REG - abrdn Euro Logistics - Annual Financial Report
26/04/2024 07:00
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RNS Number : 1220M abrdn European Logistics Income plc 26 April 2024
25 April 2024
LEI: 213800I9IYIKKNRT3G50
abrdn European Logistics Income plc
FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
Improving macroeconomic backdrop and portfolio indexation provides platform
for earnings growth
abrdn European Logistics Income plc ("ASLI" or the "Company"), the Continental
European investor in modern warehouses, which is managed by abrdn, announces
its full year results for the year to 31 December 2023.
NAV impacted by continued sector-wide asset re-pricing due to higher interest
rate environment; low all-in cost of fixed debt underpinning balance sheet
resilience
· Net asset value per ordinary share decreased by 21.4% to 93.4
cents (31 December 2022: 118.9 cents), primarily driven by market-wide outward
yield movements as a result of the higher interest rate environment
· IFRS NAV total return of -17.1% (31 December 2022: -3.8%)
· EPRA net tangible assets 95.7 cents (31 December 2022: 123.7
cents)
· IFRS earnings per share of -19.8 cents (31 December 2022: -4.5
cents)
· Loan to Value of 38.7% (31 December 2022: 34.0%)
· Low all-in cost of fixed term debt of 2.00% (31 December 2022:
2.01%), with no major refinancings due until mid-2025
Indexation-driven, active management initiatives to drive improved portfolio
occupancy and earnings growth; disposals of more mature assets proving asset
class liquidity and strengthening cash position:
· Portfolio value of €634 million (31 December 2022: €759
million), including a like-for-like valuation decrease of 14.4%, largely
driven by continued outward yield movement
· Completed the disposal of a warehouse in Leon, Northern Spain,
for €18.5 million, reflecting a small premium to the 31 December 2022
valuation
· Post year-end, completed the disposal of a vacant French
warehouse, previously occupied by Office Depot in Meung sur Loire, for €17.5
million, reflecting a small discount to the 30 September 2023 valuation and in
line with the 31 December 2023 valuation
· Attractive WAULT of 8.4 years (31 December 2022: 8.9 years) and
inflation linked lease profile, with 65% of the portfolio income subject to
full indexation
· Annualised passing rent of €32.2 million (31 December 2022:
€30.6 million), with like-for-like growth of 5% on held assets*
· Completed six lease events across 81,175 sqm, totalling €4.8
million of annualised rent, including:
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 AS Watson (Kruidvat) at its 39,840 sqm
single-tenant warehouse in Ede, the Netherlands, reflecting a 4% increase on
the previous passing rent
o Post-period end, a new 3 plus 2 year lease with METHOD Advanced Logistics
for 5,130 sqm of highly sustainable logistics space in Madrid, Spain, 8.7%
above the previous passing rent
· 95% of expected annual rent due during the year collected
· Reflecting the modern, purpose built nature of the portfolio, the
Company continued year-on-year improvement with a sector leading five stars
out of five awarded in the Global Real Estate Sustainability Benchmark
('GRESB') survey
· In November, the Board announced the launch of a Strategic
Review, enabling it to consider more fully the basis on which the Company
might best deliver value to shareholders as a whole.
Tony Roper, Chairman, abrdn European Logistics Income, commented:
"While the market looks set to improve in the second half of 2024 and into
2025, and the post period transactions and letting activity achieved by the
Investment Manager supports this, challenges will remain for the real estate
sector, primarily as a result of higher for longer interest rates.
"The Board is continuing with its Strategic Review, as it considers all
options available that offer maximum value for shareholders, and expects to
issue a further update in May.
"The logistics market remains well-positioned in terms of its fundamentals.
While vacancy rose across the sector in Europe in the last year, we believe
that the worst of these increases has passed, with speculative development
pipelines contracting. In addition, the portfolio remains well diversified by
property, tenant and geography and our tenants' businesses are generally well
positioned in areas which remain essential to the everyday operation of the
modern economy."
Troels Andersen, Lead Fund Manager, abrdn European Logistics Income, added:
"Continental European logistics real estate is well placed to recover from a
difficult market position due to the longer-term structural drivers
underpinning the sector including ongoing e-commerce penetration, onshoring
and supply chain modernisation. Whilst we have been encouraged by the
resilience of the occupational market, rental growth is still expected to
outperform historic averages and beat inflation in most European logistics
hotspots. This will support our near-term focus to deliver earnings growth,
principally through letting up the vacant space in Spain and capturing the
portfolio's attractive indexation characteristics."
*excluding rent free incentives and vacant assets
-Ends-
For further information please contact:
abrdn +44 (0) 20 7463 6000
Ben Heatley
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 as at 31 December 2023
Net asset value total return (EUR) (%) 1 IFRS net asset value (€'000) Net asset value per share (¢)1
2022: (3.8) 2022: 489,977 2022: 118.9
(17.1) 384,928 93.4
Share price total Discount to net asset value Ordinary dividend paid
return (GBP) (%)1 per share (%) 1 per share (¢)
2022: (38.3) 2022: (35.0) 2022: 5.64
(3.5) (24.1) 5.64
Ongoing charges ratio (%)1 IFRS earnings per share (¢) Portfolio valuation (€'000)
2022: 1.3 2022: (4.5) 2022: 758,719
1.6 (19.8) 633,806
Number of Average lease length excl breaks Gearing1
properties (Years) (%)
2022: 27 2022: 8.9 2022: 34.0
26 8.4 38.7
Average building size (sqm) All-in fixed interest rate (%) EPRA net tangible assets per share (¢)1
2022: 21,374 2022: 2.01 2022: 123.7
20,940 2.00 95.7
Overview
Chairman's Statement
Dear Shareholder,
I am pleased to present the Company's sixth Annual Report in respect of the
year ended 31 December 2023.
2023 continued as 2022 ended, with global macro events driving market
sentiment, a continued economic slowdown and high inflation. Rapidly rising
interest rates saw the cost of debt increase which led to a decline in the
flow of capital into the real estate sector and a significant softening of
yields.
This contrasted with the strong market fundamentals at the Company's inception
in 2017, a period which saw the sector attracting considerable amounts of
capital, encouraged by supportive debt markets. This underpinned falling
property yields and an increase in capital values. The recent sharp rise in
interest rates to combat high levels of inflation has resulted in property
yields moving out to reflect the higher cost of capital, with asset values
subsequently falling. Such fluctuations are a reminder that real estate
markets are inherently cyclical in nature. With investors fearing continued
valuation falls and seeking to lower their risk profiles, share price
discounts to NAV have been persistently wide, not only in the REIT sector but
also the wider investment trust sector.
Whilst the logistics sector fundamentals remain compelling, a combination of
this challenging backdrop and the lack of a clear pathway to reaching full
dividend cover in the near future resulted in the Board launching a strategic
review in November 2023. This is allowing us to look at all sensible options
to deliver shareholders' value. At the time of writing, this review is still
underway. It is too early to tell whether this will lead to any corporate
activity for the Company, but the Board will communicate with shareholders as
soon as it feels in a position to say further. In the meantime, the Company is
required under its articles to hold a continuation vote at its forthcoming AGM
in June, and at this stage the Board recommends that shareholders vote in
favour of this resolution to enable the Board to continue to a sensible
conclusion in seeking best value for all shareholders.
Market overview
December 2023 saw the end of seven consecutive months of falling Eurozone
inflation figures, resulting in the money markets adjusting their
expectations. However with the deposit rate held at 4%, valuations continue to
come under pressure. Looking forward, our Investment Manager believes that the
most significant value correction is behind us and the negative pressure on
yields, which has lagged the UK, will plateau later this year.
Future occupational demand looks set to be determined by two key trends:
stabilising growth amongst eCommerce operators and a continued trend towards
onshoring amongst manufacturers. The logistics market is characterised by
rising occupier demand, limited supply in core markets and high barriers to
developing new assets in prime locations.
The onshoring of operations should be a long-term trend over the next decade.
While it could lead to a tangible boost in take-up in the near term, we do not
believe it will result in the same explosive growth that the increase in
online shopping led to over the last decade. Data from a European Central Bank
survey points to an increasing number of firms expecting to increase their
sourcing of production inputs from within the EU, compared to a declining
number of firms sourcing their inputs externally.
The prime logistics markets in Germany, Netherlands, France, and Spain, where
the majority of the portfolio is focused, continue to witness
near-historically low vacancy rates. With speculative development expected to
remain low due to increased costs and regulation, we expect vacancy rates to
remain tight, which will keep upward pressure on indexed rents.
Company overview
As at 31 December 2023, the Company's property portfolio was independently
valued at €633.8 million (31 December 2022: €758.7 million), and consisted
of 26 assets (2022: 27 assets) located across five European countries. The
like-for-like portfolio valuation (excluding the sold Leon warehouse) fell
over the year by 14.4% as a result of the impact of the higher interest rate
backdrop on investor sentiment and debt costs.
In May 2023, the Company announced the completion of the first sale from its
portfolio, the 32,645 sqm Decathlon- leased warehouse, in Leon, Northern
Spain, to SCPI Iroko Zen, for €18.5 million. The disposal price reflected a
small premium to the December 2022 valuation and crystalised a 20% gross
profit. It generated an attractive IRR, improved the cash position, reduced
gearing and the all-in-interest rate, whilst reducing our retail related
exposure to a Spanish location which the Investment Manager felt could be more
challenging in the future.
Pleasingly during the year the Investment Manager agreed a number of lease
regears, more detail of which can be found in the Investment Manager's Report
that follows. These included
· A new 9.5 year lease with Dachser France in La Creche, Niort,
with the rent 3% ahead of the previous annual rent payable and significantly
ahead of ERV. Importantly for revenue generation, uncapped annual ILAT
indexation was agreed.
· A new 12 year lease with Biocoop over the Avignon, France,
property generating annual contracted rent of €2.5 million, equating to
€86 per sqm with full annual French ILAT indexation with no cap. Both of
these facilities serve as strategically important locations for our tenants.
In March 2024 we sold the vacant Meung-sur-Loire warehouse for €17.5
million, reflecting a small discount to the September 2023 valuation and in
line with the December 2023 valuation. As one of the portfolio's older assets
and with an eye on location and the potential capital expenditure required to
improve its sustainability credentials, the Board agreed with the Investment
Manager that this was a sensible sale, with the proceeds strengthening the
Company's balance sheet, which was one of the key 2023 priorities.
Shareholders should be aware of the situation the Company faced over the
electric vehicle company Arrival's units located in Gavilanes, Madrid. Despite
lengthy negotiations and continued legal proceedings, with the limited
possibility of obtaining any surrender premium or rent due to Arrival's
deteriorating financial situation, following the advice of the Investment
Manager, the Company deemed it sensible to negotiate a surrender of the lease
and to obtain possession of the units for re-leasing as quickly as possible.
It is pleasing to note that the 5,130 sqm unit was quickly leased in March to
Spanish company Method Logistics, at a rent 8.7% ahead of the Arrival passing
rent. The Getafe area remains attractive to many companies and there is good
interest being shown for the remaining units.
The Company's investment case is enhanced by the competitive advantage
provided through the Investment Manager's relationships and market knowledge,
with its local teams based in key markets in Europe, enabling it to originate
and then execute on attractive acquisitions. It has built a portfolio of
assets diversified by both geography and tenant, in established distribution
hubs and within close proximity of cities that have substantial labour pools
and excellent transport links, all important factors and underpinning the
appeal of the assets for tenants and longer term valuations and revenue
earning abilities.
Further details on the composition of the portfolio and lease renewals are
provided in the Investment Manager's Report that follows.
Results
As at 31 December 2023 the audited Net Asset Value ("NAV") per Share was 93.4
euro cents (GBp - 81.2p), a decrease of 21.5% compared with the NAV per Share
of 118.9 euro cents (GBp - 105.4p) at 31 December 2022. With the interim
dividends declared, this reflected a NAV total return of -17.1% for the year
in euro terms (-19.0% in sterling).
The closing Ordinary Share price at 31 December 2023 was 61.6p (31 December
2022 - 68.5p), representing a discount to NAV per Share of 24.1% (31 December
2022 - 35.0%).
Dividends
First, second and third interim dividends in respect of the year ended 31
December 2023 of 1.41 euro cents per Ordinary Share were paid to Shareholders
on 23 June 2023, 22 September 2023 and 29 December 2023. These equated to
1.23 pence, 1.22 pence and 1.23 pence respectively.
In light of the initial response to the previously announced Strategic Review,
the Board and its advisers were keen to ensure that the Company was optimally
positioned, and that it maintains maximum flexibility to allow it to advance
any particular proposal. As a result, the Board took the decision, announced
on 19 February 2024, to forego declaring a fourth interim distribution in
respect of the quarter ended 31 December 2023. With the Strategic Review
ongoing and to maintain flexibility, it is likely that the Company will also
forego paying a dividend in relation to the quarter ended March 2024.
Normally distributions may be made up of both dividend income and income which
is designated as an interest distribution for UK tax purposes and therefore
subject to the interest streaming regime applicable to investment trusts.
Further details on this breakdown can be found on page 23 of the published
Annual Report and financial statements for the year ended 31 December 2023 and
are reflected within the Company's dividend announcements.
Financing
The Company's debt provided by our European partner banks remains fixed in
nature and secured on certain assets or groups of assets within the portfolio.
These non-recourse loans range in maturities between 1.4 (mid-2025) and 5.1
years with all-in interest rates ranging between 1.10% and 3.11% per annum.
Full details can be found in note 14 on page 125 of the published Annual
Report and financial statements for the year ended 31 December 2023.
The Company maintains an uncommitted master loan facility ("Facility") with
Investec Bank plc for €70 million, which is currently undrawn. Under this
Facility, the Company may make requests for drawdowns at selected short-
duration tenors, as and when required, to fund acquisitions or for other
liquidity requirements and this was used to good effect during the purchase of
the Gavilanes, Madrid, assets. Within the Facility, Investec also makes
available a £3.3 million committed revolving credit facility which is carved
out of the total €70 million limit of the Facility. This facility sits at
the parent company level and provides added flexibility. There were no
drawdowns against this facility during 2023.
The year-end gearing level was 38.7% (2022 - 34.0%) with an average all-in
interest rate of 2.0% (2022: 2.01%) on the total fixed term debt arrangements
of €259.5 million (2022: 270.3 million).
GRESB and Asset Management
The Investment Manager continues to seek to improve the sustainability
credentials of the portfolio and the results of the 2023 GRESB ('Global Real
Estate Sustainability Benchmark') survey saw the Company's portfolio achieve
another year-on-year increase, with a score of 89/100 representing continued
improvement and an uplift on its 2022 GRESB survey score of 86/100. It also
compares favourably versus the 81/100 average peer score and 75/100 overall
average 2023 GRESB score.
The Company was awarded a maximum five stars in the 2023 GRESB awards,
achieving a welcome first place in its peer group of diversified funds
investing across Europe (European industrial: distribution warehouse).
In addition, the Company attained the top-rated gold level awarded by EPRA for
compliance with its 'Best Practice Recommendations' in financial reporting.
The latest GRESB scoring continues to recognise the fundamental importance
that the Investment Manager places on sustainability when acquiring and
subsequently enhancing the Company's portfolio. The improved performance score
rewards the progress made with regards to environmental, social and governance
("ESG") factors.
The Company has executed several sustainability-led initiatives during the
period, building on the significant progress made improving the credentials of
our portfolio of Grade-A, modern properties. These included:
· High tenant data coverage which has helped to inform carbon
performance and feed into our net zero plans
· Ongoing assessment of the operational performance of the
portfolio, through BREEAM In-Use assessments and sustainability audits
identifying actions to improve performance
· A portfolio-wide occupier engagement programme
· 100% of landlord energy procured from renewable sources
· 34% of the portfolio by floor area with solar PV with ongoing
reviews across the estate for further additions
· 96% of assets by floor area with EPC's A-B
The Company has set a net zero carbon target of 2050 across all emissions
(Scopes 1, 2 and 3), and the Company's strategy for achieving net zero carbon
is fully detailed on page 65 of the published Annual Report and financial
statements for the year ended 31 December 2023. ESG is embedded within the
Investment Manager's investment and asset management processes and although
many of our assets were new when purchased, a programme of works continues to
enhance areas where improvements can be made. The ESG section of the
published Annual Report and Financial statements for the year ended 31
December 2023 gives further clarity on these processes.
Governance and Board Change
The Company is a member of the Association of Investment Companies and seeks
to follow best practice regarding appropriate disclosure.
In accordance with good governance, the Directors offer to meet with our
substantial shareholders during the year to hear their views on the Company
and its performance. Following the announcement of the Strategic Review,
Directors together with the Company's advisers have met with many of our
larger shareholders to understand their views on the Company and how they
would like to see it positioned. The Directors may be contacted through the
Company Secretary.
The Board looks to undertake short annual site visits to view the properties
owned, meet with tenants where possible and members of local staff and
advisers of the Investment Manager. During the year the Board was pleased to
visit the German assets helping to better understand their locations, site
layouts and meeting with abrdn's local well-resourced Frankfurt-based real
estate team which has a focus on managing these assets for us.
With the Company having been launched in December 2017, the Directors have
been considering succession planning. With this in mind, Diane Wilde has
confirmed that she will retire and not stand for re-election at the AGM in
June. I would like to thank Diane for all her efforts since joining the Board.
Following best practice, the remaining three Directors will stand for
re-election at the forthcoming AGM and further details on each Director may be
found on pages 80 and 81 of the published Annual Report and financial
statements for the year ended 31 December 2023. No decision on a replacement
Board member will be taken until the Strategic Review has been concluded and
the direction of the Company is known.
Strategic Review
As at the date of this report, the Board is continuing to undertake a
Strategic Review of the options available to the Company, and is being advised
on this by the Company's broker, Investec, and by Savills, who have been
retained to give strategic property advice. The Board is considering all
options available that offer maximum value for shareholders including, but not
limited to, continuing with the current investment objective, selling the
entire issued share capital of the Company or a managed wind- down of the
Company's portfolio and returning monies to shareholders.
The Company has received a number of indicative non-binding proposals.
However, there can be no certainty at this stage that the final terms of any
proposal will prove to be sufficiently attractive to merit a Board
recommendation to the Company's shareholders.
All proposals received will be analysed and considered in the light of
feedback received from shareholders and the value that could be best achieved
when looking at current and forecast market conditions. The Board welcomes the
support shown by shareholders, both before and during this process, and will
update shareholders on the progress or the outcome of the Strategic Review as
soon as the process allows.
Annual General Meeting and Continuation Vote
The Company's Annual General Meeting will be held in London on Monday, 24 June
2024 at 09:00 am at the offices of FTI Consulting, 200 Aldersgate, Aldersgate
Street, London EC1A 4HD.
The formal Notice of AGM may be found on page 182 of the Annual Report and
financial statements for the year ended 31 December 2023.
This year the Company is required by its Articles to hold a continuation vote.
With the Strategic Review still ongoing, the Board recommends that
shareholders vote in favour of the Company's continuation to ensure that the
review can be completed properly and the optimal outcome for shareholders
delivered. It is the Board's current expectation that the result of the
Strategic Review will be announced ahead of the AGM, so shareholders should
have the benefit of a clear picture of the proposed way forward by the time
that they are asked to vote. Should the Board not be in a position to
communicate the outcome (or likely outcome) of the Strategic Review ahead of
the AGM, the Board would ensure that shareholders were provided with the
opportunity to vote on the future direction of the Company as and when the
Review was completed (unless the proposed course of action arising from the
Strategic Review in and of itself required a shareholder vote).
Outlook
While the market looks set to improve in H2 2024 and into 2025, and the post
period transactions and letting activity achieved by the Investment Manager
supports this, challenges will remain for the real estate sector, primarily as
a result of higher-for-longer interest rates. Crucially for us, the logistics
market remains well-positioned in terms of its fundamentals. While vacancy
rose across the sector in Europe in the last year, we believe that vacancy
levels have settled with speculative development pipelines contracting.
Several factors are driving an increased focus among occupiers on the type of
prime, modern and sustainable warehouses that our portfolio contains. Many
occupiers have put a greater focus on more energy-efficient space following
the energy price shock and modern warehouses are more suitable for
implementing automation processes, whereas older warehouses often have
specifications which are unsuitable for the machinery needed. In addition,
they are more flexible and thoughtfully designed, built around integrating new
supply chain management technologies like RFID (radio frequency identification
technology).
The portfolio remains well diversified by property, tenant and geography and
our tenants' businesses are generally well positioned in areas which remain
essential to the everyday operation of the modern economy. A strong commitment
to sustainability, demonstrated by the Company's increased GRESB rating with
five Green stars awarded for 2023, together with the inflation-linked nature
of the portfolio's leases, has provided a counterbalance to the yield
expansion witnessed.
Positive tailwinds from structural demand drivers should continue to benefit
the portfolio. The impact of increasing online shopping penetration, the need
to build greater resilience into supply chains, and the aim of reducing the
environmental impact of distribution operations will continue to generate
strong demand for high-quality, sustainable warehouse space and the portfolio
remains well positioned to benefit from these trends.
In parallel to the abovementioned Strategic Review process, the near-term
focus for the Investment Manager is to continue improving the earnings
position, principally through letting up the vacant space in Spain and
capturing the portfolio's attractive indexation characteristics.
Whilst this has been a hugely frustrating period, the Board reiterates its
thanks for the support shown by shareholders, both before and during this
process. It hopes to update shareholders on the outcome as soon as a
conclusion has been reached, which should be in advance of the Company's AGM.
Tony Roper
Chairman
25 April 2024
Strategic Report
Overview of Strategy
The Company is a UK investment trust with a premium listing on the Main Market
of the London Stock Exchange. The Company invests in European logistics real
estate to achieve its investment objective noted below.
The Company was incorporated in England and Wales on 25 October 2017 with
registered number 11032222 and launched on 15 December 2017.
As indicated in the Chairman's Statement, on 27 November 2023, the Board
announced that it was undertaking a strategic review of the options available
to the Company (the "Strategic Review"). The Board is considering all options
available to the Company that offer maximum value for the shareholders
including, but not limited to, undertaking some form of consolidation,
combination, merger or comparable corporate action, selling the entire issued
share capital of the Company (which would be conducted under the framework of
a "formal sale process" in accordance with the City Code on Takeovers and
Mergers (the "Code")), and selling the Company's portfolio and returning
monies to shareholders. There is no certainty that any changes will result
from the Strategic Review and, for the avoidance of doubt, a continuation of
the Company's current investment strategy with a rebased target dividend level
is a potential outcome of the Strategic Review.
Investment Objective
The Company aims to provide a regular and attractive level of income return
together with the potential for long-term income and capital growth from
investing in high quality European logistics real estate.
Investment Policy
The Company aims to deliver the investment objective through investment in,
and active asset management of, a diversified portfolio of logistics real
estate assets in Europe.
The Company will invest in a portfolio of single and multi-let assets
diversified by both geography and tenant throughout Europe, predominantly
targeting well-located assets at established distribution hubs and within
population centres. In particular, the Investment
Manager will seek to identify assets benefiting from long- term, index-linked,
leases as well as those which may benefit from structural change, and will
take into account several factors, including but not limited to:
· the property characteristics and whether they are appropriate for
the location (such as technical quality, ESG credentials, scale,
configuration, layout, transportation links, power supply, data connectivity,
manoeuvrability, layout flexibility, and overall operational efficiencies);
· the location and its role within European logistics (city,
regional, national or international distribution), key fundamentals supporting
logistics activity within the micro location such as proximity to airport,
port, transport nodes, multimodal transport infrastructure, established
warehousing hubs, transport corridors, population centres, labour availability
and market dynamics such as supply (of both land and existing stock), vacancy
rate and planned infrastructure upgrades;
· the terms of the lease(s) focusing on duration, inflation- linked
terms, ESG criteria, level of passing rent relative to market rent, the basis
for rent reviews, and the potential for capturing growth in market rental
income;
· the strength of the tenant's financial covenant;
· the business model of the tenant and their commitment to the
asset both in terms of capital expenditure and the role it plays in their
operations; and
· the potential to implement active asset management initiatives to
add value over the holding period.
