
management
fees 3 (301) (702) (1,003) (345) (805) (1,150)
Other operating
expenses 4 (771) - (771) (878) - (878)
Finance costs 5 (5,050) - (5,050) (4,576) - (4,576)
------------- ------------- ---------- ------------- ------------- ------------
Total expenses (6,122) (702) (6,824) (5,799) (805) (6,604)
------------- ------------- ---------- ------------- ------------- ------------
Profit/(loss) before
taxation 2,810 9,667 12,477 4,945 (35,068) (30,123)
Taxation 6 (359) 1,132 773 (263) 359 96
------------- ------------- ---------- ------------- ------------- ------------
Profit/(loss)
attributable
to equity
shareholders
of parent company 2,451 10,799 13,250 4,682 (34,709) (30,027)
------------- ------------- ---------- ------------- ------------- ------------
Earnings per
ordinary
share (pence) 7 5.42 23.88 29.30 10.28 (76.20) (65.92)
The total column of this statement represents the Statement of
Comprehensive Income of the Company prepared in accordance with
IFRS. The revenue return and capital return columns are
supplementary to this and are prepared under guidance published by
the Association of Investment Companies. All items in the above
statement derive from continuing operations.
The Company does not have any other comprehensive income and so
the total profit/(loss), as disclosed above, is the same as the
Company's total comprehensive income.
The Notes form part of these Financial Statements.
Statement of Changes in Equity
For the year ended 31 March
Year ended 31 March 2021
Share Share Retained
capital premium earnings Total
GROUP Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2020 4,555 18,446 92,306 115,307
Profit for the year - - 12,620 12,620
Dividends paid 8 - - (5,512) (5,512)
Buyback of Ordinary Shares
for Treasury 14 - - (4,332) (4,332)
-------- -------- --------- ---------
Net assets at 31 March 2021 4,555 18,446 95,082 118,083
-------- -------- --------- ---------
Year ended 31 March 2021
Share Share Retained
capital premium earnings Total
COMPANY GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2020 4,555 18,446 91,676 114,677
Profit for the year - - 13,250 13,250
Dividends paid 8 - - (5,512) (5,512)
Buyback of Ordinary Shares
for Treasury 14 - - (4,332) (4,332)
-------- -------- --------- ---------
Net assets at 31 March 2021 4,555 18,446 95,082 118,083
-------- -------- --------- ---------
Year ended 31 March 2020
Share Share Retained
capital premium earnings Total
GROUP Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2019 4,555 18,446 128,432 151,433
Loss for the year - - (30,660) (30,660)
Dividends paid 8 - - (5,466) (5,466)
-------- -------- --------- ---------
Net assets at 31 March 2020 4,555 18,446 92,306 115,307
-------- -------- --------- ---------
Year ended 31 March 2020
Share Share Retained
capital premium earnings Total
COMPANY GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2019 4,555 18,446 127,169 150,170
Loss for the year - - (30,027) (30,027)
Dividends paid 8 - - (5,466) (5,466)
-------- -------- --------- ---------
Net assets at 31 March 2020 4,555 18,446 91,676 114,677
-------- -------- --------- ---------
The Notes form part of these Financial Statements.
Group Statement of Financial Position
As at 31 March
Group
As at As at
31 March 2021 31 March 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
Non current assets
Investment properties 9 81,132 74,459
Investments held at fair value
through profit or loss 9 28,581 90,757
109,713 165,216
Deferred tax asset 6 1,258 485
Receivables 10 2,017 -
112,988 165,701
Current assets
Cash and cash equivalents 65,965 26,428
Receivables 10 972 668
------------ ---------
66,937 27,096
TOTAL ASSETS 179,925 192,797
Current liabilities
Debenture stock 11 - (15,000)
Payables 11 (2,318) (1,624)
------------ ---------
(2,318) (16,624)
TOTAL ASSETS LESS CURRENT LIABILITIES 177,607 176,173
Non-current liabilities
Payables 12 (2,862) (4,243)
Borrowings 12 (56,662) (56,623)
------------ ---------
(59,524) (60,866)
--------- ---------
NET ASSETS 118,083 115,307
--------- ---------
EQUITY ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
Called up share capital 14 4,555 4,555
Share premium 15 18,446 18,446
Retained earnings 16 95,082 92,306
TOTAL EQUITY 118,083 115,307
--------- ---------
Net Asset Value per ordinary share
(pence) 17 271.10 253.14
These Financial Statements were approved by the Board on 22 June
2021 and were signed on its behalf by:-
JAMES FERGUSON, CHAIRMAN
The Notes form part of these Financial Statements.
Company Statement of Financial Position
As at 31 March
Company
As at As at
31 March 2021 31 March 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
Non current assets
Investment properties 9 81,132 75,687
Investments held at fair value
through profit or loss 9 28,781 90,957
109,913 166,644
Deferred tax asset 6 1,258 485
Receivables 10 2,017 -
113,188 167,129
Current assets
Cash and cash equivalents 65,765 26,228
Receivables 10 972 669
----------- ---------
66,737 26,897
TOTAL ASSETS 179,925 194,026
Current liabilities
Debenture stock 11 - (15,630)
Payables 11 (2,318) (1,659)
----------- ---------
(2,318) (17,289)
TOTAL ASSETS LESS CURRENT LIABILITIES 177,607 176,737
Non-current liabilities
Payables 12 (2,862) (5,437)
Borrowings 12 (56,662) (56,623)
----------- ---------
(59,524) (62,060)
---------
NET ASSETS 118,083 114,677
--------- ---------
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital 14 4,555 4,555
Share premium 15 18,446 18,446
Retained earnings 16 95,082 91,676
TOTAL EQUITY 118,083 114,677
--------- ---------
Net Asset Value per ordinary share
(pence) 17 271.10 251.76
These Financial Statements were approved by the Board on 22 June
2021 and were signed on its behalf by:-
JAMES FERGUSON, CHAIRMAN
The Notes form part of these Financial Statements.
Group Statement of Cashflows
For the year ended 31 March
2021 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Rental income received 5,218 4,162
Dividend income received 3,486 6,466
Interest received 244 10
Operating expenses paid (1,673) (2,101)
NET CASH INFLOW FROM OPERATING ACTIVITIES 18 7,275 8,537
Cash flows from investing activities
Purchase of investments held at fair value
through
profit or loss (4,500) (13,900)
Purchase of investment properties (17,553) (10,758)
Sale of investments held at fair value
through profit or loss 79,584 17,160
Sale of investment properties 4,725 9,199
--------- ---------
NET CASH INFLOW FROM INVESTING ACTIVITIES 62,256 1,701
Cash flow from financing activities
Repayment of debenture stock (15,000) -
Loans drawn down - 22,000
Fees paid on new loan (4) (320)
Interest paid on loans (4,938) (4,156)
Finance cost of leases (191) (191)
Payments of lease liabilities (17) (15)
Dividends paid 8 (5,512) (5,466)
Buyback of Ordinary Shares for Treasury 14 (4,332) -
--------- ---------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING
ACTIVITIES (29,994) 11,852
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 39,537 22,090
Cash and cash equivalents at 1 April
2020 26,428 4,338
CASH AND CASH EQUIVALENTS AT 31 MARCH
2021 65,965 26,428
--------- --------
The Notes form part of these Financial Statements.
