abrdn Euro Logistics - Half-year Report
28/09/2023 07:00
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RNS Number : 8972N abrdn European Logistics Income plc 28 September 2023
27 September 2023
LEI: 213800I9IYIKKNRT3G50
abrdn European Logistics Income plc (LSE: ASLI) (the "Company" or "ASLI")
INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2023
Diversified portfolio of Continental European mid box and urban logistics
assets continues to benefit from occupier demand, supported by high
indexation, and sectoral tailwinds
abrdn European Logistics Income plc, the Continental European investor in
modern warehouses, which is managed by abrdn, announces its interim results
for the half year ended 30 June 2023.
NAV impacted by sector-wide asset re-pricing, which slowed in the second
quarter; low all-in fixed interest debt with no near term maturity provides
balance sheet flexibility
· Net asset value per ordinary share decreased by 8.9% to 108.29
cents (31 December 2022: 118.89 cents), primarily driven by market-wide
outward yield movements as a result of rising interest rates
· IFRS NAV total return for half year to 30 June 2023 of -6.6%
(year to 31 December 2022: -3.8%)
· EPRA net tangible assets 113.11 cents (31 December 2022: 125.47
cents)
· IFRS earnings per share for half year to 30 June 2023 of -7.76
cents (half year to 30 June 2022: 4.82 cents)
· Loan to Value of 35.3% at 30 June 2023 (31 December 2022: 34.0%)
· Low all-in fixed interest rate of 2.00%, with no refinancings due
until mid-2025 (31 December 2022: 2.01%)
· Dividend distributions for half year to 30 June 2023 2.82 cents
per share (half year to 30 June 2022: 2.82 cents)
Pro-active asset management initiatives to underpin portfolio occupancy and
indexation-led earnings growth, leveraging embedded pan-European platform
· Portfolio value as at 30 June 2023 was €693 million (31
December 2022: €759 million), reflecting the disposal of Leon; the
like-for-like portfolio valuation decreased by 6.4%, largely driven by outward
yield movement
· Completed the disposal of a warehouse in Leon, Northern Spain,
for €18.5 million, reflecting a small premium to the 31 March 2023 valuation
· Attractive WAULT to expiry of 8.7 years and inflation linked
lease profile, with c. two thirds of current portfolio income subject to full
uncapped indexation
· Headline passing rent of €33.7 million at 30 June 2023 (30 June
2022: €28.3 million)
· Completed income enhancing asset management successes across
80,819 sqm, generating €5 million of annualised rent:
o 9.5 year lease with Dachser France at its La Creche, Niort, property, 3%
ahead of previous annual rent payable
o 12-year lease extension agreed with Biocoop on 28,500 sqm at its highly
sustainable warehouse near Avignon, France, generating an annual contracted
rent of €2.5 million
o Five-year lease extension with Kruidvat at its 39,840 sqm single-tenant
warehouse in Ede, the Netherlands, reflecting a 4% increase on the previous
passing rent
· The Company maintained its four stars out of five awarded in the
Global Real Estate Sustainability Benchmark ('GRESB') survey with expectations
for further improvement this year.
Tony Roper, Chairman, abrdn European Logistics Income, commented:
"Whilst we recognise there are clear challenges ahead as a result of the
ongoing macroeconomic volatility, we are confident that 2024 will see an
improving environment. Investors continue to support the Company, recognising
the qualities of the GRESB 4-star rated portfolio underpinned by the changing
nature of both tenants and their customers in the desire for reliable and fast
delivery lines and supported by indexed income-producing assets and
competitive fees.
"With a deeply embedded pan-European platform and singular focus on carefully
selected, tenant critical assets in well-located areas close to population
hubs with good transport links, combined with our solid balance sheet, we are
well placed to generate continued growth and attractive returns for our
shareholders over the long-term."
Troels Andersen, Lead Fund Manager, abrdn European Logistics Income, added:
"The structural drivers underpinning the logistics sector remain compelling.
With the rise of improved data handling, automation, robotics and other
technologies, logistics operators and suppliers can create more efficient
supply chains with fewer risks of costly delays. This requires modern
warehousing in new and established locations which will sustain the current
demand and supply imbalance over the long-term: vacancy rates remain less than
100 basis points above the record lows witnessed earlier this year.
"We expect logistics to be one of the best performing sectors once
macroeconomic markets regain stability, given both these longer term
structural drivers and more immediate pressures impacting on new development.
The link to the economy is clear in recent data, but long-term conviction in
the European logistics sector remains strong. As our Leon disposal
demonstrated, modern logistics units of between 20,000 to 40,000 square metres
in fringe city locations represent a 'liquid' part of the logistics market
from both a leasing and investment perspective, and offer robust performance
prospects in the long run."
-Ends-
For further information please contact:
abrdn +44 (0) 20 7463 6000
Stephanie Hocking
Gary Jones
Investec Bank plc +44 (0) 20 7597 4000
David Yovichic
Denis Flanagan
FTI Consulting +44 (0) 20 3727 1000
Dido Laurimore
Richard Gotla
James McEwan
Highlights
IFRS Net Asset Value Portfolio Valuation Total Assets
(€'000) (€'000) (€'000)
446,360 693,488 758,214
31 December 2022: 489,977 31 December 2022: 758,719 31 December 2022: 817,783
Net Asset Value Total Return (EUR) Share Price Total Return (GBP) Discount to Net Asset Value
for the half year to 30 June 2023 (%)1 for the half year to 30 June 2023 (%)1 per share (%)1
(6.6) (0.4) (29.0)
Year ended 31 December 2022: (3.8) Year ended 31 December 2022: (38.3) 31 December 2022: (35.0)
Net Asset Value Total Return (EUR) Share Price Total Return since Ordinary Share Price
since launch to 30 June 2023 (%) launch to 30 June 2023 (%) (p)
20.8 (15.5) 66.00
Since launch to 31 December 2022: 29.2 Since launch to 31 December 2022: (15.1) 31 December 2022: 68.50
IFRS Net Asset Value Dividend declared for the IFRS Earnings Per Share for the
per share (¢)1 half year to 30 June 2023 (¢) half year to 30 June 2023 (¢)
108.29 2.82 (7.76)
31 December 2022: 118.89 Year ended 31 December 2022: 5.642 Year ended 31 December 2022: (4.51)
EPRA Net Tangible Assets All-in fixed Loan-To-Value
per share (¢)1 interest rate (%) (%)1
113.11 2.00 35.3
31 December 2022: 125.47 31 December 2022: 2.01 31 December 2022: 34.0
Number of Average lease length excluding Average building size
assets breaks in years (sqm)
26 8.7 20,940
31 December 2022: 27 31 December 2022: 8.9 31 December 2022: 21,374
Interim Board Report
Chairman's Statement
Overview
I am pleased to be presenting the Company's half yearly report for the six
months ended 30 June 2023.
The Company's investment objective remains solely focused on investing in
logistics real estate in Europe, with our strategy targeting both mid box
assets and smaller format 'urban logistics' that serve 'last mile' functions
for the growing near-shoring, supply chain diversification and e-commerce
activities of businesses across Europe.
Unprecedented inflationary pressures, global uncertainty as to future
macroeconomic developments and increased energy costs, leading to the sharp
increase in interest rates witnessed over the second half of 2022 and into
2023, saw a consequent adjustment to property yields and asset values.
Our portfolio has not been immune from such yield movement; and over the first
six months of the year the portfolio value, (excluding disposals) declined
by €47.3m (6.4%). However, the underlying premise of growth from
in-demand assets, buoyed by the continued near-shoring of operations, growth
in e-commerce, land scarcity and rising construction costs, remains.
Additionally, we have seen inflation feeding through into annual lease
reviews, a major benefit of many European lease agreements which are
predominantly linked to local CPI or its equivalent, helping to underpin
income and, to an extent, valuations.
Market overview
GDP growth in the Eurozone has been muted, with seasonally-adjusted quarter
-on-quarter figures of 0.0% and 0.3% in Q1 and Q2 2023 respectively. Both
were disproportionately affected by Ireland's volatile national accounts,
creating the impression of a pickup in momentum that is not reflected across
other Eurozone members. Indeed, surveys suggest the Eurozone carried poor
momentum into Q3, and purchasing manager indices (PMI's) point to contraction
in July.
Additionally, with retail sales falling, the industrial sector shrinking, bank
lending conditions becoming more restrictive, and the impact of monetary
tightening building, there is every chance that the Euro economy will fall
into recession in Q4 of this year.
Encouragingly the ECB is no longer signalling further rate increases. It
increased the deposit rate by 25bps to 4.0% from 20 September due to concerns
around strong wage growth and sticky inflation. Ultimately a recession would
likely mean a rate cutting cycle during 2024.