The Company will invest either directly or through holdings in special purpose
vehicles, partnerships, or other structures. The Company may invest in forward
commitments when the Investment Manager believes that to do so would enhance
risk adjusted returns for Shareholders and/or secure an asset at an attractive
yield.
The Company's active asset management activities are expected to focus on
adding value through:
· negotiating or renegotiating leases to increase/secure rental
income, managing vacancies;
· undertaking refurbishments to maintain liquidity;
· managing redevelopments as assets approach obsolescence;
· adding solar panels to reduce carbon emissions and generate
additional income streams;
· where appropriate, extending existing on-site buildings or
developing adjacent plots;
· refurbishment and redevelopment activity will, amongst other
things, focus on: enhancing occupier wellbeing; operational efficiencies;
energy efficiency;
· reducing carbon emissions; and elevating technological provision
as well as increasing lettable area.
The Company's active management of debt will effectively manage costs and risk
seeking to enhance investment returns.
Diversification of Risk
The Company will at all times invest and manage its assets in a manner which
is consistent with the spreading of investment risk. The following investment
limits and restrictions will apply to the Company and its business which,
where appropriate, will be measured at the time of investment:
· the Company will only invest in assets located in Europe;
· no more than 50 per cent. of Gross Assets will be concentrated in
a single country;
· no single asset may represent more than 20 per cent. of Gross
Assets;
· forward commitments will be wholly or predominantly pre-let
and/or have the benefit of a rental guarantee and the Company's overall
exposure to forward commitments and development activity will be limited to 20
per cent. of Gross Assets;
· the Company's maximum exposure to any single developer will be
limited to 20 per cent. of Gross Assets;
· the Company will not invest in other closed-ended investment
companies;
· the Company will predominantly invest in assets with tenants
which have been classified by the Investment Manager's investment process, as
having strong financial covenants. However, the Company may, on an exceptional
basis, invest in an asset with a tenant with a lower financial covenant
strength (and/or with a short lease term) where the Investment Manager
believes that the asset can be leased on a longer term tenancy to a tenant
with strong financial covenants within a reasonable time period; and
· no single tenant will represent more than 20 per cent. of the
Company's annual gross income measured annually.
The Company will not be required to dispose of any asset or to rebalance the
Portfolio as a result of a change in the respective valuations of its assets.
The Company intends to conduct its affairs so as to continue to qualify as an
investment trust for the purposes of section 1158 and 1159 (and regulations
made thereunder) of the Corporation Tax Act 2010.
Borrowing and Gearing
The Company uses gearing with the objective of improving shareholder returns.
Debt is typically non- recourse and secured against individual assets or
groups of assets with or without a charge over these assets, depending on the
optimal structure for the Company and having consideration to key metrics
including lender
diversity, cost of debt, debt type and maturity profiles.
The aggregate borrowings are always subject to an absolute maximum, calculated
at the time of drawdown for a property purchase, of 50 per cent. of Gross
Assets. Where borrowings are secured against a group of assets, such group of
assets will not exceed 25 per cent. of Gross Assets in order to ensure that
investment risk remains suitably spread.
The Board has established gearing guidelines for the Alternative Investment
Fund Manager ("AIFM") in order to maintain an appropriate level and structure
of gearing within the parameters set out above. Under these guidelines,
aggregate asset level gearing will sit, as determined by the Board, at or
around 35 per cent of Gross Assets. This level may fluctuate as and when new
assets are acquired until longer term funding has been established or whilst
short-term asset management initiatives are being undertaken.
The Board will keep the level of borrowings under review. In the event of a
breach of the investment guidelines and restrictions set out above, the AIFM
will inform the Board upon becoming aware of the same, and if the Board
considers the breach to be material, notification will be made to a Regulatory
Information Service and the AIFM will look to resolve the breach with the
agreement of the Board. The Directors may require that the Company's assets
are managed with the objective of bringing borrowings within the appropriate
limit while taking due account of the interests of shareholders. Accordingly,
corrective measures may not have to be taken immediately if this would be
detrimental to shareholders' interests.
Any material change to the Company's investment policy set out above will
require the approval of shareholders by way of an ordinary resolution at a
general meeting and the approval of the Financial Conduct Authority.
Non-material reasonable changes to the investment policy may be approved by
the Board.
Comparative Index
The Company does not have a benchmark.
Duration
Although the Company does not have a fixed life, under the Company's articles
of association the Directors are required to propose an ordinary resolution
for the continuation of the Company at the Annual General Meeting to be held
in 2024 and then every third year thereafter. While the Board continues to
evaluate the options resulting from the ongoing strategic review, a resolution
proposing that the Company continue as an investment trust is included in the
Notice for the Annual General Meeting scheduled to be held on 24 June 2024.
Please also refer to the Going Concern section within the Directors' Report on
page 85 of the published Annual Report and financial statements for the year
ended 31 December 2023.
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to assess the
Company's success in achieving its objective and to determine the progress of
the Company in pursuing its Investment Policy. The main KPIs identified by the
Board in relation to the Company, which are considered at each Board meeting,
are as follows:
KPI Description
Net asset value total return (EUR)1 The Board considers the NAV total return to be the best indicator of
performance over time and is therefore the main indicator of performance used
by the Board. Performance for the year and since inception is set out on page
24 of the published Annual Report and financial statements for the year ended
31 December 2023.
The Company is targeting, for an investor in the Company at launch, a total
NAV return of 7.5 per cent. per annum (in € terms).
Share price total return (GBP)1 The Board also monitors the price at which the Company's shares trade on a
total return basis over time. A graph showing the share price performance is
shown on page 24 of the published Annual Report and financial statements for
the year ended 31 December 2023.
Premium/(Discount)1 The premium/(discount) relative to the NAV per share represented by the share
price is monitored by the Board. A graph showing the share price
(discount)/premium relative to the NAV is shown on page 24 of the published
Annual Report and financial statements for the year ended 31 December 2023.
Dividends per Share The Board's aim is to pay a regular quarterly dividend enabling shareholders
to rely on a consistent stream of income. Dividends paid are set out on page
23 of the published Annual Report and financial statements for the year ended
31 December 2023. The Company is targeting, for an investor in the Company at
launch, an annual dividend yield of 5.0 per cent. per Ordinary Share (in €
terms).
Ongoing charges ratio ("OCR")1 The OCR is the ratio of expenses as a percentage of average daily
shareholders' funds calculated in accordance with the industry standard. The
Board reviews the OCR regularly as part of its review of all expenses. The aim
is to ensure that the Company remains competitive and is able to deliver on
its yield target to Shareholders. The Company's OCR is disclosed on page 23 of
the published Annual Report and financial statements for the year ended 31
December 2023.
1 Alternative Performance Measure - see glossary on pages 161 to 165 of the
published Annual Report and financial statements for the year ended 31
December 2023.
Manager
Under the terms of the Management Agreement, the Company has appointed abrdn
Fund Managers Limited as the Company's alternative investment fund manager
("AIFM") for the purposes of the AIFM Rules. The AIFM has delegated portfolio
management to the Danish Branch of abrdn Investments Ireland Limited which
acts as Investment Manager.
Pursuant to the terms of the Management Agreement, the AIFM is responsible for
portfolio and risk management on behalf of the Company and will carry out the
on- going oversight functions and supervision and ensure compliance with the
applicable requirements of the AIFM Rules. The AIFM and the Investment Manager
are both legally and operationally independent of the Company.
Dividend Policy
Subject to compliance with all legal requirements the Company normally pays
interim dividends on a quarterly basis. The Company declares dividends in
Euros, but shareholders will receive dividend payments in Sterling unless
electing to receive payments in Euros through the Equiniti Shareview Portfolio
website or via CRESTPay.
If applicable, the date on which the Euro/Sterling exchange rate is set will
be announced at the time the dividend is declared. Distributions made by the
Company may take the form of either dividend income or ''qualifying interest
income'' which may be designated as interest distributions for UK tax
purposes. With the strategic review still underway, the Company announced the
suspension of the fourth interim dividend for 2023 to maintain the maximum
flexibility to allow it to advance any particular proposal.
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a material adverse
effect on the Company and its financial condition, performance and prospects.
The Board has carried out a robust assessment of the principal risks as set
out below, ordered by category of risk, together with a description of the
mitigating actions taken by the Board.
The Board confirms that it has a process in place for regularly reviewing
emerging risks that may affect the Company in the future. The Board
collectively discusses with the Manager areas where there may be emerging risk
themes and maintains a register of these. Such risks may include, but are not
limited to, future pandemics,
the use of AI, cybercrime, and longer term climate change. In the event that
an emerging risk has gained significant weight or importance, that risk is
categorised and added to the Company's risk register and is monitored
accordingly. The principal risks associated with an investment in the
Company's shares can be found in the Company's latest Prospectus dated 8
September 2021, published on the Company's website.
The Board continues to be very mindful of ongoing geopolitical events which
have caused significant market volatility across Europe and the World. There
has been no discernible impact to date on our tenants across the wider region.
The indicators below show how the Board's views on the stated risks have
evolved over the last year.
Description Mitigating Action Risk
Strategic Risk: Strategic Objectives · The Company's strategy and objectives are regularly reviewed by Increasing
the Board to ensure they remain appropriate and effective. The Company
and Performance - The Company's strategic objectives and performance, both announced in November 2023 a strategic review and this remains ongoing at the
absolute and relative, become unattractive to investors leading to a widening date of this report.
of the discount, potential hostile shareholder actions and the Board fails to
adapt the strategy and/or respond to investor demand. · The Board receives regular presentations on the economy and also
the property market to identify structural shifts and threats so that the
strategy can be adapted if necessary.
· There is regular contact with shareholders both through the
Investment Manager and the broker with additional direct meetings undertaken
by the Chairman and other Directors.
· Board reports are prepared by the Investment Manager detailing
performance, NAV return and share price analysis versus peers.
· Cash flow projections are prepared by the Investment Manager and
reviewed quarterly by the Board.
· Shareholder/market reaction to Company announcements is
monitored.
Investment and Asset Management Risk: Investment Strategy - Poorly judged · abrdn has real estate research and strategy teams which provide Stable
investment strategy, regional allocation, use of gearing, inability to deploy performance forecasts for different sectors
capital and the mis-timing of disposals and acquisitions, resulting in poor
investment returns. · and regions.
· There is a team of experienced portfolio managers who have
detailed knowledge of the markets in which they operate.
· abrdn has a detailed investment process for both acquisitions and
disposals that require to be signed off internally before the Board reviews
any final decision.
· The Board is very experienced with Directors having a knowledge
of property markets.
Investment and Asset Management Risk: Developing and refurbishing property - · abrdn has experienced investment managers with extensive Stable
Increased construction costs, construction defects, delays, contractor development knowledge with in-depth research undertaken on each
failure, lack of development permits, environmental and third party damage can acquisition/development.
all impact the resulting capital value and income from investments.
· Development contracts are negotiated by experienced teams
supported by approved lawyers.
· Due diligence is undertaken on developers including credit checks
and current pipelines.
· Construction and risk insurance checked.
· Post completion the developer is responsible for defects and
monies are held in escrow for a period of time after handover.
Investment and Asset Management Risk: Health and Safety - Failure to identify · For new properties health and safety is included as a key part of Stable
and mitigate major health and safety issues or to react effectively to an due diligence.
event leading to injury, loss of life, litigation and any ensuing financial
and reputational impact. · Asset managers visit buildings on a regular basis.
· Property managers are appointed by abrdn to monitor health and
safety in each building and reports are made to the asset managers on a
monthly basis.
· Asset managers visit each building at least twice a year.
· Tenants are responsible for day to day operations of the
properties.
Investment and Asset Management Risk: Environment - Properties could be · The Investment Manager undertakes in depth research on each Stable
negatively impacted by hazardous materials (for example asbestos or other property acquisition with environmental surveys and considers its impact on
ground contamination) or an extreme environmental event (e.g. flooding) or the the environment and
tenants' own operating activities could create environmental damage. Failure
to achieve environmental targets could adversely affect the Company's · local communities.
reputation and result in penalties and increased costs and reduced investor
demand. Legislative changes relating to sustainability could affect the · The Investment Manager has adopted a thorough environmental
viability of asset management initiatives. policy which is applied to all properties in the portfolio.
· Experienced advisers on environmental, social and governance
matters are consulted both internally (within the Investment Manager) and
externally where required.
· The Investment Manager in conjunction with specialist advisers
has worked on a roadmap for the Company to reach a net zero emissions target
date of 2050.
Financial Risks: Macroeconomic - Macroeconomic changes (e.g. levels of GDP, · abrdn research teams take into account macroeconomic conditions Stable
employment, inflation, interest rate and FX movements), political changes when collating forecasts. This research is fed into Investment Manager
(e.g. new legislation) or structural changes (e.g. new technology or decisions on purchases/sales and regional allocations.
demographics) negatively impact commercial property values and the underlying
businesses of tenants (market risk and credit risk). Falls in the value of · The portfolio is EU based and diversified across a number of
investments could result in breaches of loan covenants and solvency issues. different countries and also has a diverse tenant base seeking to minimise
Interest rate increases from historical lows will impact strategy if unchanged risk concentration.
when re-financings are required. Pressure on overall net revenue returns.
· There is a wide range of lease expiry dates within the portfolio
in order to minimise re-letting risk.
· The Company has no exposure to speculative development and
forward funding is only undertaken where the development is predominantly
pre-let.
· Rigorous portfolio reviews are undertaken by the Investment
Manager and presented to the Board on a regular basis.
· Annual asset management plans are developed for each property and
individual investment decisions are subject to robust risk versus return
evaluation and approval.
· Most leases are indexed to provide increases in line with
movements in inflation and leverage is fixed to reduce the impact of interest
rate rises.
Financial Risks: Gearing - Gearing risk - an inappropriate level of gearing, · Regular covenant reporting to banks is undertaken as required. Increasing
magnifying investment losses in a declining market, could result in breaches
of loan covenants and threaten the Company's liquidity and solvency. An · The gearing target is set at an indicative 35% asset level limit
inability to secure adequate borrowing with appropriate tenor and competitive and an absolute Company limit of 50%.
rates could also negatively impact the Company. Earliest Company re-financing
required in 2025 but current conditions expected to impact banks' willingness · The Company's diversified European logistics portfolio,
to lend or seek tighter covenants. underpinned by its tenant base, should provide sufficient value and income in
a challenging market to meet the Company's future liabilities.
· The portfolio attracted competitive terms and interest rates from
lenders for the Company's fixed term loan facilities.
· The Investment Manager has relationships with multiple funders
and wide access to different sources of funding on both a fixed and variable
basis.
· Financial modelling is undertaken and stress tested annually as
part of the Company's viability assessment and whenever new debt facilities
are being considered.
· Loan covenants are continually monitored and reported to the
Board on a quarterly basis and would also be reviewed as part of the disposal
process of any secured property.
Financial Risks: Liquidity Risk and FX Risk - The inability to dispose of · The diversified portfolio is geared towards an attractive sector. Increasing
property assets in order to meet financial commitments of the Company or
obtain funds when required for asset acquisition or payment of expenses or · A cash buffer is maintained and an overdraft facility is
dividends. Movements in foreign exchange and interest rates or other external currently in place.
events could affect the ability of the Company to pay its dividends. Yield
expansion witnessed as valuations impacted by global economic concerns. · Investment is focused on mid-sized properties which is considered
the more liquid part of the sector.
· The assets of the Company are denominated in a non- sterling
currency, predominantly the Euro. No currency hedging is planned for the
capital, but the Board periodically reviews the hedging of dividend payments
having regard to availability and cost.
Financial Risks: Credit Risk - Credit Risk - the risk that the · The property portfolio has a balanced mix of investment grade Increasing
tenant/counterparty will be unable or unwilling to meet a commitment entered tenants and reflects diversity across business sectors.
into by the Group: failure of a tenant to pay rent or failure of a deposit
taker, future lender or a current exchange rate swap counterparty. · Rigorous due diligence is performed on all prospective tenants
and their financial performance continues to be monitored during their lease.
· Rent collection from tenants is closely monitored so that early
warning signs might be detected.
· Deposits are spread across various abrdn approved banks and AAA
rated liquidity funds.
Financial Risks: Insufficient Income Generation - Insufficient income · The Investment Manager seeks a good mix of tenants in properties. Increasing
generation due to macro-economic factors, and/or due to inadequate asset A review of tenant risk and profile is undertaken using, for example, the Dun
management resulting in long voids or rent arrears or insufficient return on & Bradstreet Failure Scoring method and tenant covenants are thoroughly
cash; dividend cover falls to a level whereby the dividend needs to be cut considered before a lease is granted.
and/or the Company becomes unattractive to investors. Level of ongoing charges
becomes excessive. · The abrdn team consists of asset managers on the ground who
undertake asset management reviews and implementation and there is a detailed
approval process within abrdn for lettings. The Investment Manager through its
teams on the ground seeks to manage voids and any non-payment of rent.
· At regular Board meetings forecast dividend cover is considered.
There is regular contact with the broker and shareholders to ascertain, where
possible, views on dividend cover.
Regulatory Risks: Compliance - The regulatory, legal and tax environment in · The Company has an experienced Company Secretary and engages Stable
which the Company's assets are located is subject to change and could lead to lawyers who will advise on changes once any new proposals are published. There
a sub-optimal corporate structure and result in increased tax charges or is regular contact with tax advisers in relation to tax computations and
penalties. Failure to comply with existing or new regulation. transfer pricing.
· Directors have access to updates on relevant regulatory changes
through the Company's professional advisers.
· The highest corporate governance standards are required from all
key service providers and their performance is reviewed annually by the
Management Engagement Committee.
Operational Risks: Service Providers - Poor performance/inadequate procedures · abrdn has an experienced Investment Manager and Asset Management Stable
at service providers leads to error, fraud, non- compliance with contractual Team.
agreements and/or with relevant legislation or the production of inaccurate or
insufficient information for the Company (NAV, Board Reports, Regulatory · The Company has engaged an experienced registrar: Equiniti is a
Reporting) or loss of regulatory authorisation. Key service providers include reputable worldwide organisation.
the AIFM, Company Secretary, the Depositary, the Custodian, the managing
agents, lending banks and the Company's Registrar. · All service providers have a strong control culture that is
regularly monitored.
· abrdn aims to meet all service providers once a year and the
Management Engagement Committee reviews all major service providers annually.
· The Company has the ability to terminate contracts.
Operational Risks: Business continuity - Business continuity risk to any of · abrdn has a detailed business continuity plan in place with a Stable
the Company's service providers or properties, following a catastrophic event separate alternative working office if required and the ability for the
e.g. pandemic, terrorist attack, cyber attack, power disruptions or civil majority of its workforce to work from home.
unrest, leading to disruption of service, loss of data etc.
· abrdn has a dedicated Chief Information Security Officer who
leads the Chief Information Security Office covering the following functions:
Security Operations & Delivery, Security Strategy, Architecture &
Engineering, Data Governance & Privacy, Business Resilience, Governance
& Risk, Security & IT.
· Properties within the portfolio are all insured.
· The IT environment of service providers is reviewed as part of
the initial appointment and on an ongoing basis.
Promoting the Company
The Board recognises the importance of promoting the Company to prospective
investors both for improving liquidity and enhancing the value and rating of
the Company's shares. The Board believes an effective way to achieve this is
through subscription to, and participation in, the promotional programme run
by abrdn on behalf of a number of investment trusts under its management.
The Company's financial contribution to the programme is matched by abrdn.
abrdn's marketing team reports quarterly to the Board giving analysis of the
promotional activities as well as updates on the shareholder register and any
changes in the make up of that register.
The purpose of the programme is both to communicate effectively with existing
shareholders and to gain new shareholders with the aim of improving liquidity
and enhancing the value and rating of the Company's shares. Communicating the
long-term attractions of the Company is key and therefore the Company also
supports abrdn's investor relations programme which involves regional
roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced
individuals with the right knowledge represented on the Board in order to
allow the Board to fulfil its obligations. The Board also recognises the
benefits and is supportive of the principle of diversity in its recruitment of
new Board members. The Board will not display any bias for age, gender, race,
sexual orientation, religion, ethnic or national origins, or disability in
considering the appointment of its Directors. The Board will continue to
ensure that any future appointments are made on the basis of merit against the
specification prepared for each appointment and, therefore, the Company does
not consider it appropriate to set diversity targets. At 31 December 2023,
there were two male Directors and two female Directors on the Board.
The Board commenced detailed discussions on succession planning in October
2023 before the announcement of the strategic review. The Board expects to
consider succession planning fully once again when the result of the strategic
review is known.
Sustainable and Responsible Investment Policy and Approach
Further details on abrdn's Sustainable and Responsible Investment Policy and
Approach for Direct Real Estate are available at abrdn.com (http://abrdn.com/)
.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated day to day management
and administrative functions to abrdn Fund Managers Limited. There are
therefore no disclosures to be made in respect of employees. The Company's
socially responsible investment policy is outlined in the Investment Manager's
Review.
Due to the nature of the Company's business, being a Company that does not
offer goods and services to customers, the Board considers that it is not
within the scope of the Modern Slavery Act 2015 ("MSA").
The Company is not required to make a slavery and human trafficking statement.
The Board considers the Company's supply chains, dealing predominantly with
professional advisers and service providers in the financial services
industry, to be low risk in relation to this matter.
A copy of the Manager's statement in compliance with the Modern Slavery Act is
available for download at abrdn.com (https://www.abrdn.com/en-gb)
The bulk of emissions relating to properties owned by the Company are the
responsibility of the tenants and any emissions relating to the Company's
registered office are the responsibility of abrdn plc. The Company has no
direct greenhouse gas emissions to report from the operations of its business,
although it is responsible for low emissions generated at certain properties
within its portfolio reportable under the Companies Act 2006 (Strategic Report
and Directors' Reports) Regulations 2013, see page 75 of the published Annual
Report and financial statements for the year ended 31 December 2023.
Viability Statement
The Company does not have a formal fixed period strategic plan but the Board
formally considers risks and strategy at least annually. The Board considers
the Company, with no fixed life, to be a long-term investment vehicle, but for
the purposes of this viability statement has decided that a period of three
years is an appropriate period over which to report. The Board considers that
this period reflects a balance between looking out over a long-term horizon
and the inherent uncertainties of looking out further than three years.
In assessing the viability of the Company over the review period the Directors
have conducted a robust review of the principal risks focusing upon the
following factors:
· The status of the ongoing Strategic Review;
· The principal risks detailed in the Strategic Report;
· The ongoing relevance of the Company's investment objective in
the current environment;
· The demand for the Company's shares evidenced by the historical
level of premium or discount;
· The level of income generated by the Company and the stability of
tenants;
· The level of gearing including the requirement to meet lending
covenants, negotiate new facilities and repay or refinance future facilities;
· The continuation vote required to be put to shareholders at the
AGM to be held in 2024; and
· The flexibility of the Company's bank facilities and putting
these facilities in place in time to meet commitments.
The Directors have reviewed summaries from the portfolio models prepared by
the Investment Manager which have been stress tested to highlight the
performance of the portfolio in a number of varying economic conditions
coupled with potential opportunities for mitigation. The Directors have also
stress tested the financial position of the Company with attention on the
proceeds from the disposal of the asset in France and refinancing of loans in
2025.
The Company has prepared cash flow forecasts which reflect the potential
impact of reductions in rental income including reasonably possible downside
scenarios.