Company Statement of Cashflows
For the year ended 31 March
2021 2020
Note GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Rental income received 5,218 4,162
Dividend income received 3,486 6,466
Interest received 244 10
Operating expenses paid (1,673) (2,101)
NET CASH INFLOW FROM OPERATING ACTIVITIES 18 7,275 8,537
Cash flows from investing activities
Purchase of investments held at fair
value through
profit or loss (4,500) (13,900)
Purchase of investment properties (17,553) (10,758)
Sale of investments held at fair
value through profit or loss 79,584 17,160
Sale of investment properties 4,725 9,199
--------- ---------
NET CASH INFLOW FROM INVESTING ACTIVITIES 62,256 1,701
Cash flow from financing activities
Repayment of debenture stock (15,000) -
Loans drawn down - 22,000
Fees paid on new loan (4) (320)
Interest paid on loans (4,938) (4,156)
Finance cost of leases (157) (157)
Payments of lease liabilities (51) (49)
Dividends paid 8 (5,512) (5,466)
Buyback of Ordinary Shares for Treasury 14 (4,332) -
--------- ---------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING
ACTIVITIES (29,994) 11,852
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 39,537 22,090
Cash and cash equivalents at 1 April
2020 26,228 4,138
CASH AND CASH EQUIVALENTS AT 31 MARCH
2021 65,765 26,228
--------- --------
The Notes form part of these Financial Statements.
Notes to the Financial Statements
1 Accounting policies
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) adopted
pursuant to Regulation (EC) No 1606 / 2002 as it applies in the
European Union and in conformity with the requirements of the
Companies Act 2006.
The functional and presentational currency of the Group and
Company is pounds sterling because that is the currency of the
primary economic environment in which the Group and Company
operate. The Financial Statements and the accompanying notes are
presented in pounds sterling and rounded to the nearest thousand
pounds except where otherwise indicated.
(a) Basis of preparation
The Financial Statements have been prepared on a going concern
basis as disclosed in the Annual Report and on the historical cost
basis, except for the revaluation of equities, investment
properties and investment in subsidiaries, all of which are valued
at fair value through profit and loss. The principal accounting
policies adopted are set out below. Where presentational guidance
set out in the Statement of Recommended Practice Financial
Statements of Investment Trust Companies and Venture Capital Trusts
(the SORP) issued by the Association of Investment Companies (AIC)
in October 2019 is consistent with the requirements of IFRSs, the
Directors have sought to prepare the Financial Statements on a
basis compliant with the recommendations of the SORP, except for
the allocation of finance costs to revenue as explained in Note
1(f).
The Board has considered the requirements of IFRS 8, 'Operating
Segments'. The Board is charged with setting the Group's investment
strategy. The Board has delegated the day to day implementation of
this strategy to the Investment Manager but the Board retains
responsibility to ensure that adequate resources of the Group are
directed in accordance with its decisions. The Board is of the view
that the Group is engaged in a single segment of business, being
investments in quoted UK equities and UK commercial properties. The
view that the Group is engaged in a single segment of business is
based on the fact that one of the key financial indicators received
and reviewed by the Board is the total return from the investment
portfolio taken as a whole. A review of the investment portfolio is
included in the reports from the Investment Manager in the Annual
Report.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, are set
out in the Strategic Report in the Annual Report. The financial
position of the Group as at 31 March 2021 is shown in the Statement
of Financial Position in the Annual Report. The cash flows of the
Group for the year ended 31 March 2021 are set out in the Annual
Report. The Group had fixed debt totalling GBP56,662,000 as at 31
March 2021, as set out in Notes 11 and 12; none of the borrowings
is repayable before March 2026. Note 21 sets out the Group's risk
management policies and procedures, including those covering market
price risk, liquidity risk and credit risk. As at 31 March 2021,
the Group's total assets less current liabilities exceeded its
total non current liabilities by a factor of over two. The assets
of the Group consist mainly of securities and investment properties
that are held in accordance with the Group's investment policy, as
set out in the Annual Report. Most of these securities are readily
realisable, even in volatile markets. The Group, in conjunction
with OLIM Property, has been working closely with tenants during
this unprecedented period, agreeing phased payment plans for
temporary rental concessions, changing quarterly to monthly
payments or rent deferments and extending lease lengths in return
for rent free periods. The Directors, who have reviewed carefully
the Group's forecasts for the coming year and having taken into
account the liquidity of the Group's investment portfolio and the
Group's financial position in respect of cash flows, borrowing
facilities and investment commitments (of which there is none of
significance), are not aware of any material uncertainties that may
cast significant doubt upon the Group's ability to continue as a
going concern. Accordingly, the Directors believe that it is
appropriate to continue to adopt the going concern basis in
preparing the Financial Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and the entity controlled by the Company
(its subsidiary). An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and has ability to affect those returns through
its power over the investee. The Company consolidates the investee
that it controls. All intra-group transactions, balances, income
and expenses are eliminated on consolidation. The investment in the
subsidiary is recognised at fair value in the Financial Statements
of the Company. This is considered to be the net asset value of the
Shareholders' funds, as shown in its Statement of Financial
Position.
Value and Indexed Property Income Services Limited is a private
limited company incorporated in Scotland under company number
SC467598. It is a wholly owned subsidiary of the Company and has
been appointed to act as Alternative Investment Fund Manager of the
Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
In accordance with the Company's Articles, net realised capital
returns may be distributed by way of dividend.
Additionally, the net revenue is the measure that the Directors
believe to be appropriate in assessing the Company's compliance
with certain requirements set out in sections 1158-1160 of the
Corporation Tax Act 2010.
(e) Income
Dividend income from investments is recognised as revenue for
the period on an ex-dividend basis. Where no ex-dividend date is
available, dividends receivable on or before the period end are
treated as revenue for the period.
Where the Group has elected to receive dividend income in the
form of additional shares rather than cash, the amount of cash
dividend foregone is recognised as income. Any excess in the value
of shares received over the amount of cash dividend foregone is
recognised as a gain in the income statement.
Interest receivable from cash and short term deposits and
interest payable is accrued to the end of the period.
Rental receivable and lease incentives, where material, from
investment properties under operating leases are recognised in the
Statement of Comprehensive Income over the term of the lease on a
straight line basis. Other income is recognised on an accruals
basis.
(f) Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals
basis. Expenses are presented as capital where a connection with
the maintenance or enhancement of the value of investments can be
demonstrated. In this respect and in accordance with the SORP, the
investment management fees have been allocated 30% to revenue and
70% to capital for the year ended 31 March 2021 to reflect the
Board's expectations of long term investment returns.
It is normal practice and in accordance with the SORP for
investment trust companies to allocate finance costs to capital on
the same basis as the investment management fee allocation.
However, as the Company has a significant exposure to property, and
property companies allocate finance costs to revenue to match
rental income, the Directors consider that, contrary to the SORP,
it is inappropriate to allocate finance costs to capital.
(g) Receivables and Payables
Receivables do not carry any interest and are stated at their
nominal value, as reduced by any impairment calculated using an
expected credit loss model. Payables are not interest bearing and
are stated at their nominal value.
(h) Taxation
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantially enacted by the date
of the Statement of Financial Position.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the date of
the Statement of Financial Position, where transactions or events
that result in an obligation to pay more tax in the future or the
right to pay less tax in the future have occurred at the date of
the Statement of Financial Position.
This is subject to deferred tax assets only being recognised if
it is considered more probable than not that there will be suitable
profits from which the future reversal of the temporary differences
can be deducted.
Due to the Company's status as an investment trust company, and
the intention to continue to meet the conditions required to
maintain approval for the foreseeable future, the Company has not
provided deferred tax on any capital gains and losses arising on
the revaluation or disposal of investments.