Strategy
Like many in the wider sector, whilst our financial and operational
performance may have been resilient, it has nonetheless been impacted by the
higher interest rate environment. With that in mind, the Board has continued
to monitor the current dividend level, and is exploring options which could
allow for improvement in the Company's dividend cover.
Alongside the portfolio indexation which is underpinning rental growth,
predicted lower interest rates for 2024 will support capital values and
earnings. The yield correction witnessed over the past 12 months is widely
expected to have slowed by early 2024, and with a possible economic recovery
in H2 2024 and a rate cutting cycle possibly commencing later in H1 2024, real
estate capital markets are anticipated to react ahead of this when green
shoots appear.
We continue to monitor, through the Investment Manager, credit quality and
tenant risk. At the same time, consideration may be given to the early small
repayment of borrowings using any sales proceeds, or use of additional
security from our currently unsecured assets, to provide greater capacity
with regards to our income and loan to value covenants.
In May the Board took the opportunity to visit the Company's two German assets
to meet with tenants and to see first-hand the Investment Manager's
operations in Frankfurt. As with Madrid last year, it was pleasing to meet the
experienced asset and transaction teams on the ground who deal so closely
with our tenants and various stakeholders.
Further details on the Company's portfolio are provided in the Investment
Manager's Report that follows.
Results
The unaudited Net Asset Value ("NAV") per share as at 30 June 2023 was 108.3
euro cents (GBp - 92.9p), compared with the NAV per share of 118.9 euro cents
(GBp - 105.4p) at 31 December 2022. With the interim dividends declared, this
represents a NAV total return of -6.6% for the six month period under review,
in euro terms.
The closing Ordinary share price at 30 June 2023 was 66.0p (31 December 2022 -
68.5p), implying a discount to the NAV per share of 29.0%.
Rent collection & asset management
The Company's rent collection remained robust, despite the continued
economic pressures, with 96% of the expected rental income for the half year
ended 30 June 2023 collected.
Following the planned lease surrender in August, the Investment Manager is
now actively seeking a tenant for the smaller, modern unit in Madrid
previously occupied by Amazon, with interested parties in active discussions
with agents. Talks are also ongoing with Arrival as we seek agreement on
their proposed surrender of two leases in Madrid. The warehouses in question
provide good optionality for splitting into up to five smaller units,
which could help to satisfy local occupier demand.
During the period the Company completed four leasing transactions, in three
countries, across 80,819 sq m extending the WAULT to expiry to 8.7 years.
It also completed the disposal of the warehouse in Leon, Northern Spain, for
€18.5 million, reflecting a small premium to the 31 March 2023 valuation.
Dividend
On 17 February 2023 the Board declared a fourth interim distribution of 1.41
euro cents (equivalent to 1.20 pence) per Ordinary share in respect of the
year ended 31 December 2022. In aggregate a total dividend of 5.64 euro
cents was paid in respect of the 2022 financial year, unchanged from 2021. The
equivalent sterling rate paid was 4.79 pence.
First and second interim distributions of 1.41 euro cents (equivalent to 1.23
pence and 1.22 pence respectively) have been declared in respect of the year
ending 31 December 2023.
Interim dividends continue to be declared in respect of the quarters ending on
the following dates: 31 March, 30 June, 30 September and 31 December in each
year.
Revolving credit facility/ financing
The €70 million Revolving Credit Facility ("RCF") provided to the Company by
Investec Bank affords flexibility for the acquisition of new properties and
can help to avoid immediate cash drag on investment returns. The facility is
undrawn at the time of writing, providing ample liquidity should it be
required.
Following the sale of Leon in April and the associated debt repayment, overall
debt at the portfolio level fell to €259.5m with an all-in cost of debt of
2.0%. The Company's low, secured, fixed rate debt provides support to its
investment objective, with no re-financing required until mid-2025.
The LTV was 35.3% as at 30 June 2023. The maturity of the
Company's non-recourse loans ranges between 1.9 and 5.6 years, with interest
rates ranging between 1.1% and 3.1% per annum.
The Board continues to keep the level of borrowings, calculated at the time of
drawdown for a property purchase, under review. The actual level of gearing
may fluctuate over the Company's life as and when new assets are acquired or
whilst short-term asset management initiatives are being undertaken. Banking
covenants are reviewed by the Investment Manager and the Board on a regular
basis.
ESG
Our portfolio has strong ESG credentials, and has retained the four stars (out
of five) which it was awarded in the 2022 GRESB survey (Global Real Estate
Sustainability Benchmark). The Investment Manager continues to seek to enhance
areas where improvements can be made, including investigating further solar
panel projects, LED lighting and analysis of energy and water consumption.
This process is informed in part by our ongoing tenant satisfaction survey,
and we have hopes of an even better score this year.
The Investment Manager has maintained its focus on asset management
initiatives, leveraging its network of locally based asset managers in order
to enhance the value of the portfolio's assets. This includes initiatives
around building extensions and improvements to sites, both internally and
externally, for the benefit of tenants and their workforces and to enhance the
future value of the assets.
Outlook
Prospects for both the sector and the Company remain positive. As the
uncertainty surrounding the macroeconomic backdrop begins to clear, we believe
that the combination of strong underlying market fundamentals and positive
structural drivers will continue to attract capital to the European logistics
sector, and will support rental growth.
Interest rate rises and tougher economic conditions have undoubtedly left
their mark on the real estate sector and have impacted valuations. Investor
confidence has also been tested, with the share price falling as risk aversion
took hold, as has been the case for many in the real estate sector.
Nonetheless, with the Eurozone seeing an end in sight for rate tightening, the
signs are promising for the European logistics occupier market. We should
benefit in time from strong leasing momentum, with Europe still at a
relatively early stage of its supply chain reconfiguration and e-commerce
penetration still some way behind the UK. The incontrovertible shift in the
way in which consumers shop, and the infrastructure required to service this
new form of demand close to population centres, underpins the positive longer
term prospects for the Company's investment approach.
The Board continues to look at best options to improve the Company's share
price rating. There are clear challenges ahead, but the Company's portfolio is
characterised by carefully selected, tenant critical assets in well-located
areas close to population hubs with good transport links. Vacancy rates in
Europe remain close to historic lows, reflecting the lack of new supply being
delivered into the market as a result of financing costs.
The Investment Manager believes that our logistics assets remain relatively
defensive, with our success in effecting the Leon disposal above book value
demonstrating the liquidity in the part of the market on which we are focused.
We remain confident that our well-positioned high quality portfolio, combined
with our solid balance sheet, will be able to generate continued growth and
attractive returns for our shareholders over the longer term as we move into
an improving environment in 2024.
Tony Roper
Chairman
27 September 2023
Interim Board Report
Investment Manager's Review
Logistics market trends
Logistics has been one of the most heavily sought- after sectors by investors
in recent years. In 2022, logistics accounted for 19% of all Commercial Real
Estate investments, a substantial increase on the 9% seen in 2015. However,
the €39 billion of logistics deals closed in the year to June 2023
represented a 50% decline on the previous 12-month period. Investment market
liquidity is currently lower than previous years given the mismatch in buyer
and seller pricing expectations, with yields still to peak due to
inflationary pressures and interest rate increases.
Where values have fallen the most and where yields have broadly stabilised, we
are starting to see more deal activity. Values in the Netherlands have fallen
roughly 30% and some investors already consider this area to be offering
better value today. Currently, the lowest yields can be found in Germany
(4.4%), the Netherlands (4.5%) and France (4.6%); while yields in Spain and
Poland are increasing and now stand close to 5% and 6%. In parts of Western
Europe outward yield shift has slowed as 2023 has progressed, and with
interest rate hikes moderating, transaction based indices from Green Steet
suggest that the correction in values is close to stabilising.
Recent stability can be put down to several factors. One of those is that
logistics yields have now caught up with all-in debt costs in many markets. We
estimate that logistics financing can be sourced at roughly 4.6% on average in
core markets, based on the Eurozone five-year swap rate of 3.2% (as of August
2023) and bank lending margins quoted at 140 basis points on good quality and
well-let properties. Average prime logistics yields are now 5.1%, so a
positive spread has been re-established, even if interest rates remain
elevated. Central and Eastern European markets and riskier assets remain more
costly and tougher to finance. There are more refinancing issues and distress
to come, as well as a possible increase in margins in the event of a harsh
recession, so it is too early to say that leverage is no longer a hindrance.
The logistics sector is showing signs of slowing down in line with the
economic backdrop. The Eurozone Manufacturing PMI fell to 42.7 in July 2023,
from 43.4 in the previous month, the lowest level in three years. It reflects
a continuation in manufacturing slowdown that has now lasted a full year.