The impact of reductions in rental income could be mitigated through a
reduction in dividends to shareholders if considered necessary by the Board.
The Company has modelled severe but plausible downside scenarios, taking into
account specific tenant risks. These scenarios modelled reduced rental income
through to 2026 with the worst case scenario modelling to an overall 40%
reduction of rental income per annum over that period.
The Board and Manager regularly monitor the permitted and 'hard breach'
loan-to-value covenants on the Company's eight loan facilities. Further
details on loan covenants are provided in Note 1(a) to the financial
statements on page 110 of the published Annual Report and financial statements
for the year ended 31 December 2023. There were no breaches of the
loan-to-value covenants based upon the valuations adopted at year end. The
Directors believe that the liquidity in the Group and £70m revolving credit
facility could be used for partial repayment of a loan in the event of any
future breaches.
Accordingly, taking into account the Company's current position and the
potential impact of its principal risks and uncertainties, the Directors have
a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for a period of three
years from the date of this Report subject to the material uncertainty and
outcome of Strategic Review as outlined in note 1(a) and shareholders'
approval of the continuation vote required under the articles to be put to the
AGM to be held in 2024, noting that the Directors are unaware at this early
stage of any shareholder intentions to vote against such a resolution. In
making this assessment, the Board has considered that matters such as
significant economic uncertainty, stock market volatility and changes in
investor sentiment could have an impact on its assessment of the Company's
prospects and viability in the future.
s172 Statement
The Board is required to describe to the Company's shareholders how the
Directors have discharged their duties and responsibilities over the course of
the financial year under section 172 (1) of the Companies Act 2006 (the "s172
Statement"). This s172 Statement requires the Directors to explain how they
have promoted the success of the Company for the benefit of its members as a
whole, taking into account the likely long-term consequences
of decisions, the need to foster relationships with all stakeholders and the
impact of the Company's operations on the environment.
The Board's philosophy is that the Company should operate in a transparent
culture where all parties are treated with respect and provided with the
opportunity to offer practical challenge and participate in positive debate
which is focused on the aim of achieving the expectations of shareholders and
other stakeholders alike. The Board reviews the culture and manner in which
the Investment Manager operates at its regular meetings and receives regular
reporting and feedback from the other key service providers.
Investment trusts are long-term investment vehicles, with no employees. The
Company's Board of Directors sets the investment mandate as published in the
most recent prospectus, monitors the performance of all service providers and
is responsible for reviewing strategy on a regular basis.
Key Stakeholders
A key stakeholder and service provider for the Company is the Alternative
Investment Fund Manager (the "Manager") and this relationship is reviewed at
each Board meeting and relationships with other service providers are reviewed
at least annually.
Shareholders are seen as key stakeholders in the Company. The Board seeks to
meet at least annually with shareholders at the Annual General Meeting. This
is seen as a very useful opportunity to understand the needs and views of the
shareholders. In between AGMs the Directors and Investment Manager also
conduct programmes of investor meetings with larger institutional, private
wealth and other shareholders to ensure that the Company is meeting their
needs. Such regular meetings may take the form of joint meetings or solely
with a Director where any matters of concern may be raised directly.
Our European partner lending banks are also key stakeholders. We leverage off
the Investment Manager's key relationships with a wide range of lending banks
and the Investment Manager has regular contact with these banks updating them
on the portfolio and valuations and also on plans for new acquisitions or
disposals.
The other key stakeholder group is that of the underlying tenants that occupy
space in the properties that the Company owns. The Board aims to conduct a
site visit at least annually with the aim of meeting tenants locally and
discussing their businesses and needs and assessing where improvements may be
made or expectations managed. The Investment Manager's asset managers are
tasked with conducting meetings with building managers and tenant
representatives in order to ensure the smooth running of the day to day
management of the properties. The Board receives reports on the tenants'
activities at its regular Board meetings.
The Board via the Management Engagement Committee also ensures that the views
of its service providers are heard and at least annually reviews these
relationships in detail. The aim is to ensure that contractual arrangements
remain in line with best practice, services being offered meet the
requirements and needs of the Company and performance is in line with the
expectations of the Board, Manager, Investment Manager and other relevant
stakeholders. Reviews will include those of the Company depositary, custodian,
share registrar, broker, legal adviser, lenders and auditor.
The Investment Manager's Report details the key investment decisions taken
during the year and subsequently. The Investment Manager has continued to
invest the Company's assets in accordance with the mandate provided by
shareholders at launch, under the oversight of the Board. The Company aims to
maintain gearing at asset level at or around 35% over the longer term. abrdn's
dedicated treasury team has negotiated the debt facilities at competitive
market rates, resulting in the Company's blended all-in interest rate across
all its debt being 2.00% which is to the benefit of all shareholders. The
Company has an uncommitted four year €70 million master facilities loan
agreement with Investec Bank plc to provide additional flexibility which
expires in October 2024. This facility increases the Company's ability to
acquire new assets prior to any fresh equity raise and will reduce the impact
of cash drag on investment returns.
Details of how the Board and Investment Manager have sought to address
environmental, social and governance matters across the portfolio are
disclosed from page 57 onwards of the published Annual Report and financial
statements for the year ended 31 December 2023.
The Company is just over six years old having been launched at the end of
2017. However, it is a long-term investor and the Board has established the
necessary procedures and processes to promote the long-term success of the
Company. The Board will continue to monitor, evaluate and seek to improve
these processes as the Company grows, to ensure that the investment
proposition is delivered to shareholders and other stakeholders in line with
their expectations.
Future
With exception of the Strategic Review, many of the non-performance related
matters likely to affect the Company in the future are common across all
closed ended investment companies, such as the attractiveness of investment
companies as investment vehicles, geopolitical tensions and the impact of
regulatory changes. These factors need to be viewed alongside the outlook for
the Company, both generally and specifically, in relation to the portfolio.
The Board's view on the general outlook for the Company can be found in my
Chairman's Statement whilst the Investment Manager's views on the outlook for
the portfolio are included on page 37 of the published Annual Report and
financial statements for the year ended 31 December 2023.
Tony Roper
Chairman
25 April 2024
Results
Financial Highlights
31 December 2023 31 December 2022
Total assets (€'000) 693,892 817,783
Total equity shareholders' funds (net assets) (€'000) 384,928 489,977
Net asset value per share (cents)1 93.4 118.9
Net asset value per share (pence)1 81.2 105.4
Share price - (mid market) (pence) 61.6 68.5
Market capitalisation (£'000) 253,899 282,339
Discount to net asset value per share (%)1 (24.1) (35.0)
Dividends and earnings
Net asset value total return per share (EUR) (%)1 (17.1) (3.8)
Dividends declared per share 4.23c (3.68p) 5.64c (4.80p)
Revenue reserves (€'000) 22,766 20,083
Loss (€'000) (81,801) (18,442)
Operating costs
Ongoing charges ratio (excluding property costs) (%)1 1.6 1.3
Ongoing charges ratio (including property costs) (%)1 2.4 1.7
Performance (total return)
Year ended 31 December 2023 Year ended 31 December 2022
Since Launch
% % %
Share price (38.3) (18.1)
(GBP)1
(3.5)
Net asset value (3.8) 7.2
(EUR)1
(17.1)
Dividends declared in respect of the Financial Year to 31 December 2023
Dividend distribution Euro cents equivalent2 Qualifying interest Euro cents equivalent2
Dividend distribution GBP pence Qualifying interest GBP pence
ex-dividend Record Pay date
date date
First interim 0.94 1.08 0.29 0.33 01/06/2023 02/06/2023 23/06/2023
Second interim 1.11 1.28 0.11 0.13 31/08/2023 01/09/2023 22/09/2023
Third interim 0.86 0.98 0.37 0.43 30/11/2023 01/12/2013 29/12/2023
Fourth interim3 - - - - - - -
Total 2.91 3.34 0.77 0.89
1 Considered to be an Alternative Performance Measure (see Glossary on pages
161 to 165 of the published Annual Report and financial statements for the
year ended 31 December 2023 for more information).
2 The interim distributions are paid in GBP to shareholders on the register.
However, shareholders are able to make an election to receive distributions in
euros.
3 On 19 February 2024, the Board announced that the Company would forego the
fourth interim distribution for the quarter ended 31 December 2023, which
historically has been declared in February and paid in March each year. This
was to give maximum flexibility during the strategic review process.
Strategic Report
Investment Manager's Review
Having joined the investment management team responsible for managing the
Company's portfolio in October 2022, it is my pleasure on behalf of the entire
fund management team to present my second Investment Manager's Review,
covering the financial year ending in December 2023.
2023 Market Overview
Short-term fundamentals
The European logistics sector experienced a tougher year in terms of occupier
fundamentals and leasing activity, while capital markets also remained quiet.
Although inflation cooled to 2.6% in the Eurozone in February 2024, the higher
interest rate environment and fiscal drag in the economy have weighed on
economic growth and investor sentiment.
Borrowing costs remain high for investors and tenants are taking a more
cautious approach to leasing. This has meant the market has been slower than
anticipated in rebuilding momentum.
Logistics leasing demand, which has been strong in recent years, cooled in
2023, with total take up of 29 million square metres representing a 24% year
on year decrease. Although this indicates a deceleration in the market in-line
with slower economic growth, take up was still 9% above the long-term average.
2023 quarter-on-quarter take up did gather some momentum, however, with over 8
million square metres of take up recorded in Q4, which was just a 7% reduction
on the same quarter in 2022. With 2022 delivering the second highest take up
volume on record, the Q4 2023 outcome can be considered a positive sign for
the leasing market. With H2 coming in 17% above the first half of 2023, the
occupier market is carrying improving momentum into 2024.
Regionally, there was a clear trend with more mature and larger logistics
markets seeing the sharpest slowdowns in 2023, while smaller, less mature
markets such as Belgium, Ireland and Italy saw the most resilient leasing
activity. However, this hides the fact that the largest markets typically
had very strong years in 2021 and 2022, so some of the slowdown can be
considered a natural transition back to more typical levels of long-term
demand. The UK, Germany, Netherlands and Spain all saw take up drop
year-on-year by more than 20%.
The type of demand is also shifting. In most markets, newer entrants such as
Amazon have established their bulk inbound distribution hubs and regional
fulfilment centres and are now switching to focus on efficiencies in their
Local or "last mile" delivery stations in city fringe locations. This has also
contributed to a lower level of overall take up, as demand has switched to
smaller 10,000 to 40,000 square metre mid-box units, from the larger units in
high demand in previous years. The largest deal ever recorded in Poland was
signed in 2023, with a Chinese e-commerce operator taking 265,000 square
metres of space.
A lack of modern, fit for purpose stock also remains a limiting factor for
take up in good locations. With rents continuing to rise, leasing tensions in
Europe's logistics hotspots are still evident. While vacancy rates increased
over the course of 2023, rising by 205 basis points to an average of 5.4%,
there is clear evidence that a slowdown in construction activity is having a
stabilising influence, evidenced by an 11 basis points decline in Q4 2023,
significantly below the average for the year.
The highest vacancy rates are in Poland, Spain and the UK, where rates are all
in excess of 6%, while the tightest supply situations are found in Ireland,
Denmark, Czech Republic and Netherlands. However, at the city level and in the
most desirable fringe city locations, supply of good quality and modern
logistics properties remains very low and competition between tenants is
pushing up rents.
We can see this relationship when comparing rental growth with vacancy rates.
As vacancy declined through the pandemic, rents gradually increased at a
faster pace with a strong correlation between the two. However, during 2023,
prime rental growth has continued to exceed inflation and at the same time
vacancy rates have increased. This is because competition for modern best-
in-class logistics facilities remains strong, while secondary buildings in
weaker locations typically represent the bulk of the increasing supply in the
market. It is important to differentiate between the vacancy of increasingly
obsolete older warehousing stock and modern logistics facilities in high
demand.
According to data from Savills, prime rents increased by 11% in 2023 on
average, sustaining the same rate seen in 2022. However, there was a slowdown
in Q4 2023 when rents increased by 1.5% during the quarter.
Looking ahead, the undersupply of modern logistics space in good locations
across the supply chain means that cashflows should be increasingly resilient
and strong income growth should persist. For European logistics, the milder
recession expectation is supportive given the link between economic growth and
logistics activity.
Long-term fundamentals
Supply chains continue to move through a period of exceptional structural
change, backed by four key demand drivers.
· The Covid pandemic accelerated many aspects of de- globalisation,
stress-tested existing distribution networks, and increased the need for
companies to diversify their supply chains.
· e-commerce remains an incremental demand driver for the
long-term, despite a slowdown in the growth rate; some pull back in growth was
naturally due after the e-commerce boom during the pandemic where online sales
penetration rates were artificially boosted by lockdowns.
· On-shoring has been an incrementally more important driver of
demand over the last decade, but this has recently accelerated as a result of
supply chain disruption through the Gulf of Aden and the Suez Canal. Rising
tensions in the Middle East doubled international shipping costs in late 2023,
resulting in supply chains re-routing goods. Volatility in variable costs,
rising fixed costs and increased supply chain risks as well as broader de-
globalisation pressures, are increasing supply chain diversification and the
need to be closer to end users.
· Lastly, ESG and "net zero" considerations are beginning to play a
clearer role in logistics performance, where tighter regulations from the
European Union's Energy Efficiency Directive combined with valuation guidance
from the RICS, will push tenants and investors to upgrade buildings to deliver
more efficient performance. This will further widen the gap between future-fit
assets and those facing obsolescence. When markets are undergoing a
transformation, such as in logistics, the choice of asset quality in the right
location and the future relevance of the building are increasingly critical
factors.
A large proportion of European stock is no longer appropriate for today's
logistics requirements and requires modernisation, especially as regulatory
deadlines around energy efficiency approach. Current total supply growth of
c.8% for 2023 is expected to slow to c.4% p.a. in 2024 and likely level off in
the longer term, according to Green Street. Two of the key drivers of the
expected limitations of new supply are increased financing and development
costs. 2023 saw development economics deteriorate, with estimated profit
margins halving to c.15%, driven by higher construction input costs (up 25% in
2022).
The ESG factor cannot be underestimated as a further constraining factor on
future-fit logistics supply. In preparation for the net zero transition, the
Research and Energy Committee of the European Parliament is finalising its
position on the Energy Performance of Buildings Directive which seeks to make
the EU building sector carbon neutral by 2050. However, we are seeing more
significant retrofitting and energy improvement costs factored into cash flows
and this is being accounted for in purchase prices or valuations. Polarisation
between prime and secondary assets will amplify as limited new supply in most
sectors becomes evident, while secondary and tertiary properties begin to be
penalised.
Values and capital flows
Industrial rents have experienced strong growth over the last two years, an
aspect of Europe that has lagged the UK and US markets. While yields have come
under pressure from higher debt costs, some of this has been partially offset
by rental growth or rent indexation built into many European lease contracts.
2023 gradually saw a stabilisation in logistics yields in Continental Europe,
with the sector experiencing more resilience than other sectors such as
offices and the lagging residential sector.
Investment values have declined as interest rates increased. Prime logistics
yields had tightened to 3% or below in the most sought-after locations. This
was no longer supportable as debt costs spiked and relative pricing against
bonds weakened. However, given the fundamentals and strength of investor
sentiment towards long-term structural demand drivers, when interest rates
stabilise and commercial real estate begins to attract increased investment
again, we believe that the logistics sector is well placed to recover lost
performance over the short to medium term.
Capital flows into European logistics real estate have increased to now
regularly reach roughly 20% of total investment, up from 10% in 2013. The
volume of transactions closed in 2023 was unsurprisingly down from the record
set in 2021, and 50% below the level reached in 2022. The largest markets
continue to be Germany, France, The Netherlands and Spain. Where markets have
seen the sharpest repricing (the UK, Netherlands, Germany and Nordics) we are
starting to see investor demand return and values stabilise. In the UK, yields
have shown some signs of tightening under increased investor competition,
although it is too early to tell if this is the start of a new phase in the
cycle.
Well diversified, liquid portfolio with strong urban profile
Fully aligned with the Manager's research and strategy teams, the Company
continues to pursue its high conviction strategy focusing on the most 'liquid'
and in-demand part of the European logistics market where both capital and
rental growth expectations are highest. Urban logistics and mid-sized
('mid-box') warehouses are the areas of the market where supply / demand
dynamics are the strongest and the potential tenant base the largest. A
typical mid-box warehouse sits between 10,000 - 50,000 square metres in size
and for urban logistics, often called the 'final touch in the supply chain',
building sizes are generally smaller and located in close proximity to dense
population centres for speedier deliveries.
With our focus on long-term, sustainable income, the future-proofing or
'second life' of our warehouses is an important consideration when acquiring
any new assets. Building specifications we consider important, amongst others,
are the eaves' height, floor-load capacity, number of loading doors,
manoeuvrability around the building, power supply and increasingly important,
a building's sustainability credentials.
Buildings positioned alongside main transport corridors, close to seaports,
infrastructural nodes, or in the case of urban logistics, close to large
population concentrations, are important criteria in analysing new acquisition
opportunities.
The Company's focus is solely on Continental Europe, which provides a deep
pool of potential acquisition targets and strong diversification options,
limiting single market risk. A standard lease agreement on the Continent often
includes full annual CPI indexation of rents, thereby providing a strong hedge
against inflation which has become particularly relevant in today's
inflationary environment. Despite recent upward pressure, our investment
strategy continues to benefit from lower financing costs fixed with European
banks. Finally, e-commerce penetration is still at an earlier stage on the
Continent with strong growth forecast, creating an attractive investment
backdrop. Statista also forecasts strong growth in online sales in the food
sector as more tech conscious generations become earners and consumers.
Growth is expected to be strongest in the urban logistics sub sector,
especially those assets located in dominant cities that have warehousing
supply constraints and where demand is coming from different land uses,
resulting in higher land costs and ultimately underpinning higher rents.
Parcel delivery specialists are continuing to improve their services by
reducing delivery times and thereby transportation costs. Operating a
logistics warehouse in close proximity to their ultimate customer base is the
best way to reduce their cost base with rental and building costs materially
less impactful than transportation costs.
Approximately 50% of the Company's portfolio by value comprises urban
logistics warehouses in locations such as Madrid, Frankfurt, Warsaw, Barcelona
and Den Hoorn located in the Netherlands between the cities of The Hague and
Rotterdam.
As at the Company's year-end, 16 out of the 26 warehouses held in the
portfolio were newly developed at the point of purchase and have been
constructed since 2018. The portfolio specifications are therefore very modern
and in line with tenant requirements. The portfolio is well diversified and
spread across five different countries. As at 31 December 2023, the
Netherlands represented the largest geographic exposure in the portfolio by
value (30.2%), followed by Spain (29.8%), France (15.7%), Poland (14.3%) and
Germany (10.0%).
Asset Management Initiatives
2023 was a hugely challenging year with valuation declines witnessed across
all geographies and sub-sectors. Despite sector re-pricing and a weakening of
investor sentiment, the markets remained active for the right stock.
In all for the Company, we completed eight transactions covering 144,000
square metres of space, involving €8.2 million in annualised rent. This
comprised six lease extensions, one sale, and agreeing terms committing to
another which was completed post year end.
During the first quarter the Company agreed a 9.5 year lease renewal with
Dachser France in La Creche, Niort. The new rent achieved a 3% uplift on the
previous annual rent payable and significantly ahead of ERV, reflecting the
tenant-critical nature of the asset. The strategic significance of the
location and the continued upward pressure on real rents also supported the
tenant agreeing to uncapped annual ILAT indexation, with the next uplift
effective January 2025.
Also in Q1, the Company secured a new 12 year lease re-gear with Biocoop at
its Avignon property, generating annual contracted rent of €2.5 million,
again with full annual French ILAT indexation with no cap. The 'HQE Excellent'
climate-controlled facility 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 asset also
generates €165,000 per annum of additional income from rooftop solar panels.
In May, the Company completed a 5-year lease extension at its single-tenant
warehouse in Ede, the Netherlands. The new extended lease with
pharmaceutical retailer AS Watson (trading as Kruidvat) moved the expiry out
from 2028 to July 2033 and provides for future upward- only indexation capped
at 4% per annum.
There was steady leasing activity in Poland, with two lease extensions agreed
in Krakow. A lease extension for 3 years was agreed with MaxFliz home
interiors at their 8,842 sq m facility, moves the expiry out to July 2027,
reflecting their ongoing commitment to the strong location supporting their
future operations. Also in Krakow, Chef's Culinar agreed to a 3-year extension
moving the expiry at their 1,339 sq m unit out to November 2026.
In Lodz, Poland, a lease extension was agreed, with EGT Logistics, moving the
lease expiry at their 1,634 sq m facility out to March 2027.
In May, the Company announced the sale of its 32,645 sqm warehouse, in Leon,
northern Spain for €18.5 million. The price reflected a premium to the Q4
2022 valuation and crystalised a 20% gross profit. The Company had acquired
the asset, let previously to Decathlon, in 2018 for €15.3 million.
Post year-end 2023 the Company sold its vacant French asset at Meung sur
Loire, which completed on 25 March 2024. The price represented a modest
discount to the Q3 2023 valuation, with the proceeds being used to further
strengthen the Company's balance sheet.
This was a good result in exiting an asset that would require substantial
capex, especially with an eye to our net zero emissions target.
In Madrid, the Company is now carrying 7% of the portfolio void at Phase 1B
Gavilanes (which was vacated in August 2023) as well as accounting for the
void following the surrender of the units occupied by Arrival.
Despite continued efforts to secure both a surrender premium, which had
previously been agreed with Arrival, and the outstanding rental payments for
2023, we were unable to reach a satisfactory conclusion. The Company
previously noted Arrival's announcement and SEC filing regarding bridge
financing and in the continued absence of a satisfactory conclusion, legal
proceedings to recoup monies owed continued. Off the back of good occupier
interest in the properties, the Company has secured the surrender of the lease
agreement with Arrival to take full possession of the units. Whilst it is
extremely disappointing, the Company took the decision to take full control of
the assets in order to maximise revenue going forward. Reflecting the ongoing
demand for Grade-A, highly sustainable logistics space in Spain, a new lease
has been agreed for 5,131 sqm of the space, at a rent 8.7% above the previous
passing rent, with Spanish transportation company METHOD Advanced Logistics.
In October 2023 the Company announced that it had been awarded a maximum five
stars in the 2023 Global Real Estate Sustainability Benchmark ('GRESB')
awards, achieving first place in its peer group of diversified funds investing
across Europe (European industrial: distribution warehouse). This was a
welcome achievement and progressively increased scoring over 2021 and 2022.
Property portfolio as at 31 December 2023
WAULT incl WAULT excl 2023
breaks (years) breaks (years) % of Portfolio
Country Location Built
France Avignon 2018 10.7 10.7 7.9
France Meung sur Loire 2004 - - 2.8
France Bordeaux 2005 5.1 8.1 1.8
France Dijon 2004 6.0 9.0 1.4
France Niort 2014 8.0 11.0 1.8
Germany Erlensee 2018 4.2 4.2 6.0
Germany Florsheim 2015 4.3 4.3 4.0
Netherlands Den Hoorn 2020 6.3 6.3 7.2
Netherlands Ede 1999/ 2005 9.7 9.7 4.1
Netherlands Horst 2005 8.7 8.7 1.4
Netherlands Oss 2019 10.5 10.5 2.4
Netherlands 's Heerenberg 2009/ 2011 8.0 8.0 4.4
Netherlands Waddinxveen 1983/ 1994/ 2002/ 9.9 9.9 6.2
2018 /2022
Netherlands Zeewolde 2019 10.5 10.5 4.5
Poland Krakow 2018 2.6 2.6 4.8
Poland Lodz 2020 4.5 4.5 4.8
Poland Warsaw 2019 4.2 4.2 4.7
Spain Barcelona 2019 2.5 5.5 2.7
Spain Madrid - Coslada 1999 3.0 7.0 1.6
Spain Madrid - Gavilanes 1A 2019 6.1 6.1 4.4
Spain Madrid - Gavilanes 1B 2019 - - 2.1
Spain Madrid - Gavilanes 2A 2020 2.6 12.6 2.0
Spain Madrid - Gavilanes 2B 2020 1.5 1.5 1.5
Spain Madrid - Gavilanes 2C 2020 1.5 3.5 1.5
Spain Madrid - Gavilanes 3A/B/C 2019 - - 5.0
Spain Madrid - Gavilanes 4 2022 13.3 23.3 9.0
TOTAL 7.0 8.4 100.0
A strong tenant base with inflation linked income
Our key objective remains the generation of long-term sustainable income
streams in order to pay an attractive quarterly dividend.