(i) Dividends payable
Interim dividends are recognised as a liability in the period in
which they are paid as no further approval is required in respect
of such dividends. Final dividends are recognised as a liability
only after they have been approved by Shareholders in general
meeting.
(j) Investments
Equity investments
All equity investments are classified on the basis of their
contractual cashflow characteristics and the Group's business model
for managing its assets. The business model, which is the
determining feature, is such that the portfolio of equity
investments is managed, and performance is evaluated, on the basis
of fair value. Consequently, all equity investments are measured at
fair value through profit or loss.
For listed investments, fair value through profit or loss is
deemed to be bid market prices or closing prices for SETS stocks
sourced from the London Stock Exchange. SETS is the London Stock
Exchange electronic trading service covering most of the market
including all FTSE 100 constituents and most liquid FTSE 250
constituents along with some other securities. Gains and losses
arising from changes in fair value are included in net profit or
loss for the period as a capital item in the Statement of
Comprehensive Income and are ultimately recognised in the retained
earnings.
Investment property
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 is included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value. Gains and losses arising from changes in fair value are
included in net profit or loss for the period as a capital item in
the Statement of Comprehensive Income and are ultimately recognised
in the retained earnings.
As disclosed in Note 21, the Group leases out all of its
properties on operating leases. A property held under an operating
lease is classified and accounted for as an investment property
where the Group holds it to earn rental, capital appreciation or
both. Any such property leased under an operating lease is carried
at fair value. Fair value is established by half-yearly
professional valuation on an open market basis by Savills (UK)
Limited, Chartered Surveyors and Valuers, and in accordance with
the RICS Valuation - Global Standards January 2020 (the 'RICS Red
Book'). The determination of fair value by Savills is supported by
market evidence, excluding prepaid or accrued operating lease
income arising from the spreading of lease incentives or minimum
lease payments because it has been recognised as a separate
liability or asset. The fair value of investment property held by a
lessee as a right-of-use asset reflects expected cash flows
(including variable lease payments that are expected to become
payable). Accordingly, if a valuation obtained for a property is
net of all payments expected to be made, it will be necessary to
add back any recognised lease liability, to arrive at the carrying
amount of the investment property using the fair value model. These
valuations are disclosed in Note 9.
The Company accounts for its investment in its subsidiary at
fair value. All fair value adjustments in relation to the
subsidiary are eliminated on consolidation.
(k) Cash and cash equivalents
Cash and cash equivalents comprises deposits held with
banks.
(l) Non - current liabilities
All new loans and borrowings are initially measured at cost,
being the fair value of the consideration received, less issue
costs where applicable. Thereafter, all interest-bearing loans and
borrowings are subsequently measured at amortised cost. Amortised
cost is calculated by taking into account any discount or premium
on settlement. The costs of arranging any interest-bearing loans
are capitalised and amortised over the life of the loan. When the
term of a loan is modified, the amortisation of costs is adjusted
in line with that term.
(m) Leases
The Group leases properties that meet the definition of
investment property. These right-of-use assets are presented as
part of Investments Properties in the Balance Sheet and held at
fair-value. All properties are leased out under operating leases
and rental income is recognised on a straight line basis over the
expected term of the relevant lease. Many leases have fixed or
minimum rental uplifts and where lease incentives or temporary rent
reductions have been granted as a result of the COVID pandemic,
rental income is recognised on a straight line basis over the
expected term of the lease.
(n) Critical accounting judgements and key estimates
The preparation of the Financial Statements requires the
Directors to make judgements, estimates and assumptions that may
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. The
critical accounting area involving a higher degree of judgement or
complexity comprises the determination of fair value of the
investment properties. The Group engages independent professional
qualified valuers to perform the valuation. Information about the
valuation techniques and inputs used in determining fair value as
at 31 March 2021 is disclosed in Note 9 to the Financial
Statements.
(o) Adoption of new and revised Accounting Standards
New and revised standards and interpretations that became
effective during the year had no significant impact on the amounts
reported in these Financial Statements but may impact accounting
for future transactions and arrangements.
At the date of authorisation of these Financial Statements, the
following Standards and interpretations, which have not been
applied to these Financial Statements, were in issue but were not
yet effective.
Standards
IAS 1 Amendments - Presentation of Financial Statements
(effective 1 January 2023)
IAS 8 Amendments - Accounting Policies, Changes in Accounting
Estimates and Errors (effective 1 January 2023)
IAS 39, IFRS 4, 7, 9 and 16 Amendments - Interest Rate Benchmark
Reform (Phase 2) (effective
1 January 2021)
IFRS 3 Amendments - Definition of a Business (effective 1
January 2022)
IFRS 16 Amendments - COVID-19-Related Rent Concessions beyond 30
June 2021 (effective 1 April 2021)
Conceptual Framework for Financial Reporting - Revisions
(effective 1 January 2022)
The Directors do not expect the adoption of these Standards and
interpretations (or any other Standards and interpretations which
are in issue but not effective) will have a material impact on the
Financial Statements of the Group in future periods.
2 Income 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------- --------------------------- -------- ---------- ----------- -----------
Investment income
Dividends from listed investments
in UK 3,414 3,414 5,931 5,931
Other operating income
Rental income 5,359 5,359 4,716 4,716
Interest receivable on short
term deposits 159 159 97 97
Total income 8,932 8,932 10,744 10,744
-------- ---------- ----------- -----------
2021 2020
Investment management
3 fee Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Group and Company
Investment management fee 301 702 1,003 345 805 1,150
---------- -------- ------- ---------- -------- -------
A summary of the terms of the management agreement is given in
the Directors' Report in the Annual Report.
In November 2020, OLIM Limited gave notice of its intention to
wind up its operations in early 2021. As a result, the investment
management agreement with OLIM Limited ceased with effect from 28
February 2021 and responsibility for the management of the equity
portfolio moved to OLIM Property Limited.
OLIM Limited received an investment management fee of GBP524,000
(2020 - GBP738,000), the basis of calculation of which is given in
the Annual Report.
OLIM Property Limited received an investment management fee of
GBP479,000 (2020 - GBP412,000), the basis of calculation of which
is given in the Annual Report.
4 Other operating expenses 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
-------------------------- -------------------------- ----------- ------------- ---------- -------------
Fee payable to the Company's auditor
for the audit of the Company's accounts 63 63 50 50
- audit of the Subsidiary's accounts 2 2 2 2
Fee payable to the Company's former
auditor for other services
- other assurance services - - 3 3
- other non audit services - - 7 7
Directors' fees 107 107 94 94
NIC on Directors' fees 7 7 5 5
Fees for company secretarial services 230 230 211 211
Direct property costs (80) (80) 31 31
Other expenses 442 442 475 475
----------- ------------- ---------- -------------
771 771 878 878
----------- ------------- ---------- -------------
Other non-audit services provided by the former auditor comprise
consideration of compliance with covenants.
Directors' fees comprise the Chairman's fees of GBP30,000 (2020
- GBP28,875), the Audit and Management Engagement Committee
Chairman's fees of GBP24,500 (2020 - GBP23,500) and fees of
GBP22,000 (2020 - GBP21,000) per annum paid to each other
Director.
Additional information on Directors' fees is given in the
Directors' Remuneration Report in the Annual Report.