Looking deeper at the drivers of demand, 2022 e-commerce sales growth beat
expectations to reach 12.8% in Europe. This took the e-commerce sales
penetration rate to a new high of 18.2%. Had it not been for a sharp
retrenchment in e-commerce sales penetration in the UK, the aggregate numbers
would have been even more impressive.
Germany led the growth on the continent with a 265 basis point increase in
e-commerce sales penetration, taking its total to 18.5%. France and the
Netherlands also experienced strong growth of 180 basis points each,
taking their penetration rates to 15.5% and 21.5% respectively.
However, this growth rate has slowed in 2023 as economic challenges, weaker
labour markets and higher household indebtedness have impacted household
finances. At the same time e-commerce capacity is moderating back towards more
typical pre-pandemic levels. Amazon has been sub-letting space in the UK and
Germany and vacating some of its older and less efficient stock. The
European average e-commerce sales growth rate is forecast to drop back to 6.6%
in 2023, before accelerating again towards 10% per annum in 2024 and 2025.
The growth in demand for modern logistics assets has become much more than
just an e-commerce story. A much broader supply chain configuration is taking
place, Supply chains are adjusting to reduce risks and costs, and that means
warehouses need to be closer to customers and have to perform efficiently.
With the rise of improved data handling, automation, robotics and other
technologies, logistics operators and suppliers can create more efficient
supply chains with fewer risks of costly delays. This requires modern
warehousing in new and established locations.
This supply chain modernisation is ongoing, and we expect it to sustain the
current demand and supply imbalance over the long-term.
Vacancy rates are still low and the availability of best-in-class warehouses
remains scarce. The European vacancy rate is up slightly from a record low of
2.6% in the first quarter of 2023, to 3.5% in the second quarter of 2023; we
expect that figure to edge up a little further, but to remain at comparatively
low levels.
Completions totalled c. 7% of stock in 2022 and are likely to reach a similar
level in 2023.
European logistics rents have on average increased by over 30% over the last
five years and most markets are still experiencing growth today. Rents
increased by 30% in Warsaw over the year to Q2 2023, while Germany's major
cities experienced a 20% increase on average. Sweden, Finland, the UK and
Ireland reported rental growth in excess of 10%. It is common for logistics
leases in Europe to carry indexation clauses that mean passing rents increase
with inflation year-on-year.
Based on our own experiences and what we are seeing across the market, the
vast majority of tenants have accepted the contractual rental uplifts through
this period of elevated inflation. This has supported cashflows and
underpinned higher prime rents too. With build cost inflation still elevated
and with yields rising in recent months, developers have had to push rents on
further to protect profit margins, while limited supply has left tenants with
little room for negotiation. Given the impact of the weak economic backdrop,
though, we expect rental growth to slow from recent highs. In the longer term,
we expect rental growth to exceed inflation and attract investors back into
the sector as the market turns. European Logistics Total Returns from June
2023
Attractive assets with growth potential
Our portfolio strategy is defined by the assets in which we have invested and
their locations, where we think growth will be strongest. The ability to
readily re-let a warehouse to another tenant (liquidity) is hugely important
and a component of the drivers for growth in the future.
Diversification is another important consideration. With 26 assets spread
across five European countries, and leased to 50 tenants, the Company is well
positioned in this regard. At the end of June 2023, as can be seen in the
chart below, the portfolio was weighted towards Spain (33% of portfolio value)
and the Netherlands (29%), followed by France (15%), Poland (13%) and
Germany (10%).
Property portfolio
Country Property Built WAULT incl breaks WAULT excl breaks % of Fund
(years) (years)
France Avignon 2018 11.2 11.2 7.6
France Meung sur Loire 2004
France Bordeaux 2005
France Dijon 2004
France Niort 2014
Germany Erlensee 2018
Germany Florsheim 2015
- - 2.9
5.6 8.6 1.7
6.5 9.5 1.3
9.0 9.0 1.7
4.6 4.6 5.8
4.8 4.8 3.8
Poland Krakow 2018 3.1 3.1 4.4
Poland Lodz 2020 4.9 4.9 4.4
Poland Warsaw 2019 4.3 4.3 4.4
Spain Barcelona 2019 3.0 6.0 2.6
Spain Madrid, Coslada 1999 3.5 6.5 1.7
Spain Madrid - Gavilanes 1.1 2019 6.6 6.6 4.8
Spain Madrid - Gavilanes 1.2 2019 0.1 7.1 2.3
Spain Madrid - Gavilanes 2.1 2020 3.1 13.1 2.1
Spain Madrid - Gavilanes 2.2 2020 1.0 3.0 1.7
Spain Madrid - Gavilanes 2.3 2020 2.0 4.0 1.6
Spain Madrid - Gavilanes 3 2019 3.9 7.9 6.0
Spain Madrid - Gavilanes 4 2022 13.8 23.8 9.9
The Netherlands Den Hoorn 2020 6.8 6.8 7.0
The Netherlands Ede 1999 / 2005 9.0 9.0 3.9
The Netherlands Horst 2005 9.3 9.3 1.4
The Netherlands Oss 2019 11.0 11.0 2.4
The Netherlands s Heerenberg 2009 / 2011 8.5 8.5 4.4
The Netherlands Waddinxveen 1983 / 2018 / 2022 10.4 10.4 5.9
The Netherlands Zeewolde 2019 11.0 11.0 4.3
Total 7.1 8.7 100.0
Spain represents our largest country exposure with one urban logistic
warehouse in Barcelona and nine urban logistic warehouses in Madrid. Madrid is
the third largest city in Europe after London and Paris. The urban profile of
these warehouses is exactly in line with our strategy.
The Gateway function with Rotterdam, the largest seaport in Europe, gives the
Netherlands a strategic location in Europe and represents the starting point
for large transport corridors leading to Belgium, Germany, France and beyond.
This is reflected in it having the second highest logistics stock per capita,
just behind Belgium. The combination of a densely populated country and a
fierce ongoing debate around the impact of further construction on the
environment and biodiversity makes it even harder to find locations for new
logistics developments. This leaves us well positioned with the six Dutch
assets in the portfolio. We also now have five warehouses in France providing
further diversification to this large economy.
The three warehouses in Poland provide higher yields over certain other
regions. The Polish market has been amongst the strongest growing European
logistics market, benefiting from low labour costs. Its immediate proximity to
Ukraine has not impacted the portfolio. With Poland a member of NATO, its
historically strong links to Ukraine have led to increased warehouse take-up
as some Ukrainian companies have required extra storage there. The two
multi-let assets in Germany are located in the densely populated Frankfurt
Rhine-Main region and have performed very well since being acquired.
Indexed rental income
2022 and H1 2023 have seen unprecedented levels of inflation driven by the
impact from the pandemic and the war in Ukraine, with increased costs of
energy one of the main drivers. One of the key benefits of investing in
Continental real estate, compared to the UK, is the annual indexation clause
typically seen in leases. The majority of our contracts have upward-only
indexation clauses, sometimes with a cap. In the portfolio, c. 60% of rent is
fully indexed with no caps. The affordability of rents for our tenants with
this increasingly high indexation is an important consideration. As a
landlord, we feel our position is strong at this juncture, with the logistics
businesses of many tenants critical to their success. Rent may actually often
be a smaller portion of overall operating expenses for companies, meaning that
the impact on them of indexation increases may be limited, especially where
companies have pricing power in their particular market. Our local asset
managers will enable us to manage this process well, as they did with the
challenges of the pandemic.
Our previously flagged discussions with Arrival over the possible surrender of
their leases on two units in Madrid are ongoing. We hope to reach a mutually
satisfactory agreement which will see no loss of income. However, until
these negotiations are concluded and Arrival's position becomes clearer, there
remains a degree of uncertainty over outstanding rent. We are also now
actively marketing the smaller, modern Amazon unit in Madrid which became
available in August and which we believe is an attractive option for occupiers
seeking proximity to the city.
Portfolio activity / asset management
While H1 2023 has been a period of volatility due to high inflation, rising
interest rates and falling capital values, it has been a busy period for our
local asset management teams.
The Company's first asset sale of Leon in Spain, together with four new
leasing transactions in France, the Netherlands and Poland, have generated
positive asset-level returns in a challenging market. These five transactions
have enhanced the portfolio metrics, improving the WAULT to break from 6.1 to
7.1 years and the WAULT to expiry from 8.3 to 8.7 years. The leasing
transactions totalled 80,819 sq m of space, generating in excess of €5m of
annualised income.