2023 saw the Company collect 95% of total expected rent, with the shortfall
attributable to Arrival. With more than 50 lease agreements, the portfolio has
a diversified tenant base across different sectors. In addition to the regular
interaction of our asset and property managers with our tenants, their
covenant strength is monitored on a regular basis using a variety of data
sources including Dun & Bradstreet.
In terms of exposure by segment, third party logistics providers ("3PLs")
represent the largest at 37% of total portfolio rent. The 3PL market continues
to be buoyant, particularly those businesses specialising in parcel
deliveries; our exposure comprises DHL, which occupies our assets in Madrid
and Warsaw and Dachser occupying three assets in Niort, Dijon and Bordeaux,
France.
The combination of both DHL and Dachser France accounts for 9.4% of rental
income in aggregate, across 5 units and 3 countries. Manufacturers (20%) and
companies related to the food industry (19%) complete the top three. Food
related companies such as supermarkets like Biocoop or Carrefour and traders
in food such as Combilo and Limax all performed well during the pandemic. The
retail exposure (8.3% of total rent) is accounted for by Netherlands based
drugstore Kruidvat (part of the A.S Watson group) operating its e-commerce
platform. The direct exposure to e-commerce (9.1% of total rent) is accounted
for by the holding of the state-of-the-art, last mile Amazon facility at
Gavilanes, Madrid. This is the largest asset in the portfolio by value.
Standard lease agreements on the Continent typically have annual CPI
indexation of rent. This is not the standard in the UK. Having this annual
inflation protection has proved beneficial with rising energy prices and
supply chain issues driving inflation well into double digits in the Eurozone
towards the end of 2022 and throughout 2023. 65% of the portfolio's current
income has full CPI or ILAT indexation, which undoubtedly helped to grow 2023
income.
The Company's existing leases have an average length of 7.0 years including
break options and 8.4 years excluding breaks to lease expiry.
Top 10 tenants based on current rents
Contracted Contracted WAULT incl. WAULT excl.
rent (€000 p.a.) rent (%) breaks (years) breaks (years)
Tenant Property
1 A.G. van der Helm Den Hoorn 3,435 10.7% 6.3 6.3
2 Amazon Madrid - Gavilanes 4 2,647 8.2% 13.3 23.3
3 Combilo International B.V. Waddinxveen 2,228 6.9% 9.9 9.9
4 Biocoop Avignon 2,177 6.8% 10.7 10.7
5 JCL Logistics Benelux B.V. 's Heerenberg 1,744 5.4% 8.0 8.0
7 Aalberts integrated piping systems B.V. Zeewolde 1,706 5.3% 10.5 10.5
6 A.S. Watson Ede 1,664 5.2% 9.7 9.7
8 DHL Madrid - Coslada; Warsaw 1,558 4.8% 3.7 4.4
9 DACHSER France Bordeaux; Niort; Dijon 1,481 4.6% 6.5 9.5
10 Primera Línea Logística, S.L. Madrid - Gavilanes 1A 1,361 4.2% 6.1 6.1
Subtotal 20,001 62.1%
Other tenants 12,177 37.9%
Portfolio as at 31 December 2023 32,178 100.0% 7.0 8.4
Excludes income from Arrival in Madrid 3 where lease was surrendered in
February 2024.
Loan portfolio 31 December 2023
Fixed interest rate (incl margin)
Loan (€million) Duration (years)
Country Property Lender End date
Germany Erlensee DZ Hyp 17.8 January 2029 10 1.62%
Germany Florsheim DZ Hyp 12.4 January 2026 7 1.54%
France Avignon + Meung sur Loire BayernLB 33.0 February 2026 7 1.57%
Netherlands Ede + Oss + Waddinxveen Berlin Hyp 44.2 June 2025 6 1.35%
Netherlands 's Heerenberg Berlin Hyp 11.0 June 2025 6 1.10%
Netherlands Den Hoorn + Zeewolde Berlin Hyp 43.2 January 2028 8 1.38%
Spain Madrid Gavilanes 4 + Madrid Coslada + Barcelona ING Bank 53.9 September 2025 3 3.11%
Spain Madrid Gavilanes 1 + 2 + 3 ING Bank 44.0 July 2025 3 2.72%
Total 259.5 2.00%
Well diversified debt portfolio
During 2023 interest rates have remained high across the continent. The
Company's debt from its European partner banks remains fixed in nature and
secured on certain assets or groups of assets within the portfolio. These
non-recourse loans, which include no parent company guarantees, range in
maturities between 1.4 and 5.1 years with all-in interest rates ranging
between 1.10% and 3.11% per annum. During the year €10.8 million was repaid
following the sale of Leon in April 2023.
At the end of 2023, the Company´s fixed debt facilities totalled €259.5
million at an average all-in rate of 2.0% and with a loan-to-value of 38.7%,
slightly above the long- term target of 35%. The Company´s secured fixed rate
debt supports its investment objective with the earliest re-financing of debt
required in mid-2025.
The Company arranged asset level fixed rate bank debt financings in those
local markets where all-in loan costs were the lowest, such as Germany, the
Netherlands, France and Spain with dedicated real estate banks that are active
in this lending space. Stress testing on the existing financial covenants such
as Interest Cover Ratios and Loan-To-Value (LTV) is conducted on a regular
basis. In order to diversify risk, the loan facilities have also been
cross-collateralised with groups of single-tenanted buildings or have
diversified risk thanks to multi-tenanted leasing structures.
The Company also benefits from its revolving credit facility agreement with
Investec Bank for the amount of €70 million which provides further
flexibility for the acquisition of new properties and / or for the
implementation of asset management initiatives. At the end of 2023 the
revolving credit facility agreement with Investec Bank was undrawn. Within the
facility, Investec also makes available a £3.3 million committed revolving
credit facility which is carved out of the total €70 million limit of the
facility. This facility sits at the parent company level and provides added
flexibility.
Outlook
We believe Continental European logistics real estate is well placed to
recover from a difficult market position due to the robust market
fundamentals. Backed by the tailwinds of low vacancies and structural demand
drivers, rental growth is expected to outperform historic averages and beat
inflation in most European logistics hotspots. While lingering economic,
political, and financial markets uncertainties may disrupt investment trends
in the short- term, the favourable underlying trends including ongoing
e-commerce penetration, onshoring and supply chain
reconfiguration/modernisation should remain important drivers for the sector.
We continue to prefer fringe city locations where land supply is more
constrained, and where tenant and investor demand is active. Good quality
assets in these locations are hard to source for tenants due to low levels of
new builds over the last ten years and low construction activity going
forwards. The development pipeline is also constrained by rapidly rising
financing costs, together with high construction and labour costs, planning
difficulties and more stringent controls over sustainability and efficiency
ratings of new schemes.
The immediate focus for us is to continue improving the earnings position,
principally through letting up the vacant space in Spain and capturing the
portfolio's attractive indexation characteristics.
abrdn's large and established local network and reputation provides a
competitive advantage when sourcing deals and implementing initiatives. abrdn
is one of Europe's largest real estate investors, managing approximately £43
billion of real estate, with over £15 billion of logistics assets across 12
countries. Its eight offices across Europe - London, Edinburgh, Frankfurt,
Amsterdam, Madrid, Paris, Brussels and Copenhagen - employ over 300 abrdn real
estate colleagues including portfolio managers, local transaction and asset
managers and researchers.
We are starting to see signs of interest returning to the sector with
increased investment activity in those markets that have already seen strong
pricing correction, such as in the UK and the Netherlands. Various successful
capital raises targeting the sector exclusively, or as part of multi-sector
strategies, have recently been announced providing evidence in the longer-term
conviction for the sector.
Troels Andersen
Fund Manager, abrdn
25 April 2024
Property portfolio as at 31 December 2023
Property Tenure Principal Tenant 2023 valuation (€m)
1 France, Avignon Freehold Biocoop 50.4
2 France, Meung sur Loire Freehold Vacant 17.5
3 France, Dijon Freehold Dachser 8.7
4 France, Niort Freehold Dachser 11.4
5 France, Bordeaux Freehold Dachser 11.5
6 Germany, Erlensee Freehold Bergler 38.1
7 Germany, Flörsheim Freehold Ernst Schmitz 25.1
8 Poland, Krakow Freehold Lynka 30.2
9 Poland, Lodz Freehold Compal 30.5
10 Poland, Warsaw Freehold DHL 29.7
11 Spain, Barcelona Freehold Mediapost 16.8
12 Spain, Madrid - Coslada Freehold DHL 10.0
13 Spain, Madrid - Gavilanes 1A Freehold Talentum 28.4
14 Spain, Madrid - Gavilanes 1B Freehold Vacant 13.3
15 Spain, Madrid - Gavilanes 2A Freehold Carrefour 12.5
16 Spain, Madrid - Gavilanes 2B Freehold MCR 9.8
17 Spain, Madrid - Gavilanes 2C Freehold Servicios Empresariales Ader 9.6
18 Spain, Madrid - Gavilanes 3A/B/C Freehold Arrival2 31.5
19 Spain, Madrid - Gavilanes 4 (2 buildings) Freehold Amazon 57.1
20 Netherlands, Den Hoorn Leasehold Van der Helm 45.5
21 Netherlands, Ede Freehold AS Watson (Kruidvat) 25.9
22 Netherlands, Horst Freehold Limax 8.8
23 Netherlands, Oss Freehold Orangeworks 15.4
24 Netherlands, 's Heerenberg Freehold JCL Logistics 28.0
25 Netherlands, Waddinxveen Freehold Combilo International 39.5
26 Netherlands, Zeewolde Freehold VSH Fittings 28.6
Market Value as at 31 December 2023 633.8
Less operating lease incentives (4.5)
Total market value less operating lease incentive debtor 629.3
Add IFRS 16 leasehold asset1 24.4
Total per Balance Sheet (Investment properties & Investment property 653.7
held-for-sale)
Governance
Directors' Report
The Directors present their Report and the audited financial statements for
the year ended 31 December 2023.
Results and Dividends
Details of the Company's results and dividends are shown on page 23 of the
published Annual Report and financial statements for the year ended 31
December 2023. The dividend policy is disclosed in the Strategic Report on
page 14 of the published Annual Report and financial statements for the year
ended 31 December 2023.
Investment Trust Status
The Company was incorporated on 25 October 2017 (registered in England &
Wales No. 11032222) and has been accepted by HM Revenue & Customs as an
investment trust subject to the Company continuing to meet the relevant
eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the
ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for
all financial periods commencing on or after 15 December 2017. The Directors
are of the opinion that the Company has conducted its affairs for the year
ended 31 December 2023 so as to enable it to comply with the ongoing
requirements for investment trust status.
Individual Savings Accounts
The Company has conducted its affairs so as to satisfy the requirements as a
qualifying security for Individual Savings Accounts. The Directors intend that
the Company will continue to conduct its affairs in this manner.
Share Capital
The Company's capital structure is summarised in note 16 to the financial
statements. At 31 December 2023, there were 412,174,356 fully paid Ordinary
shares of 1p each in issue. During the year no Ordinary shares were purchased
in the market for treasury or cancellation and no Ordinary shares were issued
or sold from Treasury.
Voting Rights, Share Restrictions and Amendments to Articles of Association
Ordinary shareholders are entitled to vote on all resolutions which are
proposed at general meetings of the Company. The Ordinary shares carry a right
to receive dividends. On a winding up, after meeting the liabilities of the
Company, the surplus assets will be paid to Ordinary shareholders in
proportion to their shareholdings.
There are no restrictions concerning the transfer of securities in the
Company; no special rights with regard to control attached to securities; no
agreements between holders of securities regarding their transfer known to the
Company; and no agreements which the Company is party to that might affect its
control following a takeover bid. In accordance with the Companies Act,
amendments to the Company's Articles of Association may only be made by
shareholders passing a special resolution in general meeting.
Borrowings
A full breakdown of the Company's loan facilities is provided in note 14 to
the financial statements.
Management Agreement
Under the terms of a Management Agreement dated 17 November 2017 between the
Company and the AIFM, abrdn Fund Managers Limited (and amended by way of side
letters dated 25 May 2018, 22 February 2019 and 24 January 2023), the AIFM was
appointed to act as alternative investment fund manager of the Company with
responsibility for portfolio management and risk management of the Company's
investments. Under the terms of the Management Agreement, the AIFM may
delegate portfolio management functions to the Investment Manager and is
entitled to an annual management fee together with reimbursement of all
reasonable costs and expenses incurred by it and the Investment Manager in the
performance of its duties.
Pursuant to the terms of the Management Agreement, the AIFM is entitled to
receive a tiered annual management fee (the ''Annual Management Fee'')
calculated by reference to the Net Asset Value (as calculated under IFRS) on
the following basis:
· On such part of the Net asset value that is less than or equal to
€1.25 billion, 0.75 per cent. per annum.
· On such part of the Net asset value that is more than €1.25
billion, 0.60 per cent. per annum.
The annual management fee is payable in Euros quarterly in arrears, save for
any period which is less than a full calendar quarter.
The Company or the AIFM may terminate the Management Agreement by giving not
less than 12 months' prior written notice.
The AIFM has also been appointed by the Company under the terms of the
Management Agreement to provide day-to-day administration services to the
Company and provide the general company secretarial functions required by the
Companies Act. In this role, the AIFM will provide certain administrative
services to the Company which includes reporting the Net Asset Value,
bookkeeping and accounts preparation. Effective from March 2020 accounting and
administration services undertaken on behalf of the Company have been
delegated to Brown Brothers Harriman.
The AIFM has also delegated the provision of the general company secretarial
services to abrdn Holdings Limited.
Risk Management
Details of the financial risk management policies and objectives relative to
the use of financial instruments by the Company are set out in note 22 to the
financial statements.
The Board
The current Directors, Ms Gulliver, Mr Heawood, Mr Roper and Ms Wilde were the
only Directors who served during the year. With the exception of Ms Wilde who
will be retiring from the Board at the conclusion of the Annual General
Meeting, in accordance with the Articles of Association, each Director will
retire from the Board at the Annual General Meeting convened for 24 June 2024
and, being eligible, will offer himself or herself for re-election to the
Board. In accordance with Principle 23 of the AIC's 2019 Code of Corporate
Governance, each Director will retire annually and submit themselves for
re-election at the AGM.
The Board considers that there is a balance of skills and experience within
the Board relevant to the leadership and direction of the Company and that all
the Directors contribute effectively.
In common with most investment trusts, the Company has no employees.
Directors' & Officers' liability insurance cover has been maintained
throughout the year at the expense of the Company.
Board Diversity
As indicated in the Strategic Report, the Board recognises the importance of
having a range of skilled, experienced individuals with the right knowledge
represented on the Board in order to allow it to fulfil its obligations. The
Board also recognises the benefits and is supportive of, and will give due
regard to, the principle of diversity in its recruitment of new Board members.
The Board will not display any bias for age, gender, race, sexual orientation,
socio-economic background, religion, ethnic or national origins or disability
in considering the appointment of Directors. The Board will continue to ensure
that all appointments are made on the basis of merit against the specification
prepared for each appointment. The Board takes account of the targets set out
in the FCA's Listing Rules, which are set out below.
As an externally managed investment company, the Board employs no executive
staff, and therefore does not have a chief executive officer (CEO) or a chief
financial officer (CFO) - both of which are deemed senior board positions by
the FCA. However, the Board considers the Chair of the Audit Committee to be a
senior board position and the following disclosure is made on this basis.
Other senior board positions recognised by the FCA are chair of the board and
senior independent director (SID). In addition, the Board has resolved that
the Company's year end date be the most appropriate date for disclosure
purposes.
The following information has been voluntarily disclosed by each Director and
is correct as at 31 December 2023. The Company has initiated a search for a
new non executive Director although the process is currently on hold.
Following completion of, and subject to the conclusions of, the Strategic
Review which is currently ongoing, the Board expects that, the Company will
aim to be in compliance with the recommendations of the Parker Review on
diversity in the UK boardroom by June 2025.
Board as at 31 December 2023
Number of Board Percentage of the Number of Senior Positions
Members
Board on the Board3
Men 2 50% 1
Women1 2 50% 2
Prefer not to say - -
White British or other White (including minority-white groups) 4 100% 3
Minority Ethnic2 - - 0
Prefer not to say - - -
1 Meets target that at least 40% of Directors are women as set out in LR
9.8.6R (9)(a)(i).
2 Does not currently meet target that at least one Director is from a minority
ethnic background as set out in LR 9.8.6R (9)(a)(iii).
3 Senior positions defined as Chair, Audit Chair and Senior Independent
Director.
The Role of the Chairman and Senior Independent Director
The Chairman is responsible for providing effective leadership to the Board,
by setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chairman facilitates the
effective contribution, and encourages active engagement, by each Director.
In conjunction with the Company Secretary, the Chairman ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision- making. The Chairman leads the evaluation of the Board and
individual Directors, and acts upon the results of the evaluation process by
recognising strengths and addressing any weaknesses. The Chairman also engages
with major shareholders offering annual review meetings and ensures that all
Directors understand shareholder views.
The Senior Independent Director acts as a sounding board for the Chairman and
as an intermediary for other directors, when necessary. The Senior Independent
Director takes responsibility for an orderly succession process for the
Chairman, and leads the annual appraisal of the Chairman's performance and is
also available to shareholders to discuss any concerns they may have.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board
is accountable to the Company's shareholders for good governance and this
statement describes how the Company has applied the principles identified in
the UK Corporate Governance Code as published in July 2018 (the "UK Code"),
which is available on the Financial Reporting Council's (the "FRC") website:
frc.org.uk. (http://frc.org.uk/)
The Board has also considered the principles and provisions of the AIC Code of
Corporate Governance as published in February 2019 (the "AIC Code"). The AIC
Code addresses the principles and provisions set out in the UK Code, as well
as setting out additional provisions on issues that are of specific relevance
to the Company. The AIC Code is available on the AIC's website: theaic.co.uk
(http://theaic.co.uk/) .
The Board considers that reporting against the principles and provisions of
the AIC Code, which has been endorsed by the FRC, provides more relevant
information to shareholders. The full text of the Company's Corporate
Governance Statement can be found on the Company's website:
eurologisticsincome.co.uk (http://eurologisticsincome.co.uk/) .
The Board confirms that, during the year, the Company complied with the
principles and provisions of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to:
· interaction with the workforce (provisions 2, 5 and 6);
· the need for an internal audit function (provision 26);
· the role and responsibility of the chief executive (provisions 9
and 14);
· previous experience of the chairman of a remuneration committee
(provision 32); and
· executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to the position of
the Company, being an externally managed investment company. In particular,
all of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
During the year ended 31 December 2023, the Board had four scheduled meetings
and over 14 other ad hoc Board meetings as well as numerous update calls. In
addition, the Audit Committee met three times and there was one meeting of the
Management Engagement Committee and one meeting of the Nomination Committee.
Between meetings the Board maintains regular contact with the Investment
Manager. The Directors have attended the following scheduled Board meetings
and Committee meetings during the year ended 31 December 2023 (with their
eligibility to attend the relevant meeting in brackets):
Director Board Audit Committee MEC Nomination
T Roper1 4 (4) N/A 1 (1) 2 (2)
C Gulliver 4 (4) 3 (3) 1 (1) 2 (2)
D Wilde 4 (4) 3 (3) 1 (1) 2 (2)
J Heawood 4 (4) 3 (3) 1 (1) 2 (2)
1 Mr Roper is not a member of the Audit Committee but attended all meetings by
invitation.
Policy on Tenure
The Board's policy on tenure is that Directors need not serve on the Board for
a limited period of time only. The Board does not consider that the length
of service of a Director is as important as the contribution he or she has to
make, and therefore the length of service will be determined on a case-by-case
basis. However, in accordance with corporate governance best practice and the
future need to refresh the Board over time, it is currently expected that
Directors will not typically serve on the Board beyond the Annual General
Meeting following the ninth anniversary of their appointment.
Board Committees
Audit Committee
The Audit Committee Report is on pages 95 to 97 of the published Annual Report
and financial statements for the year ended 31 December 2023.
Nomination Committee
All appointments to the Board of Directors are considered by the Nomination
Committee which, due to the relatively small size of the Board, comprises all
of the Directors and is chaired by the Chairman of the Company. The Nomination
Committee advises the Board on succession planning, bearing in mind the
balance of skills, knowledge and experience existing on the Board, and will
make recommendations to the Board in this regard. The Nomination Committee
also advises the Board on its balance of relevant skills, experience and
length of service of the Directors serving on the Board. The Board's
overriding priority when appointing new Directors in the future will be to
identify the candidate with the best range of skills and experience to
complement existing Directors. The Board recognises the benefits of diversity
and its policy on diversity is disclosed in the Strategic Report and also on
page 83 of the published Annual Report and financial statements for the year
ended 31 December 2023.
The Committee has put in place the necessary procedures to conduct, on an
annual basis, an appraisal of the Chairman of the Board, Directors' individual
self evaluation and a performance evaluation of the Board as a whole and its
Committees. In 2023 the Board conducted an evaluation based upon completed
questionnaires covering the Board, individual Directors, the Chairman and the
Audit Committee Chairman. The Chairman then met each Director individually to
review their responses whilst the Senior Independent Director met with the
Chairman to review his performance.
In accordance with Principle 23 of the AIC's Code of Corporate Governance
which recommends that all directors of investment companies should be subject
to annual re-election by shareholders, all the members of the Board with the
exception of Ms Wilde, will retire at the forthcoming Annual General Meeting
and will offer themselves for re-election. As part of the Board's succession
planning, Ms Wilde will be retiring from the Board at the conclusion of the
Annual General Meeting. In conjunction with the evaluation feedback, the
Committee has reviewed each of the proposed reappointments and concluded that
each of the Directors has the requisite high level and range of business and
financial experience and recommends their re-election at the forthcoming AGM.
Details of the contributions provided by each Director during the year are
disclosed on pages 80 and 81 of the published Annual Report and financial
statements for the year ended 31 December 2023.
The Board has initiated the search for a new independent non executive
Director but the process is on hold whilst the strategic review is concluded.
Succession planning will be considered again once the result of the review is
known.
Management Engagement Committee
The Management Engagement Committee comprises all of the Directors and is
chaired by Mr Heawood.
The Committee reviews the performance of the Manager and Investment Manager
and its compliance with the terms of the management and secretarial agreement.
The terms and conditions of the Manager's appointment, including an evaluation
of fees, are reviewed by the Committee on an annual basis. Based upon the
competitive management fee and expertise of the Manager, the Committee
believes that the continuing appointment of the Manager on the terms agreed is
in the interests of shareholders as a whole. The Committee also at least
annually reviews the Company's relationships with its other service providers.
These reviews aim to ensure that services being offered meet the requirements
and needs of the Company, provide value for money and performance is in line
with the expectations of stakeholders.