5 Finance costs 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------ ------------------------------- ------------ ------------ ------------ ------------
Interest payable on:
11% First Mortgage Debenture
Stock 2021 1,650 1,650 1,650 1,650
9.375% Debenture Stock 2026 1,875 1,875 1,875 1,875
Less amortisation of issue premium (24) (24) (23) (23)
Bank loan interest payable 1,307 1,307 863 863
Amortisation of loan expenses 85 85 54 54
Finance costs attributable to
lease liabilities 191 157 190 157
5,084 5,050 4,609 4,576
------------ ------------ ------------ ------------
6 Taxation 2021 2020
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---- ------------------------------------- -------- -------- ---------- -------- ---------- ---------
a) Analysis of the tax credit/(charge)
for the year:
Group
Current tax (359) 359 - (263) 263 -
Deferred tax - 773 773 - 96 96
-------- -------- ---------- -------- ---------- ---------
(359) 1,132 773 (263) 359 96
-------- -------- ---------- -------- ---------- ---------
Factors affecting the total tax
credit/(charge) for year:
Profit/(loss) before tax 11,847 (30,756)
-------- ----------
Tax charge/(credit) thereon at
19% (2020 - 19%) 2,251 (5,844)
Effects of:
Non taxable dividends (649) (1,127)
(Gains)/losses on investments
not taxable (1,857) 6,624
Unrelieved finance costs (518) 251
-------- ----------
(773) (96)
-------- ----------
2021 2020
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Company
Current tax (359) 359 - (263) 263 -
Deferred tax - 773 773 - 96 96
-------- -------- ---------- -------- ---------- -----------
(359) 1,132 773 (263) 359 96
-------- -------- ---------- -------- ---------- -----------
Factors affecting the total
tax credit/(charge) for year:
Profit/(loss) before tax 12,477 (30,123)
---------- -----------
Tax charge/(credit) thereon at 19%
(2020 - 19%) 2,371 (5,723)
Effects of:
Non taxable dividends (649) (1,127)
(Gains)/losses on investments
not taxable (1,970) 6,510
Unrelieved finance costs (525) 244
---------- -----------
(773) (96)
---------- -----------
b) Factors affecting future tax
charges
Unutilised tax losses 25,617 29,712
---------- -----------
Potential tax benefit at 19%
(2020 - 19%) 4,867 5,645
Recognised as a deferred tax non-current
asset 1,258 485
Not recognised as a deferred
tax asset 3,609 5,160
---------- -----------
4,867 5,645
---------- -----------
The Company and Group have deferred tax assets of GBP4,867,000
(2020 - GBP5,645,000) at 31 March 2021 relating to total
accumulated unrelieved tax losses carried forward of GBP25,617,000
(2020 - GBP29,712,000). The Company and Group have recognised
deferred tax assets of GBP1,258,000 (2020 - GBP485,000), based on
forecast profits for the next five years but have not recognised
deferred tax assets of GBP3,609,000 (2020 - GBP5,160,000) arising
as a result of losses carried forward. These losses do not have an
expiry date but it is considered too uncertain that the Group will
generate profits against which these losses would be available to
offset and, on that basis, the deferred tax asset in respect of
these losses has not been recognised.
7 Return per ordinary share 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
---- ---------------------------------- ----------- ----------- ----------- -----------
The return per ordinary share
is based on the following figures:
Revenue return 2,417 2,451 4,649 4,682
Capital return 10,203 10,799 (35,309) (34,709)
Weighted average number of Ordinary
Shares in issue 45,216,413 45,216,413 45,549,975 45,549,975
Return per share - revenue 5.35p 5.42p 10.21p 10.28p
Return per share - capital 22.56p 23.88p (77.52p) (76.20p)
Total return per share 27.91p 29.30p (67.31p) (65.92p)
----------- ----------- ----------- -----------
8 Dividends 2021 2020
GBP000 GBP000
----------- ------------------------------------------------- -------- ---------
Dividends on Ordinary Shares:
Third quarterly dividend of 2.90p per share (2020
- 2.80p) paid 24 April 2020
Fourth quarterly dividend of 3.40p per share (2020
final - 3.40p) paid 28 August 2020 1,321 1,275
1,549 1,549
First quarterly dividend of 2.90p per share (2020
- 2.90p) paid 30 October 2020 1,321 1,321
Second quarterly dividend of 2.90p per share (2020
- 2.90p) paid 29 January 2021 1,321 1,321
Dividends paid in the period 5,512 5,466
-------- ---------
The third interim dividend of 2.90p (2020 - 2.90p), paid on 30 April
2021, has not been included as a liability in these Financial Statements.
The final dividend of 3.60p (2020 fourth interim - 3.40p), being paid
on 30 July 2021, has not been included as a liability in these Financial
Statements.
Set out below is the total dividend paid and proposed in respect of
the financial year, which is the basis upon which the requirements
of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered.
The current year's revenue available for distribution by way of dividend
is GBP2,451,000 (2020 - GBP4,682,000).
2021 2020
GBP000 GBP000
First quarterly dividend of 2.90p per share (2020
- 2.90p) paid 30 October 2020 1,321 1,321
Second quarterly dividend of 2.90p per share (2020
- 2.90p) paid 29 January 2021 1,321 1,321
Third quarterly dividend of 2.90p per share (2020
- 2.90p) payable 30 April 2021 1,263 1,321
Final dividend for the year ended 31 March 2021 -
3.60p (2020 fourth interim - 3.40p) payable 30 July
2021 1,568 1,549
5,473 5,512
-------- ---------
The final dividend is based on the latest share capital of 43,557,464
Ordinary Shares excluding those held in Treasury.
9 Investments Investment
properties Equities Total
GBP'000 GBP'000 GBP'000
--- ----------------------------- --------------- -------------------- ------------- ----------
Group
Cost at 31 March 2020 49,319 85,356 134,675
Unrealised appreciation 25,140 5,401 30,541
Valuation at 31 March 2020 74,459 90,757 165,216
Purchases 17,553 4,500 22,053
Sales proceeds (4,703) (79,584) (84,287)
Realised gains on sales 92 8,496 8,588
Movement in unrealised appreciation
in year (6,269) 4,412 (1,857)
Valuation at 31 March 2021 81,132 28,581 109,713
-------------------- ------------- ----------
Investment Investment
in
properties Subsidiary Equities Total
GBP'000 GBP'000 GBP'000 GBP'000
Company
Cost at 31 March 2020 57,647 200 85,356 143,203
Unrealised appreciation 18,040 - 5,401 23,441
--------------- -------------------- ------------- ----------
Valuation at 31 March 2020 75,687 200 90,757 166,644
Purchases 17,553 - 4,500 22,053
Sales proceeds (4,703) - (79,584) (84,287)
Realised gains on sales 92 - 8,496 8,588
Movement in unrealised
appreciation in year (7,497) - 4,412 (3,085)
--------------- -------------------- ------------- ----------
Valuation at 31 March 2021 81,123 200 28,581 109,913
--------------- -------------------- ------------- ----------
The fair value valuation of GBP80,550,000 given by Savills plc excludes
prepaid or accrued operating lease income arising from the spreading
of lease incentives or minimum lease payments amounting to GBP2,289,000
and for adjustments to recognise finance lease liabilities for one
leasehold property amounting to GBP2,871,000, both in accordance
with IFRS 16. The valuation has therefore been increased by GBP582,000.
As noted in Notes 11 and 12, the movement in unrealised appreciation
in the year disclosed in the Company's Statement of Comprehensive
Income includes amortisation of GBP630,000 (2020 - GBP633,000) relating
to the transfer of the 11% Debenture Stock 2021 from Audax Properties
Limited to the Company in 2014.