Early in 2023, the Company agreed a 3,939 sq m lease renewal with Dachser
France, the international provider of transport and logistics solutions, at
its urban logistics freehold property at La Crèche, near Niort, France.
Dachser signed a new 9.5-year green lease, effective January 2023, which
generates annual contracted rent of €532,900, and which was 3% ahead of the
previous passing rent. Importantly, the new lease provides for annual uncapped
French ILAT indexation with increased payments commencing in 2025, backdated
to January 2023. The property sits on 44,000 sq m of land (with only 9% site
coverage), providing good opportunities for future expansion and/or future
development.
In May the Company agreed a new 28,500 sq m green lease extension with
Biocoop, the leading organic food distributor, at its warehouse near Avignon,
France. The new 12-year lease, effective from 1 March 2023, generates an
annual contracted rent of €2.5 million and provides for full annual French
ILAT indexation with no cap. Avignon serves as a strategically important
location for Biocoop, which operates a unique multi-professional cooperative
model, supporting a network of over 570 organic stores promoting local
production in order to limit transportation and support local economies. The
property also generates €165,000 per annum of additional income from
rooftop solar panels. We were very pleased to reaffirm our relationship with
such a sustainability focussed tenant, and the renewal added clear value.
In May we completed the Company's first asset sale, disposing of our 32,645 sq
m warehouse, in Leon, Northern Spain, to SCPI Iroko Zen, for €18.5 million.
The disposal price reflected a 3% premium to the 31 December 2022 valuation.
The Company acquired the asset in 2018 for €15.3 million with the sale
reflecting a crystalised 20% gross profit. Located in the Villadangos
industrial area, it was leased to Decathlon with a WAULT of six years.
This transaction reduced the LTV and improved the cash position, whilst
increasing the portfolio's urban logistics weighting.
During the period the Company also agreed a 5-year lease extension with Dutch
retail and pharmacy operator Kruidvat at its 39,840 sq m single-tenant
warehouse in Ede, the Netherlands. The new deal extended the lease expiry from
2028 to July 2033, generating additional income as well as reflecting a 4%
increase on the previous passing rent and providing for future upward-only
indexation capped at 4% per annum.
In Krakow, the Company agreed a three-year lease extension with Maxfliz, one
of Poland's leading interior design businesses. This deal moves the lease
expiry to July 2027, further enhancing the portfolio WAULT metrics.
ESG
Environmental, Social and Governance (ESG) has been embedded in our strategy
since listing, and it is an area where we continue to perform well. The
Company achieved a score of 86/100 and a 4-star rating in the 2022 GRESB
survey which placed the Company second in its peer group of six listed
logistics strategies in Europe.
GRESB is the Global Real Estate Sustainability Benchmark assessment and a
leading indicator worldwide for measuring green performance. The Company's
continued year-on-year improvement from 84 to 86 points is an excellent
achievement. Our starting point was strong thanks to the younger age of the
portfolio and the installation of solar panels on ten of our buildings. Our
dedicated abrdn ESG team is helping to optimise the sustainability credentials
of the portfolio and we hope to improve our score this year. We are also
seeing, as corporates continue to evolve their own sustainability pathways,
that the requirement for space that supports these strategies is becoming
par for the course.
We are concluding work on defining a Net Zero Carbon strategy with the Board
with clear reduction targets for the future. We have undertaken a pathway
analysis with a third party specialist in this field. Knowing the carbon
footprint of each building in the portfolio helps guide towards creating a
real structure to our environmental and sustainability ambitions for both the
near and long-term.
Outlook
We remain positive on the long-term demand drivers from e-commerce,
near-shoring, supply chain diversification and modernisation. The
reconfiguration of supply chains, driven by the need to adapt in the face of
pressures such as technological change, e-commerce and deglobalisation, is a
process that should drive strong demand for modern logistics properties for
some time to come.
Following the 20% decline in All Property (according to abrdn research)
values since June 2022, the yield revaluation phase appears to be closer to
the end than the beginning, although risks of another step down are elevated
because of the weakening economic outlook and the ongoing difficulties in
debt refinancing. We continue to monitor loan covenants, which are seeing
pressure from continued yield movement, but mitigants including loan repayment
and additional security remain options if required.
Logistics is expected to outperform the EU average All Property total return
with 7.8% per annum over the next three years and 7.6% per annum over five
years. This is mainly driven by income returns and modest capital growth
prompted by a balance of yield compression and income growth. The use of
financial leverage today is not particularly attractive given elevated
interest rates and persistent downside risks to the market.
We think that interest rates more widely should peak in late H2 2023, before
falling back gradually in 2024. Our all-in fixed debt at 2% per annum stands
us in good stead and our earliest refinancing is only required in June 2025.
However, we remain alive to the fact that rates may not stabilise back to
previous low levels, and we are working with the Board to use all levers
available to us to improve dividend cover. We continue to expect a three-phase
outlook:
- Yield revaluation - we believe that the yield correction is
roughly three-quarters of the way through, although price discovery will take
more time as liquidity remains low.
- Economic recovery - Eurozone recession expected in Q4 2023/H1
2024, followed by a recovery; interest rate expectations have fallen back and
a cutting cycle is expected in 2024.
- Supply-driven rental rebound - lack of supply to support rental
growth prospects while sticky inflation is supporting real income growth.
Given the elevated risk levels and the delay in the turning point in 2024, we
currently believe in a low-risk approach. We believe that attractive
opportunities will arise for investors over the next six to twelve months, and
so being ready to take advantage of better pricing entry points will be
crucial.
We expect logistics to be one of the best performing sectors over the medium
term, given the structural pressures behind demand. Units of between 20,000 to
40,000 square metres in fringe city locations currently represent the most
'liquid' part of the logistics market from both a leasing and investment
perspective and offer robust performance prospects in the long run.
Asset loans as at 30 June 2023
Country Property Bank Share in total Loan amount €'000 End date Loan Remaining Years Interest
(incl
margin)
France Avignon + Meung sur Loire BayernLB 12.7% 33.0 12-Feb-26 2.6 1.57%
Germany Erlensee DZ Hyp 6.9% 17.8 31-Jan-29 5.6 1.62%
Germany Florsheim DZ Hyp 4.8% 12.4 30-Jan-26 2.6 1.54%
Spain Madrid Facility 1 (Madrid 1) ING 17.0% 44.0 07-Jul-25 2.0 2.72%
Spain Madrid Facility 2 (Madrid 2 + Leon) ING 20.8% 53.9 16-Sep-25 2.2 3.11%
The Netherlands Ede + Oss + Waddinxveen Berlin Hyp 17.0% 44.2 06-Jun-25 1.9 1.35%
The Netherlands sHeerenberg Berlin Hyp 4.2% 11.0 27-Jun-25 2.0 1.10%
The Netherlands Den Hoorn + Zeewolde Berlin Hyp 16.6% 43.2 14-Jan-28 4.5 1.38%
Total 100.0% 259.5 3.3 2.00%
Troels Andersen
Fund Manager
abrdn Investments Ireland Limited
27 September 2023
Interim Board Report
Disclosures
Principal risks and uncertainties
The principal risks and uncertainties affecting the Company are set out on
pages 13 to 17 of the Annual Report and Financial Statements for the year
ended 31 December 2022 (the "2022 Annual Report") together with details of
the management of the risks and the Company's internal controls.
Notwithstanding the risk of recession, higher inflation and tenant rental
negotiations discussed in the Chairman's Statement and Investment Manager's
Review, these risks have not changed materially and can be summarised as
follows:
· Strategic Risk: Strategic Objectives and Performance;
· Investment and Asset Management Risk: Investment Strategy;
· Investment and Asset Management Risk: Developing and Refurbishing
Property;
· Investment and Asset Management Risk: Health and Safety;
· Investment and Asset Management Risk: Environment;
· Financial Risks: Macroeconomic;
· Financial Risks: Gearing;
· Financial Risks: Liquidity and FX Risk;
· Financial Risks: Credit Risk;
· Financial Risks: Insufficient Income Generation;
· Regulatory Risks: Compliance; . Operational Risks: Service
Providers; and . Operational Risks: Business Continuity.
The Board also has a process in place to identify emerging risks. If any of
these are deemed to be significant, these risks are categorised, rated and
added to the Company's risk matrix.
The Board notes the Investment Manager's robust and disciplined investment
process which continues to focus on high quality warehouses located across
Europe and prudent cash flow management. The Board is mindful of ongoing
events involving Russia and Ukraine which have caused significant market
volatility across Europe and the World. There has been no discernible impact
to date on our tenants located in Poland and across the wider region. The
Board, through the Manager, closely monitors all third party service
arrangements and has not suffered any interruption to service. The Board
therefore believes that the Manager and all other key third party service
providers have in place appropriate business interruption plans and are able
to maintain their service levels to the Company.