Remuneration Committee
Under the FCA Listing Rules, where an investment trust has only non-executive
directors, the Code principles relating to directors' remuneration do not
apply. Accordingly, matters relating to remuneration are dealt with by the
full Board, which acts as the Remuneration Committee.
The Company's remuneration policy is to set remuneration at a level to attract
individuals of a calibre appropriate to the Company's future development.
Further information on remuneration is disclosed in the Directors'
Remuneration Report on pages 91 to 93 of the published Annual Report and
financial statements for the year ended 31 December 2023.
Terms of Reference
The terms of reference of all the Board Committees may be found on the
Company's website eurologisticsincome.co.uk
(http://eurologisticsincome.co.uk/) and copies are available from the Company
Secretary upon request. The terms of reference are reviewed and re-assessed by
the relevant Board Committee for their adequacy on an annual basis.
Going Concern
In accordance with the Financial Reporting Council's guidance the Directors
have undertaken a rigorous review of the Company's ability to continue as a
going concern. The Board has set limits for borrowing and regularly reviews
the level of any gearing, cash flow projections and compliance with banking
covenants.
The Directors are mindful of the principal risks and uncertainties disclosed
above and the Viability Statement on page 20 of the published Annual Report
and financial statements for the year ended 31 December 2023 and have reviewed
forecasts detailing revenue and liabilities and they believe that the Company
has adequate financial resources to continue its operational existence for the
foreseeable future and at least 12 months from the date of this Annual Report.
In coming to this conclusion, the Board has also considered the impact of
geopolitical and economic turbulence on the Company's and its investments. 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 this is kept under regular review.
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.
On 27 November 2023, the Board announced that it was undertaking a Strategic
Review. The Board is considering all options available to the Company. There
is no certainty that any changes will result from the Strategic Review and,
for the avoidance of doubt, a continuation of the Company's current investment
strategy with a rebased target dividend level is a potential outcome of the
Strategic Review. The matters referred to above indicate existence of material
uncertainty. Nevertheless, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the financial
statements. Additional details about going concern are disclosed in note
1(a).
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, the Directors prepare a
list of other positions held and all other conflict situations that may need
to be authorised either in relation to the Director concerned or his/her
connected persons. The Board considers each Director's situation and decides
on any course of action required to be taken if there is a conflict, taking
into consideration what is in the best interests of the Company and whether
the Director's ability to act in accordance with his or her wider duties is
affected. Each Director is required to notify the Company Secretary of any
potential, or actual, conflict situations that will need authorising by the
Board. Authorisations given by the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although Directors are
issued with letters of appointment upon appointment. No Director had any
interest in contracts with the Company during the year or subsequently.
The Board has adopted appropriate procedures designed to prevent bribery. The
Company receives periodic reports from its service providers on the
anti-bribery policies of these third parties. It also receives regular
compliance reports from the Manager.
The Criminal Finances Act 2017 introduced the corporate criminal offence of
"failing to take reasonable steps to prevent the facilitation of tax evasion".
The Board has confirmed that it is the Company's policy to conduct all of its
business in an honest and ethical manner. The Board takes a zero-tolerance
approach to the facilitation of tax evasion, whether under UK law or under the
law of any foreign country.
Accountability and Audit
The respective responsibilities of the Directors and the auditor in connection
with the financial statements are set out on pages 94 and 105 of the published
Annual Report and financial statements for the year ended 31 December 2023
respectively.
Each Director confirms that:
· so far as he or she is aware, there is no relevant audit
information of which the Company's auditor is unaware; and,
· each Director has taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Company's auditor is aware of that
information.
Additionally there have been no important events since the year end that
impact this Annual Report.
The Directors have reviewed the level of non-audit services provided by the
independent auditor during the year amounting to £nil (2022: £20,000 in
respect of the production of a Supplementary Prospectus) and remain satisfied
that the auditor's objectivity and independence is being safeguarded.
Independent Auditor
The auditor, KPMG LLP, has indicated its willingness to remain in office. The
Directors will place a resolution before the Annual General Meeting to
re-appoint KPMG LLP as auditor for the ensuing year, and to authorise the
Directors to determine its remuneration.
Internal Control
The Board is ultimately responsible for the Company's system of internal
control and for reviewing its effectiveness and confirms that there is an
ongoing process for identifying, evaluating and managing the significant risks
faced by the Company. This process has been in place for the year under review
and up to the date of approval of this Annual Report and financial statements.
It is regularly reviewed by the Board and accords with the FRC Guidance.
The Board has reviewed the effectiveness of the system of internal control. In
particular, it has reviewed the process for identifying and evaluating the
significant risks affecting the Company and policies by which these risks are
managed.
The Directors have delegated the investment management of the Company's assets
to members of the abrdn Group within overall guidelines, and this embraces
implementation of the system of internal control, including financial,
operational and compliance controls and risk management. Internal control
systems are monitored and supported by the abrdn Group's internal audit
function which undertakes periodic examination of business processes,
including compliance with the terms of the management agreement, and ensures
that recommendations to improve controls are implemented.
Risks are identified and documented through a risk management framework by
each function within the abrdn Group's activities. Risk includes financial,
regulatory, market, operational and reputational risk. This helps the abrdn
group internal audit risk assessment model identify those functions for
review. Any weaknesses identified are reported to the Board, and timetables
are agreed for implementing improvements to systems.
The implementation of any remedial action required is monitored and feedback
provided to the Board.
The significant risks faced by the Company have been identified as being
strategic; investment and asset management; financial; regulatory; and
operational.
The key components of the process designed by the Directors to provide
effective internal control are outlined below:
· the AIFM prepares forecasts and management accounts which allows
the Board to assess the Company's activities and review its performance;
· the Board and AIFM have agreed clearly defined investment
criteria, specified levels of authority and exposure limits. Reports on these
issues, including performance statistics and investment valuations, are
regularly submitted to the Board and there are meetings with the AIFM and
Investment Manager as appropriate;
· as a matter of course the AIFM's compliance department
continually reviews abrdn's operations and reports to the Board on a six
monthly basis;
· written agreements are in place which specifically define the
roles and responsibilities of the AIFM and other third party service providers
and, where relevant, ISAE3402 Reports, a global assurance standard for
reporting on internal controls for service organisations, or their equivalents
are reviewed;
· the Board has considered the need for an internal audit function
but, because of the compliance and internal control systems in place within
abrdn, has decided to place reliance on the Manager's systems and internal
audit procedures. At its April 2024 meeting, the Audit Committee carried out
an annual assessment of internal controls for the year ended 31 December 2023
by considering documentation from the AIFM and the Depositary, including the
internal audit and compliance functions and taking account of events since 31
December 2023. The results of the assessment, that internal controls are
satisfactory, were then reported to the Board at the subsequent Board meeting.
Internal control systems are designed to meet the Company's particular needs
and the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage rather than eliminate the risk of failure to
achieve business objectives and by their nature can only provide reasonable
and not absolute assurance against mis-statement and loss.
Substantial Interests
The Board has been advised that the following shareholders owned 3% or more of
the issued Ordinary share capital of the Company at 31 December 2023 (based
upon 412,174,356 shares in issue):
Fund Manager Shares at 31-Dec-2023 % at 31-Dec-2023
East Riding of Yorkshire 33,000,000 8.0
RBC Brewin Dolphin Ireland 29,494,068 7.2
Quilter Cheviot Investment Management 25,053,097 6.1
BlackRock 22,762,321 5.5
Investec Wealth & Investment 21,545,349 5.2
Hargreaves Lansdown, stockbrokers (EO) 18,562,445 4.5
RBC Brewin Dolphin, stockbrokers 16,494,252 4.0
Canaccord Genuity Wealth Management (Retail) 13,730,263 3.3
Interactive Investor (EO) 12,453,748 3.0
On 2 April 2024, Asset Value Investors Limited notified the Company that its
total holding of Ordinary shares was 24,732,890 representing 6.0% of the
issued class of capital. Save as disclosed, there have been no significant
changes notified in respect of the above holdings between 31 December 2023 and
25 April 2024.
Relations with Shareholders
The Directors place a great deal of importance on communication with
shareholders. The Annual Report will be widely distributed to other parties
who have an interest in the Company's performance. Shareholders and investors
may obtain up to date information on the Company through the freephone
information service shown under Investor Information and on the Company's
website eurologisticsincome.co.uk (http://eurologisticsincome.co.uk/) .
abrdn Holdings Limited (aHL) has been appointed Company Secretary to the
Company. Whilst aHL is a wholly owned subsidiary of the abrdn Group, there is
a clear separation of roles between the Manager and Company Secretary with
different board compositions and different reporting lines in place. The Board
notes that, in accordance with Market Abuse Regulations, procedures are in
place to control the dissemination of information within the abrdn plc group
of companies when necessary. Where correspondence addressed to the Board is
received there is full disclosure to the Board. This is kept confidential if
the subject matter of the correspondence requires confidentiality.
The Board's policy is to communicate directly with shareholders and their
representative bodies without the involvement of representatives of the
Manager (including the Company Secretary and Investment Manager) in situations
where direct communication is required and usually a representative from the
Board is available to meet with major shareholders on an annual basis in order
to gauge their views.
The Notice of the Annual General Meeting, included within the Annual Report
and financial statements, is sent out at least 20 working days in advance of
the meeting. In normal circumstances, all Shareholders have the opportunity to
put questions to the Board or the Investment Manager, either formally at the
Company's Annual General Meeting or at the subsequent buffet luncheon for
Shareholders. Shareholders are, however, invited to send any questions for the
Board and/or the Investment Manager on the Annual Report by email to
European.Logistics@abrdn.com (mailto:European.Logistics@abrdn.com) .
(mailto:European.Logistics@abrdn.com) The Company Secretary is available to
answer general shareholder queries at any time throughout the year.
Annual General Meeting
The Annual General Meeting will be held on 24 June 2024 at the offices of FTI
Consulting, 200 Aldersgate, Aldersgate Street London, EC1A 4HD at 9:00 a.m. In
addition to the usual resolutions the following matters will be proposed at
the AGM:
Special Business Directors' Authority to Allot Relevant Securities
Approval is sought in Resolution 9, an ordinary resolution, to renew the
Directors' existing general power to allot shares but will also provide a
further authority (subject to certain limits) to grant rights to subscribe for
or to convert any security into shares under a fully pre-emptive rights issue.
The effect of Resolution 9 is to authorise the Directors to allot up to a
maximum of 272,035,075 shares in total (representing approximately 66% (as at
the latest practicable date before publication of this Annual Report) of the
existing issued share capital of the Company), of which a maximum of
136,017,537 shares (approximately 33% (as at the latest practicable date
before publication of this Annual Report) of the existing issued share capital
of the Company) may only be applied other than to fully pre-emptive rights
issues. This authority is renewable annually and will expire at the conclusion
of the next Annual General Meeting in 2025, or 30 June 2025, whichever is
earlier. The Directors do not have any immediate intention to utilise this
authority.
Special Business Disapplication of Pre-emption Rights
Resolution 10 is a special resolution that seeks to renew the Directors'
existing authority until the conclusion of the next Annual General Meeting to
make limited allotments of shares for cash of up to a maximum of 41,217,435
shares representing 10% of the issued share capital (as at the latest
practicable date before publication of this Annual Report) other than
according to the statutory pre-emption rights which require all shares issued
for cash to be offered first to all existing shareholders.
This authority includes the ability to sell shares that have been held in
treasury (if any), having previously been bought back by the Company. The
Board has established guidelines for treasury shares and will only consider
buying in shares for treasury at a discount to their prevailing NAV and
selling them from treasury at or above the then prevailing NAV.
New shares issued in accordance with the authority sought in Resolution 10
will always be issued at a premium to the NAV per Ordinary share at the time
of issue. The Board will issue new Ordinary shares or sell Ordinary shares
from treasury for cash when it is appropriate to do so, in accordance with its
current policy. It is therefore possible that the issued share capital of the
Company may change between the date of this document and the Annual General
Meeting and therefore the authority sought will be in respect of 10% of the
issued share capital as at the date of the Annual General Meeting rather than
the date of this document. This authority is renewable annually and will
expire at the conclusion of the Annual General Meeting in 2025 or 30 June
2025, whichever is earlier.
Special Business Purchase of the Company's Shares
Resolution 11 is a special resolution proposing to renew the Directors'
authority to make market purchases of the Company's shares in accordance with
the provisions contained in the Companies Act 2006 and the Listing Rules of
the Financial Conduct Authority. The minimum price to be paid per Ordinary
share by the Company will not be less than £0.01 per share (being the nominal
value) and the maximum price should not be more than the higher of (i) an
amount equal to 5% above the average of the middle market quotations for an
Ordinary share taken from the London Stock Exchange Daily Official List for
the five business days immediately preceding the date on which the Ordinary
share is contracted to be purchased; and (ii) the higher of the price of the
last independent trade and the current highest independent bid on the trading
venue where the purchase is carried out.
The Directors do not intend to use this authority to purchase the Company's
Ordinary shares unless to do so would result in an increase in NAV per share
and would be in the interests of Shareholders generally. The authority sought
will be in respect of 14.99% of the issued share capital as at the date of the
Annual General Meeting rather than the date of this document.
The Company's shares have traded at a premium to NAV per share for the
majority of the life of the Company since its launch, and therefore the
Company has not bought back any shares for treasury or cancellation. However,
the Board is very aware of the current wide share price discount to NAV and
regularly monitors this. The Directors view buybacks as a very useful tool for
seeking to assist in the management of the liquidity of the Company shares
which could be used in the future as one of a number of methods to address
imbalances of supply and demand which, arithmetically, can cause discounts to
NAV per share. Shares bought back would be purchased at a discount to the
prevailing NAV per share and the result would be accretive to the NAV for all
on-going shareholders.
The authority being sought will expire at the conclusion of the Annual General
Meeting in 2025 or 30 June 2025, whichever is earlier unless it is renewed
before that date. Any Ordinary shares purchased in this way will either be
cancelled and the number of Ordinary shares will be reduced accordingly or
under the authority granted in Resolution 10 above, may be held in treasury.
If Resolutions 9 to 11 are passed then an announcement will be made on the
date of the Annual General Meeting which will detail the exact number of
Ordinary shares to which each of these authorities relates.
These powers will give the Directors additional flexibility going forward and
the Board considers that it will be in the interests of the Company that such
powers be available. Such powers will only be implemented when, in the view of
the Directors, to do so will be to the benefit of Shareholders as a whole.
Special Business Notice of Meetings
Resolution 12 is a special resolution seeking to authorise the Directors to
call general meetings of the Company (other than Annual General Meetings) on
14 days' clear notice. This approval will be effective until the Company's
Annual General Meeting in 2025 or 30 June 2025 whichever is earlier. In order
to utilise this shorter notice period, the Company is required to ensure that
Shareholders are able to vote electronically at the general meeting called on
such short notice. The Directors confirm that, in the event that a general
meeting is called, they will give as much notice as practicable and will only
utilise the authority granted by Resolution 12 in limited and time sensitive
circumstances.
Special Business Continuation of Company
In accordance with Article 163.2 the Directors are required to propose an
ordinary resolution that the Company continue its business as presently
constituted (the "Continuation Resolution") at the sixth annual general
meeting of the Company and every third annual general meeting thereafter.
Accordingly, Resolution 13 is an ordinary resolution proposing that the
Company continue its business as presently constituted. With the Strategic
Review still ongoing, the Board recommends that shareholders vote in favour of
the Company's continuation to ensure that the review can be completed properly
and the best outcome for shareholders delivered. It is the Board's current
expectation that the result of the Strategic Review will be announced ahead of
the AGM, so shareholders should have the benefit of a clear picture of the
proposed way forward by the time that they are asked to vote. Should the Board
not be in a position to communicate the outcome (or likely outcome) of the
Strategic Review ahead of the AGM, the Board would ensure that shareholders
were provided with the opportunity to vote on the future direction of the
Company as and when the Review was completed (unless the proposed course of
action arising from the Strategic Review in and of itself required a
shareholder vote).
If the Continuation Resolution is not passed, the Articles require the
Directors to cease further investment, the properties in the Company's
portfolio to be sold in an orderly fashion as market demand appears and the
net funds, determined by the Directors as available for distribution, to be
distributed to Shareholders.
Dividend Policy
As a result of the timing of the payment of the Company's quarterly dividends,
the Company's Shareholders are unable to approve a final dividend each year.
In line with good corporate governance, the Board therefore proposes to put
the Company's dividend policy to Shareholders for approval at the Annual
General Meeting and on an annual basis.
Resolution 13 is an ordinary resolution to approve the Company's dividend
policy. The Company's dividend policy shall be that dividends on the Ordinary
shares are payable quarterly in relation to periods ending March, June,
September and December and the last dividend referable to a financial year end
will not be categorised as a final dividend that is subject to Shareholder
approval. It is intended that the Company will pay quarterly dividends
consistent with the expected annual underlying portfolio yield. The Company
has the flexibility in accordance with its Articles to make distributions from
capital.
Shareholders should note that references to ''dividends'' are intended to
cover both dividend income and income which is designated as an interest
distribution for UK tax purposes and therefore subject to the interest
streaming regime applicable to investment trusts.
Recommendation
Your Board considers Resolutions 9 to 13 to be in the best interests of the
Company and its members as a whole and most likely to promote the success of
the Company for the benefit of its members as a whole. Accordingly, your
Board unanimously recommends that Shareholders should vote in favour of all
Resolutions to be proposed at the AGM, as they intend to do in respect of
their own beneficial shareholdings amounting to 347,187 Ordinary shares.
By order of the Board
abrdn Holdings Limited - Company Secretaries and Registered Office
280 Bishopsgate London EC2M 4AG
25 April 2024
Statement of Directors' Responsibilities in Respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and parent Company
financial statements for each financial year. Under that law they are required
to prepare the Group financial statements in accordance with UK-adopted
international accounting standards and applicable law and have elected to
prepare the parent Company financial statements in accordance with UK
accounting standards and applicable law, including FRS 101 Reduced Disclosure
Framework.
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 parent Company and of the Group's profit or loss for
that period. In preparing each of the Group and parent Company financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant,
reliable and prudent;
· for the Group financial statements, state whether they have been
prepared in accordance with UK-adopted international accounting standards;
· for the parent Company financial statements, state whether
applicable UK accounting standards
· have been followed, subject to any material departures disclosed
and explained in the parent Company financial statements;
· assess the Group and parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern;
and
· use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the
financial statements will form part of the annual financial report prepared
using the single electronic reporting format under the TD ESEF Regulation. The
auditor's report on these financial statements provides no assurance over the
ESEF format.
Responsibility statement of the Directors in respect of the annual financial
report
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole; and
· the Strategic Report/Directors' Report includes a fair review of
the development and performance of the business and the position of the issuer
and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
We consider 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.
By order of the Board
Tony Roper
25 April 2024
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Notes €'000 €'000 €'000 €'000 €'000 €'000
REVENUE
Rental income 2 33,435 - 33,435 29,686 - 29,686
Property service charge income 8,095 - 8,095 6,237 - 6,237
Other operating income 540 - 540 676 - 676
Total revenue 42,070 - 42,070 36,599 - 36,599
GAINS/(LOSSES) ON INVESTMENTS
Gains on disposal of investment properties 9 - 133 133 - - -
Change in fair value of investment properties 9 - (106,878) (106,878) - (40,432) (40,432)
Total income and gains / (losses) on investments 42,070 (106,745) (64,675) 36,599 (40,432) (3,833)
EXPENDITURE
Investment management fee (3,193) - (3,193) (3,953) - (3,953)
Direct property expenses (3,155) - (3,155) (2,276) - (2,276)
Property service charge expenditure (8,095) - (8,095) (6,237) - (6,237)
SPV property management fees (232) - (232) (255) - (255)
Impairment loss on trade receivables (1,237) - (1,237) (225) - (225)
Other expenses 3 (3,583) - (3,583) (2,797) - (2,797)
Total expenditure (19,495) - (19,495) (15,743) - (15,743)
Net operating return / (loss) before finance costs 22,575 (106,745) (84,170) 20,856 (40,432) (19,576)
FINANCE COSTS
Finance costs 4 (8,002) (110) (8,112) (5,676) - (5,676)
Gains arising from the derecognition of derivative financial - 313 313 - - -
instruments
Effect of fair value adjustments on derivative financial - (1,706) (1,706) - 3,600 3,600
instruments
Effect of foreign exchange differences (67) (146) (213) (115) 461 346
Net return before taxation 14,506 (108,394) (93,888) 15,065 (36,371) (21,306)
Taxation 5 (1,327) 13,414 12,087 (1,029) 3,893 2,864
Net return for the year 13,179 (94,980) (81,801) 14,036 (32,478) (18,442)
Total comprehensive return / (loss) for the year 13,179 (94,980) (81,801) 14,036 (32,478) (18,442)
Basic and diluted earnings per share 7 3.2¢ (23.0¢) (19.8¢) 3.4¢ (7.9¢) (4.5¢)
The accompanying notes are an integral part of the financial statements.
The total column of the 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 year.
Consolidated Balance Sheet
As at 31 December 2023
As at 31 December 2023 As at 31 December 2022
Notes €'000 €'000
NON-CURRENT ASSETS
Investment properties Deferred tax asset 9 636,187 776,616
5 4,896 3,754
Total non-current assets 641,083 780,370
CURRENT ASSETS
Investment property held for sale 9 17,500 -
Trade and other receivables 10 14,682 12,570
Cash and cash equivalents 11 18,061 20,262
Other assets 876 687
Derivative financial assets 15 1,690 3,894
Total current assets 52,809 37,413
Total assets 693,892 817,783
CURRENT LIABILITIES
Lease liability 12 659 550
Trade and other payables 13 16,353 15,006
Derivative financial instruments 15 - 185
Total current liabilities 17,012 15,741
NON-CURRENT LIABILITIES
Bank loans 14 256,524 265,532
Lease liability 12 23,694 22,087
Deferred tax liability 5 11,734 24,446
Total non-current liabilities 291,952 312,065
Total liabilities 308,964 327,806
Net assets 384,928 489,977
SHARE CAPITAL AND RESERVES
Share capital 16 4,717 4,717
Share premium 17 269,546 269,546
Special distributable reserve 18 152,099 164,851
Capital reserve 19 (64,200) 30,780
Revenue reserve 22,766 20,083
Equity shareholders' funds 384,928 489,977
Net asset value per share (cents) 8 93.4 118.9
The financial statements on pages 106 to 148 of the published Annual Report
and financial statements for the year ended 31 December 2023 were approved and
authorised for issue by the Board of Directors on 25 April 2024 and signed on
its behalf by:
Caroline Gulliver
Independent Non-Executive Director
Company number: 11032222.
The accompanying notes are an integral part of the financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Special distributable
Share premium reserve Capital reserve Revenue reserve
Share capital €'000 €'000 €'000 €'000 Total
Notes €'000 €'000
Balance at 31 December 2022 4,717 269,546 164,851 30,780 20,083 489,977
Total comprehensive return for the year - - - (94,980) 13,179 (81,801)
Dividends paid 6 - - (12,752) - (10,496) (23,248)
Balance at 31 December 2023 4,717 269,546 152,099 (64,200) 22,766 384,928
For the year ended 31 December 2022
Special distributable
Share premium reserve Capital reserve Revenue reserve
Share capital €'000 €'000 €'000 €'000 Total
Notes €'000 €'000
Balance at 31 December 2021 4,309 225,792 178,207 63,258 15,939 487,505
Share Issue 16/17 408 44,513 - - - 44,921
Share issue costs 17 - (759) - - - (759)
Total comprehensive return for the year - - - (32,478) 14,036 (18,442)
Dividends paid 6 - - (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.