Transaction costs
During the year expenses were incurred in acquiring and disposing
of investments classified as fair value through profit or loss.
These have been expensed through capital and are included within
gains and losses on investments in the Statement of Comprehensive
Income. The total costs were as follows:-
2021 2020
GBP'000 GBP'000
----------------------------- --------------- -------------------- ------------- ----------
Purchases 27 83
Sales 75 17
-------------------- ----------
102 100
-------------------- ----------
The fair values of the investment properties were independently
valued by professional valuation on an open market basis for existing
use by Savills (UK) Limited, Chartered Surveyors, acting in the
capacity of External Valuers as defined in the RICS Red Book (but
not for the avoidance of doubt as an External Valuer of the portfolio
as defined by the Alternative Investment Fund Managers Regulations
2013). The valuations accord with the requirements of IFRS 13 and
the RICS Valuation - Global Standards (incorporating the IVSC International
Valuation Standards) effective from 31 January 2020 together, where
applicable, with the UK National Supplement effective 14 January
2019 (together the 'Red Book') by reference to the Investment Method
whereby the net annual income derived from a property is capitalised
by an appropriate capitalisation rate or Years' Purchase figure
to arrive at the present Capital Value of the property after an
allowance for the purchaser's costs. The relevant capitalisation
rate is chosen, based on the investment rate of return expected
(as derived from comparisons of other similar property investments)
for the type of property concerned and taking into consideration
such factors as risk, capital appreciation, security of income,
ease of sale and management of the property.
As part of Savills' standard process, the valuations were carried
out by specialist valuers, which were peer reviewed and reviewed
again prior to the valuation date. During the review process, the
various characteristics of each asset were taken into consideration
and, where appropriate, an additional level of risk was applied
taking into account the effect on market sentiment brought on by
COVID-19. Due to the make-up of the portfolio, which predominately
comprises industrial, foodstore and long let properties, yield discounts
were only applied to a number of Licenced and Leisure assets, where
capitalisation rates were moved out by between 25 and 50 basis points.
Inputs
Fair value
- Group Key unobservable Blended
Property portfolio GBP'000 input Range Yield
Net Equivalent
Industrials 30,788 Yield 3.75% - 6.50% 5.60%
Net Equivalent
Pubs 16,755 Yield 5.25% - 13.00% 6.93%
Net Equivalent
Supermarkets 13,090 Yield 4.75% - 6.25% 5.61%
Net Equivalent
Other 12,375 Yield 5.50% - 8.25% 5.54%
Net Equivalent
Leisure 6,005 Yield 8.50% - 9.75% 8.98%
Net Equivalent
Roadside 2,119 Yield 6.75% 6.75%
81,132
===========
A 50 bps increase in the equivalent yield applied would have decreased
the net assets attributable to the Group and Company's Shareholders
and the total loss for the year by GBP1,200,000. A 50 bps decrease
in the equivalent yield applied would have increased the net assets
attributable to the Group and Company's Shareholders and the total
loss for the year by GBP1,350,000. A 5% decrease in the rental value
applied would have decreased the net assets attributable to the
Group and Company's Shareholders and the total loss for the year
by GBP5,950,000. A 5% increase in the rental value applied would
have increased the net assets attributable to the Group and Company's
Shareholders and the total loss for the year by GBP6,900,000.
Investment in subsidiary
Country of Date of acquisition % Ownership Principal
incorporation activity
Name
Value and Indexed Property
Income Services Limited
(formerly Value and Income 16 January
Services Limited) UK 2014 100 AIFM
10 Receivables 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
Amounts falling due within one
year:
Dividends receivable 251 251 323 323
Prepayments and accrued income 721 721 345 346
972 972 668 669
------- -------- -------- -------------
Amounts falling due after more
than one year:
Rental 2,017 2,017 - -
2,989 2,989 668 669
======= ======== ======== =============
Many of the Company's leases provide for minimum and maximum
increases of rental at future rent reviews. Minimum increases have
been averaged over the life of the lease, generating amounts
receivable which require to be recognised as an asset.
11 Current Liabilities
2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
Debenture stock
11% First Mortgage Debenture
Stock 2021 - - 15,000 15,000
Fair value adjustment - - - 630
------------ ----------- -----------
- - 15,000 15,630
----------- ------------ ----------- -----------
The 11% First Mortgage Debenture Stock 2021, previously issued by Audax
Properties plc, was, on 28 March 2014, transferred to Value and Indexed
Property Income Trust PLC (VIP) following the approval of the substitution
of VIP as issuer of the Debentures by the holders on 11 March 2014.
Applications were made to the UK Listing Authority and the London Stock
Exchange for the Debentures to be admitted in the name of VIP to the
Official List and to trading on the main market of the London Stock
Exchange from 28 March 2014.
The 11% First Mortgage Debenture Stock 2021 was repaid at par on 31
March 2021. Under IAS 39, now IFRS 9, this debenture required to be
recorded initially at fair value of GBP19,417,000, rather than its
nominal value of GBP15,000,000 in the Company's financial statements.
The amortised cost of the debenture as at 31 March 2021 was nil (2020
- GBP15,630,000). The amortisation of the fair value adjustment was
presented as a capital item within gains/losses on investments as it
related to the reversal of a previously recognised loss on the Company's
investment in its subsidiary. In the Group financial statements, the
fair value adjustment was eliminated on consolidation.
The Company complied with the Debenture Stock Trust Deed covenants
up to the redemption date.
2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
Payables
Amounts due to OLIM Limited - - 4 4
Amounts due to OLIM Property
Limited 84 84 34 34
Accruals and other creditors 1,653 1,653 1,371 1,372
Value Added Tax payable 572 572 199 199
Lease liability 9 9 16 50
----------- ------------ ----------- -----------
2,318 2,318 1,624 1,659
----------- ------------ ----------- -----------
The amount due to OLIM Property Limited comprise the monthly management
fee for March 2021, subsequently paid in April 2021.
2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
12 Non-current liabilities
Bank loans 37,000 37,000 37,000 37,000
Balance of costs incurred (536) (536) (590) (590)
Costs incurred in the year (22) (22) - -
Add: Debit to income for the
year 85 85 54 54
------------ ------------ -------------- ------------
36,527 36,527 36,464 36,464
9.375% Debenture Stock 2026 20,000 20,000 20,000 20,000
Add:- Balance of premium less
issue expenses 159 159 182 182
Less: Credit to income for the
year (24) (24) (23) (23)
------------ ------------ -------------- ------------
20,135 20,135 20,159 20,159
Lease liability payable in more
than one year
- within 2 - 5 years 37 37 74 214
- over 5 years 2,825 2,825 4,169 5,223
------------ ------------ -------------- ------------
2,862 2,862 4,243 5,437
------------ ------------ -------------- ------------
59,524 59,524 60,866 62,060
------------ ------------ -------------- ------------
The Company has a GBP15,000,000 fixed term secured loan facility
for a period of up to ten years to 31 March 2026 (2020 -
GBP15,000,000). At 31 March 2021, GBP11,893,750 was drawn down at a
rate of 4.344% and GBP3,106,250 was drawn down at a rate of 3.60%.
The terms of the loan facility contain financial covenants that
require the Company to ensure that:-
- in respect of each 3 month period ending on 31 March and 30
September (the Half Year dates), net rental income shall be at
least 200 per cent of interest costs;
- in respect of each 12 month period beginning immediately after
31 March and 30 September, net rental income shall be at least 200
per cent of interest costs; and
- at all times, the loan shall not exceed 60 per cent of the
value of the properties that have been charged.