Related party transactions
aFML acts as Alternative Investment Fund Manager, abrdn Investments Ireland
Limited acts as Investment Manager and Aberdeen Asset Management PLC acts as
Company Secretary to the Company; details of the service and fee arrangements
can be found in the 2022 Annual Report, a copy of which is available on the
Company's website. Details of the transactions with the Manager including the
fees payable to abrdn plc group companies are disclosed in note 16 of this
Half Yearly Report.
Going concern
In accordance with the Financial Reporting Council's Guidance on Risk
Management, Internal Control and Related Financial and Business Reporting, the
Directors have undertaken a rigorous review and consider that there are no
material uncertainties and that the adoption of the going concern basis of
accounting is appropriate. The Directors are mindful of the principal risks
and uncertainties disclosed above and have reviewed forecasts detailing
revenue and liabilities. While the Company is obliged under its articles to
hold a continuation vote at the 2024 AGM, the Directors do not believe this
should automatically trigger the adoption of a basis other than going concern
in line with the Association of Investment Companies ("AIC") Statement of
Recommended Practice ("SORP") which states that it is usually more appropriate
to prepare financial statements on a going concern basis unless a continuation
vote has already been triggered and shareholders have voted against
continuation. Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the financial
statements. In coming to this conclusion, the Board has also considered the
residual impact, where feasible, of the COVID-19 pandemic and other
geopolitical economic turbulence. The Investment Manager is in contact with
tenants and third party suppliers and continues to have a constructive
dialogue with all parties. A range of scenarios have been modelled looking at
possible impact to cash flows in the short-to-medium term and the Board has
set limits for borrowing and regularly reviews financial modelling scenarios
and the level of gearing. The Directors believe that the Company has adequate
financial resources to continue in operational existence for the foreseeable
future and at least 12 months from the date of this Half Yearly Report.
Accordingly, the Directors continue to adopt the going concern basis in
preparing these financial statements.
Directors' Responsibility Statement
The Directors are responsible for preparing this half-yearly financial report
in accordance with applicable law and regulations. The Directors confirm that
to the best of their knowledge:
- the condensed set of financial statements contained within the
half-yearly financial report has been prepared in accordance with UK adopted
International Accounting Standard 34 'Interim Financial Reporting', and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and gives a true and fair view of the assets,
liabilities, financial position and net return of the Company as at 30 June
2023; and
- the Interim Board Report (constituting the interim management
report) includes a fair review of the information required by rule 4.2.7R of
the UK Listing Authority Disclosure Guidance and Transparency Rules (being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed consolidated financial
statements and a description of the principal risks and uncertainties for the
remaining six months of the financial year) and rule 4.2.8R (being related
party transactions that have taken place during the first six months of the
financial year and that have materially affected the financial position of the
Company during that period).
Tony Roper
Chairman
27 September 2023
Property Portfolio
Property Portfolio as at 30 June 2023
Property Tenure Principal Tenant
1 France, Avignon (Noves) Freehold Biocoop
2 France, Meung sur Loire Freehold Vacant
3 France, Gevrey Freehold Dachser
4 France, La Creche Freehold Dachser
5 France, Bruges Freehold Dachser
6 Germany, Erlensee Freehold Bergler
7 Germany, Flörsheim Freehold Ernst Schmitz
8 Poland, Krakow Freehold Lynka
9 Poland, Lodz Freehold Compal
10 Poland, Warsaw Freehold DHL
11 Spain, Barcelona Freehold Mediapost
12 Spain, Madrid (Coslada) Freehold DHL
13 Spain, Madrid 1.1 Freehold Talentum
14 Spain, Madrid 1.2 Freehold Amazon
15 Spain, Madrid 2.1 Freehold Carrefour
16 Spain, Madrid 2.2 Freehold MCR
17 Spain, Madrid 2.3 Freehold Servicios Empresariales Ader
18 Spain, Madrid 3 (2 buildings) Freehold Arrival
19 Spain, Madrid 4 (2 buildings) Freehold Amazon
20 The Netherlands, Den Hoorn Leasehold Van der Helm
21 The Netherlands, Ede Freehold AS Watson (Kruidvat)
22 The Netherlands, Horst Freehold Limax
23 The Netherlands, Oss Freehold Orangeworks
24 The Netherlands, 's Heerenberg Freehold JCL Logistics
25 The Netherlands, Waddinxveen Freehold Combilo International
26 The Netherlands, Zeewolde Freehold VSH Fittings
Condensed Consolidated Statement of Comprehensive Income
Notes 1 January to 30 June Unaudited 1 January to 30 June Unaudited 1 January to
31 December Audited
2023 2022
2022
Revenue €'000 Capital €'000 Total €'000 Revenue €'000 Capital €'000 Total €'000 Revenue €'000 Capital €'000 Total €'000
REVENUE 16,994 - 16,994 13,593 - 13,593 29,686 - 29,686
Rental income
Property service charge income 3,866 - 3,866 2,777 - 2,777 6,237 - 6,237
Other operating income 331 - 331 383 - 383 676 - 676
Total Revenue 2 21,191 - 21,191 16,753 - 16,753 36,599 - 36,599
GAINS ON INVESTMENTS 8 - 133 133 - - - - - -
Gains on disposal of investment properties
(Losses)/Gains on revaluation of investment properties 8 - (47,606) (47,606) - 15,676 15,676 - (40,432) (40,432)
Total Income and (losses)/gains on investments 21,191 (47,473) (26,282) 16,753 15,676 32,429 36,599 (40,432) (3,833)
EXPENDITURE (1,685) - (1,685) (2,017) - (2,017) (3,953) - (3,953)
Investment management fee
Direct property expenses (1,682) - (1,682) (981) - (981) (2,501) - (2,501)
Property service charge exposure (3,866) - (3,866) (2,777) - (2,777) (6,237) - (6,237)
SPV property management fee (135) - (135) (89) - (89) (255) - (255)
Other expenses (2,079) - (2,079) (1,169) - (1,169) (2,797) - (2,797)
Total expenditure (9,447) - (9,447) (7,033) - (7,033) (15,743) - (15,743)
Net operating return before finance costs 11,744 (47,473) (35,729) 9,720 15,676 25,396 20,856 (40,432) (19,576)
FINANCE COSTS
Finance costs 3 (4,253) (110) (4,363) (1,687) - (1,687) (5,676) - (5,676)
Gains arising from the derecognition of derivative financial instruments - 313 313 - - - - - -
Effect of fair value adjustments on derivative financial instruments - 529 529 - - - - 3,600 3,600
Effect of foreign exchange differences 117 (37) 80 516 48 564 (115) 461 346
Net return before taxation 7,608 (46,778) (39,170) 8,549 15,724 24,273 15,065 (36,371) (21,306)
Taxation 4 (598) 7,775 7,177 (367) (4,363) (4,730) (1,029) 3,893 2,864
Net return for the period 7,010 (39,003) (31,993) 8,182 11,361 19,543 14,036 (32,478) (18,442)
Total comprehensive return for the period 7,010 (39,003) (31,993) 8,182 11,361 19,543 14,036 (32,478) (18,442)
Basic and diluted earnings per ordinary share 6 1.70¢ (9.46¢) (7.76¢) 2.02¢ 2.80¢ 4.82¢ 3.43¢ (7.94¢) (4.51¢)
The accompanying notes are an integral part of the Financial Statements.
The total column of the Condensed Consolidated Statement of Comprehensive
Income is the profit and loss account of the Company. All revenue and capital
items in the above statement derive from continuing operations. No operations
were acquired or discontinued during the period.
Condensed Consolidated Balance Sheet
Notes 30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
NON-CURRENT ASSETS 8 711,293 698,463 776,616
Investment properties
Deferred tax asset 4 4,038 2,993 3,754
Total non-current assets 715,331 701,456 780,370
CURRENT ASSETS 9 14,371 12,705 12,570
Trade and other receivables
Cash and cash equivalents 10 23,182 44,189 20,262
Other assets 1,406 9,452 687
Derivative financial assets 15 3,924 - 3,894
Total current assets 42,883 66,346 37,413
Total assets 758,214 767,802 817,783
CURRENT LIABILITIES 11 550 550 550
Lease liability
Trade and other payables 12 16,439 12,929 15,006
Derivative financial liabilities 15 - - 185
Total current liabilities 16,989 13,479 15,741
NON-CURRENT LIABILITIES 13 255,959 160,552 265,532
Bank loans
Lease liability 11 21,951 22,221 22,087
Deferred tax liability 4 16,955 31,941 24,446
Total non-current liabilities 294,865 214,714 312,065
Total liabilities 311,854 228,193 327,806
Net assets 446,360 539,609 489,977
SHARE CAPITAL AND RESERVES 14 4,717 4,717 4,717
Share capital
Share premium 269,546 269,569 269,546
Special distributable reserve 164,851 178,207 164,851
Capital reserve (8,223) 74,619 30,780
Revenue reserve 15,469 12,497 20,083
Equity shareholders' funds 446,360 539,609 489,977
Net asset value per share 7 108.29¢ 130.92¢ 118.89¢
Company number: 11032222
The accompanying notes are an integral part of the Financial Statements.