Consolidated Statement of Cash Flows
For the period ended 31 December 2023
Year ended 31 December 2023 Year ended 31 December 2022
€'000 €'000
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Net return for the year before taxation (93,888)
(21,306)
Adjustments for:
Change in fair value of investment properties 106,878
40,432
Gains on disposal of investment properties (133)
-
(Increase)/decrease in lease liability 272
267
(Increase)/Decrease in trade and other receivables (2,300)
4,964
Increase/(Decrease) in trade and other payables 10
(1,554)
Change in fair value of derivative financial instruments 1,706
(3,600)
Result arising from the derecognition of derivative financial instruments (313)
-
Finance costs 4 8,112
5,676
Tax paid (1,092)
(1,070)
Cash generated by operations 19,252 23,809
Net cash inflow from operating activities 19,252 23,809
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure and cost of disposal (898) (133,523)
Disposal of investment properties 18,500 -
Net cash inflow/ (outflow) from investing activities 17,602 (133,523)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 6 (23,248)
(23,248)
Bank loans interest paid (5,202)
(3,050)
Early termination fees (110)
-
Bank loans drawn -
154,547
Bank loans repaid 14 (10,808)
(65,692)
Proceeds from derivative financial instruments 14 313
-
Proceeds from share issue 16/17 -
44,898
Issue costs relating to share issue 17 -
(759)
Net cash (outflow)/ inflow from financing activities (39,055) 106,696
Net decrease in cash and cash equivalents (2,201) (3,018)
Opening balance 31 December 2022 20,262 23,280
Closing cash and cash equivalents 18,061 20,262
REPRESENTED BY
Cash at bank 11 18,061 20,262
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements
1. Accounting policies
The consolidated financial statements of the Group for the year ended 31
December 2023 comprise the results of abrdn European Logistics Income plc and
its subsidiaries. The principal accounting policies adopted by the Group are
set out below, all of which have been applied consistently throughout the
year.
(a) Basis of accounting
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards ("UK-adopted IFRS"), which
comprise 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 consolidated financial statements of the Group have been prepared under
the historical cost convention as modified by the measurement of investment
property, investment property held for sale, and derivative financial
instruments at fair value. The consolidated financial statements are presented
in Euro.
In compliance with the AIC's Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital Trusts (Issued
November 2014 and updated in October 2019 with consequential amendments), the
consolidated statement of comprehensive income is separated between capital
and revenue profits and losses.
Going Concern
Following the announcement on 27th November 2023 and as at the date of
approval of the annual report, the Board is undertaking a strategic review of
the options available to the Company (the "Strategic Review").
The Board is considering all options that offer maximum value for the
shareholders including, but not limited to, undertaking some form of
consolidation, combination, merger, or comparable corporate action, selling
the entire issued share capital of the Company, and selling the Company's
portfolio and returning monies to shareholders. In addition, the Company is
required under its articles to hold a continuation vote at its forthcoming AGM
in June 2024. The Board has recommended that shareholders vote in favour of
the continuation of the Company to enable the Board to pursue a sensible
conclusion in seeking the best value for all shareholders.
The Company has received a number of indicative non-binding proposals. There
can be no certainty at this stage that the final terms of any proposal will
prove to be sufficiently attractive to merit a Board recommendation to the
Company's shareholders. A continuation of the Company's current investment
strategy with a rebased target dividend level can be a potential outcome of
the Strategic Review.
The Company has prepared cash flow forecasts, including severe but plausible
downside scenarios taking into account specific tenant risks. The cash flow
forecasts assumed a continuation of the Company's current investment strategy
with a rebased target dividend level. The scenarios model reduced rental
income through to 2024 and the worst case scenario models to an overall 40%
reduction of rental income per annum over that period. The impact of
reductions in rental income and increased costs in these scenarios could be
mitigated through a reduction in dividends to shareholders if considered
necessary by the Board.
The Group and Company meets its longer term funding and working capital
requirements through a combination of cash balances, rental income and a
number of bank loans with different banks.
The Group ended the year with €18.1 million cash in hand, with the Company's
€70 million master revolving credit facility undrawn, €3.3m of which is
committed and available on request to cover any short term liquidity gaps.
As detailed in note 14, there are currently eight bank facilities, none of
which are due to expire before June 2025. Under the terms of the debt
agreements, each debt obligation is "ring fenced" within a sub-group of
property holding companies. These non-recourse loans range in maturities
between 1.5 and 5.1 years with all-in interest rates ranging between 1.10% and
3.11% per annum. All debts have a fixed rate or fixed rate nature by entering
into interest rate SWAPs and caps to manage exposure to potential interest
rate fluctuations.
The permitted loan-to-value ratios in the debt arrangements as at 31 December
2023 are between 45% and 60% (soft breach limits). The "hard breach"
loan-to-value ratio covenants which give the lenders to right to exercise
their security are between 55% and 65%.
If the lenders were to adopt the valuations carried out for the purposes of
these financial statements as at 31 December 2023, the ratios would be between
39% and 64%. For the year ended 31 December 2023, there were no breaches of
loan-to-value ratio covenants. Based on the most recent covenant submissions
to lenders, there is one facility with less than 5% headroom to soft breach.
The Directors believe the liquidity within the Group and €70m revolving
credit facility could be used for partial repayment of the loan in the event
of a breach of LTV limits on this facility.
The permitted interest coverage ratios in the debt arrangements as at 31
December 2023 are between 200% and 300%. The "hard breach" interest coverage
ratio covenants, which give the lenders to right to exercise their security
are between 200% and 300%.
The latest calculated interest coverage ratios were between 236% and 1291%.
For the year ended 31 December 2023, there were no breach of interest coverage
ratios. Based on the most recent covenant submissions to lenders, there is one
facility with ICR headroom of less than 50%. Due to the property being let to
multiple tenants on long leases, the likelihood of further reduction in ICR on
this loan is limited.
The Board recognises the 24% share price discount to NAV, as at 31 December
2023 (35% as at 31 December 2022). The valuation of investment property is the
main driver of the NAV, and was determined by Savills as independent valuer.
The Board is satisfied that the valuation exercise was performed in accordance
with RICS Valuation - Global Standards. As such, the Board has full confidence
in the level of the NAV disclosed in the financial statements at the reporting
date.
The ongoing Russian invasion of Ukraine has not materially impacted the
Group's portfolio. The Group has no assets or exposure to Russia or Ukraine
but the potential impact of contagion in the European and Global economy
could, however, impact the Group through a reduction in rental income,
reduction in investment property valuation and increased costs. The Directors
note that the real estate values have continued to decline in 2023 and in the
event that the real estate market deteriorates and valuations fall further,
certain loan-to-value ratio levels would rise closer to permitted ratio
levels. However, the Directors consider this will have no impact on the
Group's ability to continue as a going concern because:
. The Directors consider that in most cases there is sufficient or good
headroom on covenant ratios.
. The Group has a substantial cash balance, with the ability to increase those
amounts further with certain mitigating actions.
. The Group has substantial unsecured properties.
. The Parent Company is not itself a party to any of the debt contracts (in
any capacity including as borrower, guarantor or security provider). The
lenders would therefore not, in any event, have any recourse to the ultimate
parent under the debt contracts.
While the Company cannot predict the outcome of the above matters, based on
the financial forecasts prepared the Directors believe it remains appropriate
to prepare the financial statements on a going concern basis.
Nevertheless, the ongoing Strategic Review referred to above indicates the
existence of a material uncertainty related to events or conditions that may
cast significant doubt on the Group's and Company's ability to continue as a
going concern and that the Group and Company may therefore be unable to
realise their assets and discharge their liabilities in the normal course of
business. The financial statements do not include any adjustments that would
be necessary if this basis were inappropriate.
New and revised standards and interpretations issued in the current year
The accounting policies adopted have been consistently applied throughout the
year presented, unless otherwise stated. This includes the below noted
Standards, Interpretations and annual improvements to IFRS that became
effective during the year, which the group has incorporated in the preparation
of the financial statements:
Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2023):
IFRS 17 Insurance Contracts - This standard replaced IFRS 4, which permitted a
wide variety of practices in accounting for insurance contracts. IFRS 17
fundamentally changes the accounting by all entities that issue insurance
contracts.
IAS 1 and IFRS Practice Statement 2 - The amendments aim to help entities
provide accounting policy disclosures that are more useful by:
a) Replacing the requirement for entities to disclose their 'significant
accounting policies' with a requirement to disclose 'material accounting
policy information', and
b) adding guidance on how entities apply the concept of materiality in
making decisions about accounting policy disclosures.
IAS 8 - The amendments clarify the distinction between changes in accounting
estimates and changes in accounting policies and the correction of errors.
Also, they clarify how entities use measurement techniques and inputs to
develop accounting estimates.
IAS 12 - Deferred tax related to assets and liabilities arising from a single
transaction. These amendments require companies to recognise deferred tax on
transactions that, on initial recognition, give rise to equal amounts of
taxable and deductible temporary differences.
IAS 12 - International tax reform. These amendments give companies temporary
relief from accounting for deferred taxes arising from the Minimum Tax
Implementation Handbook international tax reform. The amendments also
introduce targeted disclosure requirements for affected companies.
The Group has made no adjustments to its financial statements following the
above amendments and hence these are not discussed further.
Standards and Interpretations issued by IASB but not adopted by the United
Kingdom and not yet effective:
Amendment to IFRS 16 - Leases on sale and leaseback. These amendments include
requirements for sale and leaseback transactions in IFRS 16 to explain how an
entity accounts for a sale and leaseback after the date of the transaction.
Sale and leaseback transactions where some or all the lease payments are
variable lease payments that do not depend on an index or rate are most likely
to be impacted.
Amendment to IAS 1 - Non-current liabilities with covenants. These amendments
clarify how conditions with which an entity must comply within twelve months
after the reporting period affect the classification of a liability.
The amendments also aim to improve information an entity provides related to
liabilities subject to these conditions.
Amendment to IAS 7 and IFRS 7 - Supplier finance. These amendments require
disclosures to enhance the transparency of supplier finance arrangements and
their effects on an entity's liabilities, cash flows and exposure to liquidity
risk. The disclosure requirements are the IASB's response to investors'
concerns that some companies' supplier finance arrangements are not
sufficiently visible, hindering investors' analysis.
Amendments to IAS 21 - Lack of Exchangeability. An entity is impacted by the
amendments when it has a transaction or an operation in a foreign currency
that is not exchangeable into another currency at a measurement date for a
specified purpose. A currency is exchangeable when there is an ability to
obtain the other currency (with a normal administrative delay), and the
transaction would take place through a market or exchange mechanism that
creates enforceable rights and obligations.
The Group has not adopted any of these early and none are expected to have a
material impact on the financial statements of the Group.
(b) Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires the directors to
make judgements, estimates and assumptions that affect the amounts recognised
in the financial statements and contingent liabilities. However, uncertainty
about these judgements, assumptions and estimates could result in outcomes
that could require a material adjustment to the carrying amount of the asset
or liability affected in future periods.
Key estimation uncertainties
Fair value of investment properties: Investment property is stated at fair
value as at the balance sheet date as set out in note 9 to these financial
statements.
The determination of the fair value of investment properties requires the use
of estimates such as future cash flows from the assets, estimated inflation,
market rents, discount, capitalisation rates, estimated rental value and net
initial and net equivalent property yields. The estimate of future cash flows
includes consideration of the repair and condition of the property, lease
terms, future lease events, as well as other relevant factors for the
particular asset.
These estimates are based on local market conditions existing at the balance
sheet date.
(c) Basis of consolidation
The consolidated financial statements comprise the accounts of the Company and
its subsidiaries drawn up to 31 December 2023. Subsidiaries are consolidated
from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of the Group.
The Group acquires subsidiaries that own real estate properties. At the time
of acquisition, the Group considers whether the acquisition represents the
acquisition of a business. The Group accounts for an acquisition as a business
combination where an integrated set of activities is acquired in addition to
the property. More specifically, consideration is made with regard to the
extent to which significant processes are acquired and, in particular, the
extent of ancillary services provided by the Group (e.g. maintenance,
cleaning, security, bookkeeping, and the like).
The significance of any process is judged with reference to the guidance in
IAS 40 on ancillary services. When the acquisition of subsidiaries does not
represent a business, it is accounted for as an acquisition of a group of
assets and liabilities. The cost of the acquisition is allocated to the assets
and liabilities acquired based upon their relative fair values, and no
goodwill or deferred tax is recognised.
(d) Functional and presentation currency
Items included in the consolidated financial statements of the Group are
measured using the currency of the primary economic environment in which the
Company and its subsidiaries operate ("the functional currency") which in the
judgement of the Directors is Euro. The financial statements are also
presented in Euro. All figures in the consolidated financial statements are
rounded to the nearest thousand unless otherwise stated.
(e) Foreign currency
Transactions denominated in foreign currencies are converted at the exchange
rate ruling at the date of the transaction. Monetary and non-monetary assets
and liabilities denominated in foreign currencies held at the financial year
end are translated using the foreign exchange rate ruling at that date. Any
gain or loss arising from a change in exchange rates subsequent to the date of
the transaction is included as an exchange gain or loss to capital or revenue
in the Consolidated Statement of Comprehensive Income as appropriate. Foreign
exchange movements on investments are included in the Consolidated Statement
of Comprehensive Income within gains on investments.
(f) Revenue recognition
Rental income, including the effect of lease incentives, arising from
operating leases (including those containing fixed rent increases) is
recognised on a straight line basis over the lease term.
Service charge income represents the charge to tenants for services the Group
is obliged to provide under lease agreements. This income is recorded gross
within Income on the basis the Group is acting as principal, with any
corresponding cost shown within expenses.
Interest income is accounted for on an effective interest rate basis.
(g) Expenses
All expenses, including the management fee, are accounted for on an accruals
basis and are recorded through the revenue column of the Consolidated
Statement of Comprehensive Income. Gains or losses on investment properties
are recorded in the capital column.
(h) Taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
Current tax is defined as the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Where corporation tax arises in subsidiaries, these amounts are charged to the
Consolidated Statement of Comprehensive Income. The current income tax charge
is calculated on the basis of the tax laws enacted or substantively enacted at
the date of the balance sheet in the countries where the Group operates.
The Manager periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation,
and establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the consolidated financial statements and
the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other than in a
business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In addition, deferred
tax liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill.
Deferred tax liabilities and assets are measured at the tax rates that are
expected to apply in the year in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting
period, to recover or settle the carrying amount of its assets and
liabilities.
The carrying values of the Group's investment properties are assumed to be
realised by sale at the end of use. The capital gains tax rate applied is that
which would apply on a direct sale of the property recorded in the
Consolidated Balance Sheet regardless of whether the Group would structure the
sale via the disposal of the subsidiary holding the asset, to which a
different tax rate may apply. The deferred tax is then calculated based on the
respective temporary differences and tax consequences arising from recovery
through sale, and accounted for through the capital reserve.
(i) Investment properties
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 year during which the expenditure
is incurred.
After initial recognition, investment properties are measured at fair value,
with the movement in fair value recognised in the Consolidated Statement of
Comprehensive Income and transferred to the Capital Reserve. Fair value is
based on the external valuation provided by Savills (2022: Savills), chartered
surveyors, at the balance sheet date undertaken in accordance with the RICS
Valuation - Global Standards 2023, (Red Book), published
by the Royal Institution of Chartered Surveyors. The assessed fair value is
reduced by the carrying amount of any accrued income resulting from the
spreading of lease incentives and/or minimum lease payments.
On derecognition, gains and losses on disposals of investment properties are
recognised in the Consolidated Statement of Comprehensive Income.
Investment Property held for sale
A non-current asset or a group of assets containing a non-current asset (a
disposal group) is classified as held for sale if its carrying amount will be
recovered principally through sale rather than through continuing use, it is
available for immediate sale and sale is highly probable within one year. On
initial classification as held for sale, non-current assets and disposal
groups are measured at the lower of previous carrying amount and fair value
less costs to sell with any adjustments taken to profit or loss.
(j) Distributions
Interim distributions payable to the holders of equity shares are recognised
in the Statement of Changes in Equity in the year in which they are paid. An
annual shareholder resolution is voted upon to approve the Group's
distribution policy.
(k) Lease contracts
Operating lease contracts - the Group as lessor
The Group has entered into commercial property leases on its investment
property portfolio. The Group has determined, based on an evaluation of the
terms and conditions of the arrangements, that it retains all the significant
risks and rewards of ownership of these properties and so accounts for leases
as operating leases.
Initial direct costs incurred in negotiating and arranging an operating lease
are added to the carrying amount of the leased asset and recognised as an
expense on a straight-line basis over the lease term.
Operating and finance lease contracts - the Group as intermediate lessor
When the Group is an intermediate lessor, it accounts for its interest in the
head lease and the sub-lease separately. The Group assesses all leases where
it acts as an intermediate lessor, based on an evaluation of the terms and
conditions of the arrangements.
Any head leases identified as finance leases are capitalised at the lease
commencement present value of the minimum lease payments discounted at an
applicable discount rate as a right-of-use asset and leasehold liability.
Each lease payment is allocated between the liability and finance charges so
as to achieve a constant rate on the finance balance outstanding. The interest
element of the finance cost is charged to the Statement of Comprehensive
Income over the lease period.
(l) Share issue expenses
Incremental external costs directly attributable to the issue of shares that
would otherwise have been avoided are written off to share premium.
(m) Segmental reporting
The Group is engaged in property investment in Europe. Operating results are
analysed on a geographic basis by country. In accordance with IFRS 8
'Operating Segments', financial information on business segments is presented
in note 20 of the Consolidated financial statements.
(n) Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits, and
other short-term highly liquid investments readily convertible within three
months or less to known amounts of cash and subject to insignificant risk of
changes in value.
(o) Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in
the Consolidated Statement of Comprehensive Income.
Financial assets
Financial assets are measured at amortised cost, financial assets 'at fair
value through profit or loss' (FVTPL), or financial assets 'at fair value
through other comprehensive income' (FVOCI). The classification is based on
the business model in which the financial asset is managed and its contractual
cash flow characteristics.
All purchases and sales of financial assets are recognised on the trade date
basis.
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market.
Loans and receivables (including trade and other receivables, and others) are
subsequently measured at amortised cost using the effective interest method,
less any impairment. The Group holds the trade receivables with the objective
to collect the contractual cash flows.
Impairment of financial assets
The Group's financial assets are subject to the expected credit loss model.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables. The expected loss rates are based on the
payment profiles of tenants over a period of twelve months before the
measurement date, and the corresponding historical credit losses experienced
within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the
liability of the tenants to settle the receivable.
Such forward-looking information would include:
. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as a default or delinquency in interest or
principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial
re-organisation; or
. the disappearance of an active market for that financial asset because of
financial difficulties. The Group's financial assets are subject to the
expected credit loss model. For trade receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables. The
expected loss rates are based on the payment profiles of tenants over a period
of twelve months before the measurement date, and the corresponding historical
credit losses experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the liability of the tenants to settle the receivable.
Such forward-looking information would include:
. changes in economic, regulatory, technological and environmental factors,
(such as industry outlook, GDP, employment and politics);
. external market indicators; and
. tenant base.
Financial liabilities
Financial liabilities are classified as 'other financial liabilities'.
Other financial liabilities
Other financial liabilities (including borrowings and trade and other
payables) are subsequently measured at amortised cost using the effective
interest method. The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest expense
over the relevant year. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees paid or received
that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the financial
liability, or (where appropriate) a shorter period, to the net carrying amount
on initial recognition.
(p) Derivative financial instruments
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 year covered
by the relevant currency hedging instrument. It does not seek to provide a
long-term hedge for the
Company's income returns, which will continue to be affected by movements in
the Euro/Sterling exchange rate over the longer term.
The Company used interest rate SWAPs and interest rate caps to mitigate
potential volatility in interest rates and income returns. Derivatives are
measured at fair value calculated by reference to forward exchange rates for
contracts with similar maturity profiles. Changes in the fair value of
derivatives are recognised in the Statement of Comprehensive Income.
(q) Reserves
Share capital
This represents the proceeds from issuing Ordinary shares and is
non-distributable.
Share premium
Share premium represents the excess consideration received over the par value
of Ordinary shares issued and is classified as equity and is
non-distributable. Incremental costs directly attributable to the issue of
Ordinary shares are recognised as a deduction from share premium.
Special distributable reserve
The special reserve is a distributable reserve to be used for all purposes
permitted by applicable legislation and practice, including the buyback of
shares and the payment of dividends.
Capital reserve
The capital reserve is a distributable reserve subject to applicable
legislation and practice, and the following are accounted for in this reserve:
. gains and losses on the disposal of investment properties;
. increases and decreases in the fair value of investment properties held at
the year end, which are not distributable.
Revenue reserve
The revenue reserve is a distributable reserve and reflects any surplus
arising from the net return on ordinary activities after taxation.
2. Rental Income
Year
ended
Year ended
31 December 2023 31
December 2022
€'000
€'000
Rental income 33,435
29,686
Total rental income 33,435
29,686
Included within rental income is amortisation of rent free periods granted.
3. Expenditure
Year ended 31 December 2023 Year ended 31 December 2022
€'000 €'000
Professional fees 2,438 1,880
Audit fee for statutory services 412 317
Directors' fees 193 186
Depositary fees 122 44
Registrar fees 47 52
Stock exchange fees 37 20
Broker fees 93 54
Directors liability insurance expense 26 10
Employers NI 15 15
Other expenses 200 219
Total expenses 3,583 2,797
Audit fee for statutory services includes parent audit fee of £253,000 (2022:
£220,000) and subsidiary audit fee of
€24,100 (2022: €12,000).
Non-audit services' fees incurred in 2023 were £ nil (2022: £20,000 included
in share issue costs).
4. Finance costs
Year ended 31 December 2023 Year ended 31 December 2022
€'000 €'000
Interest on bank loans 5,478 4,262
Amortisation of loan costs 2,129 730
Other finance charges 395 684
Early loan repayment cost 110 -
Total finance costs 8,112 5,676
The early loan repayment costs of €110,000 relate to costs for repayment of
loan following the sale of a warehouse in Leon during the year. This cost is
classified as capital in the Consolidated Statement of Comprehensive Income.
5. Taxation
The Company is resident in the United Kingdom for tax purposes. The Company is
approved by HMRC as an investment trust under sections 1158 and 1159 of the
Corporation Tax Act 2010. In respect of each accounting year for which the
Company continues to be approved by HMRC as an investment trust the Company
will be exempt from UK taxation on its capital gains. The Company is, however,
liable to UK Corporation tax on its income. The Company is able to elect to
take advantage of modified UK tax treatment in respect of its ''qualifying
interest income'' for an accounting year referred to as the ''streaming''
regime. Under regulations made pursuant to the Finance Act 2009, the Company
may, if it so chooses, designate as an ''interest distribution'' all or part
of the amount it distributes to Shareholders as dividends, to the extent that
it has ''qualifying interest income'' for the accounting year. Were the
Company to designate any dividend it pays in this manner, it would be able to
deduct such interest distributions from its income in calculating its taxable
profit for the relevant accounting year. The Company should in practice be
exempt from UK corporation tax on dividend income received, provided that such
dividends (whether from UK or non-UK companies) fall within one of the
''exempt classes'' in Part 9A of the CTA 2010. The Corporate tax rate
increased from 19% to 25% on 1 April 2023.
(a) Tax charge in the Group Statement of Comprehensive Income
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
€'000 €'000 €'000 €'000 €'000 €'000
Current taxation: Overseas taxation
1,327 440 1,767 1,029 - 1,029
Deferred taxation: Overseas taxation
- (13,854) (13,854) - (3,893) (3,893)
Total taxation 1,327 (13,414) (12,087) 1,029 (3,893) (2,864)
Current taxation of €440,000 relates to tax paid on disposal of investment
property.