On 28 November 2019, the Company entered into a GBP22,000,000
fixed term secured loan facility for a period of up to seven years
to 30 November 2026. On 3 March 2021, this facility was extended
until 31 March 2031. At 31 March 2021, GBP20,900,000 was drawn down
at a fixed rate of 3.28099% and GBP1,100,000 was drawn down at a
variable rate of 2.38338% (being LIBOR for the period equal in
length to the interest period of the loan plus a margin of 2.35%).
The terms of the loan facility contain financial covenants that
require the Company to ensure that:-
- the total debt ratio does not at any time exceed 50 per cent;
- projected interest cover is not less than 200 per cent at all times; and
- the Loan to Value shall not exceed 68% of the value of the
properties that have been charged.
The 9.375% Debenture Stock 2026 issued by VIP is repayable at
par on 30 November 2026 and is secured by a floating charge over
the property and assets of the Company.
The Trust Deed of the 9.375% Debenture Stock contains
restrictions and events of default. The restrictions require that
the aggregate group borrowings, GBP57 million, must not at any time
exceed the total group capital and reserves (equivalent to net
assets of GBP118.1 million as at 31 March 2021).
The fair values of the loan and the debentures are disclosed in
Note 21 and the net asset value per share, calculated with the
borrowings at fair value, is disclosed in Note 17.
13 Deferred tax
Under IAS 12, provision must be made for any potential tax liability
on revaluation surpluses. As an investment trust, the Company does not
incur capital gains tax and no provision for deferred tax is therefore
required in this respect.
As disclosed in Note 6, a deferred tax asset has been recognised to reflect
the estimated value of tax losses carried forward which are likely to
be capable of offset against future profits.
14 Share capital 2021 2020
GBP000 GBP000
------ ------------------------------------------------- ------- -------------
Authorised:
56,000,000 Ordinary Shares of 10p each (2020
- 56,000,000) 5,600 5,600
------- -------------
Called up, issued and fully paid:
43,557,464 Ordinary Shares of 10p each (2020
- 45,549,975) 4,356 4,555
Treasury shares:
1,992,511 Ordinary Shares of 10p each (2020 -
- nil) 199
------- -------------
4,555 4,555
------- -------------
The ordinary share capital on the Statement of Financial Position relates
to the number of Ordinary Shares in issue and in Treasury. Only when
shares are cancelled, either from Treasury or directly, is a transfer
made to the Capital Redemption Reserve.
During the year, the Company repurchased 1,992,511 Ordinary Shares
(2020 - nil) at a cost of GBP4,332,381 including expenses (2020 - nil).
All of these shares were placed in Treasury.
15 Share premium 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
---- --------------- ------- -------- ------- --------
Opening balance 18,446 18,446 18,446 18,446
------- -------- ------- --------
16 Retained earnings 2021 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------ ---------------------------- --------- ---------- ----------- -----------
Opening balance at 31 March
2020 92,306 91,676 128,432 127,169
Profit/(loss) for the year 12,620 13,250 (30,660) (30,027)
Dividends paid (see Note 8) (5,512) (5,512) (5,466) (5,466)
Buyback of Ordinary Shares
for Treasury (see Note 14) (4,332) (4,332) - -
Closing balance at 31 March
2021 95,082 95,082 92,306 91,676
--------- ---------- ----------- -----------
The table below shows the movement in retained earnings analysed between
revenue and capital items.
2021 2020
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Group
Opening balance at 31 March
2020 3,191 89,115 92,306 4,008 124,424 128,432
Profit/(loss) for the year 2,417 10,203 12,620 4,649 (35,309) (30,660)
Dividends paid (see Note
8) (5,512) - (5,512) (5,466) - (5,466)
Buyback of Ordinary Shares
for Treasury (see Note
14) - (4,332) (4,332) - - -
Closing balance at 31 March
2021 96 94,986 95,082 3,191 89,115 92,306
-------- -------- -------- -------- --------- ---------
Company
Opening balance at 31 March
2020 2,070 89,606 91,676 2,854 124,315 127,169
Profit/(loss) for the year 2,451 10,799 13,250 4,682 (34,709) (30,027)
Dividends paid (see Note
8) (5,512) - (5,512) (5,466) - (5,466)
Buyback of Ordinary Shares
for Treasury (see Note
14) - (4,332) (4,332) - - -
Closing balance at 31 March
2021 (991) 96,073 95,082 2,070 89,606 91,676
-------- -------- -------- -------- --------- ---------
Of the Company's Retained Earnings of GBP95,082,000,
GBP69,262,000 is considered to be distributable.
17 Net asset value per equity share
The net asset values per Ordinary Share are based on the Group's net
assets attributable of GBP118,083,000 (2020 - GBP115,307,000) and on
the Company's net assets attributable of GBP118,083,000 (2020 - GBP114,677,000)
and on 43,557,464 (2020 - 45,549,975) Ordinary Shares in issue at the
year end, excluding shares held in Treasury.
The net asset value per Ordinary Share, based on the net assets of the
Group and the Company adjusted for borrowings at fair value (see Note
21) of GBP111,755,000 (2020 - GBP105,990,000) is 256.57p (2020 - 232.69p).
2021 2020
Group Company Group Company
Net assets at 31 March 2021 118,083 118,083 115,307 114,677
Fair value adjustments (6,328) (6,328) (9,317) (8,687)
----------- ----------- ----------- -------------
Net assets with borrowings at fair
value 111,755 111,755 105,990 105,990
----------- ----------- ----------- -------------
Number of shares in issue 43,557,464 43,557,464 45,549,975 45,549,975
Net asset value per share 271.10p 271.10p 253.14p 251.76p
Net asset value per share with borrowings
at fair value 256.57p 256.57p 232.69p 232.69p
2021 2020
18 Reconciliation of income from operations
before tax to net cash inflow from operating Group Company Group Company
activities GBP000 GBP000 GBP000 GBP000
18,705 19,301 (24,119) (23,519)
Income from operations before tax
(Gains)/losses on investments (9,773) (10,369) 34,863 34,263
Investment management fee (1,003) (1,003) (1,150) (1,150)
Other operating expenses (771) (771) (878) (878)
(Increase)/decrease in receivables (274) (274) 239 239
Increase/(decrease) in other payables 391 391 (418) (418)
Net cash from operating activities 7,275 7,275 8,537 8,537
---------- ----------- ---------- ----------
19 2021 2020
---- ----------------------------------
Group Company Group Company
----
Reconciliation of current and GBP000 GBP000 GBP000 GBP000
non-current liabilities arising
from financing activities
---- ---------------------------------- --------- --------- --------- ---------
Cash movements
Payment of rental (for leasing) 209 209 205 206
Repayment of debenture 15,000 15,000 - -
Drawdown of loans (for financing) - - (21,680) (21,680)
Loan costs 22 22 - -
Non-cash movements
Finance costs (for leasing) 1,179 2,407 (190) (157)
Changes in fair value - 630 - 633
Amortisation of loan premium and
expenses and fair value adjustment (61) (61) (30) (30)
Change in debt in the year 16,349 18,207 (21,695) (21,028)
Opening debt at 31 March 2020 (75,882) (77,740) (54,187) (56,712)
Closing debt at 31 March 2021 (59,533) (59,533) (75,882) (77,740)
--------- --------- --------- ---------
20 Relationship with the Investment Manager and Related Parties
Value and Indexed Property Income Services Limited is a wholly owned
subsidiary of Value and Indexed Property Income Trust PLC and all costs
and expenses are borne by Value and Indexed Property Income Trust PLC.