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 June 2023 (unaudited) Notes Share capital €'000 Share premium €'000 Capital reserve €'000 Revenue reserve €'000 Total €'000
Special distributable reserve €'000
Balance at 31 December 2022 4,717 269,546 164,851 30,780 20,083 489,977
Total Comprehensive return for the period - - - (39,003) 7,010 (31,993)
Interim Distributions paid 5 - - - - (11,624) (11,624)
Balance at 30 June 2023 4,717 269,546 164,851 (8,223) 15,469 446,360
Half year ended 30 June 2022
(unaudited)
Balance at 31 December 2021 4,309 225,792 178,207 63,258 15,939 487,505
Share issue 14 408 44,513 - - - 44,921
Share issue costs - (736) - - - (736)
Total Comprehensive return for the period - - - 11,361 8,182 19,543
Interim Distributions paid 5 - - - - (11,624) (11,624)
Balance at 30 June 2022 4,717 269,569 178,207 74,619 12,497 539,609
Year ended 31 December 2022
(audited)
Balance at 31 December 2021 4,309 225,792 178,207 63,258 15,939 487,505
Share issue 14 408 44,513 - - - 44,921
Share issue costs - (759) - - - (759)
Total Comprehensive return for the year - - - (32,478) 14,036 (18,442)
Dividends paid 5 - - (13,356) - (9,892) (23,248)
Balance at 31 December 2022 4,717 269,546 164,851 30,780 20,083 489,977
The accompanying notes are an integral part of the Financial Statements.
Condensed Consolidated Cash Flow Statement
Notes 1 January to 1 January to 1 January to
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited Audited €'000
€'000
CASH FLOWS FROM OPERATING ACTIVITIES (39,170) 24,273 (21,306)
Net return for the period before taxation
Adjustments for: 8 47,606 (15,676) 40,432
Losses/(Gains) on investment properties
Land leasehold liability decreases 136 134 267
(Increase)/Decrease in operating trade and other receivables (1,921) (1,669) 4,964
Increase/(Decrease) in operating trade and other payables 300 (4,503) (1,554)
Change in fair value of derivative financial instruments (529) - (3,600)
Result arising from the derecognition of derivative financial instruments (313) - -
Finance costs 3 4,363 1,687 5,676
Tax paid (508) (361) (1,070)
Cash generated by operations 9,964 3,885 23,809
Net cash inflow from operating activities 9,964 3,885 23,809
CASH FLOWS FROM INVESTING ACTIVITIES (399) 962 (133,523)
Purchase of investment properties
Disposal of investment properties 8 18,500 - -
Derivative financial instruments 313 109 -
Net cash inflow/outflow from investing activities 18,414 1,071 (133,523)
CASH FLOWS FROM FINANCING ACTIVITIES 5 (11,624) (11,624) (23,248)
Dividends paid
Bank loans interest paid (3,026) (1,108) (3,050)
Bank loans drawn - - 154,547
Bank loans repaid (10,808) (15,500) (65,692)
Proceeds from share issue - 44,921 44,898
Issue costs relating to share issue - (736) (759)
Net cash outflow/inflow from financing activities (25,458) 15,953 106,696
Net increase/(decrease) in cash and cash equivalents 2,920 20,909 (3,018)
Opening balance 20,262 23,280 23,280
Closing cash and cash equivalents 10 23,182 44,189 20,262
REPRESENTED BY
Cash at bank 23,182 44,189 20,262
The accompanying notes are an integral part of the Financial Statements.
Notes to the Financial Statements
1. Accounting Policies
The Unaudited Condensed Consolidated Financial Statements have been prepared
on a going concern basis and in accordance with UK adopted International
Financial Reporting Standard ("IFRS") IAS 34 'Interim Financial Reporting',
and with the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority and are consistent with the
accounting policies set out in the statutory accounts of the Group for the
year ended 31 December 2022.
The Unaudited Condensed Consolidated Financial Statements for the half year
ended 30 June 2023 do not include all of the information required for a
complete set of IFRS financial statements and should be read in conjunction
with the Consolidated Financial Statements of the Group for the year ended 31
December 2022. These were prepared in accordance with IFRS, which comprises
standards and interpretations approved by the International Accounting
Standards Board ('IASB'), and International Accounting Standards and Standing
Interpretations Committee interpretations approved by the International
Accounting Standards Committee ('IASC') that remain in effect, and to the
extent that they have been adopted by the United Kingdom, and the Listing
Rules of the UK Listing Authority. The financial information in this Report
does not comprise statutory accounts within the meaning of Section 434- 436 of
the Companies Act 2006. Those financial statements have been delivered to the
Registrar of Companies and included the report of the auditor which was
unqualified and did not contain a statement under either section 498(2) or
498(3) of the Companies Act 2006. The financial information for the half year
ended 30 June 2023 and 30 June 2022 has not been audited or reviewed by the
Company's auditor.
2. Revenue
Half year ended 30 June 2023 Half year ended 30 June 2022 Year ended 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Rental income 16,994 13,593 29,686
Property service charge income 3,866 2,777 6,237
Other income 331 383 676
Total revenue 21,191 16,753 36,599
Included within rental income is amortisation of rent free periods granted.
3. Finance Costs
Half year ended Half year ended Year ended
30 June 2023 Unaudited
30 June 2022 Unaudited
31 December 2022 Audited
Revenue Capital Total Revenue Capital Total Revenue Capital Total
€'000
€'000
€'000
€'000
€'000
€'000
€'000
€'000
€'000
Interest on bank loans 2,798 - 2,798 1,342 - 1,342 4,262 - 4,262
Amortisation of loan costs 1,257 - 1,257 150 - 150 730 - 730
Other finance costs 198 110 308 195 - 195 684 - 684
Total finance costs 4,253 110 4,363 1,687 - 1,687 5,676 - 5,676
Other finance costs include €110,000 charges paid on early repayment of bank
loan.
4. Taxation
(a) Tax charge in the Group Statement of Comprehensive Income
Half year ended 30 June 2023 Half year ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
Revenue €'000 Capital €'000 Total €'000 Revenue €'000 Capital Total €'000 Revenue €'000 Capital Total €'000
€'000
€'000
Current taxation: 598 - 598 367 - 367 1,029 - 1,029
Overseas taxation
Deferred taxation:
Overseas taxation - (7,775) (7,775) - 4,363 4,363 - (3,893) (3,893)
Total taxation 598 (7,775) (7,177) 367 4,363 4,730 1,029 (3,893) (2,864)
(b) Tax in the Group Balance Sheet
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Unaudited Unaudited Audited
€'000 €'000 €'000
Deferred tax assets: 3,700 2,655 3,384
On tax losses
On other temporary differences 338 338 370
4,038 2,993 3,754
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Unaudited Unaudited Audited
€'000 €'000 €'000
Deferred tax liabilities: - - 973
Differences between tax and derivative valuation
Differences between tax and property revaluation 16,955 31,941 23,473
Total taxation on return 16,955 31,941 24,446
5. Distributions
30 June 2023
Unaudited €'000
2022 Fourth interim dividend of 1.41¢ (1.20p) per Share paid 24 March 2023 5,812
2023 First interim dividend of 1.41¢ (1.23p) per Share paid 23 June 2023 5,812
Total dividend paid 11,624
Fourth quarterly interim dividend for 2022 of 1.41¢ (1.20p) per Share was
paid on 24 March 2023 to shareholders on the register on 3 March 2023. The
distribution was split 1.18¢ (1.00p) dividend income and 0.23¢ (0.20p)
qualifying interest income.
First quarterly interim dividend for 2023 of 1.41¢ (1.23p) per Share was paid
on 23 June 2023 to shareholders on the register on 2 June 2023. The
distribution was split 1.08¢ (0.94p) dividend income and 0.33¢ (0.29p)
qualifying interest income.
Second quarterly interim dividend for 2023 of 1.41¢ (1.22p) per Share was
paid on 22 September 2023 to shareholders on the register on 1 September 2023.