Reconciliation between the tax charge and the product of accounting
profit/(loss) multiplied by the applicable tax rate for the year ended 31
December 2023.
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
€'000 €'000 €'000 €'000 €'000 €'000
Net result before taxation 14,506 (108,394) (93,888) 15,065 (36,371) (21,306)
3,413 (25,495) (22,082) 2,862 (6,910) (4,048)
- (1,460) 13,535 13,535 - (1,090) 3,171 3,171
459 151
(1,855) (3,315) - (154) (1,090)
(1,085) (894) -
401 860 (3)
- (1,085) (894)
Theoretical tax at UK corporation tax
blended rate of 23.52% (19% to 1 April
2023 and 25% from 1 April 2023)
Effect of:
Losses where no deferred taxes have
been recognised
Impact of different tax rates on foreign
jurisdictions
Expenses that are not deductible /
income that is not taxable
Impact of UK interest distributions from
the Investment Trust
Total taxation on return 1,327 (13,414) (12,087) 1,029 (3,893) (2,864)
(b) Tax in the Group Balance Sheet
2023 2022
€'000 €'000
Deferred tax assets:
On overseas tax losses 4,740 3,384
On other temporary differences 156 370
Total taxation on return 4,896 3,754
2023 2022
€'000 €'000
Deferred tax liabilities:
Differences between tax and derivative valuation Differences between tax and 422 973
property valuation
11,312 23,473
Total taxation on return 11,734 24,446
The Corporate tax rate increased from 19% to 25% on 1 April 2023.
The amount of unutilised tax losses and tax credits for which no deferred tax
asset is recognised in the Profit & Loss account was €nil (2022:
€nil).
No deferred tax asset has been recognised (2022: nil) on estimated UK tax
losses.
The Group has subsidiaries in France, Germany, Netherlands, Poland and Spain.
There are no changes to tax rates in each country expected to have a material
impact on the Group.
Tax losses for which deferred tax asset was recognised expire as follows:
2023 2022
Tax losses carried forward Tax losses carried forward
€'000 Deferred tax asset €'000 Deferred tax asset
€'000 €'000
Expiry date Expiry date
Expire 2,645 563 2024-2027 2,564 432 2023-2027
Never expire 16,828 4,177 - 12,130 2,952 -
Total 19,473 4,740 14,694 3,384
6. Dividends
Year ended 31 December 2023 Year ended 31 December 2022
€'000 €'000
2022 Fourth Interim dividend of 1.41c /1.20p per share paid 5,812 5,812
24 March 2023
(2021 Fourth Interim: 1.41c /1.21p)
2023 First Interim dividend of 1.41c/1.23p per share paid 5,812 5,812
23 June 2023
(2022 First Interim: 1.41c /1.19p)
2023 Second Interim dividend of 1.41c/1.22p per share paid 5,812 5,812
22 September 2023
(2022 Second interim: 1.41c/1.20p)
2023 Third Interim dividend of 1.41c/1.23p per share paid 5,812 5,812
29 December 2023
(2022 Third interim: 1.41c/1.20p)
Total dividends paid 23,248 23,248
On 19 February 2024 the Board announced that the Company would forego payment
of the fourth interim distribution for the quarter ended 31 December 2023,
which has historically been declared in February and paid in March each year.
7. Earnings per share (Basic and Diluted)
Year ended 31 December 2023 Year ended 31 December 2022
Revenue net return attributable to Ordinary shareholders (€'000) 13,179 14,036
Weighted average number of shares in issue during the year 412,174,356 408,956,423
Total revenue return per ordinary share 3.2¢ 3.4¢
Capital return attributable to Ordinary shareholders (€'000) (94,980) (32,478)
Weighted average number of shares in issue during the year 412,174,356 408,956,423
Total capital return per ordinary share (23.0¢) (7.9¢)
Total return per ordinary share (19.8¢) (4.5¢)
Earnings per share is calculated on the revenue and capital loss for the year
(before other comprehensive income) and is calculated using the weighted
average number of shares in the period of 412,174,356 shares (2022:
408,956,423 shares).
8. Net asset value per share
2023 2022
Net assets attributable to shareholders (€'000) 384,928 489,977
Number of shares in issue at 31 December 412,174,356 412,174,356
Net asset value per share 93.4¢ 118.9¢
9. Investment properties
2023 2022
€'000 €'000
Opening carrying value 776,616 683,878
Purchase at cost - 128,278
Acquisition costs, disposal costs and capital expenditure 329 4,892
Proceeds from disposal of investment property (18,500) -
Realised gain on disposal 133 -
Right of use asset reassessment 1,988 -
Valuation losses (106,935) (40,304)
Movements in lease incentives 328 180
Decrease in leasehold liability (272) (308)
Transfer to Investment property held for sale (17,500) -
Total carrying value at 31 December 636,187 776,616
On 3 May 2023 the Company announced the sale of a warehouse, in Leon, Northern
Spain, for €18,500,000 which generated a realised gain on disposal of
€133,000.
The Meung-Sur-Loire warehouse in France was classified as held of sale as at
31 December 2023 and was valued at €17.5m (2022: €22.1m). The asset was
disposed of on 25 March 2024.
Valuation methodology
The Investment Manager appoints a suitable valuer (such appointment is
reviewed on a periodic basis) to undertake a valuation of all the direct real
estate investments on a quarterly basis. The valuation is undertaken in
accordance with the RICS Valuation - Global Standards ('Red Book Global
Standards') effective from 31 January 2022, published by the Royal Institution
of Chartered Surveyors.
Valuations were performed by Savills (2022: Savills), an accredited
independent valuer with a recognised and relevant professional qualification.
The valuer has sufficient current local and national knowledge of the
particular property markets involved and has the skills and understanding to
undertake the valuations competently.
The Investment Manager meets with the valuer on a quarterly basis to ensure
the valuer is aware of all relevant information for the valuation and any
change in the investments over the quarter. The Investment Manager then
reviews and discusses draft valuations with the valuer to ensure correct
factual assumptions are made prior to the valuer issuing a final valuation
report. Where known, the property valuer takes account of deleterious
materials included in the construction of the investment properties in
arriving at its estimate of fair value when the Investment Manager advises of
the presence of such materials. The majority of the leases are on a full
repairing and insurance basis and as such the Group is not liable for costs in
respect of repairs or maintenance to its investment properties.
The fair value of investment property is determined using either the
discounted cash flow or traditional method. Choice of methodology for a
particular jurisdiction is determined by the valuers independently, based on
local market practices. Both valuation methodologies are in accordance with
RICS guidelines and used in determining the fair value of investment
properties.
Discounted cash flow methodology is based on the future annual net cash flow
over a hold period of 10 years. The calculation of fair value using this
method includes:
. Present value of the cashflow generated through the future net operating
income from the investment property over the hold period.
. Present value of the exit value (sale price) at the end of the 10-year hold
period.
The rate used to calculate the present value of cashflow is the Discount Rate.
The rate used to calculate the exit value at the end of hold period is called
the Capitalisation Rate (exit cap rate). Fair value is calculated using rates
that the valuer considers appropriate for the specific investment property.
The traditional method requires an assessment of rental value (the market
rent) and a market-based yield. The yield can be simply defined as the annual
return on investment expressed as a percentage of capital value. The
traditional method can reflect income streams which are under-rented and
over-rented by incorporating risk within the yield choice (i.e., an all risks
yield) and by structuring the calculation appropriately, for example a term
and reversion for under-rented income streams and a hardcore and top-slice for
over-rented income streams. This will require the valuer to reflect risk in
each element of the calculation, e.g., increasing the yield above the market
in the top-slice to reflect the added risk of an above market rent being paid
for a specified period, or reducing the yield in the term to reflect that a
below market rent is being paid until the reversion is due. These
'traditional' approaches are typically referred to as being growth implicit,
meaning that rental growth is built into the choice of yield and not
explicitly modelled within the calculation.
As at 31 December 2023 and 31 December 2022 the German, French, Polish and
Spanish assets were valued using the discounted cash flow method, and
Netherlands properties using the traditional method. The fair value of
investment properties amounted to €633,806,000 (2022: €758,719,000).
The difference between the fair value and the value per the Consolidated
Balance Sheet at 31 December 2023 consists of adjustments for the asset held
for sale of €17.5million in Meung sur Loire, and for lease incentive assets
and the Den Hoorn lease liability separately recognised in the balance sheet
of €4,472,000 and €24,353,000 respectively (2022: €4,740,000 and
€22,637,000). Further details of the Den Hoorn lease are disclosed in note
12.
The following disclosure is provided in relation to the adoption of IFRS 13
Fair Value Measurement. All properties are deemed Level 3 for the purposes of
fair value measurement and the current use of each property is considered the
highest and best use.
Fair Value Fair Value Range (weighted average) Range (weighted average)
Country and sector 2023 2022 Valuation techniques Key Unobservable inputs 2023 2022
€'000 €'000
Netherlands - Logistics 191,700 227,800 Traditional Method ERV €578,180 - €3,242,079 €561,744 - €2,942,598
(€2,192,655) (€2,014,129)
Equivalent yield 4.58% - 5.65% (4.98%) 3.70% - 4.71% (4.15%)
Germany - 63,200 68,170 Discounted Capitalisation rate 4.60% - 4.65% (4.63%) 4.10% - 4.25% (4.16%)
Logistics Cash Flow
Discount rate 5.60% - 6.10% (5.80%) 4.95% - 5.20% (5.05%)
ERV €1,486,034 - €2,088,971 €1,282,212 - €1,874,346
(€1,849,513) (€1,644,685)
France - 99,380 107,390 Discounted Capitalisation rate 4.50% - 5.25% (4.75%) 3.50% - 4.30% (4.08%)
Logistics Cash Flow
Discount rate 6.00% - 8.00% (6.45%) 4.65% - 7.30% (5.90%)
ERV €430,900 - €2,590,794 €430,900 - €2,016,869
(€1,704,072) (€1,380,297)
Poland - 90,390 93,600 Discounted Capitalisation rate 6.10% - 6.50% (6.28%) 5.30% - 5.70% (5.48%)
Logistics Cash Flow
Discount rate 7.65% - 8.05% (7.80%) 6.80% - 7.35% (7.03%)
ERV €1,843,811 - €2,099,948 €1,620,954 - €1,852,180
(€1,955,779) (€1,709,416)
Spain - 189,136 261,759 Discounted Capitalisation rate 4.75% - 5.00% (4.89%) 3.75% - 6.00% (4.11%)
Logistics Cash Flow
Discount rate 6.25% - 7.50% (6.78%) 4.75% - 8.50% (5.53%)
ERV €486,749 - €2,568,852 €464,624 - €2,568,852
(€1,546,589) (€1,503,010)
Sensitivity analysis
The table below presents the sensitivity of the valuation to changes in the
most significant assumptions underlying the valuation of investment property.
All non-current assets other than financial instruments, deferred tax assets
and trade receivables are non-UK based.
Effect on Valuation Effect on Valuation
Country and sector Assumption Movement 2023 2022
€'000 €'000
Netherlands - Equivalent Yield +100 basis points Equivalent Yield (32,613) (46,058)
Logistics
-100 basis points Equivalent Yield 49,116 73,665
ERV -10% ERV (14,444) (15,937)
+10% ERV 14,571 15,691
Capitalisation +100 basis points (46,886) (67,483)
Germany - Logistics France - Logistics Poland - Logistics Spain - Logistics
-100 basis points 70,530 109,982
Discount +100 basis points (32,213) (39,516)
-100 basis points 35,405 43,556
ERV -10% ERV (25,854) (17,454)
+10% ERV 22,978 15,248
10.Trade and other receivables
2023 2022
€'000 €'000
Trade debtors 11,197 8,070
Bad debt provisions (1,821) (634)
Lease incentives 4,472 4,740
Tax receivables 562 39
VAT receivable 270 270
Other receivables 2 85
Total receivables 14,682 12,570
Lease incentives include accrued income resulting from the spreading of lease
incentives and/or minimum lease payments over the term of the lease. A
proportion of this balance relates to period over 12 months.
The ageing of trade debtors is as follows:
2023 2022
€'000 €'000
Less than 6 months 9,433 7,584
Between 6 & 12 months 1,493 486
Over 12 months 271 -
Total receivables 11,197 8,070
11.Cash and cash equivalents
2023 2022
€'000 €'000
Cash at bank 18,061
20,262
Total cash and cash equivalents 18,061 20,262
12. Leasehold liability
2023 2022
€'000 €'000
Maturity analysis - contractual undiscounted cash flows
Less than one year 659 550
One to two years 659 550
Two to three years 659 550
Three to four years 659 550
Four to five years 659 550
More than five years 26,218 25,065
Total undiscounted lease liabilities 29,513 27,815
Lease liability included in the statement of financial position
Current 659 550
Non - Current 23,694 22,087
Total lease liability included in the statement of financial position 24,353 22,637
On 15 January 2020 the Group acquired a logistics warehouse in Den Hoorn. The
property is located on land owned by the local municipality and leased to the
Group on a perpetual basis. The Group reserves the option to acquire the
freehold ownership on 1 July 2044 for the total sum of €15,983,000. The
annual ground lease payments amount to €659,000 per annum, the present value
of these future payments (assuming the option to acquire the freehold is
exercised) being €24,353,000 as at 31 December 2023.
13. Trade and other payables
2023 2022
€'000 €'000
Trade payables 4,729 2,354
Tenant deposits 4,008 3,853
Rental income received in advance 3,994 4,035
VAT payable 1,172 1,221
Accruals 1,681 1,534
Management fee payable 729 1,937
Accrued acquisition and development costs 40 72
Total payables 16,353 15,006
14.Bank loans
2023 2022
€'000 €'000
Bank borrowing drawn 259,462 270,270
Loan issue costs paid (6,384) (6,055)
Accumulated amortisation of loan issue costs 3,446 1,317
Total bank loans 256,524 265,532
2023 2022
€'000 €'000
Maturity less than 1 year - -
Maturity above 1 year 256,524 265,532
Total receivables 256,524 265,532
The above loans are secured on the following properties on a non-recourse
basis.
Fixed interest rate (including margin)
Country Property Lender Loan (€'000) Start date End date
Germany Erlensee DZ Hyp 17,800 20/02/2019 31/01/2029 1.62%
Germany Flörsheim DZ Hyp 12,400 18/02/2019 30/01/2026 1.54%
France Avignon + Meung Sur Loire BayernLB 33,000 12/02/2019 12/02/2026 1.57%
Netherlands Ede + Oss + Waddinxveen Berlin Hyp 44,200 06/06/2019 06/06/2025 1.35%
Netherlands 's Heerenberg Berlin Hyp 11,000 27/06/2019 27/06/2025 1.10%
Netherlands Den Hoorn + Zeewolde Berlin Hyp 43,200 15/01/2020 14/01/2028 1.38%
Spain Madrid Gavilanes 4 + Madrid Coslada + Barcelona ING Bank 53,862 26/09/2022 26/09/2025 3.11%
Spain Madrid Gavilanes 1 + 2 + 3 ING Bank 44,000 07/07/2022 07/07/2025 2.72%
259,462 2.00%
Reconciliation of movements of liabilities to cash flows arising from
financing activities.
Bank borrowings Bank interest Financial Derivatives
Total
€'000 €'000 €'000 €'000
Balance at 1 January 2023 265,532 - 3,709 269,241
Cash flow from financing activities:
Bank loans interest repaid - (5,202) - (5,202)
Bank loans repaid (10,808) - - (10,808)
Non-cash movement:
Amortisation of capitalised borrowing costs 2,129 - - 2,129
Capitalised borrowing costs (329) - - (329)
Termination of derivative financial instruments - - (313) (313)
Changes in fair value of financial instruments - - (1,706) (1,706)
Change in creditors for loan interest payable - 5,218 - 5,218
Balance at 31 December 2023 256,524 16 1,690 258,230
Bank borrowings Bank interest Financial Derivatives
Total
€'000 €'000 €'000 €'000
Balance at 1 January 2022 175,947 326 109 176,382
Cash flow from financing activities:
Bank loans interest paid - (3,050) - (3,050)
Bank loans drawn 154,547 - - 154,547
Bank loans repaid (65,692) - - (65,692)
Non-cash movement:
Amortisation of capitalised borrowing costs 730 - - 730
Changes in fair value of financial instruments - - 3,600 3,600
Change in creditors for loan interest payable - 2,724 - 2,724
Balance at 31 December 2022 265,532 - 3,709 269,241
15.Derivative financial instruments
2023 2022
€'000 €'000
Forward foreign exchange contracts - (185)
Interest rate swap 1,690 3,894
1,690 3,709
In 2022 the Company employed currency hedging to provide greater certainty as
to the level of Sterling distributions paid in respect of the year. A forward
FX contract was entered into fixing the EUR: GBP exchange rate at €1.17:£1.
Such currency hedging was not used during 2023.
During the 2022 financial year AELI Leon entered into an agreement with ING
Bank N.V for a loan facility of€25.35 million at an interest rate payable of
EURIBOR plus 1.9%. In order to mitigate the interest rate risk, it entered a
fixed floating interest rate swap for the notional amount of €23.52 million
against an all-in fixed rate of 3.05% over the three year loan term expiring
September 2025. The remaining €1.83 million drawn on the loan facility is
capped at all- in fixed rate of 4.15%. On 3 May 2023 the Company announced the
sale Leon and repayment of loan of €10.81 million. Following repayment of
the loan, the company terminated €8.98 million of interest rate swaps and
€1.83 million cap realising a gain on termination of €313,000.
AELI Madrid Logistics 1 has an agreement with ING Bank N.V for a loan facility
of €44 million at an interest rate payable of EURIBOR plus 1.15%. In order
to mitigate the interest rate risk, it entered a fixed floating interest rate
swap for the notional amount of €40 million against an all-in fixed rate of
2.57% over the three year loan term expiring July 2025.The remaining €4
million drawn on the loan facility is capped at all-in fixed rate of 4.15%.
AELI Madrid Logistics 2 has an agreement with ING Bank N.V for a loan facility
of €39.3 million at an interest rate payable of EURIBOR plus 1.15%. In order
to mitigate the interest rate risk, it entered a fixed floating interest rate
swap for the notional amount of €36.5 million against an all-in fixed rate
of 3.05% over the three year loan term
expiring September 2025. The remaining €2.8 million drawn on the loan
facility is capped at all-in fixed rate of 4.15%.
16.Share capital
2023 2022
€'000 €'000
Opening balance 4,717 4,309
Ordinary shares issued - 408
Balance as at 31 December 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 number of Ordinary shares authorised, issued and fully paid at 31 December
2023 was 412,174,356 (2022: 412,174,356).
The nominal value of each share is £0.01.
17. Share premium
2023 2022
€'000 €'000
Opening balance 269,546 225,792
Premium arising on issue of new shares Share issue costs deducted - 44,513
- (759)
Balance as at 31 December 269,546 269,546
18. Special distributable reserve
2023 2022
€'000 €'000
Opening balance 164,851 178,207
Dividends paid (12,752) (13,356)
Balance as at 31 December 152,099 164,851
At a General Meeting held on 8 November 2017, a special resolution was passed
authorising, conditional on the issue of Ordinary shares by the Company, the
amount standing to the credit of the share premium account of the Company
following issue to be cancelled. In order to cancel the share premium account
the Company was required to obtain a Court Order, which was received on 13
March 2018. A Statement of Capital form was lodged at Companies House with a
copy of the Court Order on 16 March 2018. With effect from that date the
amount of the share premium account cancelled was credited as a special
distributable reserve in the Company's books of account. Further details of
the dividends paid from the special distributable reserve are provided in note
8 of the parent company accounts.
19. Capital reserves
Realised capital Unrealised gains/(losses) Total capital
reserve €'000 reserve
€'000 €'000
Opening balance (2) 30,782 30,780
Deferred taxation 1,124 12,730 13,854
Change in fair value of investments 1,933 (108,811) (106,878)
Gains on disposal of investment properties 133 - 133
Taxation on disposal of investment properties (440) - (440)
Early loan repayments costs (110) - (110)
Movement in fair value gains on derivative financial instruments - (1,706) (1,706)
Gains arising from the derecognition of derivative financial instruments 313 - 313
Currency gains during the year - (146) (146)
Balance as at 31 December 2023 2,951 (67,151) (64,200)
Realised capital Unrealised gains/(losses) Total capital
reserve €'000 reserve
€'000 €'000
Opening balance (2) 63,260 63,258
Deferred taxation - 3,893 3,893
Fair value losses of investments - (40,432) (40,432)
Movement in fair value gains on derivative financial instruments - 3,600 3,600
Currency gains during the year - 461 461
Balance as at 31 December 2022 (2) 30,782 30,780
20.Operating segments
The Group's reportable segments are the geographical areas in which it
operates. These operating segments reflect the components of the Group that
are regularly reviewed to allocate resources and assess performance.
Parent Company
2023 Netherlands Poland Germany Spain France €'000 Total
€'000 €'000 €'000 €'000 €'000 €'000
Total Assets 224,723 94,759 64,670 198,564 108,816 2,360 693,892
Total Liabilities 128,459 5,832 33,044 100,070 40,107 1,452 308,964
Total Comprehensive return for the year (Revenue) 3,588 1,623 182 (2,568) 197 10,157 13,179
Total Comprehensive return for the year (Capital) (28,319) (2,126) (4,319) (54,376) (6,031) 191 (94,980)
Included in Total
Comprehensive income
Net change in fair value (36,416) (2,892) (4,913) (54,187) (8,470) - (106,878)
adjustment on investment
property
Rental income 11,808 5,068 3,242 9,259 4,058 - 33,435
2022 Parent Company
Netherlands Poland Germany Spain France €'000 Total
€'000 €'000 €'000 €'000 €'000 €'000
Total Assets 258,324 97,947 69,431 275,129 115,160 1,792 817,783
Total Liabilities 134,913 6,564 33,663 111,143 39,083 2,440 327,806
Total Comprehensive return for the year (Revenue) 677 1,501 353 1,745 1,126 8,634 14,036
Total Comprehensive return for the year (Capital) (19,933) 3,202 (1,634) (11,337) (2,941) 165 (32,478)
Included in Total
Comprehensive income
Net (loss)/gain from the (24,762) 3,901 (1,742) (14,635) (3,194) - (40,432)
fair value adjustment on
investment property
Rental income 10,398 4,605 2,950 8,395 3,338 - 29,686
21.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 Level 2 Level 3 Total fair value
31 December 2023 €'000 €'000 €'000 €'000
Investment properties - - 636,187 636,187
Investment property held-for-sale - - 17,500 17,500
Level 1 Level 2 Level 3 Total fair value
31 December 2022 €'000 €'000 €'000 €'000
Investment properties - - 776,616 776,616
The lowest level of input is the underlying yields on each property which is
an input not based on observable market data.
Level 1 Level 2 Level 3 Total fair value
31 December 2023 €'000 €'000 €'000 €'000
Derivative financial asset - 1,690 - 1,690
Level 1 Level 2 Level 3 Total fair value
31 December 2022 €'000 €'000 €'000 €'000
Derivative financial liability - (185) - (185)
Derivative financial asset - 3,894 - 3,894
The lowest level of input is EUR:GBP exchange rate for forward foreign
currency contracts. The lowest level of inputs for Interest rate SWAPs and
Caps are current market interest rates and yield curve over the remaining term
of the instrument.
Level 1 Level 2 Level 3 Total fair value
31 December 2023 €'000 €'000 €'000 €'000
Bank loans - 253,667 - 253,667
Level 1 Level 2 Level 3 Total fair value
31 December 2022 €'000 €'000 €'000 €'000
Bank loans - 257,449 - 257,449
Bank loans are measured at amortised cost. The fair value is estimated using
discounted cash flows with the current interest rates and yield curve
applicable to each loan. As at 31 December 2023 the estimated fair value of
the Group's bank loans is €253,667,000 (2022: €257,449,000). The amortised
cost is €256,524,000 (2022: €265,532,000).