Value and Indexed Property Income Services Limited has not traded during
the year.
Matthew Oakeshott is a director of OLIM Property Limited which has an
agreement with the Group to provide investment management services, the
terms of which are outlined in the Annual Report and in Note 3.
21 Financial instruments and investment property risks
Risk management
The Group's and the Company's financial instruments and
investment property comprise securities, property and other
investments, cash balances, loans and debtors and creditors that
arise directly from its operations; for example, in respect of
sales and purchases awaiting settlement or debtors for accrued
income.
The Managers have dedicated investment management processes
which ensures that the Investment Policy set out in the Annual
Report is achieved. For equities, stock selection procedures are in
place based on active portfolio management and the identification
of stocks. The portfolio is reviewed on a periodic basis by a
senior investment manager and also, until 28 February 2021, by
OLIM's Investment Committee and then by OLIM Property's Investment
Committee.
Additionally, the Managers' Compliance Officers continually
monitor the Group's investment and borrowing powers and report to
their respective Managers.
The main risks that the Group faces from its financial
instruments are:
(i) market risk (comprising price risk, interest rate risk and currency risk)
(ii) liquidity risk
(iii) credit risk
The Board regularly reviews and agrees policies for managing
each of these risks. The Managers' policies for managing these
risks are summarised below and have been applied throughout the
year.
(i) Market risk
The fair value of, or future cash flows from, a financial
instrument held by the Group may fluctuate because of changes in
market prices. This market risk comprises three elements - price
risk, interest rate risk and currency risk.
Price risk
Price risks (i.e. changes in market prices other than those
arising from interest rate or currency risk) may affect the value
of the Group's investments.
It is the Board's policy to hold an appropriate spread of
investments in the portfolio in order to reduce the risk arising
from factors specific to a particular sector. For equities, asset
allocation and stock selection, as set out in the Investment Policy
in the Annual Report, both act to reduce market risk. The Manager
actively monitors market prices throughout the year and reports to
the Board, which meets regularly in order to review investment
strategy. The investments held by the Company are listed on the
London Stock Exchange.
All investment properties held by the Group are commercial
properties located in the UK with long, strong income streams.
Price risk sensitivity
If market prices at the date of the Statement of Financial
Position had been 10% higher or lower, while all other variables
remained constant, the return attributable to ordinary shareholders
for the year ended 31 March 2021 would have increased/decreased by
GBP10,971,000 (2020 - increase/decrease of GBP16,522,000) and
equity reserves would have increased/ decreased by the same
amount.
Interest rate risk
Interest rate movements may affect:
- the fair value of the investments in property; and
- the level of income receivable on cash deposits
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are
appropriate to market conditions and reviews these on a regular
basis. Borrowings comprise debenture stock and five and ten year
bank loans, providing secure long term funding. It is the Board's
policy to maintain a gearing level, measured on the most stringent
basis of calculation after netting off cash equivalents, of between
25% and 50%. Details of borrowings at 31 March 2021 are shown in
Notes 11 and 12.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets
and liabilities at the balance sheet date was as follows:
Weighted average Weighted
period for which average Floating
rate is fixed interest Fixed rate rate
At 31 March 2021 Years rate % GBP'000 GBP'000
--------------------------- ------------------ ---------- ----------- --------------
Assets
Sterling 0.00 - 65,965
Total assets - 0.00 - 65,965
------------------ ---------- ----------- --------------
Weighted average Weighted
period for which average Floating
rate is fixed interest Fixed rate rate
At 31 March 2021 Years rate % GBP'000 GBP'000
--------------------------- ------------------ ---------- ----------- --------------
Liabilities
Sterling 7.17 5.64 57,000 -
Total liabilities 7.17 5.64 57,000 -
------------------ ---------- ----------- --------------
Weighted average Weighted
period for which average Floating
rate is fixed interest Fixed rate rate
At 31 March 2020 Years rate % GBP'000 GBP'000
--------------------------- ------------------ ---------- ----------- --------------
Assets
Sterling 1 1.14 21,756 4,672
Total assets 1 1.14 21,756 4,672
------------------ ---------- ----------- --------------
Weighted average Weighted
period for which average
rate is fixed interest Fixed rate Floating
At 31 March 2020 Years rate % GBP'000 rate GBP'000
--------------------------- ------------------ ---------- ----------- --------------
Liabilities
Sterling 5.35 6.715 72,000 -
Total liabilities 5.35 6.715 72,000 -
------------------ ---------- ----------- --------------
The weighted average interest rate on borrowings is based on the interest
rate payable, weighted by the total value of the loans. The maturity
dates of the Group's loans are shown in Notes 11 and 12.
The floating rate assets consist of cash deposits on call, earning
interest at prevailing market rates. The Group's equity and property
portfolios and short term receivables and payables are non interest
bearing and have been excluded from the above tables. All financial
liabilities are measured at amortised cost.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure
to interest rates at the balance sheet date and the stipulated change
taking place at the beginning of the financial year and held constant
throughout the reporting period in the case of instruments that have
floating rates.
If interest rates had been 100 basis points higher or lower and all
other variables were held constant, the Group's:
* profit for the year ended 31 March 2021 would
increase/decrease by GBP47,000 (2020 - increase /
decrease by GBP43,000). This is mainly attributable
the Group's exposure to interest rates on its
floating rate cash balances.
* the Group holds no financial instruments that will
have an equity reserve impact.
In the opinion of the Directors, the above sensitivity analyses are
not representative of the year as a whole, since the level of exposure
changes frequently as part of the interest rate risk management process
used to meet the Group's objectives.
Currency risk
A small proportion of the Group's investment portfolio is invested
in securities whose fair value and dividend stream are affected by
movements in foreign exchange rates. It is not the Group's policy to
hedge this risk.
Currency sensitivity
There is no sensitivity analysis included as the Group has no outstanding
foreign currency denominated monetary items. Where the Group's equity
investments (which are non-monetary items) are affected, they have
been included within the other price risk sensitivity analysis so as
to show the overall level of exposure.
(ii) Liquidity risk
This is the risk that the Group will encounter difficulty in
meeting obligations associated with its financial liabilities.
The Group's assets comprise of readily realisable securities
which can be sold to meet commitments if required and investment
properties which, by their nature, are less readily realisable. The
maturity of the Group's existing borrowings is set out in the
interest risk profile section of this note.
The table below details the Group's remaining contractual
maturity for its financial liabilities, based on the undiscounted
cash outflows, including both interest and principal cash flows,
and on the earliest date upon which the Group can be required to
make payment.
As at 31 March 2021
Due between
3 months
Carrying Expected Due within and Due after
value cashflows 3 months 1 year 1 year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Borrowings 57,853 78,738 1,268 1,951 75,519
Leases 2,871 7,351 22 65 7,264
Other payables 527 527 527 - -
--------- ----------- ----------- ------------ ----------
Total 61,251 86,616 1,817 2,016 82,783
--------- ----------- ----------- ------------ ----------
As at 31 March 2020
Borrowings 73,062 95,311 1,380 18,571 75,360
Leases 4,259 11,547 51 154 11,342
Other payables 467 467 467 - -
--------- ----------- ----------- ------------ ----------
Total 77,788 107,325 1,898 18,725 86,702
--------- ----------- ----------- ------------ ----------
(iii) Credit risk
This is the failure of a counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Group suffering a loss.