The distribution is split 1.28¢ (1.11p) dividend income and 0.13¢ (0.11p)
qualifying interest income.
6. Earnings Per Share (Basic and Diluted)
30 June 2023 Unaudited 30 June 2022 Unaudited 31 December 2022 Audited
Revenue net return attributable to Ordinary shareholders (€'000) 7,010 8,182 14,036
Weighted average number of shares in issue during the period 412,174,356 405,685,155 408,956,423
Total revenue return per ordinary share 1.70¢ 2.02¢ 3.43¢
Capital return attributable to Ordinary shareholders (€'000) (39,003) 11,361 (32,478)
Weighted average number of shares in issue during the period 412,174,356 405,685,155 408,956,423
Total capital return per ordinary share (9.46¢) 2.80¢ (7.94¢)
Basic and diluted earnings per ordinary share (7.76¢) 4.82¢ (4.51¢)
Earnings per Share is calculated on the revenue and capital loss for the
period (before other comprehensive income) and is calculated using the
weighted average number of Shares in the period of 412,174,356 Shares.
7. Net Asset Value Per Share
30 June 2023 Unaudited 30 June 2022 Unaudited 31 December 2022 Audited
Net assets attributable to shareholders (€'000) 446,360 539,609 489,977
Number of shares in issue 412,174,356 412,174,356 412,174,356
Net asset value per share 108.29¢ 130.92¢ 118.89¢
8. Investment Properties
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Opening carrying value 776,616 683,878 683,878
Purchase at cost - - 128,278
Acquisition costs and capital expenditure 262 (1,091) 4,892
Disposal of investment properties (18,500) - -
Disposal costs 388 - -
Gains on disposal of investment properties 133 - -
(Losses)/Gains on revaluation of investment properties (47,453) 15,462 (40,304)
Movement in leasehold liability (135) (134) 180
Movements in lease incentives (18) 348 (308)
Total carrying value 711,293 698,463 776,616
The fair value of investment properties amounted to €693,488,000. The
difference between the fair value and the value per the Condensed Consolidated
Balance Sheet at 30 June 2023 consists of accrued income relating to the
pre-payment for rent-free periods recognised over the life of the lease, and a
lease asset relating to future use of the leasehold at Den Hoorn. These total
€4,696,000 and €22,501,000 respectively. The rent incentive balance is
recorded separately in the financial statements as a current asset, and the
lease asset is offset by an equal and opposite lease liability. On 27 April
2023 the Group completed the sale of the warehouse in Leon for €18,500,000
resulting in a realised gain of €133,000.
9. Trade and Other Receivables
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Trade receivables 9,420 8,071 8,070
Bad debt provision (563) (353) (634)
VAT receivable 240 265 270
Lease incentives 4,696 4,699 4,740
Tax receivables and advances 572 - 39
Other receivables 6 23 85
Total receivables 14,371 12,705 12,570
10. Cash and Cash Equivalents
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Cash at bank 23,182 44,189 20,262
Total cash and cash equivalents 23,182 44,189 20,262
11. Leasehold Liability
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Maturity analysis - contractual undiscounted cash flows 550 550 550
Less than one year
One to five years 2,200 2,201 2,200
More than five years 24,790 25,339 25,065
Total undiscounted lease liabilities 27,540 28,090 27,815
Lease liability included in the Condensed 550 550 550
Consolidated Balance Sheet
Current
Non - Current 21,951 22,221 22,087
Total lease liability 22,501 22,771 22,637
12. Trade and Other Payables
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Tenant deposits 4,532 2,730 3,853
Rental income received in advance 4,174 2,700 4,035
Trade creditors 3,079 3,423 2,354
Accruals 1,957 1,146 1,534
Management fee payable 1,685 2,023 1,937
VAT payable 957 761 1,221
Accrued acquisition and development costs 55 146 72
Total payables 16,439 12,929 15,006
13. Bank Loans
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Bank loans greater than 12 months 255,959 160,552 265,532
Total payables 255,959 160,552 265,532
The total drawdown of the bank loans amounted to €259,462,500. The
difference between the external loans drawdowns and the value per the
Condensed Consolidated Balance Sheet consists of financing fees and their
amortised portion related to the external bank loans totaling €3,503,000. It
is recorded in the financial statements in the same line as bank loans.
14. Share Capital
30 June 2023 30 June 2022 31 December 2022
Unaudited €'000 Unaudited €'000 Audited €'000
Opening balance 4,717 4,309 4,309
Ordinary shares issued - 408 408
Closing balance 4,717 4,717 4,717
Ordinary Shareholders participate in all general meetings of the Company on
the basis of one vote for each Share held. Each Ordinary share has equal
rights to dividends and equal rights to participate in a distribution arising
from a winding up of the Company. The Ordinary Shares are not redeemable.
The total number of Shares authorised, issued and fully paid is 412,174,356.
The nominal value of each Share is £0.01 and amount paid for each Share was
£1.00.
15. Financial Instruments and Investment Properties
Fair value hierarchy
IFRS 13 requires the Group to classify its financial instruments held at fair
value using a hierarchy that reflects the significance of the inputs used in
the valuation methodologies. These are as follows:
Level 1 - quoted prices in active markets for identical investments;
Level 2 - other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayments, credit risk, etc.); and
Level 3 - significant unobservable inputs.
The following table shows an analysis of the fair values of investment
properties recognised in the balance sheet by level of the fair value
hierarchy:
Level 1 €'000 Level 2 €'000 Level 3 €'000 Total fair value €'000
30 June 2023 (unaudited) - - 711,293 711,293
Investment properties
30 June 2022 (unaudited) - - 698,463 698,463
Investment properties
31 December 2022 (audited) - - 776,616 776,616
Investment properties
The lowest level of input is the underlying yields on each property which is
an input not based on observable market data.
The following table shows an analysis of the fair values of derivative
financial instruments recognised in the balance sheet by level of the fair
value hierarchy:
Level 1 €'000 Level 2 €'000 Level 3 €'000 Total fair value €'000
30 June 2023 (unaudited) - 3,924 - 3,924
Derivative financial assets
30 June 2022 (unaudited) - - - -
Derivative financial instruments
31 December 2022 (audited) - (185) 3,894 - (185) 3,894
Derivative financial liabilities - -
Derivative financial assets
The lowest level of input is EUR:GBP exchange rate.
During 2022, the Company used forward foreign exchange contracts to mitigate
potential volatility of income returns and to provide greater certainty as to
the level of Sterling distributions expected to be paid in respect of the
period covered by the relevant currency hedging instrument. Derivatives are
measured at fair value calculated by reference to forward exchange rates for
contracts with similar maturity profiles.
16. Related Party Transactions
The Company's Alternative Investment Fund Manager ('AIFM') throughout the
period was abrdn Fund Managers Limited ("aFML"). Under the terms of a
Management Agreement dated 17 November 2017 the AIFM is appointed to provide
investment management, risk management and general administrative services
including acting as the Company Secretary. The agreement is terminable by
either the Company or aFML on not less than 12 months' written notice.
Under the terms of the agreement portfolio management services are delegated
by aFML to abrdn Investments
Ireland Limited ("aIIL"). The total management fees charged to the
Consolidated Statement of Comprehensive
Income during the period were €1,685,000 and €1,685,000 was payable at the
period end. Under the terms of a Global Secretarial Agreement between aFML and
abrdn Holdings Limited ('aHL'), company secretarial services are provided to
the Company by aHL.
For half year to 30 June 2023, the Directors of the Company received fees for
their services totaling £84,000 equivalent to €96,000.
17. Post Balance Sheet Events
A second quarterly interim dividend for 2023 of 1.41¢ (1.22p) per Share was
paid on 22 September 2023 to shareholders on the register on 1 September 2023.
The distribution was split 1.28¢ (1.11p) dividend income and 0.13¢ (0.11p)
qualifying interest income.
18. Ultimate Parent Company
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no immediate or ultimate controlling party.
19. Half Yearly Report
This Half Yearly Report was approved by the Board and authorised for issue on
27 September 2023.
The Half Yearly Report will be printed and issued to shareholders and further
copies will be available at 280 Bishopsgate, London EC2M 4AG and on the
Company's website eurologisticsincome.co.uk*
* Neither the Company's website nor the content of any website accessible from
hyperlinks on it (or any other website) is (or is deemed to be) incorporated
into, or forms (or is deemed to form) part of this announcement.