22. Risk management
The Group's financial instruments comprise securities 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, and debtors for accrued income. The Group also has the ability to
enter into derivative transactions in the form of forward foreign currency
contracts, futures and options, for the purpose of managing currency and
market risks arising from the Group's activities. The Group also has the
ability to enter into derivative transactions to hedge against fluctuations in
the cost of borrowing as a result of changes in interest rates.
The main risks the Group faces from its financial instruments are (a) market
price risk (comprising of (i) interest rate risk, (ii) foreign currency risk
and (iii) other price risk), (b) liquidity risk and (c) credit risk.
(a) Market price risk
The fair value or future cash flows of a financial instrument held by the
Group may fluctuate because of changes in market prices. This market risk
comprises three elements - interest rate risk, foreign currency risk and other
price risk.
(i) Market risk arising from interest rate risk
Interest rate movements may affect 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.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets and
liabilities at the year end were as follows:
Interest Local currency Foreign exchange Euro equivalent
As at 31 December 2023 rate '000 rate €'000
%
Assets:
Euro 4.00 17,457 1.00 17,457
Pound Sterling 5.25 180 0.87 207
Polish Zloty 5.25 1,723 4.35 397
Total 18,061
Interest Local currency Foreign exchange Euro equivalent
As at 31 December 2022 rate '000 rate €'000
%
Assets:
Euro 2.00 19,371 1.00 19,371
Pound Sterling 3.50 188 0.89 212
Polish Zloty 6.25 3,152 4.69 679
Total 20,262
The floating rate assets consist of cash deposits on call earning interest at
prevailing market rates.
An increase of 100bps in interest rates as at the reporting date would have
increased the reported profit and equity shareholders' funds by €180,610
(2022: €202,560). Other Comprehensive Income and Capital Reserves would have
been €1,253,958 (2022: €2,480,934) higher as a result of an increase in
the fair value of the derivative designated as interest rate swaps and
€63,684 (2022: €156,769) higher as a result of an increase in the fair
value of the derivative designated as interest rate caps on floating rate
borrowings.
A decrease of 100bps in interest rates would have reduced the reported profit
and equity shareholders' funds by €180,610 (2022: €202,560). Other
Comprehensive Income and the Capital Reserve would have been €1,253,952
(2022: €2,528,315) lower as a result of a decrease in the fair value of the
derivative designated as interest rate swaps and €29,261 (2022: €91,392)
lower as a result of a decrease in the fair value of the derivative designated
as interest rate caps on floating rate borrowings.
Other financial assets and liabilities (e.g. debtors, creditors) are not
subject to interest rate risk. The rates of interest on the bank loans are
fixed or hedged until the end of their term hence not subject to any interest
rate risk. Further details are disclosed in Note 14.
(ii) Market risk arising from foreign currency risk
The income and capital value of the Groups investments and liabilities can be
affected by exchange rate movements as some of the Group's assets and income
are denominated in currencies other than Euro which is the Group's reporting
currency.
The revenue account is subject to currency fluctuation arising from overseas
income.
Foreign currency risk profile
Foreign currency risk exposure by currency of denomination:
Net monetary Total currency
As at 31 December 2023 exposure exposure
€'000 €'000
Pound Sterling (680) (680)
Polish Złoty 397 397
Total foreign currency (283) (283)
Euro (268,476) (268,476)
Total (268,759) (268,759)
Net monetary Total currency
As at 31 December 2022 exposure exposure
€'000 €'000
Pound Sterling 381 381
Polish Złoty 679 679
Total foreign currency 1,060 1,060
Euro (287,699) (287,699)
Total (286,639) (286,639)
The asset allocation between specific markets can vary from time to time based
on the Investment Manager's opinion of the attractiveness of the individual
markets.
Foreign currency sensitivity
The following table details the Group's sensitivity to a 10% increase and
decrease in Sterling and Polish Zloty against the Euro and the resultant
impact that any such increase or decrease would have on net return before tax
and equity shareholders' funds. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their
translation at the year end for a 10% change in foreign.
As at 31 December 2023 As at 31 December 2022
€'000 €'000
Polish Zloty 40 68
Pound Sterling (68) 38
(iii) Market risk arising from other price risk
Other price risks (i.e. changes in market prices other than those arising from
interest rate or currency risk) may affect the value of the quoted
investments. The carrying amount for financial assets approximates to the fair
value of trade and other receivables (note 10) and trade and other payables
(note 13).
Other price risk sensitivity
If the investment property valuation fell by 10% at 31 December 2023, the
decrease in total assets and return before tax would be €63m (2022: €76m).
If the investment property valuation rose by 10% at 31 December 2023, the
increase in total assets and return before tax would be €63m (2022: €76m).
Exposures vary throughout the year as a consequence of changes in the net
assets of the Group arising out of the investment property and risk management
processes.
(b) Liquidity risk
This is the risk that the Group will encounter difficulty in meeting
obligations associated with financial liabilities. All creditors are payable
within three months.
The Group's liquidity risk is managed by the Investment Manager placing cash
in liquid deposits and accounts. Liquidity risk is the risk that the Group
will encounter in realising assets or otherwise raising funds to meet
financial commitments and also includes:
The level of dividends and other distributions to be paid by the Group may
fluctuate and there is no guarantee that any such distributions will be paid.
The Group's target returns are targets only and are based on estimates and
assumptions about a variety of factors all of which are beyond the Group's
control and which may adversely affect the Group's ability to make its target
returns. The Group may not be able to implement its investment policy and
strategy in a manner that generates dividends in line with the target returns
or the Group's investment objective. Liquidity risk is not considered to be
significant.
(c) Credit risk
This is the risk of failure of the counterparty to a transaction to discharge
its obligations under that transaction that could result in the Group
suffering a loss.
The risk is not considered significant by the Board, and is managed as
follows:
The Group has acquired a portfolio of European logistics properties and has a
number of leases with tenants. In the event of default by a tenant, the Group
will suffer a rental shortfall and incur additional costs until the property
is re-let, including legal expenses, in maintaining, insuring and re-letting
the property. The Board receives regular reports on concentrations of risk and
any tenants in arrears. The Investment Manager monitors such reports in order
to anticipate and minimise the impact of defaults by tenants. Cash is held
only with reputable financial institutions with high quality external credit
ratings.
None of the Group's financial assets is secured by collateral.
The maximum credit risk exposure as at 31 December 2023 was €28.3m (2022:
€27.7m). This was due to trade receivables and cash as per notes 10 and 11.
All cash is placed with financial institutions with a credit rating of -A or
above. Bankruptcy or insolvency may cause the Group's ability to access cash
placed on deposit to be delayed or limited. Should the credit quality or the
financial position of the financial institutions currently employed
significantly deteriorate, the Investment Manager would move the cash holdings
to another financial institution. There are no significant concentrations of
liquidity risk within the Group.
(d) Taxation and Regulation risks
The Company must comply with the provisions of the Companies Act and, as the
shares are admitted to the premium segment of the Official List, the Listing
Rules and the Disclosure Guidance and Transparency Rules.
A breach of the Companies Act could result in the Company and/or the Board
being fined or being the subject of criminal proceedings. Breach of the
Listing Rules could result in the shares being suspended from listing.
Legal and regulatory changes could occur that may adversely affect the
Company. The Company has obtained UK Investment Trust Company status. The
Company must comply with the provisions of sections 1158 and 1159 of the
Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instruments
2011/2999 to maintain this status. Breaching these regulations could result in
the Company paying UK Corporation Tax it would otherwise be exempt from,
adversely affecting the Company's ability to pursue its investment objective.
Capital management
The Group considers that capital comprises issued Ordinary shares and
long-term borrowings. The Group's capital is deployed in the acquisition and
management of subsidiaries in line with the Group's investment objective,
specifically to provide a regular and attractive level of income return
together with the potential for long-term income and capital growth from
investing in high quality European logistics real estate. The following
investment limits and restrictions apply to the Group and its business which,
where appropriate, are measured at the time of investment and once the Group
is fully invested:
. the Group will only invest in assets located in Europe;
. no more than 50 per cent. of Gross Assets will be concentrated in a single
country;
. no single asset may represent more than 20 per cent. of Gross Assets;
. forward funded commitments will be wholly or predominantly pre-let and the
Group's overall exposure to forward funded commitments will be limited to 20
per cent. of Gross Assets;
. the Group's maximum exposure to any single developer will be limited to 20
per cent. of Gross Assets;
. the Group will not invest in other closed-ended investment companies;
. the Group may only invest in assets with tenants which have been classified
by the Investment Manager's investment process as having strong financial
covenants; and
. no single tenant will represent more than 20 per cent. of the Group's annual
gross income measured annually.
The Group's principal use of cash will be to fund investments in accordance
with its investment policy, on-going operational expenses and to pay dividends
and other distributions to shareholders, as set out in the Prospectus. The
Group may from time to time have surplus cash (for example, following the
disposal of an investment).
Pending reinvestment of such cash, it is expected that any surplus cash will
be temporarily invested in cash equivalents, money market instruments, bonds,
commercial paper or other debt obligations with financial institutions or
other counterparties having a single -A (or equivalent) or higher credit
rating as determined by an internationally recognised rating agency; or
''government and public securities'' as defined for the purposes of the FCA
rules.
The Group monitors capital primarily through regular financial reporting and
also through a gearing policy. The Group intends to use gearing with the
objective of improving shareholder returns. Debt will typically be secured at
the asset level and potentially at the Group level with or without a charge
over some or all of the Group's assets, depending on the optimal structure for
the Group and having consideration to key metrics including lender diversity,
cost of debt, debt type and maturity profiles. Borrowings will typically be
non-recourse and secured against individual assets or groups of assets and the
aggregate borrowings at asset level will always be subject to an absolute
maximum, calculated at the time of drawdown for a property purchase, of 50 per
cent. of Gross Assets. Where borrowings are secured against a group of assets,
such group of assets shall not exceed 25 per cent. of Gross Assets in order to
ensure that investment risk remains suitably spread. The Board has established
gearing guidelines for the AIFM in order to maintain an appropriate level and
structure of gearing within the parameters set out above. Under these
guidelines, aggregate borrowings at asset level are expected to be at or
around 35 per cent. of gross assets. The Board will keep the level of
borrowings under review and the aggregate borrowings will always be subject to
the absolute maximum set at the time of the Group's launch, calculated at the
time of drawdown for a property purchase, of 50 per cent of Gross Assets. The
fair value of the Groups bank borrowings as at 31 December 2023 was
€259,462,000 (2022: €270,270,000).
Contractual undiscounted maturities
All financial liabilities presented as current are payable within 3 months.
The analysis of financial liabilities is below:
Within 1 year 1-2 years 2-5 years Over 5 years Total
As at 31 December 2023 €'000 €'000 €'000 €'000 €'000
Bank loans 5,182 156,823 90,759 17,824 270,588
Lease liability 659 659 1,977 26,218 29,513
Trade liabilities 16,353 - - - 16,353
Total 22,194 157,482 92,736 44,042 316,454
As at 31 December 2022 Within 1 year 1-2 years 2-5 years Over 5 years Total
€'000 €'000 €'000 €'000 €'000
Bank loans 4,836 4,836 214,634 61,337 285,643
Lease liability 550 550 1,650 25,065 27,815
Derivative financial instruments 185 - - - 185
Trade liabilities 9,750 - - - 9,750
Total 15,321 5,386 216,284 86,402 323,393
23.Related party transactions
The Company's Alternative Investment Fund Manager ('AIFM') throughout the year
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 services, risk management services 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
year were €3,193,000 (2022: €3,953,000), of which €729,000 (2022:
€1,952,000) were payable at the year 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.
A Promotional and Marketing Budget fee of £214,000 (2022: £175,000) was
approved for 2022/2023 at the November 2022 Board meeting which is payable to
abrdn Investment Management Limited ('aIML').
The remuneration of Directors is detailed below. Further details on the
Directors can be found on pages 80 to 81 of the published Annual Report and
financial statements for the year ended 31 December 2023.
2023 2022
€'000 €'000
Caroline Gulliver 49 47
John Heawood 41 41
Tony Roper 62 57
Diane Wilde 41 41
Balance as at 31 December 193 186
Please note the above figures are all Euro, while those in the Directors'
Remuneration Report are stated in GBP. The Directors' shareholdings are
detailed below.
31 December 2023 Ordinary shares 31 December 2022 Ordinary shares
T Roper 122,812 102,812
C Gulliver 90,000 72,500
J Heawood 60,000 60,000
D Wilde 74,375 74,375
During 2023 the Directors increased their shareholdings by: T Roper 20,000 on
24 May 2023 and C Gulliver 17,500 on 24 May 2023.
24.Lease analysis
The group leases out its investment properties under operating leases.
The future income under operating leases, based on the unexpired lease length
at the year end was as follows (based on total rents and excluding annual CPI
adjustments).
2023 2022
€'000 €'000
Less than one year 33,884 34,087
Between one and two years 32,370 32,708
Between two and three years 29,584 31,298
Between three and four years 26,086 28,985
Between four and five years 23,689 27,111
Over five years 89,742 154,893
Total cash and cash equivalents 235,355 309,082
The largest single tenant at the year end accounted for 10.7 per cent of the
annualised rental income at 31 December 2023.
The Group has entered into commercial property leases on its investment
property portfolio. These leases have remaining lease terms of between 1 and
18 years.
25.Post balance sheet events
On 25 March 2024, the Group sold the Meung-Sur-Loire warehouse in France for
€17.5m, realising a loss of €0.4m.
As at 31 December 2023, the property was valued at €17.5m (2022: €22.1m).
Following completion of sale, €11m was repaid to Bayern LB reducing the
total loan balance to €248.5m and LTV to 37.7%.
26.Capital commitments
As at the 31 December 2023 the Group had capital commitments of €nil (2022:
€nil).
27.Ultimate parent company
In the opinion of the Directors on the basis of shareholdings reviewed by
them, the Company has no immediate or ultimate controlling party.
Corporate Information
EPRA Financial Reporting (Unaudited)
Prepared in accordance with EPRA best practice recommendations (BPR) February
2022.
EPRA Performance Measures
31 December 2023 31 December 2022
Total Total
A. EPRA Earnings (€'000) 13,033
14,497
A. EPRA Earnings per share (cents) 3.2
3.5
B. EPRA Net tangible assets ("NTA") (€'000) 394,550
509,741
B. EPRA Net tangible assets per share (cents)1 95.7
123.7
C. EPRA Net reinstatement value ("NRV") (€'000) 430,527
546,326
C. EPRA Net reinstatement value per share (cents) 104.5
132.5
D. EPRA Net disposal value ("NDV")(€'000) 387,785
498,060
D. EPRA Net disposal value per share (cents) 94.1
120.8
E. EPRA Net initial yield (%) 4.4
4.0
E. EPRA topped-up net initial yield (%) 4.4
4.1
F. EPRA Vacancy rate (%) 6.0
3.6
G. EPRA Cost ratios - including direct vacancy costs (%) 34.1
32.0
G. EPRA Cost ratios - excluding direct vacancy costs (%) 32.4
31.0
H. EPRA Capital expenditure (€'000) 139
133,170
I. EPRA Like for like rental growth (%) 1.8
5.0
J. EPRA LTV (%) 40.0
34.6
1 Defined as an Alternative Performance Measure.
A. EPRA Earnings (€000)
Earnings per IFRS income statement (81,801)
(18,442)
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties 106,878
40,432
Gains on disposal of investment properties (133)
-
Tax on profits on disposals 440
-
Deferred tax (13,854)
(3,893)
Gains on termination of financial instruments (313)
-
Early loan repayment cost 110
-
Changes in fair value of financial instruments 1,706
(3,600)
EPRA Earnings 13,033 14,497
Weighted average basic number of shares 412,174 408,956
EPRA Earnings per share (cents) 3.2 3.5
31 December 2023 31 December 2022
Total Total
B. EPRA Net tangible assets ("NTA") (€'000)
IFRS NAV 384,928 489,977
Exclude:
Fair value of financial instruments
Deferred tax in relation to fair value gains of investment property1
Shares in issue at end of year
EPRA Net tangible assets per share (cents)
1 Excludes deferred tax adjustments on other temporary differences,
recognised under IFRS.
* Restated following correction of treatment of fair value of financial
instruments in calculation of this performance measure.
C. EPRA Net reinstatement value ("NRV") (€'000)
EPRA NTA
Real estate transfer tax and other purchasers' costs EPRA NRV
EPRA Net reinstatement value per share (cents)
* Restated following correction of treatment of fair value of financial
instruments in calculation of this performance measure.
D. EPRA Net disposal value ("NDV") (€'000)
IFRS NAV
Fair value adjustment for fixed interest debt EPRA NDV
EPRA Net disposal value per share (cents)
E. EPRA Net initial yield and 'topped up' NIY disclosure
(€'000)
Investment property - wholly owned Less: developments
Completed property portfolio
Allowance for estimated purchasers' costs Gross up completed property
portfolio valuation Annualised cash passing rental income2 Property outgoings
Annualised net rents
Add: notional rent expiration of rent free periods or other lease incentives
Topped-up net annualised rent EPRA NIY (%)
EPRA "topped-up" NIY (%)
2 Calculated based on lease agreements as at the reporting date.
(1,690) (3,709)
11,312 23,473
394,550 509,741
412,174 412,174
95.7 123.7*
394,550 509,741
35,977 36,585
430,527 546,326
104.5 132.5*
384,928 489,977
2,857 8,083
387,785 498,060
94.1 120.8
633,806 758,719
- -
633,806 758,719
35,977 36,585
669,783 795,304
34,150 33,994
(4,392) (2,501)
29,758 31,493
- 778
29,758 32,271
4.4 4.0
4.4 4.1
31 December 2023 31 December 2022
Total Total
F. EPRA Vacancy rate (€'000)
Estimated rental value of vacant space 2,231 1,270
Estimated rental value of whole portfolio 37,420 35,176
EPRA Vacancy Rate (%) 6.0 3.6
EPRA vacancy rate corresponds to the vacancy rate at year-end. It is
calculated as the
ratio between the estimated market rental value of vacant spaces and potential
rents for
the operating property portfolio. EPRA vacancy rate does not include leases
signed with a
future effect date.
G. EPRA Cost ratios (€'000)
Administrative / property operating expense per IFRS income statement 19,495 15,743
Net service charge costs / fees (8,095) (6,237)
EPRA Costs (including direct vacancy costs) 11,400 9,506
Direct vacancy costs (558) (315)
EPRA Costs (excluding direct vacancy costs) 10,842 9,191
Gross Rental income less ground rent costs 33,435 29,686
EPRA Cost Ratio (including direct vacancy costs) (%) 34.1 32.0
EPRA Cost Ratio (excluding direct vacancy costs) (%) 32.4 31.0
Overhead and operating expenses capitalised - -
H. Property related capital expenditure for the Group
(€'000)
Acquisitions - 132,754
Investment properties:
Non incremental lettable space 139 416
Incremental lettable space - -
Total CapEx 139 133,170
Conversion from accrual to cash basis 378 353
Total CapEx on cash basis 517 133,523
There is no capital expenditure associated with Joint Ventures.
Capital expenditure recognised by the Group that has not resulted in increase
of the
lettable area.
Please see details in note 9 of consolidated financial statements.
The difference in comparison to note 9 is disposal costs on sale of assets
which are not
included in above table.
31 December 2023 31 December 2022
Total Total
I. Like for like rental growth
Rental income growth (%):
Germany 2.1 10.3
Poland 7.9 7.6
France 1.3 4.9
Spain (5.2) 2.4
Netherlands 4.5 4.2
1.8 5.0
Rental income total1 (€000):
Germany 3,367 3,298
Poland 5,820 5,393
France 4,098 4,044
Spain 8,560 9,025
Netherlands 12,305 11,775
34,150 33,535
1 Calculated based on lease agreements as at the reporting date.
Total portfolio value on which the like-for-like rental growth
is based (€000):
Germany 63,200 68,170
Poland 90,390 93,600
France 99,380 107,390
Spain 189,136 243,781
Netherlands 191,700 227,800
633,806 740,741
J. EPRA LTV (€'000)
Borrowings from financial institutions 259,462 270,270
Net payables2 16,353 15,006
Exclude:
Cash and cash equivalents (18,061) (20,262)
Net debt (a) 257,754 265,014
Investment properties at fair value3 633,806 758,719
Net receivables (excluding lease incentives)4 10,210 7,829
Total property value (b) 644,016 766,548
LTV (a/b) (%) 40.0 34.6
2 Refer to note 13 for details.
3 Based on independent property valuation. Includes Investment property held
for sale.
4 Refer to note 10 for details.
Corporate Information
Alternative Investment Fund Managers Directive Disclosures (Unaudited)
abrdn Fund Managers Limited and the Company are required to make certain
disclosures available to investors in accordance with the Alternative
Investment Fund Managers Directive ('AIFMD'). Those disclosures that are
required to be made pre-investment are included within a pre-investment
disclosure document ('PIDD') which can be found on the Company's website
eurologisticsincome.co.uk (http://eurologisticsincome.co.uk/) . There have
been no material changes to the disclosures contained within the PIDD since
its last publication in September 2023.
The periodic disclosures as required under the AIFMD to investors are made
below:
. Information on the investment strategy, geographic and sector investment
focus and principal stock exposures are included in the Strategic Report.
. None of the Company's assets are subject to special arrangements arising
from their illiquid nature.
. The Strategic Report, note 22 to the financial statements and the PIDD
together set out the risk profile and risk management systems in place. There
have been no changes to the risk management systems in place in the period
under review and no breaches of any of the risk limits set, with no breach
expected.
. There are no new arrangements for managing the liquidity of the Company or
any material changes to the liquidity management systems and procedures
employed by aFML.
. All authorised Alternative Investment Fund Managers are required to comply
with the AIFMD Remuneration Code. In accordance with the Remuneration Code,
the Company's AIFM remuneration policy is available from the Company
Secretaries, abrdn Holdings Limited on request (see contact details on page
153 of the published Annual Report and financial statements for the year ended
31 December 2023) and the numerical remuneration in the disclosures in respect
of the AIFM's reporting period for the year ended 31 December 2023 are
available on the Company's website.
Leverage
The table below sets out the current maximum permitted limit and actual level
of leverage for the Company:
Gross method Commitment method
Maximum level of leverage 365.0% 185.0%
Actual level at 31 December 2023 164.7% 164.7%
There have been no breaches of the maximum level during the period and no
changes to the maximum level of leverage employed by the Company. There is no
right of re-use of collateral or any guarantees granted under the leveraging
arrangement. Changes to the information contained either within this Annual
Report or the PIDD in relation to any special arrangements in place, the
maximum level of leverage which aFML may employ on behalf of the Company; the
right of use of collateral or any guarantee granted under any leveraging
arrangement; or any change to the position in relation to any discharge of
liability by the Depositary will be notified via a regulatory news service
without undue delay in accordance with the AIFMD.
The information above has been issued by abrdn Investments Limited, which is
authorised and regulated by the Financial Conduct Authority in the United
Kingdom. abrdn Investments Limited is entered on the Financial Services
Register under registration number 121891.
The Annual Report will be posted to shareholders in early May 2024 and
additional copies will be available from the registered office of the Company
and on the Company's website, eurologisticsincome.co.uk*
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as
rise and may be affected by exchange rate movements. Investors may not get
back the amount they originally invested.
*Neither the content of the Company's website nor the content of any website
accessible from hyperlinks on the Company's website (or any other website) is
(or is deemed to be) incorporated into, or forms (or is deemed to form) part
of this announcement.
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