The risk is not significant and is managed as follows:
- investment transactions are carried out on behalf of VIP by an
outsourced dealing agent. Settlement of these transactions is
executed by a large investment bank whose credit standing is
reviewed periodically by OLIM Property (which reports to VIS).
- the risk of counterparty exposure due to failed trades causing
a loss to the Group is mitigated by the review of failed trade
reports on a daily basis. In addition, a stock reconciliation to
third party administrators' records is performed on a daily basis
to ensure that discrepancies are picked up on a timely basis.
- cash is held only with reputable banks with high quality
external credit ratings which are monitored on a regular basis.
Credit risk exposure
In summary, compared to the amounts on the Group Statement of
Financial Position, the maximum exposure to credit risk during the
year to 31 March was as follows:
2021 2020
Balance
Balance Sheet Maximum exposure Sheet Maximum exposure
GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Cash and cash equivalents 65,965 83,209 26,428 26,428
Other receivables 597 7,733 668 1,185
66,562 90,942 27,096 27,613
-------------- ----------------- --------- -----------------
(iv) Property risk
The Group's commercial property portfolio is subject to both
market and specific property risk. Since the UK commercial property
market has been markedly cyclical for many years, it is prudent to
expect that to continue. The price and availability of credit, real
economic growth and the constraints on the development of new
property are the main influences on the property investment
market.
Against that background, the specific risks to the income from
the portfolio are tenants being unable to pay their rents and other
charges, or leaving their properties at the end of their leases.
All leases are on full repairing and insuring terms, with upward
only rent reviews and the average unexpired lease length is 17
years (2020 - 17 years). Details of the tenant and geographical
spread of the portfolio are set out In the Annual Report. The long
term record of performance through the varying property cycles
since 1987 is set out in the Annual Report. OLIM Property is
responsible for property investment management, with surveyors,
solicitors and managing agents acting on the portfolio under OLIM
Property's supervision.
The Group leases out its investment property to its tenants
under operating leases. At 31 March 2021, the future minimum lease
receipts under non-cancellable leases are as follows:-
2021 2020
GBP000 GBP000
Due within 1 year 5,152 4,482
Due between 2 and 5 years 20,362 17,675
Due after more than 5 years 63,155 49,642
------- -------
88,669 71,799
------- -------
This amount comprises the total contracted rent receivable as at
31 March 2021.
None of the Group's financial assets is past due or
impaired.
Fair values of financial assets and financial liabilities
All assets and liabilities of the Group other than receivables
and payables and the borrowings are included in the Balance Sheet
at fair value.
(i) Fair value hierarchy disclosures
All assets and liabilities of the Group other than receivables
and payables and the borrowings are included in the Balance Sheet
at fair value.
The table below sets out fair value measurements using the IFRS
13 Fair Value hierarchy:-
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
At 31 March 2021
Equity investments 28,581 - - 28,581
Investment properties - - 81,132 81,132
-------- -------- -------- --------
28,581 - 81,132 109,713
-------- -------- -------- --------
At 31 March 2020
Equity investments 90,757 - - 90,757
Investment properties - - 74,459 74,459
-------- -------- -------- --------
90,757 - 74,459 165,216
-------- -------- -------- --------
Company and Group numbers per the above fair value disclosures
are the same except for the investment of GBP200,000 made by the
Company in its subsidiary and, for 2020 only, the differing fair
value of one property, sold during the year, which was the subject
of an inter-group transfer in 2014.
Fair value categorisation within the hierarchy has been
determined on the basis of the degree to which the inputs to the
fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety as
follows:-
Level 1 - inputs are unadjusted quoted prices in an active
market for identical assets
Level 2 - inputs, not being quoted prices, are observable,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices)
Level 3 - inputs are not observable
There were no transfers between Levels during the year.
(ii) Borrowings
The fair value of borrowings has been calculated at
GBP62,652,000 as at 31 March 2021 (2020 - GBP81,317,000) compared
to a Balance Sheet value in the Financial Statements of
GBP56,662,000 (2020 - GBP71,623,000) per Notes 11 and 12.
The fair value of the debenture is determined by comparison with
the fair value of an equivalent gilt edged security, discounted to
reflect the differing levels of credit worthiness of the borrowers.
The fair values of the loans are determined by a discounted cash
flow calculation based on the appropriate inter-bank rate plus the
margin per the loan agreement. These instruments are therefore
considered to be Level 2 as defined above. There were no transfers
between Levels during the year.
All other assets and liabilities of the Group are included in
the Balance Sheet at fair value.
Fair value Balance Sheet Value
2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000
9.375% Debenture Stock 2026 25,517 26,740 20,135 20,159
11% First Mortgage Debenture
Stock 2021 - 16,074 - 15,000
25,517 42,814 20,135 35,159
Bank loans 37,135 38,503 36,527 36,464
62,652 81,317 56,662 71,623
----------- ------- ------------- -------
There were no transfers between Levels during the year.
22 Capital management policies and procedures
The Group's capital management objectives are:
- to ensure that the Group will be able to continue as a going concern; and
- to maximise the return to its equity shareholders in the form
of long term real growth in dividends and capital value without
undue risk through the optimisation of the debt and equity
balance.
The capital of the Group consists of equity, comprising issued
capital, reserves, borrowings and retained earnings.
The Board monitors and reviews the broad structure of the
Group's capital. This review includes:
- the planned level of gearing which takes into account the
Managers' views on the market and the extent to which revenue in
excess of that which requires to be distributed should be
retained.
The Group's objectives, policies and processes for managing
capital are unchanged from the preceding accounting period.
Details of the Group's gearing and financial covenants are
disclosed in Notes 11 and 12.
23 Events after the Statement of Financial Position Date
There are no significant subsequent events for the Group or the
Company though purchases and sales of property in the normal course
of business which completed after the year end are disclosed in the
Annual Report.
Additional Information
In accordance with section 435 of the Companies Act 2006, the
Directors advise that the financial information set out in this
announcement does not constitute the Group's statutory Financial
Statements for the period ended 31 March 2021 but is derived from
these Financial Statements. The statutory Financial Statements for
the year ended 31 March 2020 have been delivered to the Registrar
of Companies and contained an audit report which was unqualified
and did not constitute statements under S498(2) or S498(3) of the
Companies Act 2006.
The Financial Statements for the period ended 31 March 2021 have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union. The Financial
Statements for the period ended 31 March 2021 will be forwarded to
the Registrar of Companies following the Company's Annual General
Meeting. The Auditors have reported on these Financial Statements;
their reports were unqualified and did not contain statements under
Section 498(2) or (3) of the Companies Act 2006.
The Group and Company Statement of Financial Position at 31
March 2021 and the Group and Company Statement of Comprehensive
Income, Statement of Changes in Equity and Statement of Cash Flows
for the year then ended have been extracted from the Group's
Financial Statements. Those Financial Statements have not yet been
delivered to the Registrar.
The 2021 Annual Report and Financial Statements will be posted
to Shareholders shortly and will contain the Notice of the Annual
General Meeting of the Company to be held on Friday, 23 July 2021
at 12.30pm at the offices of Maven Capital Partners UK LLP, First
Floor Kintyre House, 205 West George Street, Glasgow G2 2LW. As
referred to in the Chairman's Statement, due to the Government
advice against all non-essential travel and the rules on
maintaining social distancing, Shareholders will be unable to
attend the Annual General Meeting in person.
For Value and Indexed Property Income Trust PLC
Maven Capital Partners UK LLP
Company Secretary
22 June 2021
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