By order of the Board
ABRDN HOLDINGS LIMITED
27 September 2023
Glossary of Terms and Definitions and Alternative Performance Measures
abrdn The brand of the investment businesses of abrdn plc
abrdn plc group The abrdn plc group of companies
AIC Association of Investment Companies
AIC SORP Association of Investment Companies Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts,
issued November 2014 and updated July 2022
AIFMD The Alternative Investment Fund Managers Directive
AIFM The alternative investment fund manager, being aFML
Alternative Performance Measures Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial framework
includes IFRS and the AIC SORP
Annual Rental Income Cash rents passing at the Balance Sheet date
aFML or AIFM or Manager abrdn Fund Managers Limited
aIIL or the Investment Manager abrdn Investments Ireland Limited is a wholly owned subsidiary of abrdn plc
and acts as the Company's investment manager
Asset Cover The value of a company's net assets available to repay a certain security.
Asset cover is usually expressed as a multiple and calculated by dividing the
net assets available by the amount required to repay the specific security
Contracted Rent The contracted gross rent receivable which becomes payable after all the
occupier incentives in the letting have expired
Covenant Strength This refers to the quality of a tenant's financial status and its ability to
perform the covenants in a lease
(1) Defined as an Alternative Performance Measure.
Dividend
Cover(1 )
The ratio of the Company's net profit after tax (excluding the below items)
to the dividends paid
As at As at
30 June 2023 €'000 31 December 2022 €'000
Earnings per IFRS income statement (31,993) (18,442)
Exclude:
Net changes in the value of investment property 47,606 40,432
Gains on disposal of investment property (133) -
Gains on termination of financial instruments (313) -
Capitalised finance costs 110 -
Deferred Taxation (7,775) (3,893)
Fair value adjustments on financial instruments (529) (3,600)
Effects of foreign exchange differences (80) (346)
Profits (A) 6,893 14,151
Dividend (B) 11,624 23,248
Dividend Cover (A)/(B) 59.3% 60.9%
Discount
The amount by which the market price per share of an investment trust is
lower than the net asset value per share. The discount is normally expressed
as a percentage of the NAV per share. The opposite of a discount is a premium
Half year ended 30 June 2023 Year ended 31 December 2022
Share price (A) 66.00p 68.50p
NAV (B) 92.95p 105.43p
Discount (A-B)/B (29.0%) (35.0%)
Earnings Per Share Profit for the period attributable to shareholders divided by the average
number of shares in issue during the period
EPRA European Public Real Estate Association
EPRA Earnings per
Share
Earnings per share calculated in line with EPRA best practice recommendations
30 June 2023 €'000 31 December 2022 €'000
Earnings per IFRS income statement (31,993) (18,442)
Exclude: 47,606 40,432
Net changes in value of investment properties
Gain on disposal of investment properties (133) -
Movement in deferred tax (7,775) (3,893)
Gains on termination of financial instruments (313) -
Costs associated with early termination of financial instruments 110 -
Changes in fair value of financial instruments EPRA Earnings (529) (3,600)
6,973 14,497
Weighted average ordinary shares ('000) 412,174 408,956
EPRA Earnings per share 1.69¢ 3.54¢
EPRA Net Asset Value Metrics A
set of standardised NAV metrics prepared in compliance with EPRA best practice
recommendations
30 J une 2023 €'000 31 December 2022 €'000
IFRS NAV 446,360 489,977
Exclude: 3,924 3,709
Fair value of financial instruments
Deferred tax adjustment in relation to fair value gain on investment property 15,926 23,473
Shares in issue at period end ('000) EPRA NAV (Net Tangible Assets) per
share
466,210 517,159
412,174 412,174
113.1¢ 125.5¢
ERV The estimated rental value of a property, provided by the property valuers
Europe The member states of the European Union, the European Economic Area
("EEA") and the members of the European Free Trade Association ("EFTA") (and
including always the United Kingdom, whether or not it is a member state of
the European Union, the EEA or a member of EFTA)
Green Leases Agreements between a landlord and a tenant as to how a building is to be
occupied, operated and managed in a sustainable way
Group The Company and its subsidiaries
Gross Assets The aggregate value of the total assets of the Company as determined in
accordance with the accounting principles adopted by the Company from time to
time
FRC Financial Reporting Council
IFRS International Financial Reporting Standards
Index Linked The practice of linking the review of a tenant's payments under a lease to a
published index, most commonly the Retail Price Index (RPI) but also the
Consumer Price Index (CPI) and French Tertiary Activities Rent Index (ILAT)
Key Information Document or KID The
Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation
requires the AIFM, as the Company's PRIIP "manufacturer," to prepare a key
information document ("KID") in respect of the Company. This KID must be made
available by the AIFM to retail investors prior to them making any investment
decision and is available via the Company's website. The Company is not
responsible for the information contained in the KID and investors should note
that the procedures for calculating the risks, costs and potential returns are
prescribed by law. The figures in the KID may not reflect the expected returns
for the Company and anticipated performance returns cannot be guaranteed
Lease incentive A payment used to encourage a tenant to take on a new lease, for example by a
landlord paying a tenant a sum of money to contribute to the cost of a
tenant's fit-out of a property or by allowing a rent free period
Leverage For the purposes of the Alternative Investment Fund Managers Directive,
leverage is any method which increases the Company's exposure, including the
borrowing of cash and the use of derivatives. It is expressed as a ratio
between the Company's exposure and its net asset value and can be calculated
on a gross and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction of sterling
cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and netting
positions are offset against each other . At period end the leverage under
gross method was 181.56% and under commitment method was 159.63%.
Loan to
Value
Calculated as gross external bank borrowings dividend by total assets
As at As at
30 June 2023 (€'000) 31 December 2022 (€'000)
Bank Loans 259.5 270.3
Gross Assets 758.2 817.7
Exclude IFRS 16 right of use asset (22.5) (22.6)
Adjusted gross assets 735.7 795.1
Gearing 35.3% 34.0%
Near-Shoring
Near-shoring involves relocating a company's operations to a neighbouring
or nearby country, usually within the same region or continent in order to
capitalise on geographic proximity, cultural similarities, and potential cost
advantages while maintaining some of the benefits associated with offshoring,
such as lower labour costs.
Net Asset Value Total Return (EUR) The return
to shareholders, expressed as a percentage of opening NAV, calculated on a per
share basis by adding dividends paid in the period to the increase or decrease
in NAV. Dividends are assumed to have been reinvested on the ex dividend date,
excluding transaction costs
Half year ended 30 June 2023 Year ended 31 December 2022
Opening NAV per share 118.9¢ 129.1¢
Movement in the period (10.6¢) (10.2¢)
Closing NAV per share 108.3¢ 118.9¢
Decrease in NAV (8.9%) (7.9%)
Impact of reinvested dividends 2.3% 4.1%
Net Asset Value Total Return (6.6%) (3.8%)
Net Asset Value or NAV The value of total assets less liabilities. Liabilities for this purpose
include current and long-term liabilities. The net asset value divided by the
number of shares in issue produces the net asset value per share
Ongoing Charges Ratio of expenses as a percentage of average daily shareholders' funds
calculated as per the industry standard
Passing Rent The rent payable at a particular point in time
PIDD The pre-investment disclosure document made available by the AIFM in relation
to the Company
Premium The amount by which the market price per share of an investment trust exceeds
the net asset value per share. The premium is normally expressed as a
percentage of the net asset value per share. The opposite of a premium is a
discount
Prior Charges The name given to all borrowings including long and short-term loans and
overdrafts that are to be used for investment purposes, reciprocal foreign
currency loans, currency facilities to the extent that they are drawn down,
index-linked securities, and all types of preference or preferred capital,
irrespective of the time until repayment
Portfolio fair value The market value of the company's property portfolio, which is based on the
external valuation provided by Savills (UK) Limited
The Royal Institution of The global professional body promoting and enforcing the highest international
standards in the valuation, management and development of land, real estate,
Chartered Surveyors (RICS) construction and infrastructure
Share Price Total Return (GBP)
The return to shareholders, expressed as a percentage of opening share price,
calculated on a per share basis by adding dividends paid in the period to the
increase or decrease in share price. Dividends are assumed to have been
reinvested on the ex dividend date, excluding transaction costs
Half year ended 30 June 2023 Year ended 31 December 2022
Opening Share Price 68.5p 117.0p
Movement in share price (2.5p) (48.5p)
Closing share price 66.0p 68.5p
Decrease in share price (3.7%) (41.5%)
Impact of reinvested dividends 3.3% 3.2%
Share price total return (0.4%) (38.3%)
SPA Sale and purchase agreement
SPV Special purpose vehicle
Total Assets Total assets less current liabilities (before deducting prior charges as
defined above)
WAULT Weighted Average Unexpired Lease Term. The average time remaining until the
next lease expiry or break date